Williams Partners LP said late Thursday that it would increase its ownership stake in two Marcellus Shale natural gas gathering systems in northern Pennsylvania through an exchange of Permian Basin assets and a $155 million cash payment from Western Gas Partners LP.*
Under the agreement, Williams would receive Western Gas' non-operated 33.75% ownership stake in the Rome and Liberty gathering systems. In addition to the cash payment, Western Gas would receive Williams’ non-operated 50% ownership stake in Delaware Basin JV Gathering LLC (DBJV). The deal would increase Williams ownership in Rome and Liberty, which have current throughput of 1.6 Bcf/d, to 67.5%, while the exchange would give Western Gas and its affiliates full ownership of the DBJV.
Williams was already operating the Northeast gathering systems, which are included in its Bradford Supply Hub. The company has been focused on streamlining operations and reducing its operational areas from five to three, with a strong focus on gas-rich regions such as the Appalachian Basin. "This transaction allows Williams Partners to increase its ownership in the Bradford Supply Hub, our largest gathering franchise in the Marcellus, contributing free cash flow today while exiting non-operated, partial-ownership positions that were expected to require significant cash contributions," said Williams CEO Alan Armstrong.
For Western Gas Partners, the midstream master limited partnership of Anadarko Petroleum Corp., the agreement continues with a shift out of the Northeast. Anadarko exited the Marcellus with a $1.24 billion sale in December. The producer has also been concentrating its operations, with a sharp focus on the Permian Basin's Delaware formation, the Denver-Julesburg (DJ) Basin and the deepwater Gulf of Mexico. After the exchange, Western Gas would still have operated assets in the Marcellus' northern tier.
"With this consolidation of ownership in DBJV, we are taking another important step in the development of our fully integrated gas gathering and processing footprint in the Permian Basin," said Western Gas CEO Don Sinclair. "Our ability to develop these types of asset positions has proven to be successful in generating incremental returns for our unitholders, with the DJ Basin being our most notable example."
The Rome and Liberty systems consist of 531 miles of pipeline in several Pennsylvania counties, while the DBJV consists of 577 miles of pipeline that serve Anadarko and third party producers in Loving, Ward, Winkler and Reeves counties, TX.
Williams would continue its presence in the Delaware, which is included in its streamlined plans, and the transactions are expected to close late this quarter or next. Williams has also agreed with Anadarko to sell its 33.33% stake in the Delaware's Ranch Westex processing plant for $45 million.
*The original version of this story incorrectly stated that Williams Partners LP would make a cash payment to Western Gas Partners LP to increase its ownership stake in the Marcellus natural gas gathering systems. In fact, Williams would receive $155 million from Western Gas. NGI regrets the error.