##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 1-32599
 WILLIAMS PARTNERS L.P.
  DELAWARE
    
    20-2485124(State or other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)ONE WILLIAMS CENTER 
TULSA, OKLAHOMA
    
    74172-0172(Address of principal executive offices)
    
    (Zip Code)
 
  
  þ o
  þ o o o
  o þ




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##### 



WILLIAMS PARTNERS L.P.
INDEX
 PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Statements of Income  Three Months Ended March 31, 2008 and 2007
    
    
    3Consolidated Balance Sheets  March 31, 2008 and December 31, 2007
    
    
    4Consolidated Statements of Cash Flows  Three Months Ended March 31, 2008 and 2007
    
    
    5Consolidated Statement of Partners Capital from January 1, 2008 to March 31, 2008
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 4. Controls and Procedures
    
    
    36Part II. Other InformationItem 1. Legal Proceedings
    
    
    37Item 1A. Risk Factors
    
    
    37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 6. Exhibits
    
    
    39Amended and Restated AgreementRule 13a-14(a)/15d-14(a) Certification of Chief Executive OfficerRule 13a-14(a)/15d-14(a) Certification of Chief Financial OfficerSection 1350 Certifications of Chief Executive Officer and Chief Financial Officer
  FORWARD-LOOKING STATEMENTS
   
    
    amounts and nature of future capital expenditures;
    
    expansion and growth of our business and operations;
    
    business strategy;
    
    cash flow from operations;
    
    seasonality of certain business segments; and
    
    natural gas liquids and gas prices and demand.
  
    
    We may not have sufficient cash from operations to enable us to pay the minimum
distribution following establishment of cash reserves and payment of fees and expenses,
including payments to our general partner.
 
 1




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
    
    Because of the natural decline in production from existing wells and competitive factors, the
success of our gathering and transportation businesses depends on our ability to connect new
sources of natural gas supply, which is dependent on factors beyond our control. Any decrease
in supplies of natural gas could adversely affect our business and operating results.
    
    Lower natural gas and oil prices could adversely affect our fractionation and storage
businesses.
    
    Our processing, fractionation and storage businesses could be affected by any decrease in
natural gas liquids (NGL) prices or a change in NGL prices relative to the price of natural
gas.
    
    We depend on certain key customers and producers for a significant portion of our
revenues and supply of natural gas and NGLs. The loss of any of these key customers or
producers could result in a decline in our revenues and cash available to pay distributions.
    
    If third-party pipelines and other facilities interconnected to our pipelines and
facilities become unavailable to transport natural gas and NGLs or to treat natural gas, our
revenues and cash available to pay distributions could be adversely affected.
    
    We do not own all of the interests in Wamsutter, the Conway fractionator or Discovery,
which could adversely affect our ability to operate and control these assets in a manner
beneficial to us.
    
    Our results of storage and fractionation operations are dependent upon the demand for
propane and other NGLs. A substantial decrease in this demand could adversely affect our
business and operation results.
    
    Discovery and Wamsutter may reduce their cash distributions to us in some situations.
    
    Discoverys interstate tariff rates and terms and conditions are subject to review and
possible adjustment by federal regulators, and are subject to changes in policy by federal
regulators which could have a material adverse effect on our business and operating results.
    
    Our operations are subject to operational hazards and unforeseen interruptions for which
we may not be adequately insured.
    
    We do not operate all of our assets. This reliance on others to operate our assets and to
provide other services could adversely affect our business and operating results.
    
    Our partnership agreement limits our general partners fiduciary duties to unitholders
and restricts the remedies available to unitholders for actions taken by our general partner
that might otherwise constitute breaches of fiduciary duty.
    
    Williams public indentures and our credit facility contain financial and operating
restrictions that may limit our access to credit. In addition, our ability to obtain credit
in the future will be affected by Williams credit ratings.
    
    Our future financial and operating flexibility may be adversely affected by restrictions
in our debt agreements and by our leverage.
    
    We have a holding company structure in which our subsidiaries conduct our operations and
own our operating assets, which may affect our ability to make payments on our debt
obligations and distributions on our common units.
    
    Common units held by Williams eligible for future sale may have adverse effects on the
price of our common units.
    
    Williams controls our general partner, which has sole responsibility for conducting our
business and managing our operations. Our general partner and its affiliates have conflicts
of interests with us and limited fiduciary duties, and they may favor their own interests to
the detriment of our unitholders.
    
    Even if unitholders are dissatisfied, they currently have little ability to remove our
general partner without its consent.
   2




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in thousands, except per-unit amounts)
(Unaudited)
 Three Months EndedMarch 31,2008
    
    
    2007*Revenues:Product sales:Affiliate
    
    $
    78,122
    
    
    $
    56,552Third-party
    
    
    4,221
    
    
    
    6,313Gathering and processing:Affiliate
    
    
    8,790
    
    
    
    9,491Third-party
    
    
    46,210
    
    
    
    51,103Storage
    
    
    7,333
    
    
    
    6,410Fractionation
    
    
    3,292
    
    
    
    1,917Other
    
    
    2,394
    
    
    
    2,029Total revenues
    
    
    150,362
    
    
    
    133,815Costs and expenses:Product cost and shrink replacement:Affiliate
    
    
    22,033
    
    
    
    21,725Third-party
    
    
    30,065
    
    
    
    20,470Operating and maintenance expense (excluding depreciation):Affiliate
    
    
    23,133
    
    
    
    14,328Third-party
    
    
    23,951
    
    
    
    28,185Depreciation, amortization and accretion
    
    
    11,226
    
    
    
    13,178General and administrative expense:Affiliate
    
    
    9,876
    
    
    
    9,406Third-party
    
    
    928
    
    
    
    664Taxes other than income
    
    
    2,505
    
    
    
    2,114Other expense  net
    
    
    333
    
    
    
    460Total costs and expenses
    
    
    124,050
    
    
    
    110,530Operating income
    
    
    26,312
    
    
    
    23,285Equity earnings-Wamsutter
    
    
    21,194
    
    
    
    11,328Equity earnings-Discovery Producer Services
    
    
    13,621
    
    
    
    3,931Interest expense:Affiliate
    
    
    (25
    )
    
    
    (15
    )Third-party
    
    
    (17,711
    )
    
    
    (14,375
    )Interest income
    
    
    238
    
    
    
    983Net income
    
    $
    43,629
    
    
    $
    25,137Allocation of net income for calculation of earnings per unit:Net income
    
    $
    43,629
    
    
    $
    25,137Allocation of net income to general partner
    
    
    8,911
    
    
    
    12,912Allocation of net income to limited partners
    
    $
    34,718
    
    
    $
    12,225Basic and diluted net income per limited partner unit:Common units
    
    $
    0.66
    
    
    $
    0.31Subordinated units
    
    $
    0.66
    
    
    $
    0.31Weighted average number of units outstanding:Common units
    
    
    49,005,497
    
    
    
