Energy infrastructure company, Williams Partners L.P. (WPZ) announced that it would acquire Williams Cos. Inc.'s (WMB) currently in-service Alberta, Canada operations for $1.2 billion. The transaction is expected to be completed on Feb 28.
The acquisition is immediately accretive to Williams Partners and would position it for future growth in Canada. The assets being acquired include an oil sands offgas processing plant near Fort McMurray, about 260 miles of NGL and olefins pipelines, as well as an NGL/olefins fractionation facility and butylene/butane splitter facility at Redwater.
The Canadian operations have competitive advantages and long-term contracts that are expected to produce strong cash flows for Williams Partners. The operating results are expected to contribute distributable cash flow of about $135 million to $160 million for the remainder of 2014 and $200 million to $240 million in 2015.
Williams Partners plans to fund the deal with the issuance to Williams Cos. of 25.6 million Class D payment-in-kind (PIK) limited-partner units, $25 million in cash and an increase to the general partner's capital account to maintain Williams Cos.' 2% general-partner interest. Williams currently owns about 64% of Williams Partners, including the general-partner interest. In lieu of cash distributions, the PIK units will receive quarterly distributions of additional PIK units. Upon conversion of the PIK units, Williams expects to gain increased distributions from Williams Partners.
Williams Partners is an energy master limited partnership engaged in gathering, transportation, treating and processing of natural gas as well as fractionation and storage of NGLs. The partnership owns interests in three major interstate natural gas pipelines that, combined, deliver 14% of the natural gas consumed in the U.S. The partnership’s gathering and processing assets include large-scale operations in the U.S. Rocky Mountains as well as onshore and offshore Gulf of Mexico.
Williams Partners currently carries a short-term Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Matrix Service Company (MTRX) and New Source Energy Partners L.P. (NSLP). All these stocks hold a Zacks Rank #1 (Strong Buy).
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