The acquisition cost Williams Partners $330 million, including $297 million in cash and $33 million in WPZ limited-partner and general-partner units. The pipeline operator financed the cash portion of the transaction with its revolving credit facility.
Last month, the partnership announced its plan to buy 24.5% additional interest in the pipeline system. Upon completion, Williams Partners’ Gulfstream system stake has increased to 49%, while Williams Companies owns 1%. Spectra Energy Corp. (SE) and its affiliates control the remaining interest.
A 745-mile interstate gas pipeline system, Gulfstream stretches from the Mobile Bay area to markets in Florida. The latest acquisition will immediately be accretive to the partnership’s distributable cash flow and is also expected to generate $20 million in 2011 and $30 million in 2012 in additional segment profit for its gas pipeline business.
Recently, Williams Partners reported lower-than-expected first quarter earnings. However, its profit improved almost 33% from the year-ago level on the back of improved natural gas liquid (NGL) margins in its midstream business, higher fee-based revenue as well as through expansion in the gas pipeline business.
Notably, the partnership raised its adjusted segment profit guidance based on higher expected per-unit NGL margins and benefits of growth capital. It now expects total adjusted segment profit in the range of $1,695–$2,085 million for 2011 and $1,780–$2,320 million for 2012.
Williams Partners is an energy master limited partnership (MLP) engaged in gathering, transportation, treating, and processing of natural gas as well as the fractionation and storage of NGLs. It remains well positioned for further growth, given its geographically diverse assets, a sizable project backlog as well as its sound distribution history.
The company currently holds a Zacks #2 Rank, which is equivalent to a short-term Buy rating.