North American energy firm
Williams Companies Inc.
) inked a deal with a master limited partnership
Boardwalk Pipeline Partners LP
) to form a joint venture for developing a pipeline project. The
pipeline will carry natural gas liquids (NGL) to the growing
petrochemical complex on the Gulf Coast from Utica and Marcellus
shale plays situated in Ohio, West Virginia and Pennsylvania.
The planned Bluegrass Pipeline system will carry the NGL at a
rate of 200,000 barrels a day from the producing regions of Ohio,
West Virginia and Pennsylvania to the Texas Gas Transmission
system of Boardwalk, based in Hardinsburg, Kentucky. From
Kentucky the liquid will be transported to the coast of Texas and
Louisiana, where it will be used as feedstock for the
petrochemical plants, for fractionation purposes and the export
market. In addition, the companies are looking to construct a
processing plant in Louisiana.
Included in the deal, the companies are also planning to build a
new liquefied petroleum gas terminal on the Gulf Coast to better
access international customers.
The proposed pipeline is expected to be in operation in the
second half of 2015, subject to the fulfillment of all the
required conditions. In order to support the growing market
demand, the capacity of the pipeline is also expected to be
increased to 400,000 barrels a day from 200,000 barrels a day by
adding an extra pumping system.
However, the cost of the project is not yet disclosed by any of
Tulsa, Oklahoma-based Williams is a premier energy infrastructure
provider in North America. The company's core operations include
finding, producing, gathering, processing, and transportation of
natural gas. Boasting of a widespread pipeline system, Williams
is one of the largest domestic transporters of natural gas by
volume. Its facilities - gas wells, pipelines, and midstream
services - are concentrated in the Northwest, Rocky Mountains,
Gulf Coast, and Eastern Seaboard. Williams divides its business
into four segments: Williams Partners, Williams NGL & Petchem
Services, Access Midstream Partners, and Other.
We remain concerned about Williams' high debt levels, which leave
it vulnerable to an extended drop in commodity prices. As of Dec
31, 2012, Williams had long-term debt of more than $10.7 billion,
representing a debt-to-capitalization ratio of 69.3%.
Williams currently retains a Zacks Rank #5 (Strong Sell),
implying that it is expected to underperform the broader U.S.
equity market over the next 1 to 3 months.
However, there are other stocks in the oil and gas sector -
Calumet Specialty Products Partners LP
Compressco Partners LP
) - which hold a Zacks Rank #1 and are expected to perform
BOARDWALK PIPLN (BWP): Free Stock Analysis
CALUMET SPECLTY (CLMT): Free Stock Analysis
COMPRESSCO PTNR (GSJK): Free Stock Analysis
WILLIAMS COS (WMB): Free Stock Analysis
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