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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, 2006
 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)
 
  
  þ o
  Large accelerated filero
    
    Accelerated filero
    
    Non-accelerated filerþ
 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, 2006 and 2005
    
    
    3Consolidated Balance Sheets  March 31, 2006 and December 31, 2005
    
    
    4Consolidated Statements of Cash Flows  Three Months Ended March 31, 2006 and 2005
    
    
    5Consolidated Statement of Partners Capital from January 1, 2006 to March 31, 2006
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23Part II. Other InformationItem 1. Legal Proceedings
    
    
    24Item 5. Other Information
    
    
    24Item 6. Exhibits
    
    
    25Rule 13a-14(a)/15d-14(a) Certification of CEORule 13a-14(a)/15d-14(a) Certification of CFOSection 1350 Certifications of CEO and CFO
  FORWARD-LOOKING STATEMENTS
    
    
    We may not have sufficient cash from operations to enable us to pay the minimum
quarterly 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 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, 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.
 1




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
    
    Our processing, fractionation and storage businesses 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.
    
    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 currently 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.
    
    Lower natural gas and oil 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.
    
    Our operations are subject to operational hazards and unforeseen interruptions for which
we may or may not be adequately insured.
  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 31,2006
    
    
    2005Revenues:Storage
    
    $
    5,105
    
    
    $
    4,388Fractionation
    
    
    3,953
    
    
    
    2,430Gathering
    
    
    733
    
    
    
    880Product sales:Affiliate
    
    
    6,141
    
    
    
    2,829Third-party
    
    
    
    
    
    
    63Other
    
    
    1,131
    
    
    
    779Total revenues
    
    
    17,063
    
    
    
    11,369Costs and expenses:Operating and maintenance expense:Affiliate
    
    
    4,000
    
    
    
    2,653Third-party
    
    
    3,691
    
    
    
    3,075Product cost
    
    
    5,723
    
    
    
    2,735Depreciation and accretion
    
    
    900
    
    
    
    905General and administrative expense:Affiliate
    
    
    1,415
    
    
    
    687Third-party
    
    
    533
    
    
    
    19Taxes other than income
    
    
    207
    
    
    
    192Total costs and expenses
    
    
    16,469
    
    
    
    10,266Operating income
    
    
    594
    
    
    
    1,103Equity earnings  Discovery Producer Services
    
    
    3,781
    
    
    
    2,212Interest expense:Affiliate
    
    
    (15
    )
    
    
    (2,805
    )Third-party
    
    
    (221
    )
    
    
    (199
    )Interest income
    
    
    70
    
    
    
    Net income
    
    $
    4,209
    
    
    $
    311Allocation of 2006 net income:Net income
    
    $
    4,209Allocation of net loss to general partner
    
    
    (689
    )Allocation of net income to limited partners
    
    $
    4,898Basic and diluted net income per limited partner unit:Common units
    
    $
    0.35Subordinated units
    
    
    0.35Weighted average number of units outstanding:Common units
    
    
    7,006,146Subordinated units
    
    
    7,000,000
  3




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WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2006
    
    
    2005(Unaudited)(Thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,315
    
    
    $
    6,839Accounts receivable:Trade
    
    
    1,424
    
    
    
    1,840Other
    
    
    1,524
    
    
    
    2,104Gas purchase contract  affiliate
    
    
    5,155
    
    
    
    5,320Product imbalance
    
    
    295
    
    
    
    760Other current assets
    
    
    1,370
    
    
    
    1,133Total current assets
    
    
    14,083
    
    
    
    17,996Investment in Discovery Producer Services
    
    
    149,641
    
    
    
    150,260Property, plant and equipment, net
    
    
    68,239
    
    
    
    67,931Gas purchase contract  noncurrent  affiliate
    
    
    3,565
    
    
    
    4,754Total assets
    
    $
    235,528
    
    
    $
    240,941LIABILITIES AND PARTNERS CAPITALCurrent liabilities:Accounts payable:Trade
    
