Williams Companies Inc WMB has inked a joint venture agreement with the Canadian Pension Plan Investment Board (CPPIB) to establish a platform for the optimization of its midstream operations in Marcellus and Utica.
The JV provides various strategic and financial benefits to Williams Companies, according to Raymond James.
The Analyst
Raymond James’ Justin Jenkins maintains an Outperform rating on Williams Companies.
The Thesis
The JV with CPPIB has been formed through a series of transactions, including Williams Companies acquiring the remaining 38-percent stake in the Utica East Ohio Midstream for $740 million. The company will contribute that asset and Ohio Valley Midstream to the JV.
In exchange for this, the CPPIB will pay around $1.34 billion to Williams Companies for a 35-percent stake in the JV, Jenkins said in a Monday note.
The net result of the transactions brings proceeds of around $600 million to Williams Companies, along with a 65-percent stake in the new JV, the analyst said.
The latest deal accelerates deleveraging and supports healthy organic growth, which should lead to improved financial flexibility, Jenkins said.
“The combination of control/operation of the two proximate systems should allow for opportunities for streamlining costs and capital spending, while also aligning with CPPIB incentives for production/value growth upstream.”
Price Action
Williams Companies shares were trading up 2.09 percent at $28.37 at the time of publication Tuesday.
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