Laser Northeast Pipeline Selling to Williams for $750M

Laser Northeast Gathering, a 33-mile natural gas pipeline that cost $55 million to build and stretches from the very active Marcellus Shale drilling area of Susquehanna County (in northeastern PA) to Broome County (in New York’s Southern Tier), connecting to the interstate Millennium Pipeline, announced yesterday the company is selling itself to Williams Partners for $750 million. The deal covers Laser’s contracts to expand the pipeline and commitments from customers already signed on. When the project is fully completed it will have 75 miles of pipeline. Laser is a subsidiary of Delphi Midstream Partners.

Laser Chief Executive Officer Thomas Karam, a native of Scranton, said he knew the complex and capital-intensive pipeline business would eventually require him to take Laser public or find a suitor.

The well-respected and well-financed Williams will be a responsible steward of the system and expand it, he said, helping create jobs and economic opportunity.

Williams already has a presence in the area. The company is nearing completion of the 33.5-mile Springville Gathering System, which runs from Susquehanna and Wyoming counties to Dallas Twp.(1)

From the Laser press release:

Delphi Midstream Partners, LLC announced today that it has entered into a definitive agreement to sell its Laser Northeast Gathering Company, LLC ("Laser") in Pennsylvania and other gathering assets in Texas to Williams Partners for approximately $750 million. Williams Partners plans to fund the purchase price of the acquisition with a combination of $300 million cash and approximately 7.5 million Williams Partners common units. Delphi Midstream Partners is owned by American Securities LLC and management.

Laser is a high pressure gathering system currently comprised of 33 miles of 16-inch natural gas pipeline and associated gathering facilities in Susquehanna County, PA and Broome County, NY. The acquisition is supported by existing long-term gathering agreements that provide acreage dedications and volume commitments. When all phases are complete, the system will comprise over 75 miles of pipeline and total system capacity of 1.3 bcf/d.

"This is a great outcome for Laser and its employees. I am very pleased that our talented and professional team will join the leading company in the industry as valued employees," stated Thomas F. Karam, Chairman & CEO of Laser.

Matthew LeBaron, a managing director of American Securities, commented, "We are pleased to enter into this agreement between Delphi Midstream and Williams Partners. Tom Karam and the Laser management team have worked hard to build a world-class midstream company. This transaction reflects the value created by Delphi Midstream and we look forward to participating in Laser’s continued success as Williams Partners shareholders."(2)

A brief background on Laser’s controversial application to become a public utility

In early 2011, Laser filed an application with the Pennsylvania Public Utility Commission (PUC) for status as a public utility, which would have granted it power to seize property for its pipeline via eminent domain. In May 2011, the PUC voted to confer public utility status in a split 3-2 decision, but the decision was controversial and an official declaration was not made at the time. In July, the PUC officially reconsidered its decision after receiving negative feedback from the public, including the Pennsylvania Independent Oil and Gas Association (PIOGA). In September, Laser withdrew it’s application saying its business model had changed. At that point, Laser had finalized all of the agreements necessary to complete the pipeline and would not need eminent domain power (see this MDN story). In November, not much more than a month ago, the PUC voted to approve Laser’s application withdrawal (see this MDN story).

(1) The Scranton Times Tribune (Dec 23, 2011) – Williams to pay $750M for Laser

(2) Laser Northeast Gathering Press Release (Dec 22, 2011) – Laser Northeast Agrees to Sell to Williams Partners for $750 Million