    $
    3,269
    
    
    $
    3,906Affiliate
    
    
    2,378
    
    
    
    4,729Deferred revenue
    
    
    222
    
    
    
    3,552Accrued liabilities
    
    
    2,718
    
    
    
    2,373Total current liabilities
    
    
    8,587
    
    
    
    14,560Environmental remediation liabilities
    
    
    3,964
    
    
    
    3,964Other noncurrent liabilities
    
    
    763
    
    
    
    762Commitments and contingent liabilities (Note 5)Partners capital
    
    
    222,214
    
    
    
    221,655Total liabilities and partners capital
    
    $
    235,528
    
    
    $
    240,941
  4




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WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2005(Thousands)OPERATING ACTIVITIES:Net income
    
    $
    4,209
    
    
    $
    311Adjustments to reconcile to cash provided (used) by operations:Depreciation and accretion
    
    
    900
    
    
    
    905Amortization of gas purchase contract  affiliate
    
    
    1,354
    
    
    
    Distributions in excess of / (undistributed) equity earnings of
Discovery Producer Services
    
    
    619
    
    
    
    (2,212
    )Cash provided (used) by changes in assets and liabilities:Accounts receivable
    
    
    996
    
    
    
    678Other current assets
    
    
    (237
    )
    
    
    (45
    )Accounts payable
    
    
    (3,028
    )
    
    
    (1,495
    )Accrued liabilities
    
    
    345
    
    
    
    (209
    )Deferred revenue
    
    
    (3,330
    )
    
    
    (3,200
    )Other, including changes in noncurrent liabilities
    
    
    567
    
    
    
    1,212Net cash provided (used) by operating activities
    
    
    2,395
    
    
    
    (4,055
    )INVESTING ACTIVITIES:Capital expenditures
    
    
    (1,165
    )
    
    
    (212
    )Net cash used by investing activities
    
    
    (1,165
    )
    
    
    (212
    )FINANCING ACTIVITIES:Distributions to unitholders
    
    
    (5,002
    )
    
    
    Contributions per omnibus agreement
    
    
    1,248
    
    
    
    Changes in advances from affiliates  net
    
    
    
    
    
    
    4,267Net cash provided (used) by financing activities
    
    
    (3,754
    )
    
    
    4,267Decrease in cash and cash equivalents
    
    
    (2,524
    )
    
    
    Cash and cash equivalents at beginning of period
    
    
    6,839
    
    
    
    Cash and cash equivalents at end of period
    
    $
    4,315
    
    
    $
    
  5




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WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED STATEMENT OF PARTNERS CAPITAL
 (Unaudited)
 TotalLimited Partners
    
    
    General
    
    
    PartnersCommon
    
    
    Subordinated
    
    
    Partner
    
    
    Capital(Thousands)Balance  January 1, 2006
    
    $
    108,526
    
    
    $
    108,491
    
    
    $
    4,638
    
    
    $
    221,655Net income (loss) attributable to the period January 1,
2006 through March 31, 2006
    
    
    2,449
    
    
    
    2,449
    
    
    
    (689
    )
    
    
    4,209Cash distributions ($.35 per unit)
    
    
    (2,452
    )
    
    
    (2,450
    )
    
    
    (100
    )
    
    
    (5,002
    )Contributions pursuant to the Omnibus Agreement
    
    
    
    
    
    
    
    
    
    
    1,248
    
    
    
    1,248Other
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    104Balance  March 31, 2006
    
    $
    108,627
    
    
    $
    108,490
    
    
    $
    5,097
    
    
    $
    222,214
  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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WILLIAMS PARTNERS L.P.
 NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)
 Note 3. Allocation of Net Income and Distributions
  Allocation to general partner:Net income
    
    $
    4,209Charges direct to general partner:Reimbursable general and administrative costs
    
