Williams could delay the spinoff of its exploration and production (E&P) business, but the company remains committed to separating the upstream unit from its expanding midstream operations, CEO Alan Armstrong said on Wednesday.

Armstrong explained the "new Williams" at the Barclays Capital CEO Energy-Power Conference in New York City. The company earlier this year said it would sell a portion of its E&P business through an initial public offering (IPO) before the end of this month and would spin off the remaining interest to shareholders in early 2012 (see NGI, May 23; Feb. 21).

The company now plans to proceed with the IPO "when market conditions are suitable" and would fully separate the E&P business as WPX Energy Inc. through a tax-free spinoff to shareholders in the first quarter of 2012. "We are committed and poised to execute the IPO no later than the first quarter of 2012," said the CEO.

"In 2011 unlocking value has certainly been our focus. We've been concentrating on two facets: first on separating our E&P business to WPX Energy, and second in unlocking the value of the great natural resources we have here in the United States. They are transforming opportunities." WPX is expected to become an E&P player to reckon with by "taking large-scale, big positions, and to consolidate positions in big basins." Armstrong didn't elaborate further.

For the focused midstream company, growth will come across the board through supply and demand projects in several of the biggest North American areas, from the Marcellus Shale, the deepwater Gulf of Mexico and the western United States, as well as in chemicals operations in Canada and from gas transport along the Eastern Seaboard.

The "new Williams," Armstrong said, has close to $5 billion of growth investments planned through 2013. From 2011 through 2013 the company plans to spend $4.22-5.4 billion. Through 2016 $8.1-20.25 billion is being planned or "under negotiation."

Through Williams' Transcontinental Gas Pipe Line (Transco) the Marcellus Shale region is slated to become the company's largest midstream and gas pipeline operations with growth "across Pennsylvania and into market areas," said Armstrong. "With Transco, this growth is through producer-driven expansions. They aren't market-driven; these are where producers are signing up for space."

Expansion projects include the Northeast Supply Link, which has been fully contracted and is "moving ahead to permitting and construction." The project, scheduled to be in service in 2013, is to have 250 MMcf/d capacity. The proposed Atlantic Access project would have 1.1 Bcf/d of capacity with a forecast in-service date of 2014.

Atlantic Access is "still a proposal and not contracted, and we're not ready to move ahead...but we are very hopeful," said the CEO. "Producers continue to realize that getting gas to an existing supply hub where other producers have plenty of gas to sell as well is not a long-term answer. There has to be a solution for these markets."

Transco also is "ready to take on excess ethane, which is causing problems with gas quality," he said. For ethane projects, "ultimately large-scale solutions are going to win at the end of the day. The small ones will be built, but they don't provide optimized solutions. Large scale will win out. Either way we win. We can aggregate ethane flowing in the gas stream until there's enough to extract, or transport it just like we do at Opal, at Mobile Bay...Echo Springs."

Low natural gas prices offer an "attractive alternative" to rising oil futures, he told analysts. Williams Partners LP generates some of its revenue from processing and transporting natural gas liquids, and the growth of the pipeline partnership's fee-based processing and transport business will help the parent company increase dividends in the years to come, he said. Williams is planning to pay most of the distributions it receives from its 75% stake and general partner control in the partnership, he said.

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