Williams and Canada Pension Plan Investment Board (CPPIB) have agreed to set up a $3.8bn joint venture (JV) for operations in Marcellus and Utica basins.
As per the agreement, CPPIB will invest nearly $1.34bn to take a 35% stake in the joint venture while Williams will keep a 65% stake and will be the operator of the combined business.
The joint venture will be made up of the Williams’s fully-owned Ohio Valley Midstream system (OVM) and Utica East Ohio Midstream system (UEO) in the US.
Midstream infrastructure company Williams will be making a series of transactions in connection with the JV formation with an aim to create a new platform for the optimization of its midstream operations across the western Marcellus and Utica basins.
Under one of the transactions, the company has taken full ownership and operatorship in the Utica East Ohio Midstream system by acquiring the remaining stake of 38% from Momentum Midstream. In mid-2015, the company raised its stake from 49% to 62% for about $350m from a subsidiary of EV Energy Partners.
Commissioned in 2013, the Utica East Ohio Midstream system is mainly engaged in the processing and fractionation of natural gas and natural gas liquids in the Utica Shale play located in eastern Ohio.
The Ohio Valley Midstream system, on the other hand, which spans through northern West Virginia, southwestern Pennsylvania and eastern Ohio, serves natural gas liquid (NGL) produced in the Marcellus Shale. Its assets are a gathering system and a processing facility among others.
CPPIB managing director and energy & resources head Avik Dey said: “This joint venture 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 U.S. midstream exposure alongside highly regarded and experienced operating partners such as Williams.”
The joint venture will not include Williams’ stakes in Flint Gathering, Cardinal Gathering, Marcellus South Gathering, Blue Racer Midstream and Laurel Mountain Midstream.
Williams said that the common ownership in Ohio Valley Midstream system and Utica East Ohio Midstream system will create synergies. Furthermore, it will also lead to a more efficient platform for capital spending in the region, thereby lowering operating and maintenance expenses and giving improved capabilities and benefits for producers in the area, said the company.
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 Northeast.
“These transactions create a platform for continued optimization and growth, provide deleveraging, reduce capital spending on processing and fractionation capacity for OVM, and unlock further synergies through combined operatorship of the systems.”
Subject to regulatory approvals and other customary closing conditions, CPPIB’s investment in the JV is expected to be closed in the second or third quarter of this year.