##### 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 September 30, 2005
 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 CENTERTULSA, OKLAHOMA
    
    74172-0172(Address of principal executive offices)
    
    (Zip Code)
 
 
  o þ
 o þ
 o þ




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WILLIAMS PARTNERS L.P.
INDEX
 PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Statements of Operations  Three and Nine Months Ended September 30, 2005 and 2004
    
    
    3Consolidated Balance Sheets  September 30, 2005 and December 31, 2004
    
    
    4Consolidated Statements of Cash Flows  Nine Months Ended September 30, 2005 and 2004
    
    
    5Consolidated Statement of Partners Capital from January 1, 2005 to September 30, 2005
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    32Part II. Other InformationItem 1. Legal Proceedings
    
    
    33Item 6. Exhibits
    
    
    33Rule 13a-14(a)/15d-14(a) Certification of CEORule 13a-14(a)/15d-14(a) Certification of CFOSection 1350 Certifications of CEO & CFO
  FORWARD-LOOKING STATEMENTS
    
    
    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.
    
    Because of the natural decline in production from existing wells, our success depends on
our ability to obtain new sources of natural gas supply, which is dependent on factors
beyond our control, including Discoverys ability to complete its Tahiti lateral expansion
project. Any decrease in supplies of natural gas could adversely affect our business and
operating results.
    
    Our processing, fractionation and storage business could be affected by any decrease in
the price of natural gas liquids or a change in the price of natural gas liquids relative
to the price of natural gas.
    
    Williams revolving credit facility and Williams public indentures 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.
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
    
    Our general partner and its affiliates have conflicts of interest and limited fiduciary
duties, which may permit them to favor their own interests to the detriment of our
unitholders.
    
    Even if unitholders are dissatisfied, they cannot initially remove our general partner without its consent.
    
    You may be required to pay taxes on your share of our income even if you do not receive any cash distributions from us.
    
    Our operations are subject to operational hazards and unforeseen interruptions for which
we may or may not be adequately insured.
    
    Lower natural gas liquids prices could adversely affect our fractionation and storage
businesses.
    
    We depend on certain key customers and producers for a significant portion of our
revenues and supply of natural gas and natural gas liquids. 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 natural gas liquids or to treat
natural gas, our revenues and cash available to pay distributions could be adversely
affected.
   2




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Dollars in thousands, except per-unit amounts)
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Storage
    
    $
    5,409
    
    
    $
    4,165
    
    
    $
    14,435
    
    
    $
    11,075Fractionation
    
    
    2,386
    
    
    
    2,414
    
    
    
    7,123
    
    
    
    6,544Gathering
    
    
    649
    
    
    
    793
    
    
    
    2,295
    
    
    
    3,059Product sales:Affiliate
    
    
    2,726
    
    
    
    
    
    
    
    9,234
    
    
    
    Third-party
    
    
    
    
    
    
    1,976
    
    
    
    63
    
    
    
    3,536Other
    
    
    1,006
    
    
    
    1,109
    
    
    
    2,571
    
    
    
    3,239Total revenues
    
    
    12,176
    
    
    
    10,457
    
    
    
    35,721
    
    
    
    27,453Costs and expenses:Operating and maintenance expense:Affiliate
    
    
    2,592
    
    
    
    2,554
    
    
    
    7,938
    
    
    
    7,247Third-party
    
    
    5,680
    
    
    
    3,097
    
    
    
    8,854
    
    
    
    7,311Product cost
    
    
    2,258
    
    
    
    1,445
    
    
    
    8,320
    
    
    
    2,816Depreciation
    
    
    896
    
    
    
    918
    
    
    
    2,694
    
    
    
    2,696General and administrative expense:Affiliate
    
    
    1,170
    
    
    
    745
    
    
    
    2,708
    
    
    
    1,838Third-party
    
    
    385
    
    
    
    18
    
    
    
    431
    
    
    
    56Taxes other than income
    
    
    194
    
    
    
    179
    
    
    
    532
    
    
    
    537Total costs and expenses
    
    
    13,175
    
    
    
    8,956
    
    
    
    31,477
    
    
    
    22,501Operating income (loss)
    
    
    (999
    )
    
    
    1,501
    
    
    
    4,244
    
    
    
    4,952Equity earnings (loss)  Discovery Producer Services LLC
    
    
    66
    
    
    
    (90
    )
    
    
    2,969
    
    
    
    3,184Interest expense:Affiliate
    
    
    (1,822
    )
    
    
    (2,929
    )
    
    
    (7,439
    )
    
    
    (9,045
    )Third-party
    
    
    (192
    )
    
    
    (166
    )
    
    
    (561
    )
    
    
    (331
    )Interest income
    
    
    76
    
    
    
    
    
    
    
    76
    
    
    
    Net loss
    
    $
    (2,871
    )
    
    $
    (1,684
    )
    
    $
    (711
    )
    
    $
    (1,240
    )Allocation of 2005 net loss:Net loss
    
    $
    (2,871
    )
    
    
    
    
    
    $
    (711
    )Net loss applicable to the period through August 22, 2005
    
    
    (2,192
    )
    
    
    
    
    
    
    (32
    )Net loss applicable to the period August 23 through
September 30, 2005
    
    
    (679
    )
    
    
    
    
    
    
    (679
    )Allocation of Net loss to general partner
    
    
    (423
    )
    
    
    
    
    
    
    (423
    )Allocation of Net loss to limited partners
    
    $
    (256
    )
    
    
    
    
    