    32,358,798Subordinated units
    
    
    3,769,231
    
    
    
    7,000,000
 
 *
    
    Recast as discussed in Note 1.  3




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WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)(In thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    34,555
    
    
    $
    36,197Accounts receivable:Trade
    
    
    19,129
    
    
    
    12,860Affiliate
    
    
    33,036
    
    
    
    20,402Other
    
    
    3,852
    
    
    
    2,543Product imbalance
    
    
    15,600
    
    
    
    20,660Prepaid expense
    
    
    3,588
    
    
    
    4,056Derivative assets  affiliate
    
    
    1,488
    
    
    
    231Reimbursable projects
    
    
    3,555
    
    
    
    8,989Assets held for sale
    
    
    11,296
    
    
    
    11,519Other current assets
    
    
    3,727
    
    
    
    3,574Total current assets
    
    
    129,826
    
    
    
    121,031Investment in Wamsutter
    
    
    283,163
    
    
    
    284,650Investment in Discovery Producer Services
    
    
    211,783
    
    
    
    214,526Property, plant and equipment, net
    
    
    631,908
    
    
    
    630,770Other noncurrent assets
    
    
    30,426
    
    
    
    32,500Total assets
    
    $
    1,287,106
    
    
    $
    1,283,477LIABILITIES AND PARTNERS CAPITALCurrent liabilities:Accounts payable:Trade
    
    $
    36,208
    
    
    $
    35,947Affiliate
    
    
    27,329
    
    
    
    17,676Product imbalance
    
    
    15,578
    
    
    
    21,473Deferred revenue
    
    
    1,266
    
    
    
    4,569Derivative liabilities  affiliate
    
    
    1,521
    
    
    
    2,718Accrued interest
    
    
    12,043
    
    
    
    19,500Other accrued liabilities
    
    
    8,872
    
    
    
    8,243Total current liabilities
    
    
    102,817
    
    
    
    110,126Long-term debt
    
    
    1,000,000
    
    
    
    1,000,000Environmental remediation liabilities
    
    
    2,321
    
    
    
    2,599Other noncurrent liabilities
    
    
    9,383
    
    
    
    9,265Commitments and contingent liabilities (Note 9)Partners capital
    
    
    172,585
    
    
    
    161,487Total liabilities and partners capital
    
    $
    1,287,106
    
    
    $
    1,283,477
  4




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WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months EndedMarch 31,2008
    
    
    2007*(In thousands)OPERATING ACTIVITIES:Net income
    
    $
    43,629
    
    
    $
    25,137Adjustments to reconcile to cash provided by operations:Depreciation, amortization and accretion
    
    
    11,226
    
    
    
    13,178Amortization of gas purchase contract  affiliate
    
    
    
    
    
    
    1,188Equity earnings of Wamsutter
    
    
    (21,194
    )
    
    
    (11,328
    )Equity earnings of Discovery Producer Services
    
    
    (13,621
    )
    
    
    (3,931
    )Distributions related to equity earnings of
Wamsutter
    
    
    22,703
    
    
    
    Distributions related to equity earnings of
Discovery Producer Services
    
    
    13,621
    
    
    
    2,620Cash provided (used) by changes in assets and liabilities:Accounts receivable
    
    
    (20,212
    )
    
    
    (1,436
    )Prepaid expense
    
    
    467
    
    
    
    1,188Other current assets
    
    
    5,282
    
    
    
    (335
    )Accounts payable
    
    
    9,914
    
    
    
    11,055Product imbalance
    
    
    (835
    )
    
    
    (183
    )Accrued liabilities
    
    
    (7,214
    )
    
    
    15,460Deferred revenue
    
    
    (3,364
    )
    
    
    (3,012
    )Other, including changes in non-current liabilities
    
    
    1,120
    
    
    
    215Net cash provided by operating activities
    
    
    41,522
    
    
    
    49,816INVESTING ACTIVITIES:Capital expenditures
    
    
    (11,556
    )
    
    
    (9,766
    )Cumulative distributions in excess of equity earnings of
Discovery Producer Services
    
    
    3,179
    
    
    
    980Change in accrued liabilities-capital expenditures
    
    
    108
    
    
    
    (1,430
    )Contributions to Wamsutter
    
    
    (22
    )
    
    
    Contributions to Discovery Producer Services
    
    
    (437
    )
    
    
    Net cash used by investing activities
    
    
    (8,728
    )
    
    
    (10,216
    )FINANCING ACTIVITIES:Distributions to unitholders
    
    
    (35,283
    )
    
    
    (19,491
    )Proceeds from sale of common units
    
    
    28,992
    
    
    
    Redemption of common units from general partner
    
    
    (28,992
    )
    
    
    Contributions per omnibus agreement
    
    
    771
    
    
    
    842Other
    
    
    76
    
    
    
    Net cash used by financing activities
    
    
    (34,436
    )
    
    
    (18,649
    )Increase (decrease) in cash and cash equivalents
    
    
    (1,642
    )
    
    
    20,951Cash and cash equivalents at beginning of period
    
    
    36,197
    
    
    
    57,541Cash and cash equivalents at end of period
    
    $
    34,555
    
    
    $
    78,492
 
 *
    
    Recast as discussed in Note 1.  5




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WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED STATEMENT OF PARTNERS CAPITAL
(Unaudited)
 Limited Partners
        
    
    
    
    
    Accumulated Other
    
    
    TotalGeneral

    
    
    Comprehensive
    
    
PartnersCommon
    
    
    Subordinated
    
    
    Partner
    
    
    Loss
    
    
    Capital(In thousands)Balance  January 1, 2008
    
    $
    1,473,814
    
    
    $
    109,542
    
    
    $
    (1,419,382
    )
    
    $
    (2,487
    )
    
    $
    161,487Net income
    
    
    37,359
    
    
    
    1,556
    
    
    
    4,714
    
    
    
    
    
    
    
    43,629Other comprehensive income (loss):Net unrealized gains on cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,459
    
    
    
    2,459Reclassification into earnings of derivative
instrument gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    (5
    )Total other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,454Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,083Cash distributions
    
    
    (26,321
    )
    
    
    (4,025
    )
    
    
    (4,937
    )
    
    
    
    
    
    
    (35,283
    )Conversion of subordinated units into common
    
    
    107,073
    
    
    
    (107,073
    )
    
    
    
    
    
    
    
    
    
    
    Contributions pursuant to the omnibus
agreement
    
    
    
    
    
    
    
    
    
    
    771
    
    
    
    
    
    
    
    771Issuance of units to public
    
    
    28,992
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,992Repurchase of units from Williams
    
    
    (28,992
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,992
    )Other
    
    
    (473
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (473
    )Balance  March 31, 2008
    
