Williams and CPPIB reach $3.8bn deal to form Marcellus-Utica shale JV

Williams has entered an agreement with the Canada Pension Plan Investment Board (CPPIB) to form a $3.8bn joint venture (JV) in the western Marcellus and Utica basins in the US.

The transaction will enable Williams to optimise its midstream operations in the two basins.

The proposed JV will include Williams’ Ohio Valley Midstream (OVM) and Utica East Ohio Midstream (UEO) systems.

According to the agreement, CPPIB will invest $1.34bn to acquire a 35% interest in the JV.

Williams will assume operatorship of the combined entity with a 65% ownership stake.

Concurrent with the agreement with CPPIB, Williams acquired the remaining 38% interest in UEO from Momentum Midstream.

Williams president and CEO Alan Armstrong said: “Acquiring the remaining interest in UEO and forming a partnership with CPPIB continues to advance our already strong position in the north-east.

“These transactions create a platform for continued optimisation and growth, provide deleveraging, reduce capital spending on processing and fractionation capacity for OVM, and unlock further synergies through combined operatorship of the systems.”

Based in eastern Ohio, UEO gathers, processes and fractionates natural gas and natural gas liquids in the Utica Shale play.

According to the energy firm, the deal is expected to deliver synergies through common ownership by ‘combining UEO and OVM to create a more efficient platform for capital spending in the region’.

The venture is also expected to help drive down operating and maintenance expenses.

CPPIB managing director and Energy and Resources head Avik Dey said: “This JV will provide CPPIB additional exposure to the attractive North American natural gas market, aligning with our growing focus on energy transition.

“The joint venture complements our recent investment in Encino Acquisition Partners, an anchor customer on UEO and other Williams gathering assets.

“Through these unique operations in highly attractive basins, we will further our strategy to establish US midstream exposure alongside highly regarded and experienced operating partners such as Williams.”

Williams plans to use a portion of the proceeds from the transaction to offset the purchase price of the UEO acquisition.

The remaining proceeds will be used to fund Williams’ regional growth capital and reduce debt.

Subject to customary closing conditions and the receipt of regulatory approvals, the deal is expected to close in the second or third quarter of this year.

Last year, Encino Acquisition Partners, a company backed by CPPIB and Encino Energy, agreed to purchase Chesapeake Energy’s Utica Shale oil and gas assets in Ohio for around $2bn.