Energy Business

Can the Williams Buyout Help Save Interest in MLPs?

Kinder Morgan pipeline
Source: Kinder Morgan Inc.
The Williams Companies Inc. (NYSE: WMB) and Williams Partners L.P. (NYSE: WPZ) announced Monday morning that the companies had closed the merger between Williams Partners and Access Midstream Partners L.P. (NYSE: ACMP) that was announced last June. Beginning Tuesday, Access Midstream’s units will trade under the Williams Partners ticker symbol.

So far, 2015 has not been a particularly good year for energy master limited partnerships (MLPs). The Alerian MLP index has dropped 3.7% to date and is down an equal amount year-over-year. The index dropped 2% last week.

Last week saw the merger of Energy Transfer Partners L.P. (NYSE: ETP) and Regency Energy Partners L.P. (NYSE: RGP) in a deal valued at $18 billion, including $6.8 billion in assumed debt. That was the good news for the industry; the not-so-good news was the announcement by DCP Midstream that it was closing its Oklahoma City office and laying off 20% of its staff. DCP Midstream owns the general partner of DCP Midstream Partners L.P. (NYSE: DPM) and is a 50/50 joint venture between DCP Midstream Partners and Phillips 66 (NYSE: PSX).

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That kind of mixed news has dogged the MLP space for several months now, tracking the falling price of crude. Pipeline MLPs have taken the brunt of the punishment recently, but upstream MLPs have not fared all that well either. The latter are subject to declining crude oil prices and the fortunes of the pipeline companies are tied to demand for transportation if upstream production declines.

The Williams and Energy Transfer mergers, and several initial public offerings for MLPs since that merger was announced, could be signaling a wave of consolidation in the midstream business. In December an analyst at Wunderlich suggested that likely acquisition targets included companies with access to international markets through dock space and terminals or “latent assets” in regions where pipeline infrastructure is inadequate.

Shares of Williams Companies stock were up about 1.7% around noon on Monday, at $44.60 in a 52-week range of $39.29 to $59.77. As a result of the merger closing Monday, the company is now a pure-play general partner holding company.

Common units of Williams Partners traded up about 0.7%, at $42.82 in a 52-week range of $39.20 to $57.29.

On their last official day of trading, Access Midstream units traded up about 1.4%, at $49.30 in a 52-week range of $47.61 to $66.79.

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