Addressing The Williams Chesapeake Exposure
Sat, Sep. 10, 8:25 AM
- Energy MLPs enjoyed a lift this week (at least until yesterday) following news of the Enbridge-Spectra merger, particularly those lacking sponsorship by producers that may be targets for consolidation.
- Credit Suisse sees logical players to be involved in combinations to secure access to opportunities and capital including ETE/ETP, EPD, MMP, PAA/PAGP, OKE/OKS, WPZ, PSX/PSXP, MPC/MPLX, TRGP, NS/NSH, GEL and TEP/TEGP.
- FBR Capital says MLP valuations have improved ~45% from lows reached early this year, and expects macro trends to lift the sector; the firm thinks CAPL could enjoy double-digit growth for nearly seven years, and says MMLP is another notable outperformer whose valuation reflects more than enough discount for a distribution cut (which the firm is forecasting) - it also likes ENLK, EEP, TLP, SRLP, USAC, WLKP and USDP,
- RBC notes favorable sentiment in the MLP realm, highlighting attractive valuations particularly at ETP, BWP and AMID, and sees dropdown stories - out of favor YTD - such as VLP and SHLX offering visible growth that can support the stocks over the next 12 months.
- ETFs: AMLP, AMJ, KYN, TYG, KYE, SRV, CEM, MLPI, NML, FEN, NTG, KMF, MLPA, EMLP, FMO, AMZA, FEI, JMF, SRF, CBA, MLPN, GMZ, MLPX, GER, EMO, TTP, CTR, MLPS, CEN, SMM, DSE, FPL, AMU, MIE, JMLP, ENFR, ATMP, IMLP
Thu, Sep. 8, 4:55 PM
- Williams Cos. (NYSE:WMB) -5.3% AH after Enterprise Products Partners (NYSE:EPD) makes its official that it is no longer interested in pursuing a merger with the company; EPD +1.6%, WPZ -2.4%.
- EPD says it had submitted non-binding proposals to WMB for a merger but withdrew its indication of interest in WMB because of "recent news leaks, movements in the price of the partnership's common units as well as questions from investors."
- Speculation about a potential EPD-WMB combination began about a month ago, after a planned merger of WMB and Energy Transfer Equity collapsed in June.
Thu, Sep. 8, 2:54 PM
- Williams Cos. (WMB +2.5%) unveils measures to simplify its structure and reduce commodity exposure by consolidating to three operating areas - Atlantic-Gulf, West and Northeast Gathering & Processing - from five.
- WMB also says it plans to reinvest ~$1.7B into Williams Partners (WPZ -0.8%) through 2017, funded by reduced quarterly cash dividends; WPZ also says it will begin a distribution reinvestment program.
- WMB expects financial reporting under the new structure to take effect in early January.
Tue, Sep. 6, 9:56 AM
- Williams Partners (WPZ +1.6%) says it is exploring a possible sale or a long-term fee-based tolling services agreement related to its Geismar, La., olefins plant and complex; WPZ operates and has an 88.5% ownership interest in the Geismar plant.
- Last year, WPZ placed in service an expansion of the facility that increased its ethylene production capacity by 600M lbs.year for a total production of 1.95B lbs/year of ethylene and 114M lbs./year of propylene.
- If the process results in a sale, WPZ says it would use part of the proceeds to reduce debt to help maintain investment-grade credit metrics with the balance used to reduce planned equity issuances.
Wed, Aug. 10, 5:28 PM
- Chesapeake Energy (NYSE:CHK) agrees to sell its interests in the Barnett shale in north Texas - the birthplace of the shale revolution - to Saddle Barnett Resources.
- CHK says leaving the gas fields will cut shipping and processing costs by $715M by the end of 2017, eliminate ~$1.9B in long-term pipeline agreements, increase operating income through 2019 by $200M-$300M annually, and increase the PV-10 of its proved reserves by ~$550M.
- As part of the deal, CHK will pay $334M to Williams Partners (NYSE:WPZ) to end their current gathering agreement, projected MVC shortfall payments and fees pertaining to the Barnett Shale assets, with Saddle Resources also expected to pay an unspecified additional sum.
- CHK also renegotiates its existing cost-of-service gas gathering agreement with WPZ covering the Mid-Continent operating area to a fixed-fee arrangement, which CHK says should reduce its Mid-Continent gas gathering costs by 36%.
- The Barnett deal includes ~215K net developed and undeveloped acres and ~2,800 operated wells.
- CHK +5.2% AH, WPZ -0.2%.
Tue, Aug. 9, 10:58 AM
- Buying Williams Cos. (WMB +0.2%), not Williams Partners (WPZ +0.1%), is the best way to play the likely eventual consolidation of the companies, according to BMO Capital analyst Danilo Juvane, who cites a clearer path to 2018 dividend growth for WMB.
- Juvane expects WPZ to issue ~$3B of equity over the next 18 months, including ~$1.7B WMB reinvestment in which the general partner will forgo cash distributions on its limited partner units in exchange for equity; with the resultant growth in GP cash flow, the analyst thinks that by 2018 WMB can rebase the dividend by 150% to $2/share annualized and subsequently support 5% long-term growth, all while sporting coverage of 1.2x-1.3x.
- Meanwhile, Juvane says the outlook for WPZ distribution growth is less visible, given the expected equity issuances, particularly as the drag from incentive distribution rights continues to exacerbate the MLP’s cost of capital.
