##### 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, 2007
 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)
 
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
  o þ 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, 2007 and 2006
    
    
    3Consolidated Balance Sheets  March 31, 2007 and December 31, 2006
    
    
    4Consolidated Statements of Cash Flows  Three Months Ended March 31, 2007 and 2006
    
    
    5Consolidated Statement of Partners Capital from January 1, 2007 to March 31, 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    28Part II. Other InformationItem 1. Legal Proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 6. Exhibits
    
    
    29Rule 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
   
    
    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.
  1




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
    
    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. Any decrease in supplies of natural gas could adversely affect our business and
operating results.
 
    
    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.
 
    
    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 future financial and operating flexibility may be adversely affected by restrictions
in our indentures and by our leverage.
 
    
    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 currently have little ability to remove our
general partner without its consent.
 
    
    Unitholders may be required to pay taxes on their share of
our income even if unitholders 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.
   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 31,2007
    
    
    2006*Revenues:Product sales:Affiliate
    
    $
    56,552
    
    
    $
    58,396Third-party
    
    
    6,313
    
    
    
    2,792Gathering and processing:Affiliate
    
    
    9,491
    
    
    
    9,933Third-party
    
    
    51,103
    
    
    
    51,376Storage
    
    
    6,410
    
    
    
    5,105Fractionation
    
    
    1,917
    
    
    
    3,953Other
    
    
    2,029
    
    
    
    1,180Total revenues
    
    
    133,815
    
    
    
    132,735Costs and expenses:Product cost and shrink replacement:Affiliate
    
    
    21,725
    
    
    
    21,380Third-party
    
    
    20,470
    
    
    
    22,620Operating and maintenance expense (excluding depreciation):Affiliate
    
    
    14,328
    
    
    
    15,686Third-party
    
    
    28,185
    
    
    
    21,100Depreciation, amortization and accretion
    
    
    13,178
    
    
    
    10,714General and administrative expense:Affiliate
    
    
    9,406
    
    
    
    7,281Third-party
    
    
    664
    
    
    
    1,305Taxes other than income
    
    
    2,114
    
    
    
    2,283Other (income) expense  net
    
    
    460
    
    
    
    (3,643
    )Total costs and expenses
    
    
    110,530
    
    
    
    98,726Operating income
    
    
    23,285
    
    
    
    34,009Equity earnings-Discovery Producer Services
    
    
    2,620
    
    
    
    3,781Interest expense:Affiliate
    
    
    (15
    )
    
    
    (15
    )Third-party
    
    
    (14,375
    )
    
    
    (221
    )Interest income
    
    
    983
    
    
    
    70Net income
    
    $
    12,498
    
    
    $
    37,624Allocation of net income for calculation of earnings per unit:Net income
    
    
    12,498
    
    
    
    37,624Net income applicable to pre-partnership operations allocated to general partner
    
    
    
    
    
    
    (33,415
    )Net income applicable to partnership operations
    
    
    12,498
    
    
    
    4,209Allocation of net income (loss) to general partner
    
    
    273
    
    
    
    (689
    )Allocation of net income to limited partners
    
    $
    12,225
    
    
    $
    4,898Basic and diluted net income per limited partner unit:Common units
    
    $
    0.31
    
    
    $
    0.35Class B units
    
    $
    0.31
    
    
    
    N/ASubordinated units
    
    $
    0.31
    
    
    $
    0.35Weighted average number of units outstanding:Common units
    
    
    25,553,306
    
    
    
    7,006,146Class B units
    
    
    6,805,492
    
    
    
    N/ASubordinated units
    
    
    7,000,000
    
    
    
    7,000,000
 
 *
    
    Restated as discussed in Note 1.  3




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WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)(Thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    78,492
    
    
    $
    57,541Accounts receivable:Trade
    
    
    18,472
    
    
    
    18,320Affiliate
    
    
    6,205
    
    
    
    12,420Other
    
    
    3,814
    
    
    
    3,991Gas purchase contract  affiliate
    
    
    3,565
    
    
    
