Energy Transfer Tumbles as Chief Financial Officer Replaced

  • Takeover target Williams Cos. declines as much as 35%
  • Natural gas bankruptcies weigh on pipline company shares

Energy Transfer Equity LP, the pipeline conglomerate that’s agreed to buy Williams Cos., fell 42 percent after announcing the replacement of its chief financial officer amid investor concern that the deal is in trouble, analysts said.

Units of Energy Transfer, based in Dallas, closed at $4.05 in New York, the lowest since 2009. Shares of Williams dropped 35 percent to $11.16, also the lowest close since 2009.

Energy Transfer’s Chief Financial Officer Jamie Welch will be replaced by Thomas Long, CFO of publicly traded affiliate Energy Transfer Partners LP, according to a filing Friday with the U.S. Securities and Exchange Commission. Welch had been Energy Transfer’s CFO from 2013. He led the company’s Sept. 28 conference call with investors on the Williams deal.

The change “was not based on any disagreement with respect to any accounting or financial matter involving the Partnership or any of its affiliates,” according to a statement Monday. The company is in talks with Welch about taking a consulting role on its liquefied gas export project.

“The lack of clarity around Jamie Welch’s departure, particularly with this merger in play, is a pretty pronounced negative,” Ethan Bellamy, a Denver-based analyst for Robert W. Baird & Co., said Monday by phone. Bellamy cut his rating on Energy Transfer to hold from buy. “The market is in no mood to give anybody benefit of the doubt.”

Energy Transfer spokeswoman Vicki Anderson Granado declined to comment Monday. Williams spokesman Tom Droege had no comment on the departure of Welch or the status of the takeover.

Bankruptcy Proceedings

Adding to woes was a report Monday that Chesapeake Energy Corp., a Williams customer, has hired a restructuring law firm. Chesapeake said in a statement Monday it has no plans to pursue bankruptcy.

Bankruptcy proceedings by natural gas producers will weigh on Energy Transfer
and other pipeline stocks as creditors seek to cancel transportation and processing contracts, Christopher Sighinolfi, an analyst at Jefferies LLC, wrote in research published Monday. 

Quicksilver Resources Inc. asked the judge overseeing its bankruptcy to let the company cancel contracts with affiliates of Crestwood Equity Partners LP, according to a Feb. 5 court filing. Sabine Oil & Gas Corp. asked a court in September to void similar agreements, according to a court filing.

Energy Transfer agreed to buy Tulsa, Oklahoma-based Williams for $32.9 billion in cash, stock or a combination of both in September.

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