Integrated energy firm Williams Companies (WMB) and its 84%-owned master limited partnership Williams Partners L.P. (WPZ) completed a transaction as per which the latter acquired Williams Companies’ gathering and processing assets in the Piceance Basin of Colorado. The deal was finalized for $782 million and was announced on October 28.
Williams Companies will continue to use the assets for their Piceance basin production via a long-term gathering agreement with Williams Partners.
Out of the total consideration, Williams Partners paid $702 million in cash and the remaining $80 million in WPZ limited-partner and general-partner units.
The Parachute Plant Complex and three other treating facilities were a part of the divested assets. These units had a combined processing capacity of 1.2 billion cubic feet per day (Bcf/d). The agreement also included the divesture of 150 miles of pipeline of gathering system as well as 3,300 wells connected to the system, including pipelines ranging up to 30-inch trunk lines.
Williams Partners utilized the proceeds from the $600 million debt offering (completed in early November) and its existing revolving credit facility to fund the cash payment of the acquisition.
Williams Partners expects to witness approximately $105 million of segment operating profit (inclusive of depletion, depreciation and amortization or DD&A) from the acquired assets for its midstream operations in 2011. In addition, the deal is expected to immediately add value to the distributable cash flow for Williams Partners, on a per-unit basis.
Williams Companies currently retains a Zacks #5 Rank (short-term Strong Sell rating), while we have a Zacks #4 Rank (short-term Sell rating) on Williams Partners.
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