    $
    (256
    )Basic and diluted net loss per limited partner unit:Common units
    
    $
    (0.02
    )
    
    
    
    
    
    $
    (0.02
    )Subordinated units
    
    
    (0.02
    )
    
    
    
    
    
    
    (0.02
    )Weighted average number of units outstanding:Common units
    
    
    7,000,000
    
    
    
    
    
    
    
    7,000,000Subordinated units
    
    
    7,000,000
    
    
    
    
    
    
    
    7,000,000
  3




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WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2005
    
    
    2004(Unaudited)(Thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    14,482
    
    
    $
    Accounts receivable:Trade
    
    
    1,444
    
    
    
    2,150Other
    
    
    1,992
    
    
    
    1,388Gas purchase contract  affiliate
    
    
    5,449
    
    
    
    Other current assets
    
    
    875
    
    
    
    749Total current assets
    
    
    24,242
    
    
    
    4,287Investment in Discovery Producer Services LLC
    
    
    146,146
    
    
    
    147,281Property, plant and equipment, net
    
    
    67,042
    
    
    
    67,793Gas purchase
contract - noncurrent - affiliate
    
    
    6,076
    
    
    
    Total assets
    
    $
    243,506
    
    
    $
    219,361LIABILITIES AND PARTNERS CAPITALCurrent liabilities:Accounts payable:Trade
    
    $
    2,069
    
    
    $
    2,480Affiliate
    
    
    6,076
    
    
    
    1,980Product imbalance
    
    
    4,736
    
    
    
    1,071Deferred revenue
    
    
    6,876
    
    
    
    3,305Accrued
liabilities:Affiliate
    
    
    512
    
    
    
    317Other
    
    
    2,678
    
    
    
    3,607Total current liabilities
    
    
    22,947
    
    
    
    12,760Advances from affiliate
    
    
    
    
    
    
    186,024Environmental remediation liabilities
    
    
    3,964
    
    
    
    3,909Other noncurrent liabilities
    
    
    187
    
    
    
    Commitments and contingent liabilities (Note 7)Partners capital
    
    
    216,408
    
    
    
    16,668Total liabilities and partners capital
    
    $
    243,506
    
    
    $
    219,361
  4




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WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Nine Months EndedSeptember 30,2005
    
    
    2004(Thousands)OPERATING ACTIVITIES:Net loss
    
    $
    (711
    )
    
    $
    (1,240
    )Adjustments to reconcile to cash provided by operations:Depreciation
    
    
    2,694
    
    
    
    2,696Amortization
of gas purchase contract - affiliate
    
    
    581
    
    
    
    Undistributed earnings of Discovery Producer Services LLC
    
    
    (2,969
    )
    
    
    (3,184
    )Cash provided (used) by changes in assets and liabilities:Accounts receivable
    
    
    (2,538
    )
    
    
    (91
    )Other current assets
    
    
    (126
    )
    
    
    96Accounts payable
    
    
    3,685
    
    
    
    779Accrued liabilities
    
    
    45
    
    
    
    (65
    )Deferred revenue
    
    
    3,571
    
    
    
    4,114Other, including changes in noncurrent liabilities
    
    
    3,045
    
    
    
    1,189Net cash provided by operating activities
    
    
    7,277
    
    
    
    4,294INVESTING ACTIVITIES:Capital expenditures
    
    
    (1,860
    )
    
    
    (635
    )Contribution to Discovery Producer Services LLC
    
    
    (24,400
    )
    
    
    Net cash used by investing activities
    
    
    (26,260
    )
    
    
    (635
    )FINANCING ACTIVITIES:Proceeds from sale of common units
    
    
    100,247
    
    
    
    Payment of offering costs
    
    
    (4,291
    )
    
    
    Distribution to The Williams Companies, Inc
    
    
    (58,756
    )
    
    
    Changes in advances from affiliates  net
    
    
    (3,735
    )
    
    
    (3,659
    )Net cash provided (used) by financing activities
    
    
    33,465
    
    
    
    (3,659
    )Increase in cash and cash equivalents
    
    
    14,482
    
    
    
    Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    Cash and cash equivalents at end of period
    
    $
    14,482
    
    
    $
    
  5




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WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED STATEMENT OF PARTNERS CAPITAL
 (Dollars in thousands)
 Number of Limited
    
    
    Pre-IPO
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalPartner Units
    
    
    Owners
    
    
    Limited Partner
    
    
    General
    
    
    PartnersCommon
    
    
    Subordinated
    
    
    Equity
    
    
    Common
    
    
    Subordinated
    
    
    Partner
    
    
    CapitalBalance - January 1,
2005
    
    
    
    
    
    
    
    
    
    $
    16,668
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    16,668Accounts receivable
not contributed
    
    
    
    
    
    
    
    
    
    
    (2,640
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,640
    )Net loss
attributable to
the period through
August 22, 2005
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    
    13,996
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,996Contribution of net
assets of
predecessor
companies
    
    
    2,000,000
    
    
    
    7,000,000
    
    
    
    (13,996
    )
    
    
    10,416
    
    
    
    106,372
    
    
    
    4,343
    
    
    
    107,135Issuance of units to
public
    
    
    5,000,000
    
    
    
    
    
    
    
    
    
    
    
    100,247
    
    
    
    
    
    
    
    
    
    
    
    100,247Offering costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,291
    )
    
    
    
    
    
    
    
    
    
    
    (4,291
    )Net loss attributable
to the period
August 23, 2005
through
September 30, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (128
    )
    
