Busy Week for Williams

Yesterday, Williams Co.s (WMB - Analyst Report) agreed to buy additional natural gas properties in the Piceance Basin of western Colorado from a private company for $258 million. The new acreage is located on the east of Williams’ existing assets in the region. The deal is expected to close towards the end of the third quarter.

The acquisition of 21,800 net acres includes 28 wells currently producing 24 million cubic feet equivalent per day (MMcfe/d), as well as associated natural gas and water gathering facilities. Tulsa, Oklahoma-based Williams already holds about 190,000 acres in the Piceance Basin.

The latest acquisition may contain an estimated 795 billion cubic feet equivalent of net reserves (Bcfe), of which approximately 150 Bcfe are proved reserves. Williams plans to finance the $258 million transaction, along with $15 million in projected 2009 development costs and $50 million of the 2010 development costs, with available cash.

The additional acreage contiguous to its existing operations in the area further strengthens Williams’ industry-leading Piceance position. The deal is part of the company’s development efforts that have resulted in robust natural gas production in this region over the last few years.

In a separate development, Williams announced plans to form a joint venture with Dominion Resources Inc. (D - Snapshot Report), a major natural gas producer, to build a new pipeline. It will transport up to 1 billion cubic feet per day (Bcf/d) of natural gas produced in the Rockies and Appalachian basins to growing markets in the Eastern and Mid-Atlantic regions.

The pipeline, to be named as the Keystone Connector, would run from the terminus of Kinder Morgan Energy Partners’ (KMP - Analyst Report) Rockies Express pipeline in eastern Ohio to Williams' Transco Station 195 in southeastern Pennsylvania.

The companies are planning to bring the 240-mile pipeline into service by 2013. The Keystone Connector will offer producers year-round access to the growing East Coast markets and will provide customers increased domestic supply alternatives. We currently rate Williams shares as Neutral.