Guessing the institutions will approve this deal. All equity on the way? Or will Warren stick with no tax opinion conclusion? If you think you know how this ends, don't be too sure.
Williams remains committed to holding the stockholder vote on June 27, 2016 and closing the transaction with Energy Transfer Equity, L.P. (ETE) as soon as possible. In the event the transaction is not completed, the Williams Board expects to reduce the level of the dividend beginning in the third quarter of 2016. The amount of any dividend reduction has not yet been determined but could be material.
Looked at a report on nat gas, the NE gas prod has gone from 6 bcf/d to 24 bcf since '11, the rest of the country is down. Y/Y the NE is up 3 bcf/d and the rest is down 3 bcf/d. Seems cos dealing with the prolific prod in the NE will be good bets. TEGP REX moving gas west looks like great asset, the Utica is developing and looks stronger than the Marcellus. Nat gas for 17 futures are showing $3. Brent is $52 today. Oil could dip again or it may keep going, the liquids rich nat gas wells will look good with higher oil prices. Not sure there is much downside to TEGP except a swoon in oil and that will probably be short lived. Oil trader Hall thinks we are setting up for a big under supply situation next year, with US rigs at 300ish and global glitches. OPEC is history.
The contingent right is payable after two years if I remember correctly in more units of ETC. Look at how much ETE has appreciated with the assumption of no deal and payment of the dist. And bond ratings will be trashed. I could take a couple of years for ETE to come back. Again, think it's academic, don't think it closes, either settlement or Warren relies on no tax opinion. At least oil and gas prices are moving up. But you are going to have a bunch of sellers when the dist disappears. Not sure $10 is even a short term bottom.
I called my broker before I got the forms, they gave me the id numbers, go to proxyvote.com, input the nos and vote on three items. They would not take the merger vote verbally. When you call the broker, tell them you want the all cash option. I did talk to MacKenzie and they were not very helpful, could have been the rep I talked to, didn't really have much info. By the way, everyone should vote no but that is my humble opinion. I don't think we ever get to the close but who knows.
Do you think ETE will sell for $14 when the dist is zero for two years, with $6 billion of add debt. At $10 ETE, you have $23 and maybe some discount for ETC, 10% gets you to $20ish, the arbs have to cash in WMB right? Foolish to think the WMB value is $29 with deal as structured.
Agree completely, vote no. Today's premium would disappear in a flash with the deal back on with $6 billion in add'l debt. With ETC, div will be zip and ETE probably drops back to $10 or lower. There is no upside imo to the deal going through for ETE or WMB.
Just voted no to merger, fairly easy at proxyvote.com, enter id no. Elected cash verbally with broker and shows up online as cash election. Now, wait for a settlement or deal death.
Looking at fundamentals, you understand why ETE wanted WMB. NE nat gas production up 3 bcf/d y/y and rest of US, down 3 bcf/d y/y. From '11 to now, NE nat gas has gone from 6 bcf/d to 24 bcf/d and the rest of the country the volumes are down a couple of bcf/d. You understand why Warren wanted the WMB assets, Transco and the g and p. WMB wil do well without the deal. In fact, three years out, they will look like the better bet. Don't want it to happen, but if i was Warren, I'd try a 2x all equity offer. This could be a surprise event. Think it is low probability but you never know. ETE backs up to $12, WMB $24.
Park, one other that might be a good bet is MPC, they bought Markwest and with their refining assets have a good franchise in the NE. Yields around 4% and most analyst have $50s targets. The Markwest assets should be in demand for years with the Marcellus/Utica development. Same reason TEGP will do well, and WMB, that NE gas will have to move south and west. MPC could also be a merger target. The TEGP REX piipe was bulilt for 1.8 bcf/d to move west and now moving both ways, they see maybe 6bcf per day of capacity, and the private equity firm that controls them can drop down the addltional 50% of REX that they don't own currently. The 60%, 40%, 40% three year growth could be increased. Devon also looks like a good bet, Delaware and STACK with a great Eagle Ford asset. Selling non core assets and have a good midstream co in Enlink,. ENLC yields about 6% and should do well over next few years. I think I'm going to stay with the midsream, pipelines, but might buy an e and p if prices weaken again. $70 oil and $3.50 gas next year could get us back to increasing volumes. PAGP projects they could have a billion dollars of add'l cash flow with no capex, just filling existing pipes, when oil prices recover and the see $60 price in q4. And as for WMB, still think Transco is the best asset in the energy sector and will do well after shedding the ETE deal. Cheers.
