Natural gas pipeline giant Williams has received a past-due payment of $112 million from Chesapeake Energy Corp. after a court approved a resolution between the two companies last month as part of the producer’s bankruptcy proceedings.
The Tulsa-based pipeliner reached a global resolution in November to continue treating and moving Chesapeake’s natural gas in the Lower 48. Chesapeake filed for Chapter 11 bankruptcy protection in June to wipe out $7 billion of debt and has also sold all of its Midcontinent assets in the process. Williams said it received the $112 million payment for pre-petition and past-due receivables for midstream expenses per its existing contracts with Chesapeake.
Chesapeake also agreed to not attempt to reject its gathering agreements with Williams. In the Haynesville Shale, Williams plans to reduce its gathering fees in exchange for gaining ownership of a portion of Chesapeake’s South Mansfield producing assets. The assets include 50,000 net mineral acres.
In the Haynesville agreement, Chesapeake plans to enter into a long-term gas supply commitment on Williams’ Transcontinental Gas Pipe Line, aka Transco. The agreement would require Chesapeake to provide a minimum 100,000 Dth/d and up to 150,000 Dth/d from its Marcellus Shale assets on the Transco Regional Energy Access pipeline currently under development.
Williams said the South Mansfield assets provide an opportunity for it to transition the acreage to a “strong and well-capitalized operator” that will grow production volumes, and drive growth in fee-based cash flows on Williams’ existing spare midstream capacity.
“Chesapeake is a valuable customer, and this transaction will both strengthen Chesapeake and allow Williams to enhance the value of our significant midstream infrastructure by bringing adequate capitalization to these low-cost gas reserves,” Williams CEO Alan Armstrong said of the resolution.
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