    $
    1,591,452
    
    
    $
    
    
    
    $
    (1,418,834
    )
    
    $
    (33
    )
    
    $
    172,585
  6




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WILLIAMS PARTNERS L.P.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 1. Organization and Basis of Presentation
       Note 2. Recent Accounting Standards
 
 7




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Earnings per Share,
 8




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Note 3. Allocation of Net Income and Distributions
  Three months endedMarch 31,2008
    
    
    2007Allocation to general partner:Net income
    
    $
    43,629
    
    
    $
    25,137Net income applicable to pre-partnership operations
allocated to
general partner
    
    
    
    
    
    
    (12,639
    )Reimbursable general and administrative costs charged
directly to general partner
    
    
    398
    
    
    
    592Income subject to 2% allocation of
general partner interest
    
    
    44,027
    
    
    
    13,090General partners share of net income
    
    
    2.0
    %
    
    
    2.0
    %General partners allocated share of net income before
items directly allocable to general partner interest
    
    
    881
    
    
    
    262Incentive distributions paid to general
partner*
    
    
    4,231
    
    
    
    603Direct charges to general partner
    
    
    (398
    )
    
    
    (592
    )Pre-partnership net income allocated to
general partner
    
    
    
    
    
    
    12,639Net income allocated to general partner
    
    $
    4,714
    
    
    $
    12,912Net income
    
    $
    43,629
    
    
    $
    25,137Net income allocated to general partner
    
    
    4,714
    
    
    
    12,912Net income allocated to limited partners
    
    $
    38,915
    
    
    $
    12,225
 
 *
    
    Under the two class method of computing earnings per share, prescribed by SFAS No. 128,
Earnings Per Share, earnings are to be allocated to participating securities as if all of the
earnings for the period had been distributed. As a result, the general partner receives an
additional allocation of income in quarterly periods where an assumed incentive distribution,
calculated as if all earnings for the period had been distributed, exceeds the actual incentive
distribution. There are $8.4 million of assumed incentive distributions for the three months
ended March 31, 2008 and no assumed incentive distributions for the three months ended March 31,
2007.   General PartnerIncentivePer Unit
    
    Common
    
    Subordinated
    
    Class B
    
    
    
    
    
    Distribution
    
    Total CashPayment Date
    
    Distribution
    
    Units
    
    Units
    
    Units
    
    2%
    
    Rights
    
    Distribution2/14/2007
    
    $
    0.4700
    
    
    $
    12,010
    
    
    $
    3,290
    
    
    $
    3,198
    
    
    $
    390
    
    
    $
    603
    
    
    $
    19,4915/15/2007
    
    $
    0.5000
    
    
    $
    12,777
    
    
    $
    3,500
    
    
    $
    3,403
    
    
    $
    421
    
    
    $
    965
    
    
    $
    21,0668/14/2007
    
    $
    0.5250
    
    
    $
    16,989
    
    
    $
    3,675
    
    
    
    
    
    
    $
    447
    
    
    $
    1,267
    
    
    $
    22,37811/14/2007
    
    $
    0.5500
    
    
    $
    17,799
    
    
    $
    3,850
    
    
    
    
    
    
    $
    487
    
    
    $
    2,211
    
    
    $
    24,3472/14/2008
    
    $
    0.5750
    
    
    $
    26,321
    
    
    $
    4,025
    
    
    
    
    
    
    $
    706
    
    
    $
    4,231
    
    
    $
    35,2835/15/2008(a)
    
    $
    0.6000
    
    
    $
    31,665
    
    
    
    
    
    
    
    
    
    
    $
    758
    
    
    $
    5,498
    
    
    $
    37,921
 
 (a)
    
    The board of directors of our general partner declared this cash distribution on April
24, 2008 to be paid on May 15, 2008 to unitholders of record at the close of business on
May 7, 2008. 9




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Note 4. Assets Held for Sale
  10




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Note 5. Equity Investments
   Wamsutter
 March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)Current assets
    
    $
    35,405
    
    
    $
    27,114Property, plant and equipment, net
    
    
    273,563
    
    
    
    275,163Non-current assets
    
    
    175
    
    
    
    191Current liabilities
    
    
    (22,906
    )
    
    
    (12,944
    )Non-current liabilities
    
    
    (2,867
    )
    
    
    (2,812
    )Members capital
    
    $
    283,370
    
    
    $
    286,712
 Three Months EndedMarch 31,2008
    
    
    2007(Unaudited)Revenues:Affiliate
    
    $
    50,050
    
    
    $
    22,279Third-party
    
    
    17,575
    
    
    
    17,894Costs and expenses:Affiliate
    
    
    33,214
    
    
    
    16,174Third-party
    
    
    13,217
    
    
    
    12,671Net income
    
    $
    21,194
    
    
    $
    11,328
 11




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Discovery
 March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)Current assets
    
    $
    75,773
    
    
    $
    78,035Non-current restricted cash and cash equivalents
    
    
    3,641
    
    
    
    6,222Property, plant and equipment, net
    
    
    363,889
    
    
    
    368,228Current liabilities
    
    
    (27,375
    )
    
    
    (33,820
    )Non-current liabilities
    
    
    (12,450
    )
    
    
    (12,216
    )Members capital
    
    $
    403,478
    
    
    $
    406,449
 Three Months EndedMarch 31,2008
    
    
    2007(Unaudited)Revenues:Affiliate
    
    $
    78,006
    
    
    $
    44,533Third-party
    
    
    9,150
    
    
    
    7,948Costs and expenses:Affiliate
    
    
    38,246
    
    
    
    23,155Third-party
    
    
    26,620
    
    
    
    24,120Interest income
    
    
    (264
    )
    
    
    (661
    )Gain on sale of operating assets
    
    
    
    
    
    
    (468
    )Foreign exchange gain
    
    
    (147
    )
    
    
    (216
    )Net income
    
    $
    22,701
    
    
    $
    6,551
 12




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Note 6. Long-Term Debt and Credit Facilities
 Long-Term Debt
  Interest
    
    
    March 31,
    
    
    December 31,Rate
    
    
    2008
    
    
    2007(In millions)Credit agreement term loan, adjustable
rate, due 2012
    
    
    (a
    )
    
    $
    250
    
    
    $
    250Senior unsecured notes, fixed rate, due 2017
    
    
    7.25
    %
    
    
    600
    
    
    
    600Senior unsecured notes, fixed rate, due 2011
    
    
    7.50
    %
    
    
    150
    
    
    
    150Total Long-term debt
    
    
    
    
    
    $
    1,000
    
    
    $
    1,000
 
 (a)
    
    4.10% at March 31, 2008. Credit Facilities
   Note 7. Partners Capital
   Note 8. Fair Value Measurements
 Adoption of SFAS No.157
  13




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##### Table of Contents




    
    Level 1  Quoted prices in active markets for identical assets or liabilities that we
have the ability to access. Active markets are those in which transactions for the asset or
liability occur in sufficient frequency and volume to provide pricing information on an
ongoing basis.
    
