By John Kell
Williams Cos. has agreed to sell its Canadian assets to
affiliate Williams Partners LP for $1.2 billion, unloading an oil
sands offgas processing plant, pipelines and other facilities.
The assets include about 260 miles of pipelines, as well as
facilities in Redwater, Alberta, including an expansion project
that is already underway. The deal is expected to close on
Friday.
The two companies are closely linked, as Williams owns about 64%
of Williams Partners. Williams gathers and transports natural gas,
while Williams Partners owns most of Williams' gas pipeline and
U.S. midstream assets.
The Canadian operations being sold are expected to contribute
distributable cash flow to Williams Partners of about $135 million
to $160 million during the remaining 10 months of 2014. The deal is
expected to immediately add to Williams Partners' earnings.
The facilities are used to process offgas liquids in Canada.
Alberta's oil sands contain the largest known reserve of oil in the
world, according to Williams, but the bitumen is a tar-like
substance that is too thick and sticky to flow through conventional
pipelines. Thus, to convert the bitumen into usable oil, it is
heated to high temperatures in cokers, producing in the process
something called offgas.
The acquisition will be funded, in part, by the issuance of
Class D payment-in-kind limited partner units and $25 million in
cash. All of those so-called payment-in-kind units will be
convertible to common units at a future date no earlier than
February 2016.
Williams Partners may also issue up to $200 million of
additional payment-in-kind units to Williams to fund further
expansions at the Redwater facility.
Shares of Williams were up 0.7% to $41.50 in after-hours
trading, while Williams Partners rose two cents to $49.81.
Write to John Kell at john.kell@wsj.com
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