Market News

Williams Companies to Acquire Trace’s Haynesville Gathering & Processing Businesses

The Williams Companies, Inc. (NYSE: WMB) has agreed to purchase Trace Midstream’s gathering and processing businesses in the Haynesville basin. Trace Midstream is Quantum Energy Partners’ portfolio company.

Subject to the receipt of regulatory approvals, Williams Companies expects the acquisition to conclude in the second quarter of 2022. Shares of this energy infrastructure company lost 2.6% to close at $31.07 on Monday.

Based in Tulsa, OK, Williams Companies provides natural gas gathering, processing, and transmission as well as natural gas liquids (NGLs)-related services. It also provides NGLs and natural gas-related marketing services.

In 2021, the company’s contracted transmission capacity increased 3% year-over-year, and its gathering volumes grew 5%.

Details of the Transaction

The acquisition of Trace’s gathering and processing businesses has been valued at $950 million.

The deal is in sync with Williams Companies’ value chain strategy for clean energy. The addition of Trace’s businesses to the portfolio will expand Williams Companies’ presence in the Haynesville basin, expanding its gathering capacity to 4 billion cubic feet per day (Bcf/d) from 1.8 Bcf/d.

Per the terms of the deal, Williams Companies will receive a long-term capacity commitment, for its Louisiana Energy Gateway (LEG) project, from Rockcliff Energy. Rockcliff is an affiliate of Quantum and a customer of Trace.

Additionally, Williams Companies communicated that it has joined forces with Quantum. Per the Memorandum of Understanding signed between the parties, Quantum will become a partner and equity investor in the LEG project.

Management’s Take

Williams Companies’ President and CEO, Alan Armstrong, said, “Williams continues to increase scale and connectivity in the best and most efficient natural gas basins, and these transactions with Trace, Rockcliff and Quantum represent an important extension of our natural gas-focused strategy.”

He added, “We are excited for the opportunity to help Rockcliff continue their success and connect them to growing markets with Quantum as our new partner in LEG. Importantly, this is going to be the flagship of our low carbon wellhead to water venture, proving up what an important role natural gas can play in reducing emissions, lowering costs and providing secure reliable energy here and around the world.”

Upbeat Q4 Earnings and Projections

In the fourth quarter of 2021, Williams Companies reported adjusted earnings of $0.39 per share, up 14.7% from the consensus estimate of $0.34 per share. On a year-over-year basis, the earnings expanded 26%.

The company anticipates adjusted net income to be within the $1.757-$1.875 billion range in 2022, while adjusted earnings per share are expected between $1.29 and $1.54 per share.

Wall Street’s Take

Recently, J.P. Morgan analyst Jeremy Tonet reiterated a Buy rating on Williams Companies with a price target of $35 (suggesting 12.65% upside potential from the last closing price of $31.07).

Overall, the Street is optimistic about Williams Companies and has a Strong Buy consensus rating based on 10 Buys and 1 Hold. The average Williams Companies price target of $34.09 suggests 9.72% upside potential from current levels. Over the past year, shares of Williams Companies have gained 39.3%.

Investors’ Sentiment

The Stock Investors tool of TipRanks shows that investors currently have a Very Positive stance on Williams Companies. The number of portfolios (having exposure in Williams Companies) has increased 9% in the past month.

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