Williams (NYSE: WMB) today announced two midstream transactions
that will result in its entry into Colorado’s Denver-Julesburg
(“DJ”) Basin and the exit of Williams Partners L.P. (NYSE: WPZ)
from the Four Corners Area in New Mexico and Colorado.
Williams and KKR & Co. (NYSE: KKR) (“KKR”) today announced
that they have entered into an agreement to purchase Discovery DJ
Services (“Discovery”) from TPG Growth, the middle market and
growth equity platform of alternative asset firm TPG, for $1.173
billion, subject to customary closing conditions and purchase price
adjustments. Discovery is a Dallas-based provider of natural gas
and oil gathering and natural gas processing services in the
southern portion of Colorado’s DJ Basin.
When the acquisition closes, which is expected to occur in early
August, Williams and KKR will own the entirety of the Discovery
midstream business through a joint venture. Williams’ initial
economic contribution and ownership will be 40 percent of the
purchase price while KKR’s initial economic contribution and
ownership will be 60 percent. Under the terms of the agreed-to
joint venture, Williams will be the operator of Discovery and will
hold a majority of governance voting rights. Williams has committed
to fund additional capital as required to bring its economic
ownership to 50/50. Additionally, Williams at its option, may
acquire a portion of KKR interests at predetermined, agreed-to
terms until the sixth anniversary of close. Williams will use the
equity method of accounting for this acquisition. Williams expects
the Discovery transaction to represent a 5-6 times multiple to
Williams’ investment inclusive of additional investments of
approximately $250 million between 2018 and 2020 and based on
expected 2020 EBITDA forecast; with opportunities for additional
improvement based upon the success of natural gas liquids (NGL)
opportunities.
Discovery, whose management team is partnering with Williams and
KKR to continue executing for the customers of the DJ Basin,
provides midstream services to producers drilling the prolific
Niobrara and Codell stacked-pay zones of the basin. Discovery’s
infrastructure and related facilities are strategically located in
Weld and Adams counties in Colorado. The Discovery system includes
both natural gas and crude oil gathering pipelines, cryogenic gas
processing, liquids handling and crude oil storage. The Discovery
assets include 60 million cubic feet per day (MMcf/d) of gas
processing capacity with an additional 200 MMcf/d plant that is
fully permitted and under construction and is expected to be in
service by the end of 2018. The Discovery assets also include 130
miles of natural gas pipeline and approximately 260,000 acres
dedicated for gas gathering and processing plus an additional
60,000 acres for oil gathering.
“Adding the fast-growing Discovery midstream business, including
sites with permitting underway for greater than 1 Bcf/d of gas
processing to our portfolio, follows our strategy of connecting the
best supplies to the best markets. This is a great opportunity to
expand our asset footprint into a premium-growth basin and brings
the benefits of the Williams capability suite to better serve
producers in the DJ Basin. The acquisition of Discovery is expected
to unlock valuable synergies with our current operations and drive
increased earnings,” said Alan Armstrong, president and chief
executive officer of Williams. “For example, this transaction
allows Williams to take advantage of synergies between the
Discovery assets and our downstream businesses via the DJ Lateral
of Overland Pass Pipeline (“OPPL”). We will now have the
opportunity to integrate output from these acquired assets with
production from our existing processing footprint in the West
segment into our advantaged downstream assets, including OPPL and
the Conway fractionator and storage facilities.”
Concurrent with the announcement of the Discovery transaction,
Williams is also announcing the combined sale of assets and equity
comprising WPZ’s Four Corners Area (“FCA”) business in New Mexico
and Colorado to Harvest Midstream Company (“Harvest”) for $1.125
billion in cash, subject to customary closing conditions. The cash
proceeds from the FCA transaction will contribute to funding
Williams’ extensive portfolio of attractive growth capital and
investment expenditures, including those opportunities associated
with the Discovery acquisition. The FCA assets being divested of by
Williams are located in San Juan and Rio Arriba Counties in New
Mexico and in La Plata County in Colorado and include 3,700 miles
of pipeline, two gas processing plants, and one CO2 treating
facility. In 2017, the Modified EBITDA contribution from the FCA
assets was approximately $85 million and is forecast to be $82
million annualized in 2018. This transaction is expected to close
in the second half of 2018, following the closing of the
previously-announced merger of WPZ into WMB.
