Energy infrastructure provider, Williams Partners L.P. (WPZ - Snapshot Report) announced that it has acquired Williams Cos. Inc.'s (WMB - Analyst Report) currently in-service Alberta, Canada operations for $1.2 billion.
The acquisition will be immediately accretive to Williams Partners and positions it for future growth in Canada. The assets being acquired include an oil sands offgas processing plant near Fort McMurray, about 260 miles of NGL and olefins pipelines, as well as an NGL/olefins fractionation facility and butylene/butane splitter facility at Redwater.
The Canadian operations have competitive advantages and long-term contracts that are expected to produce strong cash flows for Williams Partners. The operating results are expected to contribute distributable cash flow of about $135 million to $160 million for the remainder of 2014 and $200 million to $240 million in 2015.
Williams Partners funded the acquisition with the issuance to Williams Cos. of 25.6 million Class D payment-in-kind (PIK) limited-partner units, $25 million in cash and an increase to the general partner’s capital account to maintain Williams Cos.' 2% general-partner interest. Williams currently owns about 66% of Williams Partners, including the general-partner interest.
Williams Partners is an energy master limited partnership engaged in gathering, transportation, treating and processing of natural gas as well as fractionation and storage of NGLs. The partnership owns interests in three major interstate natural gas pipelines that together deliver 14% of the natural gas consumed in the U.S. The partnership’s gathering and processing assets include large-scale operations in the U.S. Rocky Mountains as well as onshore and offshore Gulf of Mexico.
Williams Partners currently carries a short-term Zacks Rank #3 (Hold). Better-ranked stocks in the same sector include Willbros Group Inc. and Patterson-UTI Energy Inc. (PTEN - Analyst Report). Both these stocks hold a Zacks Rank #1 (Strong Buy).