    
    (128
    )
    
    
    (423
    )
    
    
    (679
    )Balance -
September 30, 2005
    
    
    7,000,000
    
    
    
    7,000,000
    
    
    $
    
    
    
    $
    106,244
    
    
    $
    106,244
    
    
    $
    3,920
    
    
    $
    216,408
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WILLIAMS PARTNERS L.P.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Organization and Basis of Presentation
   Initial Public Offering and Related Transactions
  
    
    distribute $58.8 million to Williams, in part to reimburse Williams for capital
expenditures relating to the assets contributed to us and for a gas purchase contract
contributed to us;
    
    provide $24.4 million to make a capital contribution to DPS to fund an escrow account
required in connection with the Tahiti pipeline lateral expansion project;
    
    provide $12.7 million of additional working capital; and
    
    pay $4.3 million of expenses associated with the IPO and related formation transactions.
   7




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WILLIAMS PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Note 2. Description of Business
  Gathering and Processing.
  NGL Services.
  8




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WILLIAMS PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 3. Allocation of Net Income and Distributions
  Allocation of net loss to general partner:Net loss for the period August 23, 2005 through
September 30, 2005
    
    $
    (679
    )Charges direct to general partner:Reimbursable general and administrative costs
    
    
    417Loss before direct charges to general partner
    
    
    (262
    )General partners share of net loss
    
    
    2.0
    %General partners allocated share of net loss before
direct charges
    
    
    (6
    )Direct charges to general partner
    
    
    (417
    )Net loss allocated to general partner
    
    
    (423
    )Net loss for the period August 23, 2005 through
September 30, 2005
    
    
    (679
    )Net loss allocated to general partner
    
    
    (423
    )Net loss allocated to limited partners
    
    $
    (256
    )
  Note 4. Related Party Transactions
   9




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WILLIAMS PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
     Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004(Thousands)General and administrative expense,
including amounts subsequently
charged
to co-owners:Allocated
    
    $
    971
    
    
    $
    718
    
    
    $
    2,229
    
    
    $
    1,734Directly charged
    
    
    275
    
    
    
    100
    
    
    
    703
    
    
    
    321Operating and maintenance expense,
including amounts subsequently
charged
to co-owners:Fuel purchases
    
    
    5,911
    
    
    
    4,503
    
    
    
    15,711
    
    
    
    12,198Salaries and benefits
    
    
    886
    
    
    
    855
    
    
    
    2,546
    
    
    
    2,609NGL purchases
    
    
    2,500
    
    
    
    
    
    
    
    6,363
    
    
    
    
   10




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WILLIAMS PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Note 5. Investment in Discovery Producer Services LLC
       September 30,
    
    
    December 31,2005
    
    
    2004(unaudited)Current assets
    
    $
    31,913
    
    
    $
    67,534Noncurrent restricted cash and cash equivalents
    
    
    45,501
    
    
    
    Property, plant and equipment
    
    
    347,414
    
    
    
    356,385Current liabilities
    
    
    (20,453
    )
    
    
    (31,572
    )Non-current liabilities
    
    
    (770
    )
    
    
    (702
    )Members capital
    
    $
    403,605
    
    
    $
    391,645
 11




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WILLIAMS PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(unaudited)Revenues
    
    $
    19,100
    
    
    $
    20,947
    
    
    $
    69,414
    
    
    $
    76,732Costs and expenses
    
    
    19,432
    
    
    
    21,216
    
    
    
    63,161
    
    
    
    68,793Interest income
    
    
    (498
    )
    
    
    (153
    )
    
    
    (1,171
    )
    
    
    (345
    )Net income (loss)
    
    $
    166
    
    
    $
    (116
    )
    
    $
    7,424
    
    
    $
    8,284
 Note 6. Credit Facilities
   
    
    ratio of debt to net worth no greater than (i) 70 percent for the period after December
31, 2004 through December 31, 2005, and (ii) 65 percent for the remaining term of the
agreement;
    
    ratio of debt to net worth no greater than 55 percent for Northwest Pipeline
Corporation, a wholly-owned subsidiary of Williams, and Transco; and
    
    ratio of EBITDA to interest, on a rolling four quarter basis, no less than (i) 2.0 for
any period after March 31, 2005 through December 31, 2005, and (ii) 2.5 for the remaining
term of the agreement.
  Note 7. Commitments and Contingencies
 Environmental Matters.
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WILLIAMS PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Other.
 Note 8. Segment Disclosures
   September 30,
    
    
    December 31,2005
    
    
    2004(Thousands)Segment assets:Gathering & Processing
    
    $
    165,147
    
    
    $
    166,985NGL Services
    
    
    66,158
    
    
    
    52,376Unallocated partnership assets
    
    
    15,269
    
    
    
    Eliminations
    
    
    (3,068
    )
    
    
    Total assets
    
    $
    243,506
    
    
    $
    219,361
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WILLIAMS PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Gathering &
    
    
    NGLProcessing
    
    
    Services
    
    
    Total(Thousands)Three months ended September 30, 2005:Segment revenues
    
    $
    650
    
    
    $
    11,526
    
    
    $
    12,176Operating and maintenance expense
    
    
    101
    
    
    
    8,171
    
    
    
    8,272Product cost
    
    
    
    
    
    
    2,258
    
    
    
    2,258Depreciation
    
    
    300
    
    
    
    596
    
    
    
    896Direct general and administrative expense
    
    
    
    
    
    
    308
    
    
    
    308Other
    
    
    
