North American energy firm, Williams Companies Inc. (WMB) announced the closure of its previously declared purchase of the remaining 50% general partner (GP.V) interest and 55.1 million limited partner (:LP) units in Access Midstream Partners LP (ACMP). Williams Companies spent roughly $6.0 billion in cash to procure the stake and units of the master limited partnership (MLP) engaged in midstream business. (Read our blog: Williams Companies to Spend $6B on Access Midstream Buyout)
The acquisition has given Williams Companies full GP ownership and 50% LP interest in the Oklahoma City-based partnership. It has also enhanced its transportation and midstream businesses as Access Midstream holds a strong portfolio of natural gas pipelines and gathering assets in the Marcellus, Barnett, Utica, Haynesville, Eagle Ford, Mid-continent and Niobrara shale regions.
The benefits from the acquisition would be reflected in Williams Companies’ third-quarter dividend, which is expected to increase 32.0% to 56 cents per share. The projected annualized dividend for 2014 and 2015 is $1.96 and $2.46, respectively. From 2015 through 2017, the company plans 15% dividend hike.
Williams Companies also has a plan to merge energy infrastructure provider Williams Partners LP (WPZ), which it owns with a 72% stake, with Access Midstream Partners. As per the terms of the merger, for every unit held, Williams Partners’ unitholders will get 0.85 units of Access Midstream Partners. Moreover, in order to compensate for the likely lower cash distribution in 2015, Williams Partners’ unitholders can either opt for a one-time payment of 81 cents per unit or a comparable value of Access Midstream Partners’ extra common units. The merger is expected to be completed by 2014.
Williams Companies reveals that the merged MLP – likely to retain its name – will have a lucrative cash distribution. In fact, it is anticipated to be significantly higher than Access Midstream’s present distribution guidance for 2014 and 2015.
Tulsa, OK-based Williams Companies currently carries a Zacks Rank #3 (Hold), which implies that it is expected to perform in line with the broader U.S. market over the next one to three months.
Better-ranked players in the energy sector include Encana Corporation (ECA). The stock sports a Zacks Rank #1 (Strong Buy).