Williams Partners L.P. (NYSE:WPZ) is planning a multibillion dollar investment program to build midstream assets to serve the development of oil and gas properties in the Marcellus Shale and other fast growing plays in the United States.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.
Williams (NYSE:WMB) owns approximately 77% of Williams Partners L.P., and also owns the general partnership interest in the company.
Williams believes that the growth in development of natural gas resources in the United States will continue in the long term, and that low prices for natural gas will encourage demand from many sources. The company expects most of this growth to come from the chemical industry, as well as from power generation. It also expects these trends to generate the need for midstream infrastructure to gather and process this production, and plans to be involved with that growth.
Williams is building the Laurel Mountain Midstream system, in southwestern Pennsylvania, to handle Marcellus Shale production. This system consists of multiple compression stations, as well as gathering and processing assets. The company expects the gathering capacity of this system to reach 900 million cubic feet (Mcf) of natural gas per day by the end of 2012.
The Laurel Mountain Midstream system was originally held in a joint venture with Atlas Pipeline Partners, L.P. (NYSE:APL). Chevron (NYSE:CVX) acquired the ownership held by that company, and is now part of the joint venture. Williams is the operator and owns 51% of the system, with Chevron holding the balance.
Williams is also building out midstream assets in, northeastern Pennsylvania, to handle future Marcellus Shale production. The company purchased existing midstream assets, from here, in 2010 from Cabot Oil and Gas (NYSE:COG), and also has a number of expansion projects planned.
Williams' goal is to increase capacity here to 650 Mcf of natural gas per day by the end of 2011, and 1.2 billion cubic feet (Bcf) per day by the end of 2012.
Williams estimates that the two Marcellus Shale systems will have combined throughput volumes of 2 Bcf per day by 2013, and 2.75 Bcf per day by 2015. The systems will see more than 300 wells hooked up, annually, at the peak.
El Paso (NYSE:EP) is also investing in midstream assets, to serve the Marcellus Shale, and has budgeted $1.4 billion to add 1.5 Bcf per day in capacity.
Southwestern Energy (NYSE:SWN) just signed an agreement with Boardwalk Pipeline Partners, LP (NYSE:BWP) to build a natural gas gathering system, in Pennsylvania, to handle production from Southwestern Energy's wells in the Marcellus Shale.
The Marcellus Shale isn't the only shale play that Williams is targeting for new investments. The company is also investing in south Texas to serve the Eagle Ford Shale. Williams recently signed a deal with Copano (Nasdaq:CPNO) and Kinder Morgan Energy Partners, L.P. (NYSE:KMP) to bring production from this play to the company's Markham facility. Williams also has existing gathering assets in several areas in the western United States, including the Uinta, Piceance and Powder River Basins.
The Bottom Line
Williams is a safer method for investors to play the growth in domestic oil and gas drilling in the United States. The company is focusing much of its resources on the Marcellus Shale, where increased drilling is leading to intense demand for midstream and other infrastructure, to gather and process the resulting production stream. (For additional reading, take a look at What Determines Oil Prices?)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
EconomicsAfter the Paris attacks investors are focusing on central bank policy and its potential for divergence: tightened by the Fed while the ECB pursues easing.
Stock AnalysisLearn the biggest potential risks that may affect the price of Pfizer's stock, complete with a fundamental analysis and review of other external factors.
Stock AnalysisA summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
Chart AdvisorCopper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
Options & FuturesInvesting during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
MarketsLearn how this simple calculation can help you determine a stock's earnings potential.
Stock AnalysisLearn about large changes to Berkshire Hathaway's portfolio. See why Warren Buffett has invested in a commodity company even though he does not usually do so.
Investing BasicsHeld onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
InvestingWe look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
EconomicsWill remaining calm and staying long present significant risks to your investment health?
Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>
Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>
A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>