Williams Announces Acquisition of Strategic Gulf Coast Natural Gas Storage Portfolio with Direct Access to LNG Export Facilities and Interstate Pipelines

Rhea-AI Summary

Williams (NYSE: WMB) has agreed to acquire a portfolio of natural gas storage assets from Hartree Partners LP for $1.95 billion. The acquisition includes six underground natural gas storage facilities located in Louisiana and Mississippi with a total capacity of 115 Bcf, as well as 230 miles of gas transmission pipeline and 30 pipeline interconnects. The acquisition price represents an approximate 10x estimated 2024 EBITDA multiple. The transaction is expected to close in January 2024.

Energy Sector Analyst

Williams' acquisition of natural gas storage assets represents a strategic move to capitalize on the growing demand for natural gas, particularly in the context of LNG exports and power generation. The energy landscape is witnessing a significant shift towards LNG as a cleaner alternative to coal and oil and this acquisition places Williams in a favorable position to supply this burgeoning market. The high injection and withdrawal capacities of the acquired facilities suggest that Williams is preparing for increased volatility in gas demand, which can be attributed to the intermittent nature of renewable energy sources.

The estimated 10x EBITDA multiple for the 2024 forecast indicates a confident outlook on the profitability of these assets. This multiple is within a reasonable range for the sector, considering the strategic positioning and the expected demand growth. The acquisition not only expands Williams' operational footprint but also enhances its capability to meet peak demand, which is crucial for maintaining energy reliability in the face of growing renewable adoption.

Financial Analyst

The financial implications of Williams' acquisition are significant, with a $1.95 billion investment reflecting a strong commitment to growth in the natural gas storage sector. Investors should note the substantial capital outlay and the expected closing in January 2024, which provides a timeline for when the financial benefits might start to materialize. The transaction's timing also aligns with the anticipated increase in LNG demand and the need for greater storage capacity due to the increase in renewable energy sources.

From a financial perspective, the acquisition could enhance Williams' earnings potential and provide a hedge against market volatility. The inclusion of 230 miles of gas transmission pipeline and 30 pipeline interconnects further integrates the company's supply chain, potentially leading to cost efficiencies and improved margins. Stakeholders should monitor the integration process and subsequent earnings reports to assess the impact on Williams' financial health and performance.

Market Research Analyst

The strategic location of the acquired assets in Louisiana and Mississippi is noteworthy, as these regions are proximal to key LNG export facilities and high-demand power generation markets. The direct connections to Transco, the nation's largest natural gas transmission pipeline, underscore the potential for expansion and increased market reach. The acquisition could provide Williams with a competitive edge, enabling it to respond promptly to market demands and price fluctuations.

It is important to consider the broader market trends, such as the 56% increase in U.S. natural gas demand since 2010 versus a mere 12% increase in storage capacity. This discrepancy highlights the potential for storage assets to become increasingly valuable as demand continues to outpace infrastructure development. Market research indicates that high deliverability storage will likely be a key differentiator in the energy sector, positioning Williams to potentially leverage these assets for significant earnings growth.

• Six natural gas storage facilities with total capacity of 115 Bcf across Louisiana and Mississippi
• Highly contracted business with diverse customer base including investment-grade utilities, interstate pipelines, LNG terminals and natural gas marketers
• Strategically located to take advantage of strong LNG and power demand fundamentals that are forecasted to drive earnings growth

TULSA, Okla.--(BUSINESS WIRE)-- Williams (NYSE: WMB) today announced that it has reached an agreement to acquire a portfolio of natural gas storage assets from an affiliate of Hartree Partners LP for $1.95 billion. The transaction includes six underground natural gas storage facilities located in Louisiana and Mississippi with total capacity of 115 billion cubic feet (Bcf), as well as 230 miles of gas transmission pipeline and 30 pipeline interconnects to attractive markets, including LNG markets, and connections to Transco, the nation’s largest natural gas transmission pipeline. The acquisition price represents an approximate 10x estimated 2024 EBITDA multiple.

“This premier natural gas storage platform on the Gulf Coast fits squarely within our strategy to own and operate the best assets connected to the best markets to serve growing demand driven by LNG exports and power generation,” said Williams President and Chief Executive Officer Alan Armstrong. “These assets better position Williams’ natural gas storage operations to serve Gulf Coast LNG demand and growing electrification loads from data centers along the Transco corridor. Importantly, this storage will also allow us to provide value to customers in markets with growing renewables adoption as daily peaks for natural gas increases the need for storage. Since 2010, U.S. demand for natural gas has grown by 56% while gas storage capacity has only increased 12%. We expect the increasing demand for high deliverability storage to drive significant earnings growth across these assets.”

The six natural gas storage facilities include four salt domes with combined capacity of 92 Bcf and two depleted reservoirs with combined capacity of 23 Bcf. The facilities have injection capacity of 5 Bcf/d and withdrawal capacity of 7.9 Bcf/d, among the highest of any natural gas storage platform in the United States. Two of the facilities, Pine Prairie and Southern Pines, are directly connected with Transco and are well positioned for expansions.

The transaction is expected to close in January 2024, following satisfaction of customary closing conditions, including the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Advisors

BofA Securities served as financial advisor to Williams; Davis Polk & Wardwell LLP served as legal advisor to Williams. Evercore served as lead financial advisor and Wells Fargo Securities, LLC served as financial advisor to Hartree; Milbank LLP served as legal advisor to Hartree.

About Williams

Williams (NYSE: WMB) is a trusted energy industry leader committed to safely, reliably, and responsibly meeting growing energy demand. We use our 33,000-mile pipeline infrastructure to move a third of the nation’s natural gas to where it's needed most, supplying the energy used to heat our homes, cook our food and generate low-carbon electricity. For over a century, we’ve been driven by a passion for doing things the right way. Today, our team of problem solvers is leading the charge into the clean energy future – by powering the global economy while delivering immediate emissions reductions within our natural gas network and investing in new energy technologies. Learn more at www.williams.com.

Portions of this document may constitute “forward-looking statements” as defined by federal law. Although Williams believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Any such statements are made in reliance on the “safe harbor” protections provided under the Private Securities Reform Act of 1995. Additional information about issues that could lead to material changes in performance is contained in Williams’ annual and quarterly reports filed with the SEC.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231227523874/en/

MEDIA:

media@williams.com

(800) 945-8723

INVESTOR CONTACT:

Danilo Juvane

(918) 573-5075

Caroline Sardella

(918) 230-9992

Source: Williams

FAQ

What assets is Williams acquiring from Hartree Partners LP?

Williams is acquiring six underground natural gas storage facilities in Louisiana and Mississippi with a total capacity of 115 Bcf, along with 230 miles of gas transmission pipeline and 30 pipeline interconnects.

What is the acquisition price for the natural gas storage assets?

The acquisition price for the natural gas storage assets is $1.95 billion, representing an approximate 10x estimated 2024 EBITDA multiple.

When is the transaction expected to close?

The transaction is expected to close in January 2024, following satisfaction of customary closing conditions.

Who served as financial advisor to Williams in the acquisition?

BofA Securities served as financial advisor to Williams, and Davis Polk & Wardwell LLP served as legal advisor to Williams.

Who served as financial advisor to Hartree in the acquisition?

Evercore served as lead financial advisor and Wells Fargo Securities, LLC served as financial advisor to Hartree, with Milbank LLP serving as legal advisor to Hartree.