After winning a seven-year legal battle and judgment over Energy Transfer in early October, Williams Cos. announced two acquisitions in Colorado’s Denver-Julesburg Basin with a combined worth of $1.27 billion on Nov. 2.
According to its SEC filing, Williams agreed to purchase Cureton Front Range, which has gas gathering pipelines and two processing plants over 225,000 acres, from Tailwater Capital, a Dallas-based private equity firm.
Williams also announced its intent to purchase the remaining 50% ownership interest in Rocky Mountain Midstream from ownership partner KKR, meaning Williams will fully own the network, which covers 250,000 acres in Northern Colorado.
The companies did not disclose the purchase price for either asset, saying that the combined value was $1.27 billion. Both deals are expected to close in December. The purchase will be partially funded by a third-quarter $348 million sale of Williams’ Bayou Ethane system, which connects Louisiana customers to facilities in Mont Belvieu, Texas.
“The proceeds from this asset sale along with expected proceeds from a recent legal judgment will help fund an important strengthening of our hand in the D-J Basin,” Alan Armstrong, president and CEO, told investors during the third-quarter earnings conference.
Messy litigation
On Oct. 10, the Delaware Supreme Court ruled in favor of Williams over Energy Transfer in a legal fight over a failed $33 billion merger, fending off the rival pipeline operator’s challenge to Williams’ court victory, originally valued at $495 million with legal fees, not counting interest.
On Nov. 2, Armstrong only referred to a “recent legal judgment” to investors. Later in the conference call, CFO John Porter said the company did not know the date of the Energy Transfer lawsuit’s payment, which has grown with interest.
“… From a leverage perspective, we finished the year not knowing the exact timing of when we’ll receive payment of the $602 million judgment awarded to us from Energy Transfer in the recent Delaware Supreme Court decision, as well as the exact timing of the close date of the D-J transactions that we announced,” Porter said. Subtracting legal fees, the company expects the judgment will be more than $530 million.
Energy Transfer led a $33 billion takeover bid of rival Williams in 2015 and into 2016. But amid pushback on both sides and a collapse in oil prices and stock values, the deal was eventually canceled amid blame-game allegations and lawsuits. Energy Transfer co-founder and chair Kelcy Warren swore off hostile takeover acquisitions in its aftermath.
Moving forward
As for the Cureton and Rocky Mountain facilities, Williams believes the combination of the two facilities will allow the company to move more product than each individually.
“We do see significant opportunities to integrate those assets,” said Chad Zamarin, Williams executive vice president. “It will take a little bit of time as there are some current commitments, but Cureton has more volume that they're gathering than they can process and deliver.
“Rocky Mountain Midstream has some excess capacity. So we're going to be able to consolidate those volumes and move a significant amount of incremental NGLs down our infrastructure.”
During the conference call, Williams executives discussed the company’s growth over the last quarter, along with plans for expansion.
Transco’s Regional Energy Access project, estimated to cost $1 billion, is expected to be online by the fourth quarter of 2024, Armstrong said. The project, which consists of two pipelines, a new compressor facility and modifications to five compressor facilities, will have a capacity of 830 MMcf/d, moving natural gas from the Marcellus Shale into Pennsylvania, New Jersey and Maryland markets.
For new projects, Armstrong said the company signed precedent agreements with customers to move 1.4 Bcf/d, with the additional capacity to be provided by the Southeast Supply Enhancement project, which will serve the Mid-Atlantic and Southeast. Project completion is slated for the end of 2027.
Financially, company executives reported a strong quarter, with $654 million in net income, over $599 last year, and an adjusted EBITDA of $1.652 billion—up $15 million from the same period last year.