Williams Partners announces $2.5B acquisition in Marcellus Shale

Caiman's cryogenic processing and de-ethanization complex at Fort Beeler, WVa. Caiman is capable of processing 335 MMcf/d at Fort Beeler with an additional 210 MMcf/d coming online by summer's end.
Photo and map courtesy of Caiman Energy.

Joint venture planned for Utica Shale

Williams Partners LP, a limited partnership formed by The Williams Companies Inc., is about to make its presence – and earnings potential – known in both the Marcellus and Utica shales with a recently announced acquisition and joint venture.

The company will acquire Caiman Eastern Midstream LLC, an independent gathering and processing business in northern West Virginia, southwestern Pennsylvania and eastern Ohio, for a reported $2.5 billion.

Caiman, backed by private equity investors including EnCap Flatrock Midstream, EnCap Investments LP and Highstar Capital, holds physical assets that include a gathering system, two processing facilities and a fractionator. Expansions to these assets are under construction, and an ethane pipeline is planned.

The assets are anchored by long-term contracted commitments, including 236,000 dedicated gathering acres from 10 producers in West Virginia, Ohio and Pennsylvania. In addition, there are processing commitments in place of 100 MMcfd.

Williams Partners expects significant growth in gathering volumes and natural gas liquids (NGLs) production from these assets. There is an estimated 300 trillion cubic feet of natural gas in place within a 35-mile radius of the system, and a significant amount remains undedicated.

The partnership expects to gather more than 2 billion cubic feet per day (bcfd) and produce approximately 300,000 barrels per day (bbld) of NGLs and condensate by 2020.

Joint venture in Utica

Williams Partners also intends to enter a joint venture with Caiman Energy to develop midstream infrastructure in the NGL- and oil-rich areas of the Utica Shale, primarily in Ohio and northwest Pennsylvania.

"These new assets, anchored by long-term agreements with a diverse set of customers, give us a major presence in the liquids-rich portion of the Marcellus Shale," said Alan Armstrong, CEO of Williams Partners' general partner. "We expect significant long-term growth potential because the liquids-rich gas makes this area the most economical and top-performing play for producers in North America.

"It's also just adjacent to the rich gas and oil-producing portions of the Utica Shale, where we're planning on developing new infrastructure with Caiman. Our goal is to be the leading gathering, processing and transportation solution provider for producers in the Marcellus Shale."

Jack Lafield, president and CEO of Caiman Energy, commented: "We're looking forward to working with Williams in the Utica Shale to bring midstream infrastructure to Ohio for producers working in this dynamic and rapidly evolving play."

Transaction terms and funding

Williams Partners will fund the acquisition with $1.78 billion in cash and the issuance to Caiman of approximately 11.8 million

Williams Partners common units valued at approximately $720 million. The partnership expects to fund the cash portion of the transaction with a combination of equity, debt and available cash.

Williams Partners has entered into a commitment with respect to a $1.78 billion interim liquidity facility with UBS Investment Bank to fund the full cash purchase price for the acquisition.

The acquisition is subject to customary regulatory filings and approvals. The partnership expects to complete the acquisition in the second quarter of 2012.

Jefferies and UBS Investment Bank acted as financial advisors to Williams Partners and Gibson Dunn acted as legal counsel to Williams Partners. Additionally, UBS Investment Bank is acting as sole arranger for the Williams Partners interim liquidity facility.

Barclays and Citigroup acted as financial advisors to Caiman Energy and Vinson & Elkins acted as legal counsel to Caiman.