    Level 2  Inputs are other than quoted prices in active markets included in Level 1, that
are either directly or indirectly observable. These inputs are either directly observable in
the marketplace or indirectly observable through corroboration with market data for
substantially the full contractual term of the asset or liability being measured.
    
    Level 3  Includes inputs that are not observable for which there is little, if any,
market activity for the asset or liability being measured. These inputs reflect
managements best estimate of the assumptions market participants would use in determining
fair value. Our Level 3 consists of instruments valued using valuation methods that utilize
unobservable pricing inputs that are significant to the overall fair value.
     14




---



##### Table of Contents



Fair Value Measurements Using Significant Unobservable Inputs
(Level 3)
(In thousands)
 Net DerivativeAsset (Liability)Balance as of January 1, 2008
    
    $
    (2,487
    )Realized and unrealized gains (losses):
    
    
    Included in net income
    
    
    Included in other comprehensive income
    
    
    2,459Purchases, issuances, and settlements
    
    
    (5
    )Transfers in/(out) of Level 3
    
    
    Balance as of March 31, 2008
    
    $
    (33
    )Unrealized gains (losses) included in net
income relating to instruments still held at
March 31, 2008
    
    $
    
  Note 9. Commitments and Contingencies
 Environmental Matters-Four Corners.
      15




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##### Table of Contents



Environmental Matters-Conway.
  Will Price.
 Grynberg.
 GE Litigation.
 Mid-America
Pipeline Company.
 Other.
 Summary.
 16




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##### Table of Contents



17




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##### Table of Contents



Note 10. Segment Disclosures
  Gathering &Gathering &
    
    
    Processing -
    
    
    NGLProcessing - West
    
    
    Gulf
    
    
    Services
    
    
    Total(In thousands)Three Months Ended March 31, 2008:Segment revenues
    
    $
    132,333
    
    
    $
    567
    
    
    $
    17,462
    
    
    $
    150,362Product cost and shrink replacement
    
    
    47,446
    
    
    
    
    
    
    
    4,652
    
    
    
    52,098Operating and maintenance expense
    
    
    40,893
    
    
    
    524
    
    
    
    5,667
    
    
    
    47,084Depreciation, amortization and accretion
    
    
    10,299
    
    
    
    153
    
    
    
    774
    
    
    
    11,226Direct general and administrative expense
    
    
    1,930
    
    
    
    
    
    
    
    544
    
    
    
    2,474Other, net
    
    
    2,554
    
    
    
    
    
    
    
    284
    
    
    
    2,838Segment operating income (loss)
    
    
    29,211
    
    
    
    (110
    )
    
    
    5,541
    
    
    
    34,642Equity earnings
    
    
    21,194
    
    
    
    13,621
    
    
    
    
    
    
    
    34,815Segment profit
    
    $
    50,405
    
    
    $
    13,511
    
    
    $
    5,541
    
    
    $
    69,457Reconciliation to the Consolidated Statements of Income:Segment operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    34,642General and administrative expenses:Allocated-affiliate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,662
    )Third party-direct
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (668
    )Combined operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    26,312Three Months Ended March 31, 2007:Segment revenues
    
    $
    120,428
    
    
    $
    561
    
    
    $
    12,826
    
    
    $
    133,815Product cost and shrink replacement
    
    
    39,675
    
    
    
    
    
    
    
    2,520
    
    
    
    42,195Operating and maintenance expense
    
    
    33,097
    
    
    
    550
    
    
    
    8,866
    
    
    
    42,513Depreciation, amortization and accretion
    
    
    12,175
    
    
    
    304
    
    
    
    699
    
    
    
    13,178Direct general and administrative expense
    
    
    1,821
    
    
    
    
    
    
    
    498
    
    
    
    2,319Other, net
    
    
    2,384
    
    
    
    
    
    
    
    190
    
    
    
    2,574Segment operating income (loss)
    
    
    31,276
    
    
    
    (293
    )
    
    
    53
    
    
    
    31,036Equity earnings
    
    
    11,328
    
    
    
    3,931
    
    
    
    
    
    
    
    15,259Segment profit
    
    $
    42,604
    
    
    $
    3,638
    
    
    $
    53
    
    
    $
    46,295Reconciliation to the Consolidated Statements of Income:Segment operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    31,036General and administrative expenses:Allocated-affiliate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,224
    )Third party-direct
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (527
    )Combined operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    23,285
 18




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Please read the following discussion of our financial condition and results of operations in
conjunction with the consolidated financial statements included in Item 1 of Part I of this
quarterly report.
 Overview
  
    
    Gathering and Processing  West.Our West segment includes Four Corners and ownership
interests in Wamsutter, consisting of (i) 100% of the Class A limited liability company
membership interests and (ii) 50% of the initial Class C limited liability company
membership interests (together, the Wamsutter Ownership Interests). We account for the
Wamsutter Ownership Interests as an equity investment.
    
    Gathering and Processing  Gulf.Our Gulf segment includes (1) our 60% ownership
interest in Discovery and (2) the Carbonate Trend gathering pipeline off the coast of
Alabama. We account for our ownership interest in Discovery as an
equity investment.
    
    NGL Services.Our NGL Services segment includes three integrated NGL storage
facilities and a 50% undivided interest in a fractionator near Conway, Kansas.
 Executive Summary
  19




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##### Table of Contents



Results of Operations
 Consolidated Overview
  Three months endedMarch 31,
    
    

% Change from2008
    
    
    2007
    
    
    2007(1)(Thousands)Revenues
    
    $
    150,362
    
    
    $
    133,815
    
    
    
    +12
    %Costs and expenses:Product cost and shrink replacement
    
    
    52,098
    
    
    
    42,195
    
    
    
    -23
    %Operating and maintenance
expense
    
    
    47,084
    
    
    
    42,513
    
    
    
    -11
    %Depreciation, amortization and accretion
    
    
    11,226
    
    
    
    13,178
    
    
    
    +15
    %General and administrative
expense
    
    
    10,804
    
    
    
    10,070
    
    
    
    -7
    %Taxes other than income
    
    
    2,505
    
    
    
    2,114
    
    
    
    -18
    %Other expense
    
    
    333
    
    
    
    460
    
    
    
    +28
    %Total costs and expenses
    
    
    124,050
    
    
    
    110,530
    
    
    
    -12
    %Operating income
    
    
    26,312
    
    
    
    23,285
    
    
    
    +13
    %Equity earnings  Wamsutter
    
    
    21,194
    
    
    
    11,328
    
    
    
