It has been nearly seven decades that the Transco pipeline has been established, stretching from the Gulf Coast of Texas to the city of New York. It travels through the prominent US shale regions of Utica and Marcellus and is considered a strategic pipeline for the natural gas industry. Both these shale regions have risen to become the largest natural gas producers in the country.
The Transco pipeline has resulted in two failed takeover bids for Williams Companies Inc (NYSE:WMB) in the past one year. It has generated a clash between the pipeline magnate and CEO of Energy Transfer Partners LP (ETP), Kelcy Warren, and the CEO of Williams Companies, Alan Armstrong. It has also resulted in the mass exodus of the board of Williams Companies, as six directors resigned.
Now, the pipeline has been upgraded to flow from the south to the north as well. Furthermore, President-elect Donald Trump is considered more skewed towards pro-fossil fuel policies. This increases the value of the Transco pipeline and further fuels the speculation that Williams Companies will be a major takeover target in 2017.
Williams Companies intends to become a standalone entity. During a telephone interview, Mr. Armstrong said that the company had growth projects under development and would not consider acquiring new assets from outside sources. One of the prominent growth projects is the extension of the Transco pipeline by 185 miles (300 kilometers) in Eastern Pennsylvania. The project, known as Atlantic Sunrise, is anticipated to become completely operational in 2018.
Although the expansion of the pipeline remains the top priority for the company, it has not completely scrapped off a prior idea of bringing back its master-limited partnership (MLP), Williams Partners LP (WPZ) back into the fold of the corporation. By doing so, the company’s operations will become extensive, making it a more attractive target for suitors. The corporate structure of both entities would become more efficient and challenges related to MLP will be eliminated.
In September 2014, Kinder Morgan Inc. (KMI) decided to consolidate its business comprising of multiple MLPs by abandoning the MLP structure and amalgamating together to form a corporation. The consolidated company is now the biggest energy infrastructure company in the US.
Until then, the company will focus upon transporting natural gas through its current project. The Gulf Coast has immense importance as it is a hub to numerous gas exporting terminals and gas-powered stations situated in the east.