Calling the deal "a strategic entry point into one of the largest emerging natural gas plays in North America at an attractive price," Williams on Monday closed a joint venture agreement with Atlas Pipeline Partners LP that provides the company access to the Marcellus Shale.
First announced in early April (see Daily GPI, April 2), the new midstream joint venture, Laurel Mountain Midstream LLC, owns 1,800 miles of intrastate gathering lines in the Appalachian Basin servicing 6,900 wells. Average throughput for the Atlas Marcellus system was more than 100 MMcf/d. Atlas Energy Resources LLC, an Atlas Pipeline affiliate, has increased the gathering system's throughput by 30% in the past year.
Williams contributed $100 million and issued a $25.5 million note payable to Laurel Mountain in exchange for a 51% ownership interest in the joint venture. As part of the deal, Williams will also operate the gathering system.
Williams said its previously announced contribution of $102 million was reduced by $2 million in closing adjustments. The company noted that the number could further change slightly due to post-closing adjustments.
Laurel Mountain's anchor customer will be Atlas Energy Resources, whose Marcellus leasehold totals more than 550,000 acres, including 274,000 acres in southwestern Pennsylvania. An estimated 4-6 Tcfe of resource potential may exist in the leasehold, with 4,000-6,000 potential drilling locations with 40-acre spacing, according to Atlas Energy. The producer currently operates around 120 wells in the Marcellus formation.
In addition to the anchor-tenant relationship with Atlas Energy, the joint venture partners said they plan to offer services to other producers in the future.
The existing southwest Pennsylvania gathering system connects to several interstate gas pipelines and expansions under way by several pipelines, which are expected to offer additional takeaway capacity to the East Coast markets in the future. One of these expansions is Williams' Rockies Connector project, a proposed expansion of Transcontinental Gas Pipe Line, which would connect gas supplies originating from the Appalachian and Rockies regions (see Daily GPI, May 7, 2008).
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