    4,754Prepaid expense
    
    
    2,499
    
    
    
    3,765Other current assets
    
    
    2,869
    
    
    
    2,534Total current assets
    
    
    115,916
    
    
    
    103,325Investment in Discovery Producer Services
    
    
    146,514
    
    
    
    147,493Property, plant and equipment, net
    
    
    648,692
    
    
    
    647,578Other
    
    
    32,800
    
    
    
    34,752Total assets
    
    $
    943,922
    
    
    $
    933,148LIABILITIES AND PARTNERS CAPITALCurrent liabilities:Accounts payable  trade
    
    $
    23,205
    
    
    $
    19,827Product imbalance
    
    
    468
    
    
    
    651Deferred revenue
    
    
    370
    
    
    
    3,382Accrued interest
    
    
    16,483
    
    
    
    2,796Other accrued liabilities
    
    
    13,721
    
    
    
    13,377Total current liabilities
    
    
    54,247
    
    
    
    40,033Long-term debt
    
    
    750,000
    
    
    
    750,000Environmental remediation liabilities
    
    
    3,964
    
    
    
    3,964Other noncurrent liabilities
    
    
    6,440
    
    
    
    3,749Commitments and contingent liabilities (Note 7)Partners capital
    
    
    129,271
    
    
    
    135,402Total liabilities and partners capital
    
    $
    943,922
    
    
    $
    933,148
  4




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WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006*(Thousands)OPERATING ACTIVITIES:Net income
    
    $
    12,498
    
    
    $
    37,624Adjustments to reconcile to cash provided by operations:Depreciation, amortization and accretion
    
    
    13,178
    
    
    
    10,714Gain on sale of property, plant and equipment
    
    
    
    
    
    
    (3,319
    )Amortization of gas purchase contract  affiliate
    
    
    1,188
    
    
    
    1,353Distributions in excess of equity earnings of
Discovery Producer Services
    
    
    980
    
    
    
    619Cash provided (used) by changes in assets and liabilities:Accounts receivable
    
    
    6,241
    
    
    
    481Prepaid expense
    
    
    1,188
    
    
    
    (833
    )Other current assets
    
    
    (335
    )
    
    
    Accounts payable
    
    
    3,378
    
    
    
    (10,753
    )Product imbalance
    
    
    (183
    )
    
    
    (1,912
    )Accrued liabilities
    
    
    15,460
    
    
    
    389Deferred revenue
    
    
    (3,012
    )
    
    
    (3,330
    )Other, including changes in non-current liabilities
    
    
    215
    
    
    
    826Net cash provided by operating activities
    
    
    50,796
    
    
    
    31,859INVESTING ACTIVITIES:Capital expenditures
    
    
    (9,766
    )
    
    
    (9,615
    )Change in accrued liabilities-capital expenditures
    
    
    (1,430
    )
    
    
    Proceeds from sales of property, plant and equipment
    
    
    
    
    
    
    7,200Net cash used by investing activities
    
    
    (11,196
    )
    
    
    (2,415
    )FINANCING ACTIVITIES:Distributions to unitholders
    
    
    (19,491
    )
    
    
    (5,002
    )Distributions to The Williams Companies, Inc.
    
    
    
    
    
    
    (28,214
    )Contributions per omnibus agreement
    
    
    842
    
    
    
    1,248Net cash used by financing activities
    
    
    (18,649
    )
    
    
    (31,968
    )Increase (decrease) in cash and cash equivalents
    
    
    20,951
    
    
    
    (2,524
    )Cash and cash equivalents at beginning of period
    
    
    57,541
    
    
    
    6,839Cash and cash equivalents at end of period
    
    $
    78,492
    
    
    $
    4,315
 
 *
    
    Restated as discussed in Note 1.  5




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WILLIAMS PARTNERS L.P.
 
