Williams is one of the largest energy producers in the U.S. Their operations include exploration & production (E&P), as well as “midstream” – or processing, storage and transportation of gas, including an extensive network of pipelines. In fact, Williams owns three interstate natural gas pipelines totaling some 15,000 miles in length. We now get word that Williams is going to split the company.
Williams announced that it will separate its exploration and production business from the rest of the company through an initial public offering [IPO] in late 2011. The oil exploration and production company plans to spin off the balance of this business to shareholders.
Williams plans to sell off just under a 20% interest in the exploration and production business through an initial public offering in the third quarter of 2011. Sometime in 2012, the rest of the business will be spun out to existing shareholders. The company will use the IPO proceeds to reduce debt. Williams is engaging in the reorganization because it believes that this plan will allow management to increase its focus, which will ultimately lead to increased shareholder value.*
Williams Production Appalachia is a division of Williams concentrating on exploration and production in the Marcellus Shale region. No doubt it will be part of the 20 percent in the IPO.
So what does this mean for landowners in the Marcellus? Williams is certainly not going away. They will continue to play a major role in the Marcellus, but will do so by concentrating on the processing and pipelines part of the equation, leaving the exploring and drilling to others. So if you’re signing a lease with Williams, or have signed, there’s a pretty good chance it won’t ultimately be Williams that does the drilling. After the IPO, who knows? The new company may make a go of it, but it may also sell itself to another player. (RIL take note!)
*Investopedia (Feb 21) – Williams: Breaking Up Is Easy To Do