Energy developer Williams intends to split into two firms

The largest energy developer in western Colorado’s Piceance Basin intends to split into two companies, it said Wednesday.

Williams says it plans to create a separate, as-yet-unnamed exploration and production company, while keeping its pipeline and oil and gas processing assets. Separating the two will improve the focus of each, Williams said. It also will provide investors a choice between a high-dividend, moderate-risk investment in an infrastructure company and a higher-growth, higher-risk energy development investment, Williams said.

The separation of the exploration and production business into a second, publicly traded company is scheduled to be completed in 2012. It would result from a tax-free spinoff of up to 80 percent of ownership to Williams stockholders following an earlier initial public offering of up to 20 percent of common stock.

“At the time of the IPO, the company will have a name, but it’s just one of those many decisions that haven’t been made yet,” Williams spokeswoman Julie Gentz said.

In western Colorado, Williams employs 190 people in exploration and production and 250 people in total, in addition to numerous contract workers. Gentz said she couldn’t address at this point how the split might affect local activity levels, and no changes would be happening immediately.

“For the most part, things will be business as usual,” Gentz said. “We’ll still be drilling, producing and developing. And the western Colorado community remains very important to Williams.”

Williams for years has been the most active natural gas developer in western Colorado in terms of numbers of rigs operated and amount of gas produced.

Based in Tulsa, Okla., Williams became involved in Piceance Basin gas development with its 2001 purchase of Barrett Resources Corp.

Last fall, Williams agreed to sell its Piceance Basin pipeline and gas plant system for $782 million to a partnership in which it holds a majority interest.

Carter Mathies of Clover Energy Services LLC in Grand Junction said it makes sense from shareholder and other perspectives to separate pipeline businesses, which by law can earn fixed rates of return on capital, from energy development ones, which are vulnerable to volatile oil and gas prices but also provide big growth opportunities.

“(Pipelines) are a safer bet, if you will, and often dividend-yielding, whereas exploration and production companies offer in my opinion far more upside but a higher level of risk,” he said

Mathies said Williams’ exploration and production side consists of a strong portfolio of oil and gas holdings that provide investment opportunities.

“The Piceance is certainly one of those where they have the economies of scale to keep pounding out a nice profit over time,” he said.

The split doesn’t require a shareholder vote but is subject to regulatory review, the final consent of the Williams board and other approvals.


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