Energy logistics and pipelines are supposed to be boring. After all, there’s nothing partially exciting about moving various energy resources from place to place. It’s uneventful, and it’s like watching paint dry. Which is why pipeline and midstream firms are humdrum, but steady dividend payers.
However, fracking and shale gas has changed that dynamic. Our newfound energy abundance has lit a fire under the previously boring and staid midstream players. New buildouts and a hefty dose of M&A is now the new normal.
And changing with the times is pipeline firm Williams Companies (WMB).
WMB recently announced a huge deal to acquire rival midstream firm Access Midstream Partners (ACMP). The deal is big and could be hugely transformative for WMB stock and its investors. This is one pipeline firm that investors shouldn’t miss out on.
WMB Is All About Natural Gas
For Williams Companies, the story has always been about natural gas. The firm’s major operating areas are a “who’s who” of the hottest shale fields — including the prolific Marcellus field in Pennsylvania and Ohio’s Utica. Currently, about 14% of all the natural gas produced in the nation is carried by one of its pipelines. WMB has also made natural gas liquids (NGLs) processing a major pillar of its overall business model. So when it announced that it would be buying ACMP for nearly $6 billion dollars, natural gas was once again on its mind.
If you remember, Access Midstream Partners was once owned by beleaguered E&P firm Chesapeake (CHK). However, in its bid to pay down debt, CHK sold its interest in ACMP to private equity stake holders — Global Infrastructure Partners. And like Williams Companies, ACMP’s major focus was natural gas pipeline and processing infrastructure located in North America’s shale formations.
Last year, WMB acquired a 50% stake in ACMP’s privately held general partner from Global Infrastructure. And after seeing what juicy assets Access has, Williams Companies decided that it was worth pulling the trigger.
Under the terms of the deal, WMB will gain 100% control of Access Midstream’s general partner as well as 55.1 million units of ACMP from GIP. Williams will boost its ownership in the MLP units from 23% to a little more than 50%. Williams will pay for the deal with equity, debt and cash on hand. The acquisition should close in the third quarter of this year.
Great News For WMB Stock Investors
Investors have a lot to like when it comes down to the deal — even beyond the 20% pop in WMB stock.