Thursday August 1, 1:35 pm Eastern Time Reuters Business Report Williams Bolsters Finances By Carolyn Koo
NEW YORK (Reuters) - Williams Cos. Inc. (NYSE:WMB - News) said on Thursday it secured $2 billion in financing from banks and billionaire investor Warren Buffett and sold $1.8 billion in assets, resolving the cash-strapped energy company's near-term money needs. ADVERTISEMENT
Investors had been waiting to see if Williams, caught in an industrywide credit crunch following the collapse of energy trader Enron Corp. (Other OTC:ENRNQ.PK - News) last year, could obtain financing after failing last week to land an unsecured credit line of about $2 billion.
Shares of Williams jumped 44 percent in midday trade on the New York Stock Exchange, making them one of the top percentage gainers after being halted earlier in the session. The news also boosted shares of other energy companies, including Dynegy Inc. (NYSE:DYN - News), which has also struggled with a cash crunch.
Williams' financing brought relief to investors as a credit default would have hamstrung the entire energy-trading industry.
"If both of these companies look as though they're going to be able to meet their cash requirements, they're going to continue as ongoing entities for the foreseeable future. This is positive for the entire energy industry," said Gordon Howald, an analyst at Credit Lyonnais