HOUSTON – Williams Companies Inc has spurned Energy Transfer Equity’s $48 billion takeover offer for now but a tie-up would give the company a dominant position in the fastest-growing natural gas market in the United States: the Northeast’s Marcellus Shale.
The deal, which would be one of the largest pipeline acquisitions ever, also would give Energy Transfer Chief Executive Kelcy Warren a new foothold in the deepwater Gulf of Mexico.
Williams’ presence in the natural gas-heavy Marcellus and nearby Utica shale would fill a gap in Energy Transfer Equity’s portfolio.
“ETE wants to be a larger player in the Northeast,” Evercore ISI analyst Timm Schneider said in a note to investors on Tuesday. “An acquisition of Williams would put them in the region right away.”
Williams said on Sunday it had rejected the unsolicited offer as too low.
Williams CEO Alan Armstrong has in the past touted his company’s big bet on natural gas growth as inefficient coal plants and more costly fuel oil are phased out in the Northeast.
Energy Transfer Equity oversees Energy Transfer Partners and Sunoco Logistics Partners, both major pipeline and logistics players in domestic onshore shale oil and gas plays.
While they have big projects in development in the Marcellus and Utica, Williams gathered 38 percent of the natural gas volumes from those fields in the first quarter this year, according to a company presentation.
Energy Transfer’s Revolution project aims to build gas gathering pipelines in the Marcellus, but it will not come online until 2017.
Williams and its master limited partnership, Williams Partners LP, also are pouring more than $5 billion into expansions of the company’s 9,600-mile (15,449 km) Texas-to-New York Transco natural gas pipeline network.
Energy-focused investment bank Tudor, Pickering, Holt & Co said on Tuesday that Marcellus volumes would be directed to Energy Transfer Partners and Sunoco Logistics assets.
The bank also said Transco would allow Energy Transfer Equity to compete with Kinder Morgan Inc’s Tennessee Gas Pipeline and Sempra Energy’s Texas Eastern Transmission pipeline, both of which move U.S. Gulf Coast gas to the Northeast.
A Williams merger also would add three oil and gas production platforms and four major deepwater Gulf of Mexico oil pipelines to Energy Transfer Equity’s lineup.
The platforms include Gulfstar, which started up last year and can produce up to 80,000 barrels per day of oil and 172 million cubic feet per day of natural gas.
“Minimal asset overlap benefits both footprints as new commercial opportunities (are) likely to develop,” energy-focused investment bank Tudor Pickering said.
(Reporting by Kristen Hays; Editing by Terry Wade and Marguerita Choy)
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