Williams Ties Up with Boardwalk Pipeline

Last Tuesday, North American energy firm, Williams Companies Inc. (WMB) entered into a joint venture (:JV) deal with a master limited partnership, Boardwalk Pipeline Partners LP (BWP).

Per the agreement, Williams and Boardwalk are expected to manufacture the previously proposed export terminal of liquefied petroleum gas (:LPG) at Lake Charles, La. The terminal will have a load rate capacity of 25,000 barrels per hour and will be able to store roughly 900,000 barrels of refrigerated propane and butane. Currently, both Williams and Boardwalk are looking for customers to seal off-take agreements.

Earlier, Williams and Boardwalk had inked a JV contract for the construction of Bluegrass Pipeline and Fractionation plant. The natural gas liquid (NGL) that will be carried by the new pipeline from the producing regions of Marcellus and Utica shale plays are likely to be separated into its respective products like propane and butane at Lake Charles, LA-based Fractionation plant.

However, the news – which was announced after the markets closed on Tuesday – had negligible impact on the company’s stock price. By close of trade on Wednesday, Williams settled at $36.58 per share, marginally 0.5% lower from the previous day. Moreover, on Thursday, the closing price of the stock was $36.30.

Tulsa, OK-based Williams is a premier energy infrastructure provider in North America. The company’s core operations include finding, producing, gathering, processing and transportation of natural gas. With an extensive pipeline system, Williams is one of the largest domestic transporters of natural gas by volume.

However, Williams’ wide natural gas exposure raises its sensitivity to the commodity prices, which continue to be volatile. This translates into an uncertain near- to medium-term outlook for the company.

Williams currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at energy production/pipeline entities like Oiltanking Partners LP (OILT) and Pembina Pipeline Corp. (PBA) that offer value. Both Oiltanking and Pembina Pipeline sport a Zacks Rank #1 (Strong Buy).

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