    
    
    
    194
    
    
    
    194Segment
operating income (loss)
    
    
    249
    
    
    
    (1
    )
    
    
    248Equity earnings
    
    
    66
    
    
    
    
    
    
    
    66Segment profit (loss)
    
    $
    315
    
    
    $
    (1
    )
    
    $
    314Reconciliation to the Consolidated Statements of Operations:Segment operating income
    
    
    
    
    
    
    
    
    
    $
    248Allocated general and administrative expense
    
    
    
    
    
    
    
    
    
    
    (1,247
    )Combined operating loss
    
    
    
    
    
    
    
    
    
    $
    (999
    )Three months ended September 30, 2004:Segment revenues
    
    $
    794
    
    
    $
    9,663
    
    
    $
    10,457Operating and maintenance expense
    
    
    142
    
    
    
    5,509
    
    
    
    5,651Product cost
    
    
    
    
    
    
    1,445
    
    
    
    1,445Depreciation
    
    
    300
    
    
    
    618
    
    
    
    918Direct general and administrative expense
    
    
    
    
    
    
    118
    
    
    
    118Other
    
    
    
    
    
    
    179
    
    
    
    179Segment operating income
    
    
    352
    
    
    
    1,794
    
    
    
    2,146Equity loss
    
    
    (90
    )
    
    
    
    
    
    
    (90
    )Segment profit
    
    $
    262
    
    
    $
    1,794
    
    
    $
    2,056Reconciliation to the Consolidated Statements of Operations:Segment operating income
    
    
    
    
    
    
    
    
    
    $
    2,146Allocated general and administrative expense
    
    
    
    
    
    
    
    
    
    
    (645
    )Combined operating income
    
    
    
    
    
    
    
    
    
    $
    1,501
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WILLIAMS PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Gathering &
    
    
    NGLProcessing
    
    
    Services
    
    
    Total(Thousands)Nine months ended September 30, 2005:Segment revenues
    
    $
    2,295
    
    
    $
    33,426
    
    
    $
    35,721Operating and maintenance expense
    
    
    477
    
    
    
    16,315
    
    
    
    16,792Product cost
    
    
    
    
    
    
    8,320
    
    
    
    8,320Depreciation
    
    
    900
    
    
    
    1,794
    
    
    
    2,694Direct general and administrative expense
    
    
    
    
    
    
    782
    
    
    
    782Other
    
    
    
    
    
    
    532
    
    
    
    532Segment operating income
    
    
    918
    
    
    
    5,683
    
    
    
    6,601Equity earnings
    
    
    2,969
    
    
    
    
    
    
    
    2,969Segment profit
    
    $
    3,887
    
    
    $
    5,683
    
    
    $
    9,570Reconciliation to the Consolidated Statements of Operations:Segment operating income
    
    
    
    
    
    
    
    
    
    $
    6,601Allocated general and administrative expense
    
    
    
    
    
    
    
    
    
    
    (2,357
    )Combined operating income
    
    
    
    
    
    
    
    
    
    $
    4,244Nine months ended September 30, 2004:Segment revenues
    
    $
    4,009
    
    
    $
    23,444
    
    
    $
    27,453Operating and maintenance expense
    
    
    404
    
    
    
    14,154
    
    
    
    14,558Product cost
    
    
    
    
    
    
    2,816
    
    
    
    2,816Depreciation
    
    
    900
    
    
    
    1,796
    
    
    
    2,696Direct general and administrative expense
    
    
    
    
    
    
    376
    
    
    
    376Other
    
    
    
    
    
    
    537
    
    
    
    537Segment operating income
    
    
    2,705
    
    
    
    3,765
    
    
    
    6,470Equity earnings
    
    
    3,184
    
    
    
    
    
    
    
    3,184Segment profit
    
    $
    5,889
    
    
    $
    3,765
    
    
    $
    9,654Reconciliation to the Consolidated Statements of Operations:Segment operating income
    
    
    
    
    
    
    
    
    
    $
    6,470Allocated general and administrative expense
    
    
    
    
    
    
    
    
    
    
    (1,518
    )Combined operating income
    
    
    
    
    
    
    
    
    
    $
    4,952
 Note 9. Recent Accounting Standards
 conditional asset retirement obligation
 15




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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 historical consolidated financial statements included in Item 1 of this
quarterly report.
 General
  
    
    distribute $58.8 million to affiliates of The Williams Companies, Inc. (Williams), the
parent of our general partner, in part to reimburse Williams for capital expenditures
relating to the assets contributed to us and for a gas purchase contract contributed to us;
    
    provide $24.4 million to make a capital contribution to Discovery Producer Services LLC
(Discovery) to fund an escrow account required in connection with the Tahiti pipeline
lateral expansion project;
    
    provide $12.7 million of additional working capital; and
    
    pay $4.3 million of expenses associated with our IPO and related formation transactions.
   Overview
  
    
    Gathering and Processing.Our Gathering and Processing segment includes (1) our 40
percent ownership interest in Discovery and (2) the Carbonate Trend gathering pipeline
off the coast of Alabama. Discovery owns an integrated natural gas gathering and
transportation pipeline system extending from offshore in the Gulf of Mexico to a natural
gas processing facility and an NGL fractionator in Louisiana. These assets generate
revenues by providing natural gas gathering, transporting and processing services and
integrated NGL fractionating services to customers under a range of contractual
arrangements. Although Discovery includes fractionation operations, which would normally
fall within the NGL Services segment, it is primarily engaged in gathering and processing
and is managed as such.
    
