Williams Companies to Spend $6B on Access Midstream Buyout - Analyst Blog

North American energy firm, Williams Companies Inc. ( WMB ) has decided to purchase the remaining 50% general partner (GP) interest and 55.1 million limited partner (LP) units in Access Midstream Partners LP ( ACMP ). Williams Companies will spend roughly $6.0 billion in cash to procure the stake and units of the master limited partnership (MLP) engaged in the midstream business.

The acquisition will likely give Williams Companies full GP ownership and 50% LP interest in the Oklahoma City-based partnership. The transaction is likely to close by the third quarter.

Williams Companies also has a plan to merge energy infrastructure provider Williams Partners LP ( WPZ ) with Access Midstream Partners. Notably, Williams Companies has 72% ownership in Williams Partners (including the general-partner interest).

Williams Companies added that with the advent of hydraulic fracturing (or fracking) -- a method used to extract natural gas by blasting underground rock formations with a mixture of water, sand and chemicals -- shale gas production is now booming in the U.S. The increased production in turns creates huge demand for natural gas transportation. We believe that with the acquisition, Williams Companies will significantly improve its transportation and midstream businesses as Access Midstream holds a strong portfolio of natural gas pipelines and gathering assets in the Marcellus, Barnett, Utica, Haynesville, Eagle Ford, Mid-continent and Niobrara shale regions.

The benefits from the acquisition would be reflected in Williams Companies' third quarter dividend, which is expected to increase 32.0% to 56 cents per share. The projected annualized dividend for 2014 and 2015 is $1.96 and $2.46, respectively. For 2015 through 2017, the company plans a 15% dividend hike.

Tulsa, OK-based Williams Companies is a premier energy infrastructure provider in North America. But we remains concerned with the company's extensive natural gas exposure, which raises its sensitivity to the commodity's price, which continues to be volatile.

As a results, Williams Companies currently retains a Zacks Rank #3 (Hold), which implies that it is expected to perform in line with the broader U.S. market in the next one to three months.

Meanwhile, one can look at better-ranked players in the same industry such as EQT Midstream Partners LP ( EQM ) which carries a Zacks Rank #1 (Strong Buy).

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WILLIAMS COS (WMB): Free Stock Analysis Report

WILLIAMS PTNRS (WPZ): Free Stock Analysis Report

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EQT MIDSTRM PTR (EQM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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