    
    789Income before direct charges to general partner
    
    
    4,998General partners share of net income
    
    
    2.0
    %General partners allocated share of net income before
direct charges
    
    
    100Direct charges to general partner
    
    
    (789
    )Net loss allocated to general partner
    
    $
    (689
    )Net income
    
    $
    4,209Net loss allocated to general partner
    
    
    (689
    )Net income allocated to limited partners
    
    $
    4,898
  Per Unit
    
    Common
    
    Subordinated
    
    General
    
    Total CashPayment Date
    
    Distribution
    
    Units
    
    Units
    
    Partner
    
    Distribution11/14/2005 (a)
    
    $
    0.1484
    
    
    $
    1,039
    
    
    $
    1,039
    
    
    $
    42
    
    
    $
    2,1202/14/2006
    
    $
    0.3500
    
    
    $
    2,452
    
    
    $
    2,450
    
    
    $
    100
    
    
    $
    5,0025/15/2006 (b)
    
    $
    0.3800
    
    
    $
    2,662
    
    
    $
    2,660
    
    
    $
    109
    
    
    $
    5,431
 
 (a)
    
    This distribution represents the $0.35 per unit minimum quarterly distribution
pro-rated for the 39-day period following the IPO closing date (August 23, 2005 through
September 30, 2005).(b)
    
    The board of directors of our general partner declared this cash distribution on April
27, 2006 to be paid on May 15, 2006 to unitholders of record at the close of business on
May 8, 2006. 8




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WILLIAMS PARTNERS L.P.
 NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)
 Note 4. Investment in Discovery Producer Services LLC
  March 31,
    
    
    December 31,2006
    
    
    2005(Unaudited)Current assets
    
    $
    62,700
    
    
    $
    70,525Noncurrent restricted cash and cash equivalents
    
    
    41,859
    
    
    
    44,559Property, plant and equipment
    
    
    340,935
    
    
    
    344,743Current liabilities
    
    
    (27,475
    )
    
    
    (45,070
    )Non-current liabilities
    
    
    (1,146
    )
    
    
    (1,121
    )Members capital
    
    $
    416,873
    
    
    $
    413,636
 Three Months EndedMarch 31,2006
    
    
    2005(Unaudited)Revenues
    
    $
    62,120
    
    
    $
    27,289Costs and expenses
    
    
    53,294
    
    
    
    22,042Interest income
    
    
    (626
    )
    
    
    (284
    )Net income
    
    $
    9,452
    
    
    $
    5,531
 Note 5. Commitments and Contingencies
 Environmental Matters.
  9




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WILLIAMS PARTNERS L.P.
 NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)
  Hurricane Costs.
 Other.
 10




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WILLIAMS PARTNERS L.P.
 NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)
 Note 6. Segment Disclosures
  Gathering &
    
    
    NGLProcessing
    
    
    Services
    
    
    Total(Thousands)Three Months Ended March 31, 2006:Segment revenues
    
    $
    733
    
    
    $
    16,330
    
    
    $
    17,063Operating and maintenance expense
    
    
    242
    
    
    
    7,449
    
    
    
    7,691Product cost
    
    
    
    
    
    
    5,723
    
    
    
    5,723Depreciation and accretion
    
    
    300
    
    
    
    600
    
    
    
    900Direct general and administrative expense
    
    
    2
    
    
    
    301
    
    
    
    303Taxes other than income
    
    
    
    
    
    
    207
    
    
    
    207Segment operating income
    
    
    189
    
    
    
    2,050
    
    
    
    2,239Equity earnings
    
    
    3,781
    
    
    
    
    
    
    
    3,781Segment profit
    
    $
    3,970
    
    
    $
    2,050
    
    
    $
    6,020Reconciliation to the Consolidated Statements of Income:Segment operating income
    
    
    
    
    
    
    
    
    
    $
    2,239General and administrative expenses:Allocated-affiliate
    
    
    
    
    
    
    
    
    
    
    (1,117
    )Third party-direct
    
    
    
    
    
    
    
    
    
    
    (528
    )Combined operating income
    
    
    
    
    
    
    
    
    
