Williams Creates Giant Natural Gas Partnership
Washington PA Observer-Reporter
20 January 2010
Associated Press
TULSA, Okla. - Williams Cos., already one of the nation's largest
producers of natural gas, said Tuesday it will create one of the
biggest natural gas partnerships in the nation by combining its
pipeline and processing units.
The deal, valued at about $10 billion plus $2 billion in debt, is the
latest in an industry trying to capitalize on the increasing role of
natural gas in powering U.S. homes and businesses.
Williams, based in Tulsa, Okla., will get about $3.5 billion in cash
from Williams Partners, its midstream natural gas processing company,
to pay down debt. Williams also is offering to purchase up to $3
billion of its debt in a cash tender offer.
A key asset Williams brings to the partnership is the Texas
Transcontinental Gas pipeline, which runs to Pennsylvania's rich
Marcellus Shale. It carries gas from the Gulf Coast through southern
and mid-Atlantic states to New Jersey and New York City as well as the
Northwest.
In April, Moon Township-based Atlas Energy Resources' Atlas Pipeline
Partners affiliate formed a joint venture with a subsidiary of Williams
to own Atlas Pipeline's Marcellus Shale gathering system and processing
facilities as well as other Appalachian systems owned by Atlas Pipeline.
Atlas Energy said the new venture, Laurel Mountain Midstream LLC,
intends to be the leading gathering system in the southwestern
Pennsylvania portion of the Marcellus Shale. Atlas Energy is the anchor
shipper on the system.
The new, larger Williams Partners comes at a time when many energy
companies are angling for a piece of the rapidly growing natural gas
market.
Two weeks ago, Chesapeake Energy said it was taking on French oil
company Total as a partner to help develop deep fields in Texas. Last
month, Exxon Mobil said it will buy XTO Energy in a deal valued at $31
billion.
Much of the focus in the deals, including Monday's announcement, is the
huge reserves that the U.S. has of natural gas. Domestic and
international energy companies have rushed in as estimates of supplies
have grown sharply.
Williams CEO Steve Malcolm said that passing along pipeline and
midstream assets to Williams Partners will boost capital for the parent
company as it races against larger competitors to expand its natural
gas finds.
In a conference call with analysts, Malcolm said the goal is to create
a simpler company with greater access to capital that can be used for
exploring and producing gas, including the Piceance basin in Colorado
that Williams executives believe could be as productive as any of the
major shale developments in the U.S.
"We know exactly how we're going to grow," he said.
Williams Partners will also give its parent company about 203 million
limited-partner units - valued at $6.3 billion based on Friday's
closing price. Williams Cos. stake in Williams Partners grows from 24
percent to 80 percent.
The company expects Williams Partners will become a larger, diversified
master limited partnership with better access to debt and financial
markets. Master limited partnerships have certain tax benefits because
the partnership does not pay taxes on its profit, but when unitholders
receive distributions.
Williams is one of the biggest natural gas operations in the U.S.,
producing enough gas for more than 4 million homes per day and
transporting about 12 percent of the nation's daily supply of natural
gas.