 CONSOLIDATED STATEMENT OF PARTNERS CAPITAL
 (Unaudited)
 Limited Partners
    
    
    General
    
    
    Total PartnersCommon
    
    
    Class B
    
    
    Subordinated
    
    
    Partner
    
    
    Capital(Thousands)Balance  January 1, 2007
    
    $
    733,878
    
    
    $
    241,923
    
    
    $
    108,862
    
    
    $
    (949,261
    )
    
    $
    135,402Net income
    
    
    7,937
    
    
    
    2,114
    
    
    
    2,174
    
    
    
    273
    
    
    
    12,498Cash distributions
    
    
    (12,010
    )
    
    
    (3,198
    )
    
    
    (3,290
    )
    
    
    (993
    )
    
    
    (19,491
    )Contributions pursuant to the omnibus agreement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    842
    
    
    
    842Other
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20Balance  March 31, 2007
    
    $
    729,825
    
    
    $
    240,839
    
    
    $
    107,746
    
    
    $
    (949,139
    )
    
    $
    129,271
  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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Note 3. Allocation of Net Income and Distributions
  Three months endedMarch 31,2007
    
    
    2006Allocation to general partner:Net income
    
    $
    12,498
    
    
    $
    37,624Net income applicable to pre-partnership operations
allocated to
general partner
    
    
    
    
    
    
    (33,415
    )Charges direct to general partner:Reimbursable general and administrative costs
    
    
    592
    
    
    
    789Income subject to 2% allocation of
general partner interest
    
    
    13,090
    
    
    
    4,998General 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
    
    
    262
    
    
    
    100Incentive distributions paid to general
partner*
    
    
    603
    
    
    
    Direct charges to general partner
    
    
    (592
    )
    
    
    (789
    )Pre-partnership net income allocated to
general partner
    
    
    
    
    
    
    33,415Net income allocated to general partner
    
    $
    273
    
    
    $
    32,726Net income
    
    $
    12,498
    
    
    $
    37,624Net income allocated to general partner
    
    
    273
    
    
    
    32,726Net income allocated to limited partners
    
    $
    12,225
    
    
    $
    4,898
 
 *
    
    Under the two class method of computing earnings per share, prescribed by Statement of
Financials Accounting Standards 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 no assumed incentive
distributions for the three months ended March 31, 2007 or 2006.   Per Unit
    
    Common
    
    Subordinated
    
    Class B
    
    General
    
    Total CashPayment Date
    
    Distribution
    
    Units
    
    Units
    
    Units
    
    Partner
    
    Distribution2/14/2006
    
    $
    0.3500
    
    
    $
    2,452
    
    
    $
    2,450
    
    
    
    
    
    
    $
    100
    
    
    $
    5,0025/15/2006
    
    $
    0.3800
    
    
    $
    2,662
    
    
    $
    2,660
    
    
    
    
    
    
    $
    109
    
    
    $
    5,4318/14/2006 (a)
    
    $
    0.4250
    
    
    $
    6,204
    
    
    $
    2,975
    
    
    
    
    
    
    $
    263
    
    
    $
    9,44211/14/2006 (b)
    
    $
    0.4500
    
    
    $
    6,569
    
    
    $
    3,150
    
    
    
    
    
    
    $
    401
    
    
    $
    10,1202/14/2007 (c)
    
    $
    0.4700
    
    
    $
    12,010
    
    
    $
    3,290
    
    
    $
    3,198
    
    
    $
    993
    
    
    $
    19,4915/15/2007 (d)
    
    $
    0.5000
    
    
    $
    12,777
    
    
    $
    3,500
    
    
    $
    3,403
    
    
    $
    1,386
    
    
    $
    21,066
 
 (a)
    
    Includes $0.1 million incentive distribution rights payment to the general partner. 8




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(b)
    
    Includes $0.2 million incentive distribution rights payment to the general partner.(c)
    
    Includes $0.6 million incentive distribution rights payment to the general partner.(d)
    
    The board of directors of our general partner declared this cash distribution on April
26, 2007 to be paid on May 15, 2007 to unitholders of record at the close of business on
May 7, 2007. Includes a $1.0 million incentive distribution rights payment to the general
partner. Note 4. Out of Period Adjustments
  Three Months EndedMarch 31,2007
    