    NGL Services.Our NGL Services segment includes three NGL storage facilities and a 50
percent undivided interest in a fractionator near Conway, Kansas. These assets generate
revenues by providing stand-alone NGL fractionation and storage services using various
fee-based contractual arrangements where we receive a fee or fees based on actual or
contracted volumetric measures.
 Recent Events
  16




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##### Table of Contents



Results of operations
 Consolidated Overview
  17




---



##### Table of Contents



Three months ended September 30,
    
    
    Nine months ended September 30,% Change
    
    
    
    
    
    
    
    
    
    
    % Change2005
    
    
    2004
    
    
    from 2004 (1)
    
    
    2005
    
    
    2004
    
    
    from 2004 (1)(Thousands)
    
    
    
    
    
    
    (Thousands)Revenues
    
    $
    12,176
    
    
    $
    10,457
    
    
    
    +16%
    
    
    $
    35,721
    
    
    $
    27,453
    
    
    
    +30%Costs and expenses:Operating and maintenance
expense
    
    
    8,272
    
    
    
    5,651
    
    
    
    -46%
    
    
    
    16,792
    
    
    
    14,558
    
    
    
    -15%Product cost
    
    
    2,258
    
    
    
    1,445
    
    
    
    -56%
    
    
    
    8,320
    
    
    
    2,816
    
    
    
    -195%Depreciation
    
    
    896
    
    
    
    918
    
    
    
    +2%
    
    
    
    2,694
    
    
    
    2,696
    
    
    
    General and administrative
expense
    
    
    1,555
    
    
    
    763
    
    
    
    -104%
    
    
    
    3,139
    
    
    
    1,894
    
    
    
    -66%Taxes other than income
    
    
    194
    
    
    
    179
    
    
    
    -8%
    
    
    
    532
    
    
    
    537
    
    
    
    +1%Total costs and expenses
    
    
    13,175
    
    
    
    8,956
    
    
    
    -47%
    
    
    
    31,477
    
    
    
    22,501
    
    
    
    -40%Operating income (loss)
    
    
    (999
    )
    
    
    1,501
    
    
    
    NM
    
    
    
    4,244
    
    
    
    4,952
    
    
    
    -14%Equity earnings (loss) 
Discovery Producer
Services LLC
    
    
    66
    
    
    
    (90
    )
    
    
    NM
    
    
    
    2,969
    
    
    
    3,184
    
    
    
    -7%Interest expense
    
    
    (2,014
    )
    
    
    (3,095
    )
    
    
    +35%
    
    
    
    (8,000
    )
    
    
    (9,376
    )
    
    
    +15%Interest income
    
    
    76
    
    
    
    
    
    
    
    NM
    
    
    
    76
    
    
    
    
    
    
    
    NMNet loss
    
    $
    (2,871
    )
    
    $
    (1,684
    )
    
    
    -70%
    
    
    $
    (711
    )
    
    $
    (1,240
    )
    
    
    +43%
 
 (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 September 30, 2005 vs. three months ended September 30, 2004
     18




---



##### Table of Contents



Nine months ended September 30, 2005 vs. nine months ended September 30, 2004
        Results of operations  Gathering and Processing
  19




---



##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Thousands)Segment revenues
    
    $
    650
    
    
    $
    794
    
    
    $
    2,295
    
    
    $
    4,009Costs and expenses:Operating and maintenance expense
    
    
    101
    
    
    
    142
    
    
    
    477
    
    
    
    404Depreciation
    
    
    300
    
    
    
    300
    
    
    
    900
    
    
    
    900Total costs and expenses
    
    
    401
    
    
    
    442
    
    
    
    1,377
    
    
    
    1,304Segment operating income
    
    
    249
    
    
    
    352
    
    
    
    918
    
    
    
    2,705Equity earnings (loss)
    
    
    66
    
    
    
    (90
    )
    
    
    2,969
    
    
    
    3,184Segment profit
    
    $
    315
    
    
    $
    262
    
    
    $
    3,887
    
    
    $
    5,889
 Carbonate Trend
 Three months ended September 30, 2005 vs. three months ended September 30, 2004
      Nine months ended September 30, 2005 vs. nine months ended September 30, 2004
   20




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##### Table of Contents



Discovery Producer Services
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Thousands)Revenues
    
    $
    19,100
    
    
    $
    20,947
    
    
    $
    69,414
    
    
    $
    76,732Costs and expenses, including interest:Operating and maintenance expense:Fuel and shrink replacement
    
    
    7,763
    
    
    
    9,441
    
    
    
    28,598
    
    
    
    36,071Other operating and maintenance expense
    
    
    4,583
    
    
    
    5,840
    
    
    
    14,709
    
    
    
    14,686Depreciation and accretion
    
    
    6,127
    
    
    
    5,671
    
    
    
    18,366
    
    
    
    16,991Interest income
    
    
    (498
    )
    
    
    (153
    )
    
    
    (1,171
    )
    
    
    (345
    )Other expense, net
    
    
    959
    
    
    
    264
    
    
    
    1,488
    
    
    
    1,045Total costs and expenses
    
    
    18,934
    
    
    
    21,063
    
    
    
    61,990
    
    
    
    68,448Net income (loss)
    
    $
    166
    
    
    $
    (116
    )
    
    $
    7,424
    
    
    $
    8,284Williams Partners 40 percent interest
    
    $
    66
    
    
    $
    (46
    )
    
    $
    2,969
    
    
    $
    3,314Capitalized interest amortization
    
    
    
