Williams, BWP Form Joint Venture - Analyst Blog
March 07 2013 - 10:40AM
Zacks
North American energy firm
Williams Companies Inc. (WMB) inked a deal with a
master limited partnership Boardwalk Pipeline Partners
LP (BWP) to form a joint venture for developing a pipeline
project. The pipeline will carry natural gas liquids (NGL) to the
growing petrochemical complex on the Gulf Coast from Utica and
Marcellus shale plays situated in Ohio, West Virginia and
Pennsylvania.
The planned Bluegrass Pipeline system will carry the NGL at a rate
of 200,000 barrels a day from the producing regions of Ohio, West
Virginia and Pennsylvania to the Texas Gas Transmission system of
Boardwalk, based in Hardinsburg, Kentucky. From Kentucky the liquid
will be transported to the coast of Texas and Louisiana, where it
will be used as feedstock for the petrochemical plants, for
fractionation purposes and the export market. In addition, the
companies are looking to construct a processing plant in
Louisiana.
Included in the deal, the companies are also planning to build a
new liquefied petroleum gas terminal on the Gulf Coast to better
access international customers.
The proposed pipeline is expected to be in operation in the second
half of 2015, subject to the fulfillment of all the required
conditions. In order to support the growing market demand, the
capacity of the pipeline is also expected to be increased to
400,000 barrels a day from 200,000 barrels a day by adding an extra
pumping system.
However, the cost of the project is not yet disclosed by any of the
companies.
Tulsa, Oklahoma-based Williams is a premier energy infrastructure
provider in North America. The company’s core operations include
finding, producing, gathering, processing, and transportation of
natural gas. Boasting of a widespread pipeline system, Williams is
one of the largest domestic transporters of natural gas by volume.
Its facilities – gas wells, pipelines, and midstream services – are
concentrated in the Northwest, Rocky Mountains, Gulf Coast, and
Eastern Seaboard. Williams divides its business into four segments:
Williams Partners, Williams NGL & Petchem Services, Access
Midstream Partners, and Other.
We remain concerned about Williams’ high debt levels, which leave
it vulnerable to an extended drop in commodity prices. As of Dec
31, 2012, Williams had long-term debt of more than $10.7 billion,
representing a debt-to-capitalization ratio of 69.3%.
Williams currently retains a Zacks Rank #5 (Strong Sell), implying
that it is expected to underperform the broader U.S. equity market
over the next 1 to 3 months.
However, there are other stocks in the oil and gas sector –
Calumet Specialty Products Partners LP (CLMT) and
Compressco Partners LP (GSJK) – which hold a Zacks
Rank #1 and are expected to perform better.
BOARDWALK PIPLN (BWP): Free Stock Analysis Report
CALUMET SPECLTY (CLMT): Free Stock Analysis Report
COMPRESSCO PTNR (GSJK): Free Stock Analysis Report
WILLIAMS COS (WMB): Free Stock Analysis Report
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