    2006(Unaudited)Gathering
and Processing West:Adjust carrying
value of prepaid right-of-way
asset recorded from 2001 through
2006
    
    $
    1,243
    
    
    $
    Adjust 2006
incentive compensation accrual
    
    
    (899
    )
    
    
    Adjust the
2005 asset
retirement obligation recognition
    
    
    785
    
    
    
    Adjust the
accounts payable balance recorded
in 2005
    
    
    
    
    
    
    (2,000
    )March 31, 2006
accounts payable adjustment corrected in the second quarter
of 2006
    
    
    
    
    
    
    (1,300
    )NGL Services:Adjust carrying
value of product imbalance
liability recorded in prior
periods
    
    
    1,437
    
    
    
    
 9




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Note 5. Equity Investments
  Discovery Producer Services LLC
 March 31,
    
    
    December 31,2007
    
    
    2006(Unaudited)Current assets
    
    $
    67,628
    
    
    $
    73,841Non-current restricted cash and cash equivalents
    
    
    19,865
    
    
    
    28,773Property, plant and equipment, net
    
    
    375,970
    
    
    
    355,304Current liabilities
    
    
    (46,072
    )
    
    
    (40,559
    )Non-current liabilities
    
    
    (3,810
    )
    
    
    (3,728
    )Members capital
    
    $
    413,581
    
    
    $
    413,631
 Three Months EndedMarch 31,2007
    
    
    2006(Unaudited)Revenues:Affiliate
    
    $
    44,533
    
    
    $
    52,786Third-party
    
    
    7,948
    
    
    
    9,334Costs and expenses:Affiliate
    
    
    23,155
    
    
    
    33,671Third-party
    
    
    24,120
    
    
    
    20,050Interest income
    
    
    (661
    )
    
    
    (626
    )Gain on sale of operating assets
    
    
    (468
    )
    
    
    Foreign exchange gain
    
    
    (216
    )
    
    
    (427
    )Net income
    
    $
    6,551
    
    
    $
    9,452
 10




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Note 6. Credit Facilities and Long-Term Debt
 Credit Facilities
   Long-Term Debt
  Note 7. Commitments and Contingencies
 Environmental Matters-Four Corners.
   11




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Environmental Matters-Conway.
  Will Price.
 Grynberg.
 12




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Vendor Dispute.
 Outstanding Registration Rights Agreement.
 Other.
 Summary.
 13




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Note 8. Segment Disclosures
  Gathering &
    
    
    Gathering &Processing -
    
    
    Processing -
    
    
    NGLWest
    
    
    Gulf
    
    
    Services
    
    
    Total(In thousands)Three Months Ended March 31, 2007:Segment revenues
    
    $
    120,428
    
    
    $
    561
    
    
    $
    12,826
    
    
    $
    133,815Operating and maintenance expense
    
    
    33,097
    
    
    
    550
    
    
    
    8,866
    
    
    
    42,513Product cost and shrink replacement
    
    
    39,675
    
    
    
    
    
    
    
    2,520
    
    
    
    42,195Depreciation, 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-Discovery Producer Services
    
    
    
    
    
    
    2,620
    
    
    
    
    
    
    
    2,620Segment profit
    
    $
    31,276
    
    
    $
    2,327
    
    
    $
    53
    
    
    $
    33,656Reconciliation 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    23,285Three Months Ended March 31, 2006:Segment revenues
    
    $
    115,672
    
    
    $
    733
    
    
    $
    16,330
    
    
    $
    132,735Operating and maintenance expense
    
    
    29,095
    
    
    
    242
    
    
    
    7,449
    
    
    
    36,786Product cost and shrink replacement
    
    
    38,277
    
    
    
    
    
    
    
    5,723
    
    
    
    44,000Depreciation, amortization and accretion
    
    
    9,814
    
    
    
    300
    
    
    
    600
    
    
    
    10,714Direct general and administrative expense
    
    
    3,400
    
    
    
    2
    
    
    
    301
    
    
    
    3,703Other, net
    
    
    (1,567
    )
    
    
    
    
    
    
    207
    
    
    