    
    
    
    (44
    )
    
    
    
    
    
    
    (130
    )Equity earnings (loss) per our Consolidated
Statements of Operations
    
    $
    66
    
    
    $
    (90
    )
    
    $
    2,969
    
    
    $
    3,184
 Three months ended September 30, 2005 vs. three months ended September 30, 2004
  
    
    NGL sales volumes decreased from approximately 14.1 million gallons in 2004 to 4.4
million in 2005 with a resulting $7.1 million decrease in product sales revenues. This
decline was due primarily to the temporary shutdown of the Discovery assets for
hurricanes Dennis in July 2005, Katrina in August 2005 and Rita in September 2005.
Total NGL volumes sold in the 2004 period were negatively impacted by an interruption
of service because of an accidental influx of seawater in a lateral while putting in
place a subsea connection to the Front Runner prospect. This decrease was partially
offset
 21




---



##### Table of Contents



by a $1.7 million increase in product sales revenues associated with a 53 percent
increase in average sales prices.
 
    
    Fee-based revenues from transportation services decreased $0.3 million due primarily
to $0.7 million from a lower average natural gas transmission rate and $0.1 million
from lower condensate transportation volumes, partially offset by $0.5 million from
higher natural gas transmission volumes. Average gas transmission volumes for 2004 of
approximately 131,000 MMBtu/d were negatively impacted by a temporary interruption of
service because of an accidental influx of seawater in a lateral while putting in place
a subsea connection to the Front Runner prospect. The 2005 average gas transmission
volumes of approximately 149,000 MMBtu/d were negatively impacted by hurricanes Dennis
in July 2005, Katrina in August 2005 and Rita in September 2005.
    
    Product sales also decreased $0.4 million due to lower sales of excess fuel and
replacement gas in the third quarter of 2005 than 2004.
  
    
    Product sales were also impacted by two processing customers elections to have
Discovery market their NGLs. Discovery sells these NGLs and distributes the proceeds
to them less a marketing fee. The sales related to these two contracts generated an
additional $3.2 million of revenue in the third quarter of 2005. This increase was
offset by a related increase in fuel and shrink replacement discussed below.
    
    Fee-based revenues from gathering services increased $0.4 million due primarily to a
14 percent increase in the average gathering rate and a 14 percent increase in
gathering volumes. This average rate increase resulted from higher gathering rates
associated with the new volumes from the Front Runner, Rock Creek and Tarantula
prospects which came on-line in late 2004. Gathered volumes for 2004 were negatively
impacted by the seawater influx incident discussed above.
    
    Processing and fractionation revenues increased $0.9 million due primarily to higher
fractionated volumes in 2005 as compared to 2004. The increase in fractionated volumes
was due primarily to the new volumes from Front Runner.
       22




---



##### Table of Contents



Nine months ended September 30, 2005 vs. nine months ended September 30, 2004
  
    
    Increasing gas prices during the first half of 2004 made it more economical for
Discoverys customers to bypass the processing plant rather than to process the gas,
leaving Discovery with higher levels of excess fuel and replacement gas in 2004 than
2005. This excess natural gas was sold in the market and generated $10.7 million
higher Product sales revenues in the first nine months of 2004.
    
    Total NGL volumes sold in the 2004 period were approximately 45 million gallons as
compared to 35 million gallons in 2005, which resulted in a $7.2 million decrease in
revenues between the two periods. This decrease is primarily related to the
third-quarter 2005 decline discussed previously. This decrease was partially offset by
a $5.0 million revenue increase associated with a 20 percent increase in average sales
prices.
    
    Fee-based revenues from transportation services decreased $2.7 million due primarily
to $2.1 million from a lower average natural gas transmission rate and $0.6 million
from lower condensate transportation volumes, partially offset by $0.5 million from
higher natural gas transmission volumes.
    
    Other revenues declined $1.2 million due largely to lower platform rental fees.
  
    
    Fee-based revenues from gathering increased $0.8 million due primarily to a 32
percent increase in the average gathering rate associated with new volumes from the
Front Runner, Rock Creek and Tarantula prospects which came on-line in late 2004.
    
    Processing and fractionation revenues increased $2.0 million due primarily to an
increase in fractionated volumes in 2005 from 2004 related primarily to the new volumes
from Front Runner.
    
    Product sales also increased $5.3 million for the NGL sales related to two
processing customers election to have Discovery market their NGLs for a fee under an
option in their contracts as discussed above. This increase was offset by a related
increase in fuel and shrink replacement discussed below.
    
    In 2005, Discovery received a $1.4 million volume threshold deficiency payment
related to a volume shortfall under a transportation contract.
    23




---



##### Table of Contents



Outlook
   
    
    We anticipate recompletions and workovers to partially offset production declines from
the wells currently connected to the Carbonate Trend pipeline.
    
    Following Hurricane Katrina, Discoverys Larose plant was one of the first large-scale
gas processing facilities to return to service in that area of Louisiana. In October 2005,
Discovery conducted two expedited open seasons for firm transportation to provide outlets
for natural gas that has been stranded following damage to third-party facilities during
hurricanes Katrina and Rita. Both of these open seasons were for up to 250,000 MMBtu/d.
The first of these includes the construction of a new receipt point at Texas Eastern
Transmission Companys Larose compressor station in Lafourche Parish, Louisiana. The
second is via an existing interconnection to Tennessee Gas Pipelines Line 500 in
Terrebonne Parish, Louisiana. We expect to begin receiving additional incremental volumes
from these receipt points by December 2005, and anticipate continued throughput for the
subsequent three to six months. Shippers will reimburse Discovery for all capital
necessary to establish these connections.
    
