Williams Partners Acquires Gas Gathering System (WPZ, WMB)

Natural gas and crude oil pipeline partnership Williams Partners LP (NYSE: WPZ) announced late yesterday that it would acquire a natural gas gathering subsidiary of privately held Caiman Energy for $2.5 billion. The system is located in the Marcellus shale play and includes access to 236,000 acres with 10 producers in West Virginia, Ohio, and Pennsylvania. Supplies are guaranteed by long-term commitments according to Williams. The details:

Williams Partners expects significant growth in gathering volumes and NGL production from these assets. There is an estimated 300 trillion cubic feet (Tcfe) of natural gas in place within a 35-mile radius of the system, and a significant amount remains undedicated. The partnership expects the Caiman system to gather more than 2 billion cubic feet per day (Bcf/d) and produce approximately 300,000 barrels per day (bbl/d) of NGLs and condensate by 2020. It expects the acquisition to be accretive to projected distributable cash flow attributable to partnership operations per LP unit by 2013, with substantial projected growth thereafter.

Williams Companies (NYSE: WMB), which owns 72% of Williams Partners, will buy 16.3 million Williams Partners’ common units for about $1 billion and will waive its 2% general partner incentive distributions for 2012 and 2013 to help finance the deal.

Williams Cos. also announced that it would raise its annual dividend by 55% to $1.20 this year. The company also expects to raise its dividend by 20% in each of the next two fiscal years.

Williams Partners’ common units are down about -2% today, at $59.86 in a 52-week range of $45.39-$65.39. Williams Cos. shares are up more than 3% at $31.40 in a 52-week range of $21.90-$33.47.

Paul Ausick