Williams diversifies interests with Bakken acquisition

TULSA, Okla. - Integrated natural gas company Williams (NYSE: WMB) is diversifying its exploration and production interests with a recent acreage acquisition in North Dakota’s Bakken formation.

According to the company, by 2013, nearly 25% of the company's E&P revenue streams are expected to be generated by oil production, up from 7% in 2010.

In the recent transaction, Williams has agreed to purchase roughly 85,800 net acres from private owners for $925 million. The acreage is located entirely on the Fort Berthold Indian Reservation, located in the Williston Basin of North Dakota.

The company estimates that these properties represent approximately 185 million barrels of oil equivalent (MMboe) in total net reserves potential in the Middle Bakken and the Upper Three Forks formations.

The sale has an effective date of Oct. 1 and is expected to close by year end, subject to standard closing conditions. The assets in the proposed transaction also include 3,300 barrels per day of net oil production from 24 existing wells.

"This acquisition establishes a significant acreage position in an area which further diversifies, and when combined with our recently acquired Marcellus position, basically transforms our business — both geographically and in terms of our product mix," said Ralph Hill, president of Williams' E&P business. "It enables us to deploy available capital and existing technical expertise to a very attractive new opportunity."

Williams' entry into the Bakken Shale play follows its entry into Pennsylvania's Marcellus Shale, where the company has accumulated approximately 100,000 net acres over the past year and a half.

In addition to the purchase price, Williams expects to invest additional funds for drilling and development costs totaling approximately $60 million in 2010 and $200 million to $300 million in 2011. The company expects to fund the acquisition and 2010 capital expenditures with cash on hand, including proceeds from the Piceance asset drop down to WPZ. The funding for 2011 will be provided by expected increases in operating cash flows and expected cash on hand.

Currently, there are three rigs operating on these properties. Williams expects to double the current level of drilling activity to six rigs by 2012 and expects the new leases to be producing more than 20,000 barrels per day by the end of 2012.

Steve Malcolm, Williams' chairman, president and chief executive officer, said the company's experience in developing other horizontal shale plays is readily transferable to the Williston Basin.
"Development of the Bakken will be very similar to the low-risk, repeatable nature of the Barnett and Marcellus shales, as well as the tight sands in the Piceance Basin.”

This proposed transaction was not included in the 2010-12 capital expenditure or other guidance provided on Oct. 28. The company will update its guidance when it reports year-end 2010 financial results. 

Source:  Williams

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