Williams Makes Good on Plan to Double Down in Heart of Shale

  • Pipeline giant trades Texas line stake for ones in Marcellus
  • Company has deal with Anadarko to sell Texas gas plant stake

Williams Cos. is following through on a promise to unload assets and double down in a region of the U.S. where natural gas production is still booming: the Marcellus shale formation.

On Thursday, the master-limited pipeline partnership controlled by Williams Cos. said it had struck a deal with Western Gas Partners LP to exchange its 50 percent stake in a gas-gathering system in Texas for a bigger position in two gathering networks in the northern Pennsylvania area of the Marcellus and a cash payment of $155 million.

The trade builds on Williams’s efforts to streamline operations and strengthen its position as a pipeline giant in the Marcellus and Utica shale basins of the eastern U.S. -- a plan Chief Executive Officer Alan Armstrong laid out in the aftermath of a failed, $33 billion takeover by Energy Transfer Equity LP last year. Gas supplies flowing out of the region have outpaced pipeline capacity, and Williams has heavily invested in projects to bring more of the heating fuel to market.

In the exchange with Western Gas, “Williams gets more gas right where they want it," Brandon Blossman, an energy analyst with Tudor Pickering Holt & Co., said by phone. “They want to ‘core down’ to their competency, and their competency is moving gas from the Northeast to end-users in the mid-Atlantic, Southeast and Gulf Coast.”

While the deal will shrink Williams’s spending in Texas and New Mexico and bring in immediate cash, the company is also giving up “growth potential” in America’s most-active shale basin, the oil-rich Permian, TJ Schultz, an analyst at RBC Capital Markets, said in a note late Thursday.

“We like the nature of the transaction,” Schultz said, “but do not expect it to be a big near-term needle mover on the stock.”

Williams Partners rose as much as 1.6 percent and was trading at $41.07, up 0.7 percent, at 10:53 a.m. in New York. Williams Cos. rose 0.4 percent.

Record Volume

Williams said Thursday that it had also reached an agreement with Anadarko Petroleum Corp. to sell its 33.33 percent stake in the Ranch Westex gas-processing plant in the Delaware Basin of West Texas and New Mexico for $45 million in cash.

Both deals are expected to close by early second-quarter 2017, according to the company’s statement.

“The Marcellus area hit a record-gathering volume for us in January,” Armstrong said in the statement Thursday, adding that the region stands to further benefit from the construction of its $3 billion Atlantic Sunrise gas pipeline expansion that was approved by federal regulators last week.

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE