Williams Buys Caiman Eastern Midstream for $2.5 Billion

Williams announced yesterday that it will buy Caiman Energy subsidiary Caiman Eastern Midstream for $2.5 billion. Caiman Midstream has a major presence in the wet gas area of the Marcellus and Utica Shale play. The acquisition will give Williams a major pipeline gathering network in northern West Virginia, southwestern Pennsylvania and eastern Ohio, along with two processing facilities and a fractionator. Williams says by 2020 the Caiman system will be gathering more than 2 billion cubic feet per day of natural gas along with 300,000 barrels per day of natural gas liquids and condensate.

In addition to the acquisition, the Caiman Energy parent company will partner with Williams in a new joint venture to further develop new midstream infrastructure in the Utica Shale. From the Williams press release:

Williams Partners L.P. today announced it has agreed to acquire Caiman Energy’s wholly owned subsidiary, Caiman Eastern Midstream LLC, for approximately $2.5 billion. The acquisition will provide Williams Partners with a significant footprint and growth potential in the natural gas liquids-rich portion of the Marcellus Shale.

Williams owns 72 percent of Williams Partners, including the general-partner interest. Caiman Energy is backed by private equity investors including EnCap Flatrock Midstream, EnCap Investments L.P. and Highstar Capital.

Caiman Eastern Midstream is an independent gathering and processing business located in northern West Virginia, southwestern Pennsylvania and eastern Ohio. Caiman’s existing physical assets include a gathering system, two processing facilities and a fractionator. Expansions to the gathering system, processing facilities and fractionator are currently under construction. An ethane pipeline is also planned.

The assets are anchored by long-term contracted commitments, including 236,000 dedicated gathering acres from 10 producers in West Virginia, Ohio and Pennsylvania.

Williams Partners expects significant growth in gathering volumes and NGL production from these assets. There is an estimated 300 trillion cubic feet (Tcfe) of natural gas in place within a 35-mile radius of the system, and a significant amount remains undedicated. The partnership expects the Caiman system to gather more than 2 billion cubic feet per day (Bcf/d) and produce approximately 300,000 barrels per day (bbl/d) of NGLs and condensate by 2020. It expects the acquisition to be accretive to projected distributable cash flow attributable to partnership operations per LP unit by 2013, with substantial projected growth thereafter.

Joint Venture to Develop Utica Shale Infrastructure

Williams Partners is also announcing it intends to participate in a new joint venture with Caiman Energy and its investors and management to develop midstream infrastructure in the NGL- and oil-rich areas of the Utica Shale, primarily in Ohio and northwest Pennsylvania.

CEO Perspective

"These new assets, anchored by long-term agreements with a diverse set of customers, give us a major presence in the liquids-rich portion of the Marcellus Shale," said Alan Armstrong, chief executive officer of Williams Partners’ general partner. "We expect significant long-term growth potential because the liquids-rich gas makes this area the most economical and top-performing play for producers in North America.

"It’s also just adjacent to the rich gas and oil-producing portions of the Utica Shale, where we’re planning on developing new infrastructure with Caiman. Our goal is to be the leading gathering, processing and transportation solution provider for producers in the Marcellus Shale.

"We’re putting together the kind of infrastructure that makes drilling in the Marcellus even more desirable for producers because we provide large-scale infrastructure solutions that connect producers’ natural gas and natural gas liquids to the best markets."

Jack Lafield, president and CEO of Caiman Energy, made the following comments:

"We’re pleased that this transaction will achieve a strong return for our investors at EnCap and Highstar Capital. We’re very proud of the sizable rich gas system we’ve built in the Marcellus and the great relationships Caiman has developed with producers and the people of West Virginia. The Williams name is synonymous with excellence and superior customer service. We’re excited to turn over our gathering and processing assets to the Williams team. Williams has a unique ability to build on the value we’ve created in the Marcellus. They will serve our customers and the people of West Virginia with distinction.

"Today also marks the beginning of an exciting new alliance with Williams Partners," Lafield said. "We’re looking forward to working with Williams in the Utica Shale to bring midstream infrastructure to Ohio for producers working in this dynamic and rapidly evolving play. When you combine our management team and the expertise of both our companies in gas gathering, processing and NGLs, with our shared commitment to community and customer-focused solutions, it’s clear that Caiman and Williams are a powerful team."

Transaction Terms and Funding

Williams Partners plans to fund the purchase price of the acquisition with a combination of $1.78 billion in cash and the issuance to Caiman of approximately 11.8 million Williams Partners common units valued at approximately $720 million. The partnership expects to fund the cash portion of the transaction with a combination of equity, debt and available cash. Williams Partners has entered into a commitment with respect to a $1.78 billion interim liquidity facility with UBS Investment Bank which would be available to fund the full cash purchase price for the acquisition.

Williams intends to make an additional investment in Williams Partners of approximately $1 billion to facilitate the acquisition. Williams intends to purchase approximately 16.3 million Williams Partners limited-partner units at a price equal to the price of the units Williams Partners will issue to Caiman. Williams has also agreed to temporarily waive the general partner incentive distributions through 2013 with respect to the limited-partner units to be issued to Caiman and Williams. Williams estimates the foregone IDRs would have yielded approximately $26 million in 2012 and $42 million in 2013.

Williams Partners and Williams remain committed to retaining investment-grade credit metrics.

The acquisition is subject to customary regulatory filings and approvals. The partnership expects to complete the acquisition in the second quarter of 2012.

Guidance Update

Williams Partners is providing an update to its 2012-13 guidance and introducing its initial 2014 guidance.

The new guidance reflects the Caiman acquisition’s expected contribution of approximately $40 million, $200 million and more than $400 million in adjusted segment profit plus DD&A in 2012, 2013 and 2014, respectively. Williams Partners expects the segment profit plus DD&A contribution to continue increasing substantially beyond the current 2012-14 guidance period. Williams Partners is also increasing its expectation for NGL margins in 2012-13 based on lower expected natural gas prices.

Capital expenditure guidance for 2012-13 is being updated to reflect the Caiman acquisition’s purchase price and expected post-closing growth capital expenditures of approximately $500 million in 2012 and approximately $590 million in 2013. Approximately $250 million in growth capital expenditures associated with the Caiman acquisition are planned for 2014.

Williams Partners is also increasing its expectation for its regular cash distributions to limited-partner unitholders in 2013. The partnership expects to deliver approximately 8 percent annual growth in distributions for 2012 and 8-10 percent annual growth for 2013 and 2014.

Williams Partners’ updated 2012-14 commodity price assumptions and guidance data is available in today’s presentation posted at www.williamslp.com/investors.


Jefferies and UBS Investment Bank acted as financial advisors to Williams Partners and Gibson Dunn acted as legal counsel to Williams Partners. Additionally, UBS Investment Bank is acting as sole arranger for the Williams Partners interim liquidity facility.

Barclays and Citigroup acted as financial advisors to Caiman Energy and Vinson & Elkins acted as legal counsel to Caiman.

Williams Partners in the Marcellus

This acquisition builds on Williams Partners’ strategy to build large-scale infrastructure in the Marcellus Shale. It is currently building the Susquehanna Supply Hub in northeastern Pennsylvania, a major natural gas supply hub that will be capable of delivering more than 3 Bcf/d of Marcellus Shale production into four major interstate gas pipeline systems.

Williams Partners’ gathering system in northeastern Pennsylvania currently covers three counties and has a capacity of 750 MMcf/d. With the recent start-up of the Springville pipeline, it is now connected to three major interstate gas pipeline systems – Williams Partners’ Transco system, Tennessee Gas Pipeline and Millennium Pipeline. The recently announced 120-mile Constitution Pipeline will connect Williams Partners’ Susquehanna Supply Hub to the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in Schoharie County, NY.

Williams Partners’ Transco interstate gas pipeline system runs through eastern Pennsylvania and has several expansion projects in the area. Among those is the proposed Atlantic Access project, which would significantly expand direct access for Marcellus and Utica Shale natural gas to additional, growing U.S. markets by late 2014.

Williams Partners also owns a 51-percent interest and operates the Laurel Mountain Midstream joint venture in western Pennsylvania. Laurel Mountain includes a gathering system of nearly 1,400 miles of pipeline with a capacity of approximately 230 MMcf/d.*

*Williams Partners (Mar 19, 2012) – Williams Partners Announces $2.5 Billion Acquisition to Establish Major Footprint in Liquids-Rich Area of Marcellus Shale; Plans Joint Venture to Pursue Utica Shale Opportunities

Password Reset
Please enter your e-mail address. You will receive a new password via e-mail.