    (1,360
    )Segment operating income
    
    
    36,653
    
    
    
    189
    
    
    
    2,050
    
    
    
    38,892Equity earnings-Discovery Producer Services
    
    
    
    
    
    
    3,781
    
    
    
    
    
    
    
    3,781Segment profit
    
    $
    36,653
    
    
    $
    3,970
    
    
    $
    2,050
    
    
    $
    42,673Reconciliation to the Consolidated Statements of Income:Segment operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    38,892General and administrative expenses:Allocated-affiliate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,355
    )Third party-direct
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (528
    )Combined operating income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    34,009
 14




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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. The Four
Corners system gathers and processes or treats approximately 37% of the natural gas
produced in the San Juan Basin and connects with the five pipeline systems that transport
natural gas to end markets from the basin.
 
    
    Gathering and Processing  Gulf.Our Gulf segment includes (1) our 40% 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% 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.
 Executive Summary
  15




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##### Table of Contents



Results of Operations
 Consolidated Overview
  Three months ended
    
    
    % ChangeMarch 31,
    
    
    from2007
    
    
    2006
    
    
    2006(1)(Thousands)Revenues
    
    $
    133,815
    
    
    $
    132,735
    
    
    
    +1
    %Costs and expenses:Product cost and shrink replacement
    
    
    42,195
    
    
    
    44,000
    
    
    
    +4
    %Operating and maintenance
expense
    
    
    42,513
    
    
    
    36,786
    
    
    
    -16
    %Depreciation, amortization and accretion
    
    
    13,178
    
    
    
    10,714
    
    
    
    -23
    %General and administrative
expense
    
    
    10,070
    
    
    
    8,586
    
    
    
    -17
    %Taxes other than income
    
    
    2,114
    
    
    
    2,283
    
    
    
    +7
    %Other (income) expense
    
    
    460
    
    
    
    (3,643
    )
    
    NMTotal costs and expenses
    
    
    110,530
    
    
    
    98,726
    
    
    
    -12
    %Operating income
    
    
    23,285
    
    
    
    34,009
    
    
    
    -32
    %Equity earnings  Discovery
    
    
    2,620
    
    
    
    3,781
    
    
    
    -31
    %Interest expense
    
    
    (14,390
    )
    
    
    (236
    )
    
    NMInterest income
    
    
    983
    
    
    
    70
    
    
    NMNet income
    
    $
    12,498
    
    
    $
    37,624
    
    
    
    -67
    %
 
 (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, 2007 vs. three months ended March 31, 2006
     16




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##### Table of Contents



Results of operations  Gathering and Processing  West
  Four Corners
 Three months endedMarch 31,2007
    
    
    2006(Thousands)Revenues
    
    $
    120,428
    
    
    $
    115,672Costs and expenses, including interest:Product cost and shrink replacement
    
    
    39,675
    
    
    
    38,277Operating and maintenance expense
    
    
    33,097
    
    
    
    29,095Depreciation, amortization and accretion
    
    
    12,175
    
    
    
    9,814General and administrative expense  direct
    
    
    1,821
    
    
    
    3,400Taxes other than income
    
    
    1,924
    
    
    
    2,076Other (income) expense, net
    
    
    460
    
    
    
    (3,643
    )Total costs and expenses, including interest
    
    
    89,152
    
    
    
    79,019Segment profit
    
    $
    31,276
    
    
    $
    36,653
 Three months ended March 31, 2007 vs. three months ended March 31, 2006
   
    
    $3.3 million related to a 10% increase in NGL volumes that Four Corners received under
certain processing contracts. This increase was related primarily to improved ethane
processing margins in 2007;
 
    
    $1.1 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 $1.1 million discussed below;
 17




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##### Table of Contents




    
    $0.4 million related to a slight increase in average NGL sales prices realized
on sales of NGLs which we received under certain processing contracts; and
 
    
    $0.3 million related to a slight increase in condensate and LNG sales.
   