    With the current oil and gas price environment, drilling activity across the shelf and
the deepwater of the Gulf of Mexico has been robust. However, the availability of
specialized rigs necessary to drill in the deepwater areas, such as those in and around
Discoverys gathering areas, limits producers ability 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.
    
    We expect continued growth in the average volumes of natural gas gathered by Discovery
attributable to new production from the Front Runner, Rock Creek and Tarantula prospects,
which we expect to offset natural declines in production from existing connected wells.
    
    Late in the fourth quarter of 2005, Discovery expects to connect a new well with an
estimated initial volume of 35,000 MMBtu/d. Capital to connect this new well will be
provided by others.
    
    In July 2005, Discovery executed an agreement with three producers to construct an
approximately 35-mile gathering pipeline lateral to connect Discoverys existing pipeline
system to these producers production facilities for the Tahiti prospect in the deepwater
region of the Gulf of Mexico. In late August 2005, the Tahiti producers formally decided
to proceed with the project. The Tahiti pipeline lateral expansion is expected to have a
design capacity of approximately 200 million cubic feet per day, and its anticipated
completion date is May 1, 2007.
 24




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##### Table of Contents



Results of operations  NGL Services
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Thousands)Segment revenues
    
    $
    11,526
    
    
    $
    9,663
    
    
    $
    33,426
    
    
    $
    23,444Costs and expenses:Operating and maintenance expense
    
    
    8,171
    
    
    
    5,509
    
    
    
    16,315
    
    
    
    14,154Product cost
    
    
    2,258
    
    
    
    1,445
    
    
    
    8,320
    
    
    
    2,816Depreciation
    
    
    596
    
    
    
    618
    
    
    
    1,794
    
    
    
    1,796General and administrative expense  direct
    
    
    308
    
    
    
    118
    
    
    
    782
    
    
    
    376Taxes other than income
    
    
    194
    
    
    
    179
    
    
    
    532
    
    
    
    537Total costs and expenses
    
    
    11,527
    
    
    
    7,869
    
    
    
    27,743
    
    
    
    19,679Segment profit (loss)
    
    $
    (1
    )
    
    $
    1,794
    
    
    $
    5,683
    
    
    $
    3,765
 Three months ended September 30, 2005 vs. three months ended September 30, 2004
  
    
    Storage revenue increased $1.2 million due to higher contracted storage volumes and
a slightly higher average per-unit storage rate. Volumes in the third quarter of 2004
were initially lower due to the 67 percent increase in the one-year storage rate on
April 1, 2004 primarily reflecting the pass through of increased costs to comply with
Kansas Department of Health and Environment (KDHE) regulations. Subsequently, the
volumes returned to more normal levels.
    
    Product sales of surplus propane volumes created through our product optimization
activities increased $0.8 million due to increased volumes and higher average sales
prices. We actively manage the fractionation process to optimize the resulting mix of
products. This increase was offset by the related increase in Product cost.
  Three months endedSeptember 30,2005
    
    
    2004(Thousands)Operating and maintenance expense:Salaries and benefits
    
    $
    697
    
    
    $
    675Outside services and other
    
    
    2,484
    
    
    
    2,199Fuel and
power costs
    
    
    2,801
    
    
    
    2,235Product imbalance adjustments
    
    
    2,189
    
    
    
    400Total operating and maintenance expense
    
    $
    8,171
    
    
    $
    5,509
 Outside services and other increased $0.3 million due primarily to increased cavern
workovers in the third quarter of 2005 as compared to 2004. In 2004, a greater number
of these workovers were completed in the second quarter.


25



---



##### Table of Contents



Nine months ended September 30, 2005 vs. nine months ended September 30, 2004
  
    
    Product sales were $5.8 million higher due primarily to the sale of surplus propane
volumes created through our product optimization activities. This increase was offset
by the related increase in Product cost.
    
    Storage revenues increased $3.4 million due primarily to higher average per-unit
storage rates for the first quarter of 2005 and higher storage volumes in the second
and third quarters. The published rate for one-year storage contracts increased 67
percent on April 1, 2004, primarily reflecting the pass through of increased costs to
comply with KDHE regulations. The storage volumes in the second and third quarters of
2004 initially declined due to these higher storage rates. Subsequently, the volumes
returned to more normal levels.
    
    Fractionation revenues increased $0.6 million due primarily to a 12 percent increase
in the average fractionation rate.
 26




---



##### Table of Contents



Nine months endedSeptember 30,2005
    
    
    2004(Thousands)Operating and maintenance expense:Salaries and benefits
    
    $
    2,014
    
    
    $
    2,060Outside services and other
    
    
    5,305
    
    
    
    6,418Fuel and
power costs
    
    
    7,387
    
    
    
    6,173Product imbalance adjustments
    
    
    1,609
    
    
    
    (497
    )Total operating and maintenance expense
    
    $
    16,315
    
    
    $
    14,154
       Outlook
    27




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##### Table of Contents



Financial condition and liquidity
 Liquidity and Capital Resources  Williams Partners L.P.
   
    
    Indemnification of environmental and related expenditures for a period of three years
(for certain of those expenditures) up to $14 million, which includes between $3.4 million
and $4.6 million for the restoration activities due to the partial erosion of the
Carbonate Trend pipeline overburden by Hurricane Ivan, approximately $3.1 million for
capital expenditures related to KDHE-related cavern compliance at our Conway storage
facilities, and approximately $1 million for our 40 percent share of Discoverys costs for
marshland restoration and repair or replacement of Paradis emission-control flare.
    
