Williams Announces E&P Acreage Acquisitions in Marcellus Shale; Total Acreage Increasing to 94,000 Acres
TULSA, Okla., May 25 /PRNewswire-FirstCall/ — Williams (NYSE: WMB) announced today a major acreage acquisition that nearly doubles the company’s Exploration & Production holdings in the Marcellus Shale.
Williams has acquired approximately 42,000 net acres from Alta Resources LLC and its partners for $501 million. The acreage is primarily located in Susquehanna County in northeastern Pennsylvania. The company estimates that it represents approximately 1.2 trillion cubic feet equivalent (Tcfe) in total net natural gas reserves potential. Gas in place is estimated to be 100-130 billion cubic feet equivalent (Bcfe) per section.
The company is also purchasing a 5-percent overriding royalty interest on the approximately 48,500 gross acres associated with the acquisition for $84 million, which reduces the royalty burden.
Williams expects to invest additional funds for drilling, completion, seismic and facilities costs totaling approximately $55 million in 2010 growing to $100 million to $200 million by 2012 as operations expand. The company will fund the acquisition and 2010 capital expenditures with cash on hand and subsequent investments will be funded from operating cash flows.
“This acquisition establishes Williams with a significant concentrated acreage position in what we believe is the highest resource potential area of the Marcellus,” said Ralph Hill, president of Williams’ exploration and production business. “This is our largest Marcellus acquisition to date – and for good reason.
“The rock quality, thickness and density of the shale and gas in place are among the best in the basin – and recent results from other operators in the area have consistently exceeded expectations,” Hill said.
He added that Alta Resources’ successful track record in mapping shale plays, particularly their development efforts in the Fayetteville Shale, which led to their Marcellus mapping expertise, was one of the key factors in the acquisition. Alta also followed a long-term leasing strategy designed specifically for a rational development plan with substantially no near-term lease expirations.
In addition to the Alta acquisition, Williams also has committed to lease approximately 8,000 net acres in another attractive area of Pennsylvania. Once this deal is completed, the company will hold approximately 94,000 net acres in the Marcellus Shale at an average cost of approximately $7,000 per acre.
“We are very pleased with the position we have accumulated in the Marcellus Shale in just the past 11 months,” Hill said.
Steve Malcolm, Williams’ chairman, president and chief executive officer, said the acquisition further diversifies Williams’ drilling portfolio.
“Our now significant position in the Marcellus Shale builds on our already considerable drilling portfolio that includes our world-class resource in the Piceance Basin,” Malcolm said.
“The new position is also consistent with our strategy of moving the overall Williams businesses toward a large-scale presence in Marcellus Shale,” Malcolm said. “Our increasing scale will provide more potential opportunities for bolt-on E&P acquisitions as well as Gas Pipeline and Midstream growth opportunities via Williams Partners.”
This acquisition was not included in the 2010-12 capital expenditure or other guidance provided on May 5. The company will update its guidance when it reports second-quarter 2010 financial results. The acquisition is also subject to standard closing conditions. Williams expects the transaction to close in third-quarter 2010.
About Williams (NYSE: WMB)
Williams is an integrated natural gas company focused on exploration and production, midstream gathering and processing, and interstate natural gas transportation primarily in the Rocky Mountains, Gulf Coast, Pacific Northwest, Eastern Seaboard and the Marcellus Shale in Pennsylvania. Most of the company’s interstate gas pipeline and midstream assets are held through its 84-percent ownership interest (including the general-partner interest) in Williams Partners L.P. (NYSE: WPZ), a leading diversified master limited partnership. More information is available at www.williams.com. Go to http://www.b2i.us/irpass.asp?BzID=630&to=ea&s=0 to join our e-mail list.
Contact: Jeff Pounds Williams (media relations) (918) 573-3332 Sharna Reingold Williams (investor relations) (918) 573-2078
Portions of this document may constitute “forward-looking statements” as defined by federal law. Although the company believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Any such statements are made in reliance on the “safe harbor” protections provided under the Private Securities Reform Act of 1995. Additional information about issues that could lead to material changes in performance is contained in the company’s annual reports filed with the Securities and Exchange Commission.
Oil and gas reserves and resource potential disclaimer
“Reserves potential” as used in this press release may include “proved,” “probable,” “possible,” and “resource estimations.”
The SEC requires oil and gas companies, in filings made with the SEC, to disclose proved reserves, which are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, under existing economic condition, operating methods , and governmental regulations. Beginning with year-end reserves for 2009, the SEC permits the optional disclosure of probable and possible reserves. The SEC defines “probable” reserves as “those additional reserves that are less certain to be recovered than proved reserves but which, together with proved reserves, are as likely as not to be recovered.” The SEC defines “possible” reserves as “those additional reserves that are less certain to be recovered than probable reserves.” Williams applies these definitions in estimating probable and possible reserves. Statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include estimated reserves not necessarily calculated in accordance with, or contemplated by, the SEC’s latest reserve reporting guidelines. Investors are urged to consider closely the disclosure in Williams’ Annual Report on Form 10-K for the fiscal year ended December 31, 2009, available from Williams at One Williams Center, Tulsa, OK 74172 (Attn: Investor Relations). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC’s website at www.sec.gov.
The SEC’s rules prohibit us from including in filings with the SEC estimates of resources. Our “resource estimations” include estimates of hydrocarbon quantities for (i) new areas for which we do not have sufficient information to date to classify as proved, probable or even possible reserves and (ii) other areas to take into account the low level of certainty of recovery of the resources. Resource estimates do not take into account the certainty of resource recovery and are therefore not indicative of the expected future recovery and should not be relied upon. Resource estimates might never be recovered and are contingent on exploration success, technical improvements in drilling access, commerciality and other factors.