    $
    594Three Months Ended March 31, 2005:Segment revenues
    
    $
    880
    
    
    $
    10,489
    
    
    $
    11,369Operating and maintenance expense
    
    
    107
    
    
    
    5,621
    
    
    
    5,728Product cost
    
    
    
    
    
    
    2,735
    
    
    
    2,735Depreciation and accretion
    
    
    300
    
    
    
    605
    
    
    
    905Direct general and administrative expense
    
    
    
    
    
    
    203
    
    
    
    203Taxes other than income
    
    
    
    
    
    
    192
    
    
    
    192Segment operating income
    
    
    473
    
    
    
    1,133
    
    
    
    1,606Equity earnings
    
    
    2,212
    
    
    
    
    
    
    
    2,212Segment profit
    
    $
    2,685
    
    
    $
    1,133
    
    
    $
    3,818Reconciliation to the Consolidated Statements of Income:Segment operating income
    
    
    
    
    
    
    
    
    
    $
    1,606Allocated general and administrative expense
    
    
    
    
    
    
    
    
    
    
    (503
    )Combined operating income
    
    
    
    
    
    
    
    
    
    $
    1,103
 11




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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 Part I of
this quarterly report.
 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 integrated 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
   Results of operations
 Consolidated Overview
  12




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Three months ended March 31,
    
    
    % Change2006
    
    
    2005
    
    
    from 2005 (1)(Thousands)Revenues
    
    $
    17,063
    
    
    $
    11,369
    
    
    
    +50
    %Costs and expenses:Operating and maintenance expense
    
    
    7,691
    
    
    
    5,728
    
    
    
    -34
    %Product cost
    
    
    5,723
    
    
    
    2,735
    
    
    
    -109
    %Depreciation and accretion
    
    
    900
    
    
    
    905
    
    
    
    +1
    %General and administrative expense
    
    
    1,948
    
    
    
    706
    
    
    
    -176
    %Taxes other than income
    
    
    207
    
    
    
    192
    
    
    
    -8
    %Total costs and expenses
    
    
    16,469
    
    
    
    10,266
    
    
    
    -60
    %Operating income
    
    
    594
    
    
    
    1,103
    
    
    
    -46
    %Equity earnings  Discovery
    
    
    3,781
    
    
    
    2,212
    
    
    
    +71
    %Interest expense
    
    
    (236
    )
    
    
    (3,004
    )
    
    
    +92
    %Interest income
    
    
    70
    
    
    
    
    
    
    NMNet income
    
    $
    4,209
    
    
    $
    311
    
    
    NM
 
 (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, 2006 vs. three months ended March 31, 2005
        13




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Results of operations  Gathering and Processing
  Three months endedMarch 31,2006
    
    
    2005(Thousands)Segment revenues
    
    $
    733
    
    
    $
    880Costs and expenses:Operating and maintenance expense
    
    
    242
    
    
    
    107Depreciation
    
    
    300
    
    
    
    300General and administrative expense  direct
    
    
    2
    
    
    
    Total costs and expenses
    
    
    544
    
    
    
    407Segment operating income
    
    
    189
    
    
    
    473Equity earnings  Discovery
    
    
    3,781
    
    
    
    2,212Segment profit
    
    $
    3,970
    
    
    $
    2,685
 Carbonate Trend
 Three months ended March 31, 2006 vs. three months ended March 31, 2005
    14




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Discovery Producer Services
  Three months endedMarch 31,2006
    
    
    2005(Thousands)Revenues
    
    $
    62,120
    
    
    $
    27,289Costs and expenses, including interest:Product cost and shrink replacement
    
    
    41,550
    
    
    
    11,124Operating and maintenance expense
    
    
    4,822
    
    
    
    3,993General and administrative expense
    
    
    690
    
    
    
    500Depreciation and accretion
    
    
    6,379
    
    
    
    6,113Interest income
    
    
    (626
    )
    
    
    (284
    )Other (income) expense, net
    
    
    (147
    )
    
