Williams Closes Bakken Acquisition - Analyst Blog

Integrated natural gas firm Williams Companies (WMB) completed the acquisition of a private company Dakota-3 E&P Company LLC along with its properties in the Bakken oil play of North Dakota. Williams  paid a total consideration of $925 million in cash.  The effective date of the purchase was October 1 and was announced in mid November.

(Read the full report at:  Williams to Take Position in Bakken)

The acquired acreage spreads across the Fort Berthold Indian Reservation in the Williston Basin covering an area of almost 85,800 net acres. The assets are estimated to hold a reserve potential of approximately 185 million barrels of oil equivalent in Middle Bakken and Upper Three Forks formations.

Dakota-3 currently operates 3 rigs and 24 existing wells on the aforesaid properties, with a net oil production of 3,300 barrels per day. Williams targets to increase the current level of exploration activity to six rigs by 2012. 

In an attempt to rebound production over the next few quarters, Williams is fast expanding its footing in the fertile onshore oil play regions of the U.S. In May, the company acquired approximately 42,000 net acres in the Marcellus Shale, totaling almost 94,000 acres of net acreage.   

The acquisitions are expected to present Williams a strong diversification geographically as well as in terms of product mix. We believe that the company's solid engineering base and technical skills will enable it to fully exploit these resources and come up with successful performance. 

However, these acquisitions expose Williams to various risks, which might adversely affect the company's growth rate in the near to medium term. In addition, volatility in natural gas and natural gas liquids prices also remain key areas of concern.  We expect Williams to perform in-line with its peers and industry levels in the coming months.

Williams Companies, the interstate gas pipeline and midstream assets of which are held through its 84% ownership interest in Williams Partners L.P. (WPZ), currently retains a Zacks #3 Rank (short-term Hold recommendation).

 
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