Deeper Dive into the Williams–Energy Transfer Merger
Williams is a major energy infrastructure company
Williams Companies (WMB) is an energy infrastructure company focused on midstream operations, which connect energy exploration and production companies to ultimate users including refineries and distributors. They are primarily US-based, however, they have offshore deepwater Gulf assets and exposure to the Canadian Tar Sands.
Williams Companies is broken up into four operating segments: Williams Partners, Access Midstream, Williams NGL and Petroleum Services, and Other.
Williams Partners: This segment includes the consolidated master limited partnership Williams Partners (WPZ), which was supposed to merge with Williams but was terminated to allow the merger with Energy Transfer Equity (ETE). This segment includes gas pipelines and other midstream assets. The pipeline business includes the interstate gas pipelines and any associated joint ventures.
The midstream assets include gathering, treating, and processing of natural gas, natural gas liquids (NGL) production, fractionation, storage, transportation, deepwater production handling, and crude oil transportation services. The pipeline part of this business primarily comprises Transco and Northwest Pipeline.
Access Midstream: This segment is composed of Williams’ consolidated master limited partnership ACMP, which includes domestic midstream businesses that provide services to producers under long-term, fee-based contracts.
Williams Natural Gas Liquids and Petrochemical Services: This segment is primarily composed of domestic olefins pipeline assets and Canadian growth projects under development, including a propane dehydrogenation facility and a liquids extraction plant.
Other assets: This segment includes the corporate operations and functions as well as a Canadian construction company.
Energy Transfer Equities is interested in diversifying its operations and wringing out synergies between the two companies. Synergies (both cost and revenue) are the primary driver of the Williams–Energy Transfer merger.
Other merger arbitrage resources
Other important merger spreads include the deal between Baker Hughes (BHI) and Halliburton (HAL). For the basics on risk arbitrage investing, please refer to Merger arbitrage must-knows: A key guide for investors.
Investors who would like diversified exposure to the financial sector should look at the S&P SPDR Energy ETF (XLE).
Energy Transfer Equity is a major midstream energy company
Energy Transfer Equity (ETE) is a midstream holding company that holds interests in numerous partnerships in the midstream energy business. The company operates in four basic business segments:
Investment in Energy Transfer Partners
Energy Transfer Partners’ operations include the following: Interstate Transportation and Storage, Midstream Operations, Liquids Transportation and Services Operations, Sunoco Logistics, Retail Marketing, and Other.
Energy Transfer Equity also has investments in common stock, especially Sunoco Logistics (SXL) and Sunoco LP (SUN).
Investment in Regency
This is from Energy Transfer Equity’s recent deal with Regency Energy Partners. ETE’s 10-K describes Regency Energy Partners this way: “Regency provides ‘wellhead-to-market’ services to producers of natural gas, which include transporting raw natural gas from the wellhead through gathering systems, processing raw natural gas to separate NGLs from the raw natural gas and selling or delivering the pipeline-quality natural gas and NGLs to various markets and pipeline systems, and the gathering of oil (crude and/or condensate, a lighter oil) received from producers, the gathering and disposing of salt water, and natural gas and NGL marketing and trading.”
This area is probably going to have the most synergies with Williams (WMB). Synergies are the big driver of the Williams–Energy Transfer merger.