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Analyzing Williams Partners’ Geismar Olefins Plant Sale

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Analyzing Williams Partners’ Geismar Olefins Plant Sale PART 1 OF 4

Williams Partners to Sell Geismar Olefins Plant for $2.1 Billion

Williams Partners to sell olefins plant

Williams Partners (WPZ), the midstream MLP subsidiary of Williams Companies (WMB), has announced the sale of its Geismar Olefins Plant to Nova Chemical for $2.1 billion. WPZ is the owner of one of the largest US natural gas pipeline networks.

The long-term agreement with Nova Chemicals is to supply and transport ethane to the plant on its Bayou Ethane pipeline. The sale has been discussed since the fourth quarter of 2016 as part of the MLP’s plan for a long-term sustainable natural gas–focused strategy.

Williams Partners to Sell Geismar Olefins Plant for $2.1 Billion

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The proceeds from this transaction would be mainly used for debt repayment and funding capital projects. We’ll look at this in more detail in the next part of this series.

According to Alan Armstrong, Williams Partners’ CEO (chief executive officer), “The Williams Olefins transaction and these announced new supply and transportation agreements fortify our focus on natural gas market fundamentals, reduce our commodity margin exposure and secure our fee-based Gulf Coast transportation business – all consistent with Williams’ strategy to allocate capital to its core, natural gas-focused business.”

Williams Partners’ market performance

Williams Partners stock rose 0.94% following the announcement. At the same time, the Alerian MLP ETF (AMLP), which is comprised of 25 midstream energy MLPs, was flat. WPZ has risen 7.8% since the beginning of 2017. In comparison, Boardwalk Pipeline Partners (BWP) has risen 4.8%, and Energy Transfer Partners (ETP) has fallen 1.5% in 2017.

In the next part of this series, we’ll look at the benefits of the Geismar Olefins Plant sale.

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