Overview: Is the Access Midstream acquisition a good proposition?
Access Midstream Acquisition
The Access Midstream Partners-Williams Companies (ACMP-WMB) merged entity would become a large-scale infrastructure business in the natural gas gathering and processing plane that would benefit from greater supply of natural gas and natural gas products from the North American gas shale boom.
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A combination of asset footprint
If we look at the asset footprint of Williams Companies, we find WMB owns and operates a natural gas pipeline system extending from Texas, Louisiana, Mississippi, and the offshore Gulf of Mexico through Alabama, Georgia, South Carolina, North Carolina, Virginia, Maryland, Delaware, Pennsylvania, and New Jersey to the New York City metropolitan area. As of February 19, 2014, it operates 15,000 miles of interstate gas pipelines; 1,000 miles of natural gas liquid (0r NGL) transportation pipelines; and approximately 10,000 miles of oil and gas gathering pipelines.
On the other hand, ACMP’s operations are focused on the Barnett, Eagle Ford, Haynesville, Marcellus, Niobrara, and Utica shales and the mid-continent region of the U.S. It has in ~8.3 million acres of land and operates 6,414 miles of pipelines for an average volume throughput of 3.82 million cubic feet per day.
Synergy from asset mix
The merged entity will find synergy from the gas gathering and processing and NGL operations of ACMP and WMB. ACMP’s focused approach in the fast growing gas shales will complement WMB’s wider reach spanning several states in the U.S. WMB currently has presence in Northeast (including Utica and Marcellus shales), Rockies, San Juan, the Gulf of Mexico, and the Gulf Coast. ACMP has operations in Northeast, Rockies, Fort Worth, mid-continent, Gulf Coast, and the Permian regions. WMB projects that the gas gathering volume of the merged entity may double due to very high level of growth in many of these regions.
In the northwest Oklahoma region ACMP’s gathering systems typically contains significant amount of NGLs. By 1Q14, the system had an average throughput of 0.431 billion cubic feet (bcf) per day. The operation primarily focuses on servicing Chesapeake’s (CHK) production. It also gathers NGLs to meet required specifications of third-party takeaway pipelines.
WMB has the unique advantage of offering downstream petrochemical services. It has a majority interest in an olefins production facility in Geismar, Louisiana. NGLs like ethane and propane are the main feedstocks for the olefin cracker plant. The company also owns a refinery grade propylene splitter and pipelines. It has total production capacity of 1.35 billion pounds of ethylene and 90 million pounds of propylene per year. In addition, in the Discovery plant in Louisiana, WMB owns a fractionator plant, which has a capacity of 32 thousand barrels per day of NGLs. A fractionator plant separates NGLs into individual components such as ethane, propane, and butane. It’s expected that the downstream service would complement ACMP’s NGL production and rationalize cost to the merged company by combining operations of WMB and ACMP.
Access Midstream Partners L.P. (ACMP) is a master limited partnership (or MLP) operating in the midstream energy space. Currently, Williams Companies (WMB) and Global Infrastructure Partners jointly own the general partner of ACMP. ACMP is part of the Alerian MLP ETF (AMLP) and WMB is part of the Global X MLP & Energy Infrastructure ETF (MLPX) and the Alerian Energy Infrastructure ETF (ENFR).