A decision to spin off its exploration and production (E&P) unit as a pure-play producer will give Williams shareholders more opportunities to target their investments, CEO Alan Armstrong said Thursday.
Speaking at the company's annual shareholder meeting, Armstrong explained the company's plans to launch later this year a partial initial public offering of its E&P business, to be known as WPX Energy Inc. (see Daily GPI, Feb. 17). Williams would offer investors a 20% stake in WPX to raise up to $750 million in equity.
"Separating into two companies -- with two very different investment profiles -- allows us to pursue growth in both sectors...Meanwhile, WPX Energy will be a low-cost, large-scale producer in some of the country's most prolific basins and plays: the Piceance, the Marcellus Shale and the Bakken Shale."
Following the spinoff Williams primarily would operate the natural gas pipeline and infrastructure businesses and own about 80% of WPX. The remaining WPX shares would be distributed to Williams' shareholders in 2012 as a dividend. Federal approval is expected later this year.
"Once the separation is complete we believe both the growth potential and overall valuation of our assets will be enhanced," said the CEO.
As natural gas becomes a bigger part of the U.S. energy supply, Williams plans to be part of it, said Armstrong.
"North America has the world's best infrastructure for utilizing natural gas and natural gas liquids via our vast network of midstream systems, petrochemical complexes, gas transmission and distribution systems. From industry to government, from environmentalists to economists, from power generators to industrial customers, people are turning to natural gas. And that's creating new demand for infrastructure, for technology, for expertise -- all of which we are blessed to have at Williams."
El Paso Corp., which, like Williams, also has a gas pipeline unit and an E&P business, is considering a similar move to separate its businesses, according to industry rumors. CEO Doug Foshee earlier this year acknowledged the many opportunities the company has (see Daily GPI, Jan. 28). A spokesman said the company has considered restructuring but a more appropriate time to split would be when El Paso once again achieves investment-grade status, which is expected in 2012.
However, some shareholders may have other plans. Earlier this month Jana Partners LLC, a hedge fund that has been instrumental in breaking up companies, confirmed that it now owns more than 4% of El Paso stock.
El Paso is holding an analyst meeting on Tuesday (May 24).
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