Williams Cuts 2016 Spending by $1 Billion on Lower Gas Flows

  • Partnership won't need to sell equity or debt this year
  • Energy Transfer's target reports slower production growth

Williams Cos., the natural-gas pipeline company being purchased by Energy Transfer Equity LP, cut its 2016 capital budget for expansion by 32 percent or about $1 billion, citing reduced output growth by its producer customers.

Publicly traded operating unit Williams Partners LP won’t need to sell equity this year once the spending cuts are combined with $1 billion of first-half asset sales, Williams and Williams Partners, both based in Tulsa, Oklahoma, said Monday in a statement.

Slumping U.S. oil and gas production amid falling prices has driven down the value of pipeline stocks, stoking investor doubt on Energy Transfer’s September commitment to buy Williams for $38 million. Cheap stock has made it difficult for pipeline partnerships to sell equity to fund expansion and payouts to investors. Kinder Morgan Inc., the largest U.S. pipeline owner, cut its dividend in December and reduced its 2016 spending plan last week.

“This is about $1 billion lower than was anticipated,” Michael Kay, a pipeline analyst at Bloomberg Intelligence, said by phone Monday. “It makes the funding much easier. It pretty much alleviates concern that the distribution would be cut.”

Spending Targets

Expansion spending will be limited to growth on the 10,200-mile (16,400-kilometer) Transco pipeline system from the Gulf Coast to New York that is fully contacted by customers and $700 million to connect new wells, Williams said.

Williams Partners rose 3.2 percent to $22.14 in New York, reducing the year-to-date loss to 21 percent. Williams fell 7.2 percent to $18.31 and is down 29 percent this year. Energy Transfer, based in Dallas, fell 4.8 percent to $9.17 and is down 33 percent. Energy Transfer Partners LP, the largest source of cash flow at Energy Transfer Equity, rose 0.7 percent to $26.52, a decline of 21 percent for this year.

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