Energy, Utilities & Water  July 31, 2018

Williams diverts resources from SW Colorado to DJ Basin

TULSA, Okla.– Williams (NYSE: WMB), an energy infrastructure company, will move resources from the Four Corners area of New Mexico and Southwest Colorado and ramp up activity in the Denver-Julesburg basin, which includes Weld County and Northern Colorado.

Williams and KKR & Co. (NYSE: KKR) have entered into an agreement to buy Discovery DJ Services from TPG Growth, the middle market and growth equity platform of alternative asset firm TPG, for $1.173 billion, subject to customary closing conditions and purchase price adjustments. Discovery is a Dallas-based provider of natural gas and oil gathering and natural gas processing services in the southern portion of Colorado’s DJ Basin.

When the acquisition closes, which is expected to occur in early August, Williams and KKR will own all of Discovery’s midstream business through a joint venture. Williams’ initial economic contribution and ownership will be 40 percent of the purchase price while KKR’s initial economic contribution and ownership will be 60 percent. Under the terms of the agreed-to joint venture, Williams will be the operator of Discovery and will hold a majority of governance voting rights. Williams has committed to fund additional capital as required to bring its economic ownership to 50/50. Williams at its option, may acquire a portion of KKR interests at predetermined, agreed-to terms until the sixth anniversary of close.

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Discovery, whose management team is partnering with Williams and KKR to continue its operations with customers of the DJ Basin, provides midstream services to producers drilling the prolific Niobrara and Codell stacked-pay zones of the basin. Discovery’s infrastructure and related facilities are located in Weld and Adams counties in Colorado. The Discovery system includes both natural gas and crude oil gathering pipelines, cryogenic gas processing, liquids handling and crude oil storage.

The Discovery assets include 60 million cubic feet per day of gas processing capacity with an additional 200 million cubic feet per day plant that is permitted and under construction and is expected to be in service by the end of 2018. The Discovery assets also include 130 miles of natural gas pipeline and approximately 260,000 acres dedicated for gas gathering and processing plus an additional 60,000 acres for oil gathering.

“Adding the fast-growing Discovery midstream business, including sites with permitting underway for greater than 1 Bcf/d (billion cubic feet per day) of gas processing to our portfolio, follows our strategy of connecting the best supplies to the best markets. This is a great opportunity to expand our asset footprint into a premium-growth basin and brings the benefits of the Williams capability suite to better serve producers in the DJ Basin. The acquisition of Discovery is expected to unlock valuable synergies with our current operations and drive increased earnings,” said Alan Armstrong, president and chief executive officer of Williams.

Williams also announced the sale of assets and equity comprising Williams Partners L.P. (NYSE: WPZ) in the Four Corners Area to Harvest Midstream Co. for $1.125 billion in cash, subject to customary closing conditions. The cash proceeds from the Four Corners transaction will contribute to funding Williams’ portfolio of attractive growth capital and investment expenditures, including those opportunities associated with the Discovery acquisition. The assets being divested are located in San Juan and Rio Arriba counties in New Mexico and in La Plata County in Colorado and include 3,700 miles of pipeline, two gas processing plants, and one carbon dioxide treating facility.

Armstrong said pressures on the natural gas industry are demanding “consolidation of upstream production with midstream operations in a way that optimizes throughput and lowers cost.”.

TULSA, Okla.– Williams (NYSE: WMB), an energy infrastructure company, will move resources from the Four Corners area of New Mexico and Southwest Colorado and ramp up activity in the Denver-Julesburg basin, which includes Weld County and Northern Colorado.

Williams and KKR & Co. (NYSE: KKR) have entered into an agreement to buy Discovery DJ Services from TPG Growth, the middle market and growth equity platform of alternative asset firm TPG, for $1.173 billion, subject to customary closing conditions and purchase price adjustments. Discovery is a Dallas-based provider of natural gas and oil gathering and…

Ken Amundson
Ken Amundson is managing editor of BizWest. He has lived in Loveland and reported on issues in the region since 1987. Prior to Colorado, he reported and edited for news organizations in Minnesota and Iowa. He's a parent of two and grandparent of four, all of whom make their homes on the Front Range. A news junkie at heart, he also enjoys competitive sports, especially the Rapids.
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