    
    312Total costs and expenses, including interest
    
    
    52,668
    
    
    
    21,758Net income
    
    $
    9,452
    
    
    $
    5,531Williams Partners 40 percent interest -
Equity earnings per our Consolidated Statements of Income
    
    $
    3,781
    
    
    $
    2,212
 Three months ended March 31, 2006 vs. three months ended March 31, 2005
  
    
    Product sales increased $36.8 million for NGL sales related to third-party processing
customers elections to have Discovery market their NGLs for a fee under an option in their
contracts. These sales were offset by higher associated product costs of $36.8 million
discussed below.
    
    Processing and fractionation revenues increased $5.6 million including $6.7 million in
additional fee-based revenues related to the TGP and TETCO open seasons discussed above and
$0.8 million increased volumes from the Front Runner prospect, partially offset by normal
reservoir declines.
    
    Transportation revenue increased $2.1 million including $3.2 million in additional
fee-based revenues related to the TGP and TETCO open seasons discussed above, partially
offset by $1.0 million related to normal reservoir declines.
 15




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
    
    Product sales decreased approximately $8.5 million as a result of 60 percent lower NGL
sales volumes following Hurricanes Katrina and Rita, partially offset by a $1.8 million
increase associated with 32 percent higher average sales prices.
    
    Product sales also decreased $0.9 million due to the absence of excess fuel and shrink
replacement gas sales in 2006.
    
    Gathering revenues decreased $2.1 million due primarily to a $1.4 million deficiency
payment received in the first quarter of 2005.
        Outlook
   16




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##### Table of Contents




    
    In 2006, recompletions and workovers may not offset production declines from the wells
currently connected to the Carbonate Trend pipeline.
    
    Throughput volumes for Discovery resulting from the TETCO open season ended on March 14,
2006. Currently Discovery continues to receive reduced throughput volumes from TGP.
Discovery is negotiating for the retention of some of this gas on a long-term basis and
will compete with several other plants in the area for this business.
    
    We anticipate lower gathered volumes from Discoverys pre-hurricane sources throughout
2006. The 2005 hurricanes caused a significant disruption in the normal operations of our
customers including critical recompletion and drilling activity necessary to sustain and
improve their production levels.
    
    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 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.
    
    On March 31, 2006, Discovery connected a new well in ATPs Gomez prospect, with initial
volume of approximately 13,000 million British Thermal Units per day (MMBtu/d) and may
increase to approximately 50,000 MMBtu/d by Fall 2006.
    
    We anticipate a significant increase in Discoverys property damage insurance premiums,
which are due in October 2006. The expected increase is related to an overall increase in
premiums for property located in the Gulf Coast area following the 2005 hurricanes.
 Results of operations  NGL Services
  Three months endedMarch 31,2006
    
    
    2005(Thousands)Segment revenues
    
    $
    16,330
    
    
    $
    10,489Costs and expenses:Operating and maintenance expense
    
    
    7,449
    
    
    
    5,621Product cost
    
    
    5,723
    
    
    
    2,735Depreciation and accretion
    
    
    600
    
    
    
    605General and administrative expense  direct
    
    
    301
    
    
    
    203Taxes other than income
    
    
    207
    
    
    
    192Total costs and expenses
    
    
    14,280
    
    
    
    9,356Segment profit
    
    $
    2,050
    
    
    $
    1,133
 17




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##### Table of Contents



Three months ended March 31, 2006 vs. three months ended March 31, 2005
  
    
    Product sales were $3.2 million higher due primarily to the sale of normal butane
and propylene. The $2.0 million increase in normal butane resulted from the sale of
product that was previously purchased for operating supply at our storage facilities.
The $1.1 million increase in propylene sales resulted from a loss allowance retained
from the unloading of railcars. This volume accumulated in 2004 and 2005. This
increase was largely offset by the related increase in Product cost.
    