    
    $2.3 million increase from 14% higher volumetric shrink requirements associated with the
increased NGL volumes received under Four Corners keep-whole processing contracts
discussed above; and
 
    
    $1.1 million increase from third party producers who elected to have us purchase their
NGLs, which was offset by the corresponding increase in product sales discussed above.
   
    
    the  absence of $3.3 million of other adjustments that
served to increase income in the first quarter of 2006 as noted in Note 4 of the
Notes to our Consolidated Financial Statements; and
 
    
    $1.9 million increase in other operating expenses due primarily to higher leased
compression costs.
      Outlook
  
    
    In 2007, we anticipate that sustained drilling activity, expansion opportunities and
production enhancement
activities by existing customers should be sufficient to more than offset the historical
decline and increase gathered and processed volumes.
 18




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##### Table of Contents




    
    We have realized above average margins at our gas processing plants in recent years due
primarily to increasing prices for NGLs. We expect per-unit margins in 2007 will remain
higher in relation to five-year historical averages but below the record levels realized in
2006. Additionally, we anticipate that our contract mix and commodity management activities
at Four Corners will continue to allow us to realize greater margins relative to industry
benchmark averages.
 
    
    In May 2007, we hedged 8.8 million gallons of May through
December 2007 forecasted NGL sales using financial swap contracts
with a range of fixed prices of $1.15 to $1.62 per gallon depending
on the specific product. We receive the underlying NGL gallons as
compensation for processing services provided at Four Corners. We
have designated these derivatives as cash flow hedges under
Statement of Financial Accounting Standards No. 133.
 
    
    We anticipate that operating costs, excluding compression, will remain stable as
compared to 2006. Compression cost increases are dependent upon the extent and amount of
additional compression needed to meet the needs of our Four Corners customers and the cost
at which compression can be purchased, leased and operated.
 
    
    We continue to operate our assets on the Jicarilla Apache Nation in Northern New
Mexico pursuant to a special business license which extends through June 30, 2007 while we
conduct further discussions that could result in renewal of our rights of way, sale of the
gathering assets which are on, or are isolated by, reservation lands or other options that
 might be in the mutual interest of both parties.  The current right of way agreement, which
covers certain gathering system assets in Rio Arriba County, New Mexico, expired on
December 31, 2006.
 Results of Operations  Gathering and Processing  Gulf
  Three months endedMarch 31,2007
    
    
    2006(Thousands)Segment revenues
    
    $
    561
    
    
    $
    733Costs and expenses:Operating and maintenance expense
    
    
    550
    
    
    
    242Depreciation
    
    
    304
    
    
    
    300General and administrative expense
- direct
    
    
    
    
    
    
    2Total costs and expenses
    
    
    854
    
    
    
    544Segment operating income (loss)
    
    
    (293
    )
    
    
    189Equity earnings  Discovery
    
    
    2,620
    
    
    
    3,781Segment profit
    
    $
    2,327
    
    
    $
    3,970
 Carbonate Trend
  19




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##### Table of Contents



Discovery Producer Services
 Three months endedMarch 31,2007
    
    
    2006(Thousands)Revenues
    
    $
    52,481
    
    
    $
    62,120Costs and expenses, including interest:Product cost and shrink replacement
    
    
    33,518
    
    
    
    41,550Operating and maintenance expense
    
    
    6,415
    
    
    
    4,822Depreciation and accretion
    
    
    6,483
    
    
    
    6,379General and administrative expense
    
    
    544
    
    
    
    690Interest income
    
    
    (661
    )
    
    
    (626
    )Other (income) expense, net
    
    
    (369
    )
    
    
    (147
    )Total costs and expenses, including interest
    
    
    45,930
    
    
    
    52,668Net income
    
    $
    6,551
    
    
    $
    9,452Williams Partners 40 percent interest 
Equity earnings per our Consolidated Statements
of Income$
    2,620
    
    
    $
    3,781
 Three months ended March 31, 2007 vs. three months ended March 31, 2006
  
    
    Fee-based processing and fractionation revenues decreased $6.0 million due primarily
to $5.4 million in reduced fee-based revenues related to processing the TGP and TETCO
open seasons volumes discussed above. In 2006 the open season agreements included
fee-based processing and fractionation. Our current agreement with TETCO includes
processing services based on a percent-of-liquids contract, where the NGLs we take as
compensation are reflected in the higher product sales discussed below.
 