Park, nice to hear from you. Choose the all cash option and you will get $8.10 cash and 1.5274 units. The election choices have confused people from the beginning. I do think the deal won't close. Either there will be agreement to terminate or ETE won't close. It has been dire for energy but seems commodity prices will recover. SYRG has been mentioned as a good play on the NIobrara. PDCE would be a good one to compare it too. I don't own any e and p s but have learned in this cycle to stay with the absolute best geology and balance sheets. The Pemian Midland basin is one of those plays, the Delaware Basin, Concho, Cimarex, Energen, and the STACk in Oklahoma. NFX and CLR both have good positions there. The Utica, Marcellus liquids rich gas, Anterro and Gulport. Saw a report that showed there are 180 rigs running in 17 counties. Or you just buy EOG and get almost all of the best plays. PSX and OXY both are good bets.
I do think WMB will come back after shedding this deal. Have been buyin PAGP on comeback of oil price, and TEGP is one you should look at, operates the REX pipeline that is now taking gas from APP west, originally built to move gas east. Will have 60% increase in dist this year and 40% next year and also 40% in 18. It is a partnership taxed as a c corp so no k1s and divs are not taxed at least tthrough 17.
Keep in touch. Seems a stable China is key to global growth.
As of today, no matter what the court decides, Warren can't close, because of the tax opinion. I can't see a clear case where either side is due damages. You could make the case that WMB paid WPZ $400mm to nix that merger, but WMB owns 60% of WPZ and they wanted to give WPZ more support anyway, not much there. The court could order him to reverse the conv pref plan which wouldn't have much effect as it wouldn't be needed in a no merger scenario. WMB did nothing to justify paying the breakup penalty, except insisting that the deal go through. I don't think either side really wants to let a court decide this. We'll find out in a couple of weeks. Meanwhile, the institutions will vote yes, they would do almost anything for a few dollars more and could care less about Tulsa or employees.
The vote is yes, the court nixes the conv pref plan and ETE doesn't close. Probably more suits that take months to be resolved and the world goes on. Transco is the pot of gold in the energy infrastructure sector and WMB will continue to do well. ETE has a good franchise, not as good as they would have had with WMB assets and they do well also. WMB is undervalued and does materially better than ETE over the nex 3 years.
The SEC filing Friday says it's the transfer of assets from ETC to ETE, Warren's comment on not closing makes sense. Again, will never close. Question is what changed about the deal from last Sept to now that made the tax opinion impossible. You can see the logic that corp assets end up in partnership through ETC, guess you can see where that doesn't smell exactly right.
This is in the SEC filing Friday, it's the transfer of assets from ETC to ETE that's the problem. If I were Warren, I wouldn't want to close either. Question is what changed from the deal date to now.
The merger remains subject to a number of closing conditions, including the receipt of Williams stockholder
approval and receipt by ETC and Williams of a tax opinion from Latham & Watkins LLP (“Latham”) that the contribution of Williams’ assets by ETC to ETE should qualify as an exchange to which Section 721(a) of the Internal Revenue Code applies. ETE has advised Williams that Latham has advised ETE that it would not be able to deliver this tax opinion were the opinion requested as of the date of the proxy statement/prospectus mailed to Williams’ stockholders. ETE has advised Williams that it believes there is a substantial risk that the closing condition relating to this tax opinion will not be met, and that it is unlikely that ETC would waive the closing condition. Williams believes that the contribution should qualify as an exchange to which Section 721(a) of the Internal Revenue Code applies, and would be willing to waive the condition to closing that Williams receive this tax opinion.
There is a post by anonymous wizard on WMB board that explains the tax issue, seems logical. This will never close. Question is why was this not determined before the deal was done. Today, I think no matter what happens, no close, so value ETE and WMB standalone. ETE $15 to $18. WMB $25 to $28. Making it all equity is irrelevant. Problem is WMB has not really give much guidance but I think they will be fine, sure how you merge WPZ into WMB when WPZ is yielding less than WMB. Guess they would shelve that and sell some assets, possibly cut the div and do well over next five years. I think I'd rather own WMB than ETE but will keep both.
The light finally came on for me, it's the transfer between ETC and ETE, partnerships but one taxed as a c corp, ?. Does make sense, this deal will never close as Warren said. And ETE might lose conv pref issue and still not close the deal. The tax issue is the real issue.
Haven't looked at it, will. I own both WMB and ETE, and ETP, WPZ as well. So I would like to see both prosper. Today, my vote is no but I really don't think the small investor will have much influence. Will be interesting to see how the proxy firms come out, if they say no, a good chance it doesn't pass. A 2x all equity without the conv pref plan and the new equity incentive plan would be alright except you still have Warren, i don't trust him and he has too much power, the partnership form for a $100b EV firm doesn't work. Also ETP has a short term challenge as well and the ETC vehicle doesn't feel right. I haven't received the S4 yet. And the flip side is Warren is doing a bunch of things to get rid of the $6 billion debt, which WMB should want to eliminate also. The cost of the debt was a little less than 6% and ETE equity costs around 8%, they could make it work but I don't want it to. Question is whether Warren wants it to. Wiz brought up a good point, the taxability issue is within ETE and not the initial ETC for WMB swap I think. If that is the case, Warren is honestly saying this wiill never close. And I would agree. It's messy.