    Fractionation revenues increased $1.5 million due primarily to a 35 percent increase
in the average fractionation rate related to the pass through to customers of increased
fuel and power costs and 21 percent higher volumes in the first three months of 2006
compared to the first three months of 2005. The increased fractionation volumes are a
result of increased customer throughput in anticipation of a scheduled turnaround in
April 2006 and the elimination of Conways backlogged product at the storage facility.
    
    Storage revenues increased $0.7 million due primarily to higher average per-unit
storage rates for the 2005-2006 term and higher storage volumes from additional
short-term storage leases caused by the reduced demand for propane due to the unusually
warm temperatures in the early winter months of 2006.
    
    Other revenues increased $0.4 million due to increased butane conversion revenue and
increased terminaling revenue.
  Three months endedMarch 31,2006
    
    
    2005(Thousands)Operating and maintenance expense:Salaries and benefits
    
    $
    701
    
    
    $
    661Outside services and other
    
    
    3,492
    
    
    
    1,555Fuel and power
    
    
    3,658
    
    
    
    2,268Product imbalance expense (income)
    
    
    (402
    )
    
    
    1,137Total operating and maintenance expense
    
    $
    7,449
    
    
    $
    5,621
 
    
    Outside services and other increased $1.9 million due primarily to increased storage
cavern workovers to meet KDHE requirements.
    
    Fuel and power costs increased $1.4 million due primarily to:
 
    
    $0.5 million higher average cost due to a 23 percent increase in the price of natural gas;
    
    $0.4 million higher average cost associated with a long-term physical natural gas contract; and
    
    $0.4 million increase due to a 19 percent increase in the consumption of natural gas
associated with higher fractionated volumes.
 18




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##### Table of Contents




    
    Product imbalance expense (income) had a favorable change of $1.5 million due primarily
to:
 
    
    $1.2 million of gains recognized from the management of the fractionation process to
optimize the resulting mix of products which typically results in surplus propane
volumes and deficit ethane volumes; and
    
    $0.8 million lower product imbalance valuation adjustments.
    Outlook
    Financial Condition and Liquidity
 Outlook for 2006
  
    
    The issuance of common units contemplated in our Form S-1 filed on April 7, 2006;
    
    The issuance of senior notes in a private placement concurrent with the common unit offering;
    
    Cash and cash equivalents;
    
    Cash generated from operations;
    
    Cash distributions from Discovery and Four Corners;
    
    Capital contributions from Williams pursuant to an omnibus agreement; and
    
    Credit facilities, as needed.
  
    
    Acquisition of a 25.1 percent interest in Four Corners;
    
    Maintenance capital expenditures for our Conway assets;
    
    Capital contributions to Discovery for its capital expenditure program; and
    
    Minimum quarterly distributions to our unitholders.
 19




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##### Table of Contents



Discovery
    Capital Contributions from Williams
  
    
    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 $1.0 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 $3.2 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.
    
    Capital contributions from Williams of approximately $1.0 million for expensed
KDHE-related compliance work at our Conway storage facilities.
 Credit Facilities
   20




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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.
    Working Capital Attributable to Deferred Revenues
  Cash Distributions to Unitholders
  Results of Operations  Cash Flows
 Williams Partners L.P.
 Three months endedMarch 31,2006
    
    
    2005(Thousands)Net cash provided (used) by operating activities
    
    $
    2,395
    
    
    $
    (4,055
    )Net cash used by investing activities
    
    $
    (1,165
    )
    
    $
    (212
    )Net cash provided (used) by financing activities
    
    $
    (3,754
    )
    
    $
    4,267
 21




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##### Table of Contents




    
    $4.4 million increase in distributed earnings from Discovery; and
    
    $2.8 million in lower interest expense due to the forgiveness by Williams of advances to
us at the closing of our IPO.
   Discovery  100 percent
  Three months endedMarch 31,2006
    
    
    2005(Thousands)Operating Activities:Net income
    
    $
    9,452
    
    
    $
    5,531Adjustments to reconcile to cash provided by operations:Depreciation and accretion
    