    +87
    %Equity earnings  Discovery
    
    
    13,621
    
    
    
    3,931
    
    
    NMInterest expense
    
    
    (17,736
    )
    
    
    (14,390
    )
    
    
    -23
    %Interest income
    
    
    238
    
    
    
    983
    
    
    
    -76
    %Net income
    
    $
    43,629
    
    
    $
    25,137
    
    
    
    +74
    %
 
 (1)
    
    + = Favorable Change;  = Unfavorable Change; NM = A percentage
calculation is not meaningful due to change in signs, a zero-value
denominator or a percentage change greater than 200. Three months ended March 31, 2008 vs. three months ended March 31, 2007
   20




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21




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##### Table of Contents



Results of operations  Gathering and Processing  West
  Three months endedMarch 31,2008
    
    
    2007(Thousands)Revenues
    
    $
    132,333
    
    
    $
    120,428Costs and expenses, including interest:Product cost and shrink replacement
    
    
    47,446
    
    
    
    39,675Operating and maintenance expense
    
    
    40,893
    
    
    
    33,097Depreciation, amortization and accretion
    
    
    10,299
    
    
    
    12,175General and administrative expense  direct
    
    
    1,930
    
    
    
    1,821Taxes other than income
    
    
    2,221
    
    
    
    1,924Other expense, net
    
    
    333
    
    
    
    460Total costs and expenses, including interest
    
    
    103,122
    
    
    
    89,152Segment operating income
    
    
    29,211
    
    
    
    31,276Equity earnings  Wamsutter
    
    
    21,194
    
    
    
    11,328Segment profit
    
    $
    50,405
    
    
    $
    42,604
 Four Corners
 Three months ended March 31, 2008 vs. three months ended March 31, 2007
   
    
    $16.6 million related to a 59% increase in average NGL sales prices realized on sales of
NGLs which we received under keep-whole and percent-of-liquids processing contracts. This
increase resulted from general increases in market prices for these commodities between the
two periods;
    
    $7.5 million higher sales of NGLs on behalf of third party producers for whom
we purchase their NGLs for a fee under their contracts. Under these arrangements,
we purchase the NGLs from the third party producers and sell them to an affiliate.
This increase is offset by higher associated product costs of $7.5 million
discussed below; and
    
    $1.0 million higher condensate and LNG sales.
    
    
    $7.5 million increase from third party producers who elected to have us purchase their
NGLs, which was
 22




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##### Table of Contents



offset by the corresponding increase in product sales discussed above; and
 
    
    $3.3 million increase from 22% higher average natural gas prices.
     Outlook
 
    
    We anticipated that growth capital investments we completed in 2007 to support
ConocoPhillips and other producer customers drilling activity, expansion opportunities
and production enhancement activities would be sufficient to offset the historical decline
and slightly increase 2008 average gathering and processing volumes above 2007 levels.
However, first-quarter 2008 volumes were significantly impacted by severe weather
conditions that inhibited both our and our customers ability to access facilities and
maintain production. We currently expect average gathering and processing volumes in the
second through fourth quarters of 2008 will be slightly higher as compared with the same
quarters of 2007 although full-year 2008 gathering and processing volumes will be slightly
lower as compared to 2007.
    
    We have realized above average net liquids margins at our gas processing plants in
recent years due primarily to increasing prices for NGLs. Based on first-quarter 2008
prices for NGLs and natural gas combined with the hedging program described below, per-unit
margins in 2008 could meet or exceed record levels realized in 2007. However, the prices
of NGLs and natural gas can quickly fluctuate in response to a variety of factors that are
impossible to control and, in particular, NGL pricing is typically impacted negatively by
recessionary economic conditions.
    
    Throughout the remainder of 2008, we may experience periodic restrictions in the volume
of NGLs we can deliver to third-party pipelines. These restrictions
happen for a variety of reasons including a lack of capacity. If
alternative delivery options are unavailable, such restrictions could impact our ability to
recover and sell NGLs, which might otherwise have been available from our Four Corners
processing plants.
    
    We currently have financial swap contracts to hedge 5.4 million gallons of our monthly
forecasted NGL sales and fixed price natural gas purchase contracts to hedge the price of
our natural gas shrink replacement associated with these NGL sales for April through
December 2008. The 5.4 million gallons per month represents
approximately 40% of our 2007
NGL sales for these same months. On an aggregate basis, as of March 31, 2008, there remains a hedged margin of
$25.0 million or an average of $0.51 per gallon on these NGL sales in 2008. The primary
purpose of these hedges is to mitigate risk associated with ethane sales derived from keep-
 23




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##### Table of Contents



whole processing arrangements. Of the 5.4 million gallons, 4.2 million are ethane sales.
The average hedged margin on these forecasted keep-whole NGL sales exceeds the average
margin realized on keep-whole NGL sales for 2007.
    
    We anticipate that operating costs, excluding compression, gathering fuel and system
gains and losses, will remain stable as compared to 2007. Compression cost increases are
dependent upon the extent and amount of additional compression needed to meet the needs of
our customers and the cost at which compression can be purchased, leased and operated.
System gains and losses are an unpredictable component of our operating costs.
    
    Our right of way agreement with the Jicarilla Apache Nation (JAN) which covered certain
gathering system assets in Rio Arriba County of northern New Mexico, expired on
December 31, 2006. We currently operate our gathering assets on the JAN lands pursuant to a
special business license granted by the JAN which expires August 31, 2008, and are
negotiating with the JAN to sell them these gathering assets. The current special business
license requires the execution of a purchase and sale agreement for these gathering assets
on or before May 31. It is anticipated that this sale will be completed during the third
or fourth quarter of 2008. As a result of the maturation of negotiations during the first
quarter of 2008, these assets have been classified as held for sale on the consolidated
balance sheet and include property, plant and equipment. Current expectations are that the
final terms of the sale will allow us to maintain partial revenues associated with
gathering and processing services for gas produced from the JAN lands
and continued operations of the gathering assets on the JAN lands through at least 2009.
We believe the expected proceeds from the sale of these assets will substantially exceed
their carrying value. Based on current estimated gathering volumes and a range of annual
average commodity prices over the past five years, we estimate that gas produced on or
isolated by the JAN lands represents approximately $20 to $30 million of Four Corners
annual gathering and processing revenue less related product costs.
 24




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##### Table of Contents



Wamsutter
  Three months endedMarch 31,2008
    
    
    2007(Thousands)Revenues
    
    $
    67,625
    
    
    $
    40,173Costs and expenses, including interest:Product cost and shrink replacement
    
    
    26,030
    
    
    
    14,298Operating and maintenance expense
    
    
    11,637
    
    
    
    7,047Depreciation and accretion
    
    
    5,228
    
    
    
    4,258General and administrative expense
    
    
    3,219
    
    
    
    2,820Taxes other than income
    
    
    484
    
    
    
    422Other income, net
    
    
    (167
    )
    
    
    Total costs and expenses
    
    
    46,431
    
    
    
    28,845Net income
    
    $
    21,194
    
    
    $
    11,328Williams Partners interest  equity earnings per
our Consolidated Statements of Income
    
    $
    21,194
    
    
    $
    11,328
 Three months ended March 31, 2008 vs. three months ended March 31, 2007
   
    
    $16.2 million related to a 54% increase in average NGL sales prices realized on sales of
NGLs which Wamsutter received under keep-whole processing contracts. This increase
resulted from general increases in market prices for these commodities between the two
periods.
 
