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Williams Alters Midstream Deals With Bankrupt Chesapeake

Zacks Equity Research
·3 min read

Williams Companies, Inc. WMB reached a global resolution with natural gas producer Chesapeake Energy Corporation CHKAQ, allowing the latter to restructure its debts and remain in operation as it moves through bankruptcy proceedings.

In June, Chesapeake filed for bankruptcy protection from creditors to pay off debts worth $7 billion. The filing was expected to have an impact on drilling firms and gas transportation services, which had to cope with rejections and reduced charges in the bankruptcy court. Several legal actions were taken by the midstream companies against upstream operators who rejected gathering agreements made before the pandemic as well as those who restructured it outside of court.

Under the terms of the contract with Williams, Chesapeake will pay all liabilities and debts associated with the midstream expenses. Notably, the shale producer plans to enter a long-term agreement to supply up to 150,000 dekatherm of gas/day for Williams’ Transco Regional Energy Access (“REA”) pipeline, currently under development. Beside this, Chesapeake agreed to not reject Williams’ gathering agreements in the Eagle Ford, Marcellus or Midcontinent regions.

Williams stated it will partly grab the ownership of Chesapeake’s South Mansfield producing assets for approving lower gathering and transportation fees.  The reduced fee is expected to promote additional drilling across Chesapeake’s Haynesville area and the midstream company is likely to continue providing services and transport Chesapeake’s natural gas in the Lower 48. The restructuring agreement would, thus, enable Chesapeake to own a reliable outlet for its natural gas production.

Per Alan Armstrong, CEO at Williams, the midstream company strategically invested in large-scale and crucial infrastructure, which is required to collect and process natural gas produced by Chesapeake. He further added that the gathering systems are necessary to maximize the reserves’ potential. Importantly, the transaction strengthens Chesapeake’s position and allows Williams to upgrade its midstream infrastructure by bringing adequate capitalization to the affordable gas reserves.

Company Profile & Price Performance

Headquartered in Tulsa, OK, Williams is a leading energy infrastructure provider in North America. The company’s shares have outperformed the industry in the past six months. Its stock has gained 7.5% against the industry’s 0.6% decline.



Zacks Rank & Stocks to Consider

Williams currently carries a Zack Rank #3 (Hold). Some better-ranked players in the energy space are DCP Midstream Partners DCP, currently sporting a Zacks Rank #1 (Strong Buy), and Enerplus Corporation ERF, carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

DCP Midstream is expected to see earnings growth of 183.4% in 2021, while Enerplus is likely to see earnings growth of 400% next year.

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Williams Companies, Inc. The (WMB) : Free Stock Analysis Report
Enerplus Corporation (ERF) : Free Stock Analysis Report
DCP Midstream Partners, LP (DCP) : Free Stock Analysis Report
Chesapeake Energy Corporation (CHKAQ) : Free Stock Analysis Report
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