“The FCA transaction is a win-win opportunity for both Williams
and Harvest,” said Micheal Dunn, chief operating officer of
Williams. The sale of the FCA assets supports Williams’ expansion
of operations into the DJ Basin and funding of future growth
capital. At the same time, we are pleased that an outstanding
midstream services provider like Harvest will be the operator of
these assets and know that the employees who move from Williams to
Harvest will continue delivering gas gathering and processing
expertise that is second to none in that basin.”
Armstrong added, “The Four Corners Area has been an important
part of Williams dating back to the acquisition of Northwest Energy
in 1983. However, pressure on natural gas pricing from adjacent
basins like the Permian, demand a new basin model that consolidates
and integrates upstream production with midstream operations in a
way that optimizes throughput and lowers cost. We believe that
Harvest is ideally positioned to achieve this integration, and
Williams can redeploy the proceeds into improved opportunities for
growth. The value and multiple on EBITDA that we are receiving is a
testament to the high-quality assets that Williams employees have
grown and maintained in the basin over the past 35 years.”
For the Discovery acquisition, Simmons acted as the lead
financial adviser to both Williams and KKR; Gibson Dunn served as
legal counsel to Williams, and Simpson Thatcher served as legal
adviser to KKR. For the transaction to divest of its assets in the
Four Corners Area, Williams’ lead financial adviser was Morgan
Stanley and Davis Polk acted as legal counsel.
Investor Webcast and Conference Call Aug. 2 to Discuss
Second-Quarter 2018 Financial Results and Today’s
Transactions
The transactions announced today are expected to impact
Williams’ guidance provided on May 17, 2018, for capital
expenditures. Williams expects to provide an update to 2018 and
2019 capital expenditures guidance, including updates from today’s
transactions and other commercial activities on the company’s
second-quarter 2018 earnings webcast and conference call scheduled
for Aug. 2, 2018, at 9:30 a.m. Eastern Time (8:30 a.m. Central
Time). A limited number of phone lines will be available at (877)
260-1479. International callers should dial (334) 323-0522. The
conference ID is 1766230. Williams senior management will also
discuss today’s transactions during the Aug. 2 webcast and
call.
About Williams & Williams Partners
Williams (NYSE: WMB) is a premier provider of large-scale
infrastructure connecting U.S. natural gas and natural gas products
to growing demand for cleaner fuel and feedstocks. Headquartered in
Tulsa, Okla., Williams owns approximately 74 percent of Williams
Partners L.P. (NYSE: WPZ). Williams Partners is an
industry-leading, large-cap master limited partnership with
operations across the natural gas value chain including gathering,
processing and interstate transportation of natural gas and natural
gas liquids. With major positions in top U.S. supply basins,
Williams Partners owns and operates more than 33,000 miles of
pipelines system wide – including the nation’s largest volume and
fastest growing pipeline – providing natural gas for clean-power
generation, heating and industrial use. Williams Partners’
operations touch approximately 30 percent of U.S. natural gas.
www.williams.com
About KKR
KKR is a leading global investment firm that manages multiple
alternative asset classes, including private equity, energy,
infrastructure, real estate, credit and, through its strategic
partners, hedge funds. KKR aims to generate attractive investment
returns by following a patient and disciplined investment approach,
employing world-class people, and driving growth and value creation
with KKR portfolio companies. KKR invests its own capital alongside
its partners' capital and provides financing solutions and
investment opportunities through its capital markets business.
References to KKR's investments may include the activities of its
sponsored funds. For additional information about KKR &
Co. Inc. (NYSE: KKR), please visit KKR's website
at www.kkr.com and on Twitter @KKR Co.
About TPG Growth
TPG Growth is the middle market and growth equity investment
platform of TPG, the global alternative asset firm. With
approximately $13.2 billion of assets under management, TPG Growth
targets investments in a broad range of industries and geographies.
TPG Growth has the deep sector knowledge, operational resources,
and global experience to drive value creation, and help companies
reach their full potential. The firm is backed by the resources of
TPG, which has approximately $84 billion of assets under
management. For more information, visit www.tpg.com.
About Harvest Midstream Company
Harvest Midstream Company, formerly Harvest Pipeline Company, is
a privately held midstream services provider based in Houston,
Texas, that operates crude oil and natural gas gathering, storage,
transportation, treatment and terminalling assets across the Lower
48 and Alaska. To learn more visit www.harvestmidstream.com.
Forward-Looking Statements
The reports, filings, and other public announcements of The
Williams Companies, Inc. (Williams) may contain or incorporate by
reference statements that do not directly or exclusively relate to
historical facts. Such statements are “forward-looking statements”
within the meaning of Section 27A of the Securities Act of
1933, as amended (Securities Act), and Section 21E of the
Securities Exchange Act of 1934, as amended (Exchange Act). These
forward-looking statements relate to anticipated financial
performance, management’s plans and objectives for future
operations, business prospects, outcome of regulatory proceedings,
market conditions, and other matters. We make these forward-looking
statements in reliance on the safe harbor protections provided
under the Private Securities Litigation Reform Act of 1995.