    
    $9.4 million related to a 45% increase in NGL volumes that Wamsutter received under
keep-whole processing contracts. Severe winter weather conditions in 2008 lowered volumes
received under some of Wamsutters larger fee-based processing agreements. This allowed
Wamsutter to process greater volumes under keep-whole processing arrangements.
 
    
    $3.1 million related to favorable adjustments to the margin sharing provisions of one of
Wamsutters significant contracts.
  25




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##### Table of Contents




    
    $6.8 million increase from 36% higher average natural gas prices; and
 
    
    $5.9 million increase from 45% higher volumetric shrink requirements due to higher
volumes processed under Wamsutters keep-whole processing contracts;
     Outlook
 
    
    Compared to 2007, Wamsutter anticipated that sustained drilling activity, expansion
opportunities and production enhancement activities by producers would have been sufficient
to offset the historical production decline and to increase Wamsutters average gathering
volumes. However, first-quarter 2008 volumes were significantly impacted by severe weather
conditions that inhibited both Wamsutters and their customers ability to access
facilities and maintain production, resulting in lower than expected volumes. We currently
expect average gathering and processing volumes in the second through fourth quarters of
2008 will be slightly higher as compared with these same quarters of 2007 and that
full-year 2008 gathering and processing volumes will be flat as compared to 2007.
 
    
    Total gas available for processing has increased in recent years; however, due to
limited plant capacity, not all of this increased volume could be processed resulting in
gas being bypassed around the Echo Springs plant. Under normal operating conditions, this
results in lower NGL volumes received under keep-whole processing contracts.  In 2008, we
anticipate that an agreement providing us with third party propanes, butanes and natural
gasoline processing for Wamsutter bypassed gas at Colorado Interstate Gas Companys (CIG)
Rawlins natural gas processing plant will increase the processing capacity available to
Wamsutter by 80 million cubic feet per day (MMcf/d) or approximately 20%.  We anticipate
that this third party processing will result in an increase in NGL volumes sold by
Wamsutter.   Due to operational problems caused by severe winter weather in the first
quarter of 2008, processing volumes have not been sufficient to fully utilize Echo Springs
plant capacity; therefore, minimal volumes have been processed by CIG.  We do anticipate
the volumes to increase for the remainder of the year allowing us to realize increased NGL
volumes through the third-party processing agreement.
 
    
    In 2007, Wamsutter realized record high net liquids margins at its Echo Springs plant.
The 2007 net liquids margins were significantly impacted by very low local shrink
replacement natural gas costs as compared with other natural gas markets.  Natural gas
prices have returned to more comparable levels in 2008 and we
 26




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##### Table of Contents



do not expect them to return to 2007 levels.  Accordingly, we expect per-unit margins in
2008 will remain higher in relation to five-year historical averages, but below the record
levels realized in 2007.
 
    
    Throughout the remainder of 2008, we may experience periodic restrictions in the volume
of NGLs we can deliver to third-party pipelines. These restrictions
happen for a variety of reasons including a lack of capacity. If
alternative delivery options are unavailable, such restrictions could impact our ability to
recover and sell NGLs, which might otherwise have been available from our Echo Springs
processing plant.
 
    
    Operating costs, excluding system gains and losses and new third-party processing fees
at the CIGs Rawlins plant, are expected to approximate those in 2007.  System gains and
losses are an unpredictable component of our operating costs.  Additionally, the new
third-party processing arrangement at CIGs Rawlins plant mentioned above requires that we
pay a fee per million British thermal units (MMbtu) processed that will add approximately
$4.0 million in operating costs.
 Results of Operations  Gathering and Processing  Gulf
  Three months endedMarch 31,2008
    
    
    2007(Thousands)Segment revenues
    
    $
    567
    
    
    $
    561Costs and expenses:Operating and maintenance expense
    
    
    524
    
    
    
    550Depreciation
    
    
    153
    
    
    
    304Total costs and expenses
    
    
    677
    
    
    
    854Segment operating loss
    
    
    (110
    )
    
    
    (293
    )Equity earnings  Discovery
    
    
    13,621
    
    
    
    3,931Segment profit
    
    $
    13,511
    
    
    $
    3,638
 Carbonate Trend
  27




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##### Table of Contents



Discovery
  Three months endedMarch 31,2008
    
    
    2007(Thousands)Revenues
    
    $
    87,156
    
    
    $
    52,481Costs and expenses, including interest:Product cost and shrink replacement
    
    
    52,240
    
    
    
    33,518Operating and maintenance expense
    
    
    7,008
    
    
    
    6,415Depreciation and accretion
    
    
    6,983
    
    
    
    6,483General and administrative expense
    
    
    1,750
    
    
    
    544Interest income
    
    
    (264
    )
    
    
    (661
    )Other income, net
    
    
    (3,262
    )
    
    
    (369
    )Total costs and expenses, including interest
    
    
    64,455
    
    
    
    45,930Net income
    
    $
    22,701
    
    
    $
    6,551Williams Partners 60 percent interest  Equity
earnings per our Consolidated Statements of
Income
    
    $
    13,621
    
    
    $
    3,931
 Three months ended March 31, 2008 vs. three months ended March 31, 2007
  
    
    $20.3 million from 105% higher NGL volumes due primarily to an increase in volumes
processed under keep-whole processing arrangements;
    
    $11.7 million related to a 29% increase in average NGL sales prices realized on sales of
NGLs which Discovery received under certain processing contracts. This increase resulted
from general increases in market prices for these commodities between the two periods; and
    
    $3.7 million higher sales of NGLs on behalf of third party producers for whom Discovery
purchases their NGLs for a fee under their contracts. This increase is offset by higher
associated product costs of $3.7 million discussed below.
   
    
    $12.3 million higher volumetric natural gas requirements from increased keep-whole
processing activity;
    
    $3.7 million higher product purchase cost for the processing customers who elected to
have Discovery purchase their NGLs;
    
    $2.6 million increase in payments for gas processing rights from third-party processors;
and
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##### Table of Contents




    
    $2.4 million increase from higher average natural gas prices.
     Outlook
 Discovery
  
    
    With the current oil and natural gas price environment, drilling activity across the
shelf and the deepwater of the Gulf of Mexico has been robust. However, the limited
availability of specialized rigs necessary to drill in the deepwater areas, such as those
in and around Discoverys gathering areas, limits the ability of producers to bring
identified reserves to market quickly. This will prolong the timeframe over which these
reserves will be developed. We expect Discovery to be successful in competing for a portion
of these new volumes.
    
