Williams to restructure, enlarge partnership

Williams Cos. Inc., Tulsa, will fold its gas pipeline and domestic midstream businesses into Williams Partners LP, along with its limited and general-partner interests in Williams Pipeline Partners LP, in a partnership-transforming restructuring valued at $12 billion.

By OGJ editors
HOUSTON, Jan. 20
-- Williams Cos. Inc., Tulsa, will fold its gas pipeline and domestic midstream businesses into Williams Partners LP, along with its limited and general-partner interests in Williams Pipeline Partners LP, in a partnership-transforming restructuring valued at $12 billion.

The gas pipeline assets include 100% of Transcontinental Gas Pipe Line Co., 65% of Northwest Pipeline GP, and 24.5% of Gulfstream Natural Gas System LLC. Williams also will contribute its general-partner and limited-partner interests in Williams Pipeline Partners, which owns the remaining 35% of Northwest Pipeline.

Williams will own about 80% of new, much larger Williams Partners, up from 24% of current partnership. The company said it will be able to allocate more capital to exploration and production for growth and diversification.

Asset moves
The midstream assets include Williams’ operations in Rocky Mountains and Gulf Coast, as well as its recently added business in Pennsylvania's Marcellus shale. These assets encompass seven processing trains totaling 2.3 bcfd of capacity in the Rockies and four processing trains on the Gulf Coast.

The Gulf Coast processing trains are integrated with five major deepwater oil and gas pipeline systems and two platforms to handle production in deepwater Gulf of Mexico. The midstream assets also include various equity investments in domestic processing and fractionation assets, said the announcement.

For the asset contributions, Williams will receive from Williams Partners some $3.5 billion cash, less Williams Partners' transaction fees and expenses, plus 203 million Williams Partners limited-partner units, and will maintain its 2% general-partner interest, said the announcement. Williams Partners also will assume about $2 billion of existing debt associated with the gas pipeline assets.

The transaction will immediately add to Williams Partners' distributable cash flow/limited-partner unit. Williams expects this restructuring to increase recurring earnings and cash flow and enable the company to pursue a “greater number of investment and growth opportunities.”

Williams’ corporate structure
Upon completion of the transactions, Williams will continue to be an integrated natural gas company but with a simplified corporate structure, said the announcement. Williams will retain its full ownership and control of general partner Williams Partners. The restructuring will increase Williams' combined general-partner and limited-partner ownership interest in Williams Partners to about 84%.

Williams will continue to focus on the success of Williams Partners, given its large ownership position and preeminent exploration and production business. Williams is the tenth largest natural gas producer in the US, and its primary production areas are in the Piceance, Powder River, San Juan, and Fort Worth basins. Williams also has a growing position in the Marcellus shale in the Appalachian basin where it recently began operations.

Williams will retain the olefins and Canadian midstream businesses and will retain the remaining 25.5% interest in Gulfstream, in accordance with certain limitations in Gulfstream's governing documents. This interest would be eligible for contribution to Williams Partners in the future.

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