Mon, Aug. 8, 5:14 PM
- Williams Cos. (NYSE:WMB) and Williams Partners (NYSE:WPZ) agree to sell their Canadian businesses to Inter Pipeline (OTCPK:IPPLF) for C$1.35B (US$1.03B).
- As part of the deal, WMB waives US$150M of incentive distribution rights in the quarter to facilitate WPZ's consent to the sale in recognition of the value of inter-company contracts; following the waiver, WPZ will receive US$817M net consideration and WMB will receive US$209M.
- The companies say they plan to use the proceeds to reduce borrowings on credit facilities.
Mon, Aug. 8, 12:19 PM
- Williams Partners (WPZ +1.4%) and its co-developers in the $925M Constitution natural gas pipeline are favored to prevail in at least one of two legal challenges to New York’s opposition to the project, Bloomberg reports.
- The developers argue that the project should go forward and that requiring other state permits as a condition precedent to construction is an overreach.
- The FERC last month approved the 124-mile pipeline from the Marcellus shale region in Pennsylvania to markets in New England and New York, and granted the developers a two-year extension to December 2018.
- Other partners in the Constitution pipeline include Cabot Oil & Gas (COG +3.3%), Piedmont Natural Gas (PNY +0.1%) and WGL Holdings (WGL -0.8%).
Tue, Aug. 2, 3:33 PM
Mon, Aug. 1, 5:40 PM
- Williams Cos. (WMB -6%) has picked up 4.1% after hours as its Q2 earnings report brings confirmation of a dividend cut to be used to invest in pipeline unit Williams Partners (WPZ, itself up 2.1% after hours).
- The company cut its quarterly cash dividend to $0.20/share from its previous $0.64, starting with Q3, saying it expects to resume increases in 2018.
- Williams swung to a net loss (unaudited) of $405M after taking a $747M pretax impairment charge tied to Canadian operations held for sale.
- Williams will reinvest about $1.7B into Williams Partners through 2017, funded by a distribution reinvestment program. That begins with $500M in investment in 2016 ($250M in Q3 via private purchase and the balance in Q4 via the DRIP).
- Another $1.2B will be reinvested in WPZ in 2017 via the DRIP.
- Press Release
Mon, Aug. 1, 4:32 PM
Wed, Jul. 27, 8:15 AM
Fri, Jul. 22, 11:54 PM
- The partners behind the proposed Constitution Pipeline earlier today asked the FERC for a 24-month extension until December 2018 to construct its 124-mile interstate pipeline from Susquehanna County, Pa., to Schoharie County, N.Y.
- FERC's initial approval had required completion of the extension by December 2016, but the project has been delayed because New York state regulators refused to grant a needed water quality certification in April.
- Williams Partners (NYSE:WPZ), Cabot Oil & Gas (NYSE:COG) and Piedmont Natural Gas (NYSE:PNY) are the partners behind the proposed $925M gas pipeline.
Fri, Jul. 22, 3:15 PM
- Williams Cos. (WMB -0.8%) and Williams Partners (WPZ -0.7%) are resumed with Neutral ratings at Citigroup, which views the Williams complex as a relatively inexpensive valuation balanced by a need for reduced payouts and balance sheet right-sizing.
- Citi's Faisel Khan expects WMB to cut its quarterly dividend to $0.20, a 69% reduction, and WPZ to whack its distribution to $0.50, a 41% reduction; Khan thinks a distribution cut would provide much needed flexibility and allow WPZ to maintain its investment grade credit rating.
- Khan believes electing directors with industry experience and a track record of capital discipline are critical coming out of November's shareholder meeting, after earlier letters of resignation from activist board members were critical of current management and the resignation of other members cast some doubt over WMB's management team.
Thu, Jul. 14, 2:52 PM
- Williams Cos. (WMB +5.6%) moves sharply higher following a Reuters report that it has received at least seven bids for its Canada unit, in a potential sale that could fetch $1B-$2B.
- Interest has come from pipeline companies Enbridge (ENB -0.4%), Pembina (PBA +0.5%), Keyera (OTC:KEYUF) and Inter Pipeline (OTCPK:IPPLF), as well as three Canadian pension plans, and an unspecified number of U.S. companies, according to the report.
- The sale process reportedly is at an advanced stage, and a deal could result by the end of the month; interest is said to be strong, highlighting demand for midstream assets that offer a steady cash flow despite volatile oil prices.
- Also: WPZ +3.3%, EEP +0.1%.
Wed, Jul. 13, 12:27 PM
- Williams Cos. (WMB -0.9%) is reinstated with a Buy rating and $25 price target at Goldman Sachs, which says WMB offers a “compelling opportunity” in view of its robust fundamentals and relatively inexpensive valuation.
- Goldman highlights WMB's visible growth from well-contracted projects, and notes that Williams Partners (WPZ -0.5%) is expected to generate 7% consolidated EBITDA compound annual growth rate from 2015-20, resulting in solid cash flow at the company level.
- Investors should consider any weakness in shares following the dividend cut as a buying opportunity, the firm says.
- Morgan Stanley resumes coverage with a Neutral rating and a $24 price target, citing an attractive valuation but uncertainty from WMB's "full plate" in determining the correct GP/LP structure, potentially resetting the dividend, and business mix policies as the company grapples with a path of independence.