Williams Cos., WPX complete spinoff
TWO COMPANIES WILL FOCUS ON SINGULAR EFFORTS
TULSA — To borrow an oft-told phrase from certain gossip columns, Williams Cos. Inc. and WPX Energy Inc. have split amicably.
The separation of these once intertwined natural gas companies, however, is anything but glamorous or even controversial. Parent Williams Cos. split off its exploration and production wing into WPX to offer shareholders more focused, basic investing choices.
“We’re a pure play company now with one business — producing energy,” WPX CEO Ralph Hill wrote in a letter to employees once the spinoff commenced this past weekend. “We don’t have a diverse, integrated model with multiple business units. We’re one team — and that’s WPX.”
Williams, meanwhile, is now a purely midstream conglomerate focused on oil, gas and liquids gathering, processing and pipeline assets across the U.S. The Tulsa-based parent company completed the spinoff by distributing one share of WPX for every three Williams share owned by holders.
Consider Williams and WPX separate but still integral to each other. The production company will be one of the parent company’s largest midstream customers.
WPX drills on leases within the Bakken and Marcellus Shales and Piceance Basin, and it owns a 69 percent interest in Apco Oil and Gas International’s interests in South America.
“So we will benefit from WPX’S continuing growth,” Williams CEO Alan Armstrong said. “And we hope to expand our relationship with WPX down the road, just as we would look to do with all of the large oil and gas producers.”
The Williams-wpx split comes in the midst of a corporate simplification going on in the oil and gas industry. Marathon Oil Corp. separated its refining and marketing segment from the parent company in 2011, and Conocophillips will complete a similar spinoff later this year.
Hill kept busy Tuesday touting the WPX brand nationwide. He and other company executives rang the opening bell at the New York Stock Exchange to celebrate the first day of official listing and also appeared on the Bloomberg News television outlet.
The WPX leader also gave employees a brief outline of the new company’s vow to stay “grounded” while also diving in the brave new waters as a stand-alone entity.
“There’s no magic or mystery,” Hill wrote in the message to WPX employees. “The tried and true formula for success in the E&P sector is pretty simple — keep your costs down, grow your production and grow your reserves.”
In another break from Williams’ focus on natural gas, about 37 percent of WPX’S revenues are expected to come from oil and natural gas liquids in 2012, according to the investor presentation. The company plans to increase its rig counts in both the Marcellus and Bakken shales this year.
All together, WPX holds nearly 1.6 million acres and 4.5 trillion cubic feet equivalent in proved reserves, according to reports.
Williams will head back to basics, too, returning to its roots in pipeline and natural gas infrastructure assets. Williams has been in the E&P sector since acquiring production assets with Northwest Pipeline in 1983.
The so-called “shale revolution,” with horizontal drilling and hydraulic fracturing opening up vast reserves domestically, can benefit WPX and Williams on both sides of the energy stream. Those include the Bakken and Marcellus shales, but Williams also owns assets in Canada.
“It takes a lot of infrastructure to convert these natural gas resources into products that can compete with oil-based products around the world,” Armstrong said. “Williams’ great workforce positions us very well to be a leader in this area.”