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Williams' (WMB) Midstream Deal With Chesapeake Gains Approval

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Williams Companies, Inc. (WMB - Free Report) received approval from the bankruptcy court of the United States for the global resolution it reached with Chesapeake Energy Corporation last month. The settlement enables Chesapeake to restructure its debts and remain in operation as it advances in bankruptcy proceedings.

Post approval, Williams received a payment of $112 million from Chesapeake, pertaining to all pre-petition debts and overdue receivables related to the midstream expenses under the terms of the contract.

Earlier, Chesapeake filed for bankruptcy protection from creditors to repay debts worth $7 billion. The filing was expected to have an impact on drilling firms and gas transportation facilities, which had to face rejections and reduced charges in the bankruptcy court. Several legal actions were taken by the midstream companies against upstream operators, who rejected gathering agreements made before the pandemic as well as those who restructured it outside of court.

Further, the shale producer plans to enter a long-term agreement to supply about 100,000-150,000 dekatherm of gas/day for Williams’ Transco Regional Energy Access (“REA”) pipeline, currently under construction. In addition to this, Chesapeake agreed to not reject Williams’ gathering agreements in the Eagle Ford, Marcellus or Midcontinent regions.

As part of the resolution, Williams will partly grab the ownership of Chesapeake’s South Mansfield producing assets of nearly 50,000 net mineral acres for approving lower gathering and transportation fees. This allows Williams to transform the acreage into a strong, productive operator to market substantial gas volumes for future downstream opportunities.  The reduced fee is expected to promote further drilling across Chesapeake’s Haynesville area.

The midstream company will continue to provide service and transport Chesapeake’s natural gas in the Lower 48. The restructuring agreement would, thus, enable Chesapeake to own a reliable outlet for its natural gas production. Importantly, the transaction is expected to strengthen Chesapeake’s position and allow Williams to upgrade its midstream infrastructure by bringing adequate capitalization to affordable gas reserves.

Company Profile & Price Performance

Headquartered in Tulsa, OK, Williams is a leading energy infrastructure provider in North America. The company’s shares have outperformed the industry in the past six months. Its stock has gained 13.4% compared with the industry’s 8% growth.

 

 

Zacks Rank & Stocks to Consider

Williams currently carries a Zack Rank #3 (Hold). Some better-ranked players in the energy space are Exxon Mobil Corporation (XOM - Free Report) and Altus Midstream Company (ALTM - Free Report) . Both companies currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Exxon Mobil is expected to see earnings growth of 517.2% in 2021, while Altus Midstream is likely to see earnings growth of 364.5% next year.

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