Williams enters DJ basin, exits Four Corners Area in separate deals

In two separate midstream transactions, Williams Cos. Inc., Tulsa, has entered Colorado’s Denver-Julesburg (DJ) basin and exited Williams Partners LP from the Four Corners Area (FCA) in New Mexico and Colorado.

DJ basin

Williams and KKR & Co. will purchase Discovery DJ Services, Dallas, from TPG Growth, the middle market and growth equity platform of alternative asset firm TPG, for $1.173 billion. At deal close, expected in August, Williams and KKR will own the Discovery midstream business through a joint venture. Williams will serve as operator and will initially contribute and own 40%. KKR will contribute and own 60%. Williams plans to fund additional capital as required to bring its economic ownership to 50%. Additionally, Williams may acquire a portion of KKR interests at predetermined, agreed-to terms until the sixth anniversary of close.

Discovery provides midstream services to producers drilling the Niobrara and Codell stacked-pay zones of the DJ basin through infrastructure and related facilities in Weld and Adams counties in Colorado, including both natural gas and crude oil gathering pipelines, cryogenic gas processing, liquids handling, and crude oil storage. The Discovery assets include 60 MMcfd of gas processing capacity with an additional 200 MMcfd plant that is fully permitted and under construction and is expected to be in service by yearend. The Discovery assets also include 130 miles of gas pipeline and 260,000 acres dedicated for gas gathering and processing plus an additional 60,000 acres for oil gathering.

The addition, “including sites with permitting under way for greater than 1 bcfd of gas processing to our portfolio, follows our strategy of connecting the best supplies to the best markets,” said Alan Armstrong, Williams president and chief executive officer. The deal “allows Williams to take advantage of synergies between the Discovery assets and our downstream businesses via the DJ Lateral of Overland Pass Pipeline (OPPL),” he said. Output from the acquired assets can be integrated with production from the company’s existing processing footprint in the West segment into its downstream assets, including OPPL and the Conway fractionator and storage facilities, Armstrong said.

Four Corners Area

Williams separately agreed to sell assets and equity comprising its FCA to Hilcorp Energy Co. affiliate Harvest Midstream Co., Houston, for $1.125 billion in cash.

The system includes more than 3,700 miles of pipeline, two gas processing plants, and one carbon dioxide treating facility in the counties of San Juan and Rio Arriba, NM, and La Plata, Colo. It has an inlet gas gathering capacity of 1.8 bcfd.

Cash proceeds will contribute to growth capital and investment expenditures, including those associated with the Discovery acquisition, Williams said.

The FCA deal is expected to close in this year’s second half, following the closing of the previously announced merger of Williams Partners into Williams (OGJ Online, May 18, 2018).