Leading North American energy firm Williams Companies Inc. (WMB) has closed the previously announced separation of its exploration and production business from its pipeline/infrastructure operations, thereby creating two independent corporations.
The Tulsa, Oklahoma-based parent company’s former upstream unit has started trading on the New York Stock Exchange as a publicly traded entity WPX Energy Inc. (WPX). Williams completed the spin-off process on December 31 by distributing one share of WPX for every three Williams common stocks held by shareowners.
Williams’ move to split itself into two is seen as an attempt to focus on its pipelines and other energy infrastructure assets in North America. The company is now a pure play midstream conglomerate with operations spanning from the Canadian oil sands to deepwater fields in the Gulf of Mexico.
Williams owns and operates 15,000 miles of natural gas transportation pipelines and over 10,000 miles of oil and gas gathering pipelines. Additionally, the energy carrier and transport specialist holds the general partner interest and a 73% limited partner ownership interest in master limited partnership Williams Partners L.P. (WPZ).
Williams also reasoned that the growth prospects for energy infrastructure all across North America remain exciting with the requirement to support producers in the growth of shale plays, especially in regions where there is a severe lack of facilities.
The Williams-WPX split comes on the heels of similar strategies of corporate simplification undertaken by major companies in the oil and gas industry. Last year, Marathon Oil Corp. (MRO) separated its refining and marketing segment from the parent company, while ConocoPhillips (COP) is scheduled to complete a similar spin-off later in 2012.
We remain positive on the outlook for new Williams post-split, as it holds the promise of unlocking significant value. Creation of two separate companies will allow both of them to pursue great opportunities in their respective market segments without the constraints of the parent company and better serve the needs of both investor groups.
Williams currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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