    Discoverys Tahiti pipeline lateral was installed on the sea bed in February 2007.
Chevron has recently moved the production facility to location indicating their ongoing
progress toward first production. Chevron announced that it expects first production by
the third quarter of 2009. Discoverys revenues from the Tahiti project are dependent on
receiving throughput from Chevron. Therefore, delays Chevron experiences in bringing their
production online impact the initial timing of revenues for Discovery.
    
    The Texas Eastern Transmission Company (TETCO) agreement was recently extended through
May 2008 after which time we expect no further volumes under this agreement. Current
flowing volumes are approximately 170 billion British thermal units per day (BBtu/d).
    
    Gross processing margins have been at record high levels due to commodity prices for
NGLs and natural gas, Discoverys mix of processing contract types and its operation and
optimization activities. We expect that 2008 gross processing margins will remain
favorable to historical averages. However, the prices of NGLs and natural gas can quickly
fluctuate in response to a variety of factors that are impossible to control and, in
particular, NGL pricing is typically impacted negatively by recessionary economic
conditions.
 
    
    Discoverys Larose gas processing plant has been operating at near capacity. We
expect that additional processing volumes from the Tennessee Gas Pipeline (TGP) system
in 2008 will replace some of the processing volumes previously coming from the TETCO
system; and therefore, the Larose plant will continue to remain at near capacity
throughout 2008.
 
    
    Discovery receives a significant amount of the processing volumes from TGP via a very
large third-party owned natural gas platform. The platform was recently shut down after a
leak was discovered on a
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##### Table of Contents



pipeline near the platform. Processing volumes received from TGP will be impacted during
the ongoing shut down while repairs are being made and could reduce Discoverys 2008
operating profit by approximately $4.0 million to $5.0 million.
    
    In February 2008, Discovery executed agreements with LLOG Exploration Company to provide
production handling, transportation, processing and fractionation services for their MC 705
and 707 production. At this time, Discovery began receiving minimum payments of
approximately $0.2 million per month under this agreement and expects an increase when
production begins in early summer 2008.
    
    We expect Discoverys 2008 results will be favorably impacted by approximately $3.0
million due to its recently approved FERC rate filing pertaining to the regulated portion
of its business.
    
    Discovery has recently received an additional dedication in four blocks for an estimated
60 trillion British thermal units of new natural gas reserves with ATP Oil and Gas
Corporation (ATP) around its Gomez facility. Discovery also recently contracted three
blocks in the Mirage, Morgas and Telemark areas with capital requirements to connect to
Discoverys facilities to be funded entirely by ATP.
    
    Discovery is currently renegotiating the management fee it is charged by Williams for
providing senior management guidance, legal, marketing, financial
analysis, information technology, accounting and other management services to Discovery.  Discovery expects an
increase of approximately $1.0 million per quarter and the increase has been recognized as
part of Discoverys first-quarter results.
 Results of Operations  NGL Services
  Three months endedMarch 31,2008
    
    
    2007(Thousands)Segment revenues
    
    $
    17,462
    
    
    $
    12,826Costs and expenses:Product cost
    
    
    4,652
    
    
    
    2,520Operating and maintenance expense
    
    
    5,667
    
    
    
    8,866Depreciation and accretion
    
    
    774
    
    
    
    699General and administrative expense  direct
    
    
    544
    
    
    
    498Other expense, net
    
    
    284
    
    
    
    190Total costs and expenses
    
    
    11,921
    
    
    
    12,773Segment profit
    
    $
    5,541
    
    
    $
    53
 Three months ended March 31, 2008 vs. three months ended March 31, 2007
  
    
    Product sales increased $1.9 million due to higher sales volumes of ethane and normal
butane. The increase in sales volumes was more than offset by the related increase in
product cost discussed below.
 
    
    Fractionation revenues increased $1.4 million due primarily to the expiration of a
fractionation contract with a cap on the per-unit fee, which limited our ability to pass
through increases in fractionation fuel expense to this customer.
 30




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##### Table of Contents




    
    Storage revenues increased $0.9 million due primarily to higher average storage revenues
from additional storage leases.
    Outlook
 
    
    We expect 2008 storage revenues will be consistent with 2007 due to continued strong
demand for propane and butane storage as well as higher priced specialty storage services.
 
    
    We continue to perform a large number of storage cavern workovers and wellhead
modifications to comply with KDHE regulatory requirements. We expect outside service costs
to continue at current levels throughout 2008 to ensure that we meet the regulatory
compliance requirements.
 Financial Condition and Liquidity
  
    
    Cash and cash equivalents on hand;
    
    Cash generated from operations, including cash distributions from Wamsutter and
Discovery;
    
    Insurance recoveries related to the fire at the Ignacio gas processing plant;
    
    Proceeds from the sale of gathering assets to the Jicarilla Apache Nation;
    
    Capital contributions from Williams pursuant to the omnibus agreement; and
    
    Credit facilities, as needed.
  
    
    Maintenance and expansion capital expenditures for our Four Corners and Conway assets;
    
    Contributions we must make to Wamsutter LLC to fund certain of its expansion capital
expenditures;
    
    Completion of the Four Corners repair expenditures related to the fire at Ignacio gas
processing plant, which generally should be reimbursed by insurance approximately as they
are incurred;
    
    Interest on our long-term debt; and
    
    Quarterly distributions to our unitholders.
 Wamsutter Distributions
  Total Distribution toDate of Distribution
    
    Members
    
    Our Share3/28/08
    
    $25,000
    
    $21,438
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##### Table of Contents



Discovery Distributions
  Total Distribution toDate of Distribution
    
    Members
    
    Our 60% Share1/30/08
    
    $28,000
    
    $16,8004/30/08
    
    $26,000
    
    $15,600
 Insurance Recoveries
  Sale of Gathering Assets to the Jicarilla Apache Nation
  Capital Contributions from Williams
  
    
    Indemnification of environmental and related expenditures, less any related
insurance recoveries, for a period of three years ending August 2008 (for certain of
those expenditures) up to a cap of $14.0 million. As of March 31, 2008, we have
received $5.7 million from Williams for indemnified items since inception of the
agreement in August 2005. Thus, approximately $8.3 million remains available for
reimbursement of our costs on these items.
 
    
    Additionally, under the omnibus agreement, we will receive (1) an annual credit for
general and administrative expenses of $1.6 million in 2008 and $0.8 million in 2009
and (2) up to $3.4 million to fund our initial 40% share of the expected total cost of
Discoverys Tahiti pipeline lateral expansion project in excess of the $24.4 million we
contributed during September 2005. As of March 31, 2008 we have received $1.6 million
from Williams for the Tahiti-related indemnification since inception.
  Credit Facilities
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##### Table of Contents



Capital Requirements
  
    
    Maintenance capital expenditures, which are capital expenditures made to replace
partially or fully depreciated assets in order to maintain the existing operating capacity
of our assets and to extend their useful lives; and
    
    Expansion capital expenditures such as those to acquire additional assets to grow our
business, to expand and upgrade plant or pipeline capacity and to construct new plants,
pipelines and storage facilities.
  Maintenance
    
    Expansion
    
    TotalThrough
    
    
    
    Through
    
    
    
    ThroughCompany
    

Total Year Estimate
    

Mar. 31, 2008
    

Total Year Estimate
    

Mar. 31, 2008
    

Total Year Estimate
    

Mar. 31, 2008Four Corners
    
    $
    23.0
    
    
    $
    8.5
    
    
    $
    14.5
    
    
    $
    1.5
    
    
    $
    37.5
    
    
    $
    10.0Conway
    
    
    3.2
    
    
    
    .6
    
    
    
    13.9
    
    
    
    1.0
    
    
    
    17.1
    
    
    
    1.6Wamsutter  (our share)
    
    
    20.0
    
    
    
    3.3
    
    
    
    5.2
    
    
    
    .4
    
    
    
    25.2
    
    
    
    3.7Discovery  (our share)
    
    
    3.6
    
    
    
    .1
    
    
    
    9.0
    
    
    
    1.4
    
    
    
    12.6
    
    
    
    1.5
    33




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##### Table of Contents



Cash Distributions to Unitholders
  Results of Operations  Cash Flows
 Three months endedMarch 31,Williams Partners L.P.
    
    2008
    
    2007(Thousands)Net cash provided by operating activities
    
    $
    41,522
    
    
    $
    49,816Net cash used by investing activities
    
    
    (8,728
    )
    
    
    (10,216
    )Net cash used by financing activities
    
    
    (34,436
    )
    
    
    (18,649
    )
  
    
    $16.6 million decrease in cash provided by working capital excluding accrued interest.
Cash provided by working capital decreased due primarily to changes in our accounts
receivable between the two periods; and
    
    $24.4 million higher cash interest payments for the interest on our $750.0 million
senior unsecured notes issued in June and December 2006 to finance our acquisition of Four
Corners and on our $250.0 million term loan issued in December 2007 to finance our
acquisition of Wamsutter.
   Three months endedMarch 31,Wamsutter  100 percent
    
    2008
    
    2007(Thousands)Net cash provided by operating activities
    
    $
    28,625
    
    
    $
    15,619Net cash used by investing activities
    
    
    (4,089
    )
    
    
    (13,581
    )Net cash used by financing activities
    
    
    (24,536
    )
    
    
    (2,038
    )
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##### Table of Contents



Three months endedMarch 31,Discovery  100 percent
    
    2008
    
    2007(Thousands)Net cash provided by operating activities
    
    $
    32,043
    
    
    $
    1,001Net cash used by investing activities
    
    
    (3,882
    )
    
    
    (1,050
    )Net cash used by financing activities
    
    
    (25,672
    )
    
    
    (6,600
    )
   Fair Value Measurements
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  35




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##### Table of Contents



Commodity Price Risk
      Interest Rate Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   36




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Our future financial and operating flexibility may be adversely affected by restrictions in our
debt agreements and by our leverage.
   
    
    make it more difficult for us to satisfy our obligations with respect to our senior
unsecured notes and our other indebtedness, which could in turn result in an event of default on such other
indebtedness or our outstanding notes;
    
    impair our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes or other purposes;
    
    adversely affect our ability to pay cash distributions to unitholders;
    
    diminish our ability to withstand a downturn in our business or the economy generally;
    
    require us to dedicate a substantial portion of our cash flow from operations to debt service payments, thereby reducing the availability of cash for working capital, capital
expenditures,
acquisitions, general corporate purposes or other purposes; limit our flexibility in
planning for, or
reacting to, changes in our business and the industry in which we operate; and
    
    place us at a competitive disadvantage compared to our competitors that have
proportionately less debt.
   We may not be able to grow or effectively manage our growth.
  
    
    identify businesses engaged in managing, operating or owning pipeline, processing,
fractionation and storage assets, or other midstream assets for acquisitions, joint ventures and construction
projects;
    
    control costs associated with acquisitions, joint ventures or construction projects;
    
    consummate acquisitions or joint ventures and complete construction projects;
    
    integrate any acquired or constructed business or assets successfully with our
existing operations and into our operating and financial systems and controls;
    
    hire, train and retain qualified personnel to manage and operate our growing business; and
    
    obtain required financing for our existing and new operations.
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 ISSUER PURCHASES OF EQUITY SECURITIES
 (d)(c)
    
    Maximum NumberTotal Number of
    
    (or ApproximateUnits Purchased
    
    Dollar Value) of(b)
    
    as Part of
    
    Units that May Yet(a)
    
    Average
    
    Publicly
    
    Be PurchasedTotal Number of
    
    Price Paid
    
    Announced Plans
    
    Under the Plans orPeriod
    
    Units Purchased
    
    per Unit
    
    or Programs
    
    ProgramsJanuary 1  January 31, 2008
    
    
    800,000
    (1)
    
    $
    36.24
    (1)
    
    
    800,000
    (1)
    
    
    0
    (1)February 1  February 29, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March 1  March 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    800,000
    
    
    $
    36.24
    
    
    
    800,000
    
    
    
    0
  37




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##### Table of Contents



38




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##### Table of Contents



Item 6. Exhibits
  ExhibitNumber
    
    Description+Exhibit 3.1
    
    Amended and Restated Agreement of Limited Partnership of Williams Partners L.P.
(including form of common unit certificate), as amended by Amendments Nos. 1, 2, 3
and 4.+Exhibit 31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.+Exhibit 31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.+Exhibit 32
    
    Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.
 
 +
    
    Filed herewith. 39




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##### Table of Contents



SIGNATURES
  WILLIAMS PARTNERS L.P.(Registrant)By: Williams Partners GP LLC, its general partner/s/ Ted T. TimmermansTed. T. Timmermans
Controller (Duly Authorized Officer and Principal Accounting Officer)
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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description+Exhibit 3.1
    
    Amended and Restated Agreement of
Limited Partnership of Williams Partners L.P. (including form of
common unit certificate), as amended by Amendments Nos. 1, 2, 3 and 4.+Exhibit 31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.+Exhibit 31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.+Exhibit 32
    
    Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.
 
 +
    
    Filed herewith. 41