    
    6,379
    
    
    
    6,113Cash provided (used) by changes in assets and liabilities
    
    
    2,684
    
    
    
    (3,663
    )Net cash provided by operating activities
    
    
    18,515
    
    
    
    7,981Investing Activities:Property, plant and equipment:Capital expenditures
    
    
    (2,546
    )
    
    
    (3,638
    )Change in accounts payable  capital expenditures
    
    
    454
    
    
    
    (3,459
    )Decrease in restricted cash
    
    
    2,700
    
    
    
    Net cash provided (used) by investing activities
    
    
    608
    
    
    
    (7,097
    )Financing Activities:Contributions from members
    
    
    7,383
    
    
    
    Distributions to members
    
    
    (13,598
    )
    
    
    Net cash used by financing activities
    
    
    (6,215
    )
    
    
    Net increase in cash and cash equivalents
    
    $
    12,908
    
    
    $
    884
  22




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##### Table of Contents




    
    $13.6 million of distributions paid to members, including a regular quarterly
distribution of $11.0 million; partially offset by
    
    $7.4 million of capital contributions from members for the construction of the
Tahiti pipeline lateral expansion.
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Commodity Price Risk
  
 Item 4. Controls and Procedures
   23




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##### Table of Contents



PART II OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 5. Other Information
     Relationships
  24




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##### Table of Contents



Item 6. Exhibits
  ExhibitNumber
    
    
    
    Description*# Exhibit 2
    
    
    
    Purchase and Sale agreement, dated April 6, 2006, by and among Williams Energy
Services, LLC, Williams Field Services Group, LLC, Williams Field Services
Company, LLC, Williams Partners GP LLC, Williams Partners L.P. and Williams
Partners Operating LLC (attached as Exhibit 2.1 to Williams Partners L.P.s
current report on Form 8-K (File No. 001-32599) filed with the SEC on April 7,
2006.*Exhibit 10
    
    
    
    Credit agreement dated as of
May 1, 2006 among Williams Partners L.P., The Williams
Companies, Inc., Northwest Pipeline
Corporation, Transcontinental Gas Pipeline Corporation, and Citibank,
N.A., as administrative agent
(attached as Exhibit 10.1 to The Williams Companies, Incs current report on Form 8-K (File No.
001-04174) filed with the SEC on May 1, 2006).+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.
 
 *
    
    Such exhibit has heretofore been filed with the SEC as part of the filing indicated and is
incorporated herein by reference.#
    
    Pursuant to Item 601(b)(2) of Regulation S-K, the registrant agrees to furnish supplementally a
copy of any omitted exhibit or schedule to the SEC upon request.+
    
    Filed herewith 25




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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)
  26




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    
    
    Description*# Exhibit 2
    
    
    
    Purchase and Sale agreement, dated April 6, 2006, by and among Williams Energy
Services, LLC, Williams Field Services Group, LLC, Williams Field Services
Company, LLC, Williams Partners GP LLC, Williams Partners L.P. and Williams
Partners Operating LLC (attached as Exhibit 2.1 to Williams Partners L.P.s
current report on Form 8-K (File No. 001-32599) filed with the SEC on April 7,
2006.*Exhibit 10
    
    
    
    Credit agreement dated as of
May 1, 2006 among Williams Partners L.P., The Williams
Companies, Inc., Northwest Pipeline
Corporation, Transcontinental Gas Pipeline Corporation, and Citibank, N.A., as administrative agent
(attached as Exhibit 10.1 to The Williams Companies, Incs current report on Form 8-K (File No.
001-04174) filed with the SEC on May 1, 2006).+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.
 
 *
    
    Such exhibit has heretofore been filed with the SEC as part of the filing indicated and is
incorporated herein by reference.#
    
    Pursuant to Item 601(b)(2) of Regulation S-K, the registrant agrees to furnish supplementally a
copy of any omitted exhibit or schedule to the SEC upon request.+
    
    Filed herewith 27