    An annual credit for general and administrative expenses of $3.9 million in 2005 ($1.4
million pro-rated for the portion of the year from August 23 to December 31), $3.2 million
in 2006, $2.4 million in 2007, $1.6 million in 2008 and $0.8 million in 2009.
    
    Up to $3.4 million to fund our 40 percent 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.
    
    Reimbursement of our 40 percent share of any amounts the Federal Energy Regulatory
Commission requires Discovery to refund to shippers for retained gas gains or
over-recovery of lost and unaccounted for gas in excess of a specified amount.
   
    
    maintenance capital expenditures 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.
  
    
    We require cash in order to provide services to our storage customers who prepaid their
annual storage contracts in April 2005. The storage year for customer contracts at our
Conway storage facility runs from April 1 of a year to March 31 of the following year. We
typically receive payment for these one-year contracts in advance in April after the
beginning of the storage year and recognize the associated revenue
 28




---



##### Table of Contents



over the course of the storage year. As of September 30, 2005, our deferred storage revenue
is $6.9 million. We retained a portion of the proceeds from our IPO for working capital
purposes associated with this deferred revenue.
 
    
    We expect to make minimum quarterly distributions of $5 million ($0.35 per common and
subordinated unit and a two percent payment on the general partner interest) to our
unitholders and our general partner to the extent we have sufficient cash from operations
after establishment of cash reserves and payment of fees and expenses. On October 24,
2005, the board of directors of our general partner declared a cash distribution of $0.1484
per unit for the period from the closing of our initial public offering, August 23, 2005,
through September 30, 2005. The $0.1484 per unit amount is pro-rated based on a quarterly
distribution amount of $0.35 per unit. We intend to pay the quarterly distribution of $2.1
million on November 14, 2005.
    
    Maintenance capital expenditures for Conway assets are estimated to be approximately
$5.4 million for 2005, of which approximately $1.9 million has been spent through September
30, 2005. The amount of estimated maintenance capital expenditures for the Conway assets
includes approximately $1.9 million to be spent in connection with the installation of
wellhead control equipment and well meters and KDHE-related cavern compliance costs. In
the omnibus agreement, Williams agreed to reimburse us for the cost of these expenditures
as previously discussed.
 Liquidity and Capital Resources  Discovery
   
    
    potential shipper refunds that may be required by the Federal Energy Regulatory
Commission for retained system gas gains and the over-recovery of lost and unaccounted-for
gas up to a specified amount,
    
    $1 million of compressor modifications at the Larose gas processing plant,
    
    and working capital needs.
   29




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##### Table of Contents



Cash Flows and Capital Expenditures  Williams Partners L.P.
 Nine months endedSeptember 30,2005
    
    2004(Thousands)Net cash provided by operating activities
    
    $
    7,277
    
    
    $
    4,294Net cash used provided by investing activities
    
    
    (26,260
    )
    
    
    (635
    )Net cash provided (used) by financing activities
    
    
    33,465
    
    
    
    (3,659
    )
    Cash Flows and Capital Expenditures  Discovery
  30




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##### Table of Contents



Nine months endedSeptember 30,2005
    
    
    2004(Thousands)Operating Activities:Net income
    
    $
    7,424
    
    
    $
    8,284Adjustments to reconcile to cash provided by operations:Depreciation and accretion
    
    
    18,366
    
    
    
    16,991Cash provided (used) by changes in assets and liabilities:Accounts receivable
    
    
    4,083
    
    
    
    (2,828
    )Inventory
    
    
    (235
    )
    
    
    69Other current assets
    
    
    143
    
    
    
    1,311Accounts payable
    
    
    (915
    )
    
    
    3,956Other current liabilities
    
    
    (516
    )
    
    
    (678
    )Accrued liabilities
    
    
    534
    
    
    
    1,329Net cash provided by operating activities
    
    
    28,884
    
    
    
    28,434Investing Activities:Property, plant and equipment:Capital expenditures
    
    
    (9,327
    )
    
    
    (33,604
    )Change in accounts payable  capital expenditures
    
    
    (10,224
    )
    
    
    2,002Increase in restricted cash and cash equivalents
    
    
    (45,501
    )
    
    
    Net cash used by investing activities
    
    
    (65,052
    )
    
    
    (31,602
    )Financing Activities:Contributions from members
    
    
    48,303
    
    
    
    Distributions to members
    
    
    (43,764
    )
    
    
    Net cash provided by financing activities
    
    
    4,539
    
    
    
    Net decrease in cash and cash equivalents
    
    $
    (31,629
    )
    
    $
    (3,168
    )
    31




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##### Table of Contents



Contractual Cash Obligations  Williams Partners L.P.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  Commodity Price Risk
  Interest Rate Risk
  
 Item 4. Controls and Procedures
   32




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##### Table of Contents



PART II OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 6. Exhibits.
     33




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##### Table of Contents



SIGNATURE
  WILLIAMS PARTNERS L.P.By: Williams Partners GP LLC, its general partner/s/Ted T. TimmermansTed. T. TimmermansController (Duly Authorized Officer and Chief Accounting Officer)November 1, 2005
 34




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##### Table of Contents



EXHIBIT INDEX
 Exhibit Number
    
    Description31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.32
    
    Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer
 35