All statements, other than statements of historical facts,
included herein that address activities, events or developments
that we expect, believe or anticipate will exist or may occur in
the future, are forward-looking statements. Forward-looking
statements can be identified by various forms of words such as
“anticipates,” “believes,” “seeks,” “could,” “may,” “should,”
“continues,” “estimates,” “expects,” “forecasts,” “intends,”
“might,” “goals,” “objectives,” “targets,” “planned,” “potential,”
“projects,” “scheduled,” “will,” “assumes,” “guidance,” “outlook,”
“in-service date” or other similar expressions. These
forward-looking statements are based on management’s beliefs and
assumptions and on information currently available to
management.
Forward-looking statements are based on numerous assumptions,
uncertainties and risks that could cause future events or results
to be materially different from those stated or implied herein.
Many of the factors that will determine these results are beyond
our ability to control or predict. Specific factors that could
cause actual results to differ from results contemplated by the
forward-looking statements include, among others, the
following:
- Satisfaction of the conditions to the
completion of the WPZ Merger, including receipt of the Williams
stockholder approval, and our ability to close the WPZ Merger;
- Whether WPZ will produce sufficient
cash flows to provide expected levels of cash distributions;
- Whether we are able to pay current and
expected levels of dividends;
- Whether we will be able to effectively
execute our financing plan;
- Availability of supplies, market
demand, and volatility of prices;
- Inflation, interest rates, and general
economic conditions (including future disruptions and volatility in
the global credit markets and the impact of these events on
customers and suppliers);
- The strength and financial resources of
our competitors and the effects of competition;
- Whether we are able to successfully
identify, evaluate and timely execute our capital projects and
other investment opportunities;
- Our ability to acquire new businesses
and assets and successfully integrate those operations and assets
into existing businesses as well as successfully expand our
facilities;
- Development and rate of adoption of
alternative energy sources;
- The impact of operational and
developmental hazards and unforeseen interruptions;
- The impact of existing and future laws
(including, but not limited to, the Tax Cuts and Jobs Act of 2017),
regulations, the regulatory environment, environmental liabilities,
and litigation, as well as our ability to obtain necessary permits
and approvals, and achieve favorable rate proceeding outcomes;
- Our costs and funding obligations for
defined benefit pension plans and other postretirement benefit
plans;
- Changes in maintenance and construction
costs;
- Changes in the current geopolitical
situation;
- Our exposure to the credit risk of our
customers and counterparties;
- Risks related to financing, including
restrictions stemming from debt agreements, future changes in
credit ratings as determined by nationally-recognized credit rating
agencies and the availability and cost of capital;
- The amount of cash distributions from
and capital requirements of our investments and joint ventures in
which we participate;
- Risks associated with weather and
natural phenomena, including climate conditions and physical damage
to our facilities;
- Acts of terrorism, including
cybersecurity threats, and related disruptions;
- Additional risks described in our
filings with the Securities and Exchange Commission (SEC).
Given the uncertainties and risk factors that could cause our
actual results to differ materially from those contained in any
forward-looking statement, we caution investors not to unduly rely
on our forward-looking statements. We disclaim any obligations to
and do not intend to update the above list or announce publicly the
result of any revisions to any of the forward-looking statements to
reflect future events or developments.
In addition to causing our actual results to differ, the factors
listed above may cause our intentions to change from those
statements of intention set forth herein. Such changes in our
intentions may also cause our results to differ. We may change our
intentions, at any time and without notice, based upon changes in
such factors, our assumptions, or otherwise.
Because forward-looking statements involve risks and
uncertainties, we caution that there are important factors, in
addition to those listed above, that may cause actual results to
differ materially from those contained in the forward-looking
statements. For a detailed discussion of those factors, see Part I,
Item 1A. Risk Factors in our Annual Report on Form 10-K filed with
the SEC on February 22, 2018 and in Part II, Item 1A. Risk Factors
in our Quarterly Reports on Form 10-Q.
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version on businesswire.com: https://www.businesswire.com/news/home/20180730005183/en/
WilliamsMedia Contact:Keith Isbell,
918-573-7308orInvestor Contacts:John Porter,
918-573-0797orPaul Schroedter, 918-573-9673
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