    
    Transportation revenues decreased $2.2 million, including $2.5 million in reduced
fee-based revenues related to the absence of TGP and TETCO open season agreements
discussed above.
 
    
    Product sales decreased $0.8 million. A $14.8 million decrease in NGL sales related
to third-party processing customers elections to have Discovery purchase their NGLs
under an option in their contracts was offset by a $10.8 million increase in NGL
volumes that Discovery received under certain processing contracts, including our
current TETCO agreement, and $2.0 million from higher sales of excess fuel and shrink
replacement gas. See below for the corresponding changes in product cost and shrink
replacement for each of these components.
  20




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##### Table of Contents



Outlook
 Carbonate Trend
  Discovery
  
    
    The Tahiti pipeline lateral expansion project is currently on schedule. The pipeline was
installed on the sea bed in February. The end connections and commissioning will take
place in the fourth quarter of this year, and we anticipate initial throughput will begin
in the first half of 2008. We expect this agreement will have a significant favorable
impact on Discoverys revenues.
 
    
    Discovery signed a one-year processing contract with TETCO effective October 2006 for a
minimum volume of 100 BBtu/d and a maximum of 300 BBtu/d. The volume flowing under this
contract for the first quarter has been 160 BBtu/d and is continuing at this rate.
Additionally, we signed several short term processing arrangements from the TETCO system
with multiple producers accounting for an additional 25-50BBtu/d.
 
    
    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.
 
    
    ATP Oil & Gas Corporation completed an additional well in its Gomez prospect and the
facility is currently flowing approximately 60 BBtu/d. We expect the rate to increase from
this level in the third quarter of 2007 after it installs modifications to the facility,
which could result in a temporary disruption of service. This disruption could potentially
reduce our revenues by approximately $0.9 million.
 
    
    In December 2006 we signed an agreement with Energy
Partners LTD, which is anticipated to result in at least approximately 10 BBtu/d of throughput beginning in the second
quarter of 2007.
 21




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##### Table of Contents



Results of Operations  NGL Services
  Three months endedMarch 31,2007
    
    
    2006(Thousands)Segment revenues
    
    $
    12,826
    
    
    $
    16,330Costs and expenses:Operating and maintenance expense
    
    
    8,866
    
    
    
    7,449Product cost
    
    
    2,520
    
    
    
    5,723Depreciation and accretion
    
    
    699
    
    
    
    600General and administrative expense  direct
    
    
    498
    
    
    
    301Other expense, net
    
    
    190
    
    
    
    207Total costs and expenses
    
    
    12,773
    
    
    
    14,280Segment profit
    
    $
    53
    
    
    $
    2,050
 Three months ended March 31, 2007 vs. three months ended March 31, 2006
  
    
    Product sales decreased $3.4 million due to lower sales volumes. This decrease was
offset by the related decrease in product cost discussed below.
 
    
    Fractionation revenues decreased $2.0 million due primarily to 32% lower
fractionation volumes and 28% lower rates. Fractionation throughput was down during the
first quarter of 2007 due to a customers decision to fractionate a percentage of their
volumes outside of the Mid-Continent region. Such a decision is based on current
prices being paid for fractionated products outside of the Mid-Continent region. In
March 2007 these volumes were once again being fractionated at our Conway facility.
The lower fractionation rate relates to the pass through to customers of decreased fuel
and power costs.
 
    
    Storage revenues increased $1.3 million due primarily to higher average storage
volumes from additional short-term storage leases.
    Outlook
 
    
    Conways primary storage lease renewal period closed March 31, 2007. Based on confirmed
and historical short-term leases, we expect 2007 to result in similar storage revenue as
2006. Customers are renewing storage leases at similar levels to 2006 based on the
expectation of positive forward pricing for products.
 22




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##### Table of Contents




    
    We are developing a capital project to store refinery grade butane (RGB) at Conway
Underground East. The estimated capital investment is expected to be between $1.0 million
and $1.5 million. Contracted new revenue associated with this project is $1.3 million.
Potential contracts may generate an additional $0.6 to $1.2 million. We expect that these
additional revenues will begin in the second half of 2007.
 
