US pipeline operator Williams Companies (WMB.US) has reached an agreement to acquire Momentum Midstream LLC from private equity firm EnCap Flatrock Midstream in a deal valued at up to $5.5 billion, expanding its natural gas network along the US Gulf Coast.
According to a Monday statement, Williams will pay $3.5 billion in cash and assumed debt, plus approximately $2 billion in stock for the acquisition. This is one of the largest acquisitions in Williams' history, further cementing its dominant position in the resource-rich Haynesville Shale play of East Texas and northern Louisiana.
Against the backdrop of surging global demand and a wave of liquefied natural gas (LNG) export terminals under construction, US pipeline operators have been seeking to secure their position. Houston-based Momentum Midstream operates approximately 4,000 miles (6,400 km) of pipelines with a daily capacity of 6 billion cubic feet of natural gas, connecting the Haynesville region to Gulf Coast LNG facilities, power plants, and industrial customers.
Alongside this acquisition, Williams also announced a $1.5 billion expansion project called Delta Access along its Transco pipeline network, and the Shelby Trough Connector project for its Louisiana Energy Gateway system.
Williams reported second-quarter results on Monday that beat analyst expectations, with shares rising about 1.9% after regular trading hours in New York. The company posted Q2 revenue of $3.05 billion, up 9.7% year-over-year and exceeding expectations by $200 million, while adjusted earnings per share came in at $0.50, in line with forecasts.
Media reports from June indicated that Williams was in advanced talks to acquire Momentum Midstream. Despite President Donald Trump's push to expand US energy infrastructure, new pipelines continue to face numerous legal challenges and lengthy federal permitting processes. These obstacles have made mergers and acquisitions an increasingly attractive way for pipeline operators to expand their networks.
Through the Momentum acquisition, Williams, which already owns more than 30,000 miles of pipeline infrastructure, will gain additional capacity to transport natural gas from the Haynesville region to export terminals on the US Gulf Coast. As the world's largest LNG exporter, the US is expected to roughly double its international export volumes by the end of the decade as new terminals in Texas and Louisiana come online.
As these massive and geopolitically strategic facilities are completed, they will place increasing pressure on pipelines transporting gas from the Haynesville region, the major gas-producing basin closest to the Gulf Coast. Bank of America Securities served as lead financial advisor to Williams, with Davis Polk & Wardwell acting as legal counsel. Barclays and Jefferies served as financial advisors to Momentum, while Kirkland & Ellis provided legal counsel. Vinson & Elkins acted as legal counsel to EnCap Flatrock.