    
    We continue to execute 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 2007 and 2008 to ensure that we meet the
regulatory compliance requirement to complete cavern wellhead modifications before the end
of 2008. Our forecast for 2007 is to workover approximately 59 caverns (both complete and
partial) compared to 51 cavern workovers (38 complete and 13 partial) in 2006. During the
first quarter of 2007 we completed 16 workovers with another 25 caverns out of service for
workovers.
 Financial Condition and Liquidity
  
    
    Cash and cash equivalents on hand;
 
    
    Cash generated from operations, including cash distributions from Discovery;
 
    
    Insurance or other recoveries related to the Carbonate Trend overburden restoration,
which should be received, approximately, as costs are incurred;
 
    
    Capital contributions from Williams pursuant to the omnibus agreement; and
 
    
    Credit facilities, as needed.
  
    
    Maintenance capital expenditures for our Four Corners and Conway assets;
 
    
    Expansion capital expenditures for our Four Corners assets;
 
    
    Carbonate Trend overburden restoration;
 
    
    Interest on our long-term debt; and
 
    
    Quarterly distributions to our unitholders.
 Discovery
  Total Distribution toDate of Distribution
    
    Members
    
    Our 40% Share1/30/07
    
    $  9,000
    
    $3,6004/30/07
    
    $16,000
    
    $6,400
  23




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##### Table of Contents



Capital Contributions from Williams
  
    
    Indemnification of environmental and related expenditures, less any related insurance
recoveries, for a period of three years (for certain of those expenditures) up to a cap of
$14 million. Amounts expected to be incurred in 2007 related to these indemnifications are
as follows:
 Ø
    
    approximately $2.9 million for capital expenditures related to KDHE-related cavern
compliance at our Conway storage facilities; and
 Ø
    
    approximately $1.2 million for our 40% 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 $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% 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, 2007 we have received $1.6 million from Williams
for this indemnification.
   Credit Facilities
   Capital Requirements
  24




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##### Table of Contents




    
    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.
  Company
    
    Maintenance
    
    Expansion
    
    TotalConway
    
    $
    11.0
    
    
    $
    2.0
    
    
    $
    13.0Four Corners
    
    
    25.0
    
    
    
    24.0
    
    
    
    49.0Discovery  100%
    
    
    7.0
    
    
    
    40.0
    
    
    
    47.0
       Carbonate Trend Overburden Restoration
  Debt Service  Long-Term Debt
  25




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##### Table of Contents



Cash Distributions to Unitholders
   Results of Operations  Cash Flows
 Williams Partners L.P.
 Three months endedMarch 31,2007
    
    2006(Thousands)Net cash provided by operating activities
    
    $
    50,796
    
    
    $
    31,859Net cash used by investing activities
    
    
    (11,196
    )
    
    
    (2,415
    )Net cash used by financing activities
    
    
    (18,649
    )
    
    
    (31,968
    )
  
    
    $5.1 million decrease in operating income as adjusted for non-cash items; and
 
    
    $0.8 million decrease in distributed earnings from Discovery.
  26




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##### Table of Contents



Discovery  100 percent
 Three months endedMarch 31,2007
    
    2006(Thousands)Net cash provided by operating activities
    
    $
    1,469
    
    
    $
    18,515Net cash provided (used) by investing activities
    
    
    (1,517
    )
    
    
    608Net cash used by financing activities
    
    
    (6,600
    )
    
    
    (6,215
    )
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Commodity Price Risk
   27




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##### Table of Contents



Interest Rate Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   First-Quarter 2007 Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  28




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##### Table of Contents



Item 6. Exhibits
  ExhibitNumber
    
    Description+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. 29




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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. TimmermansController
(Duly Authorized Officer and
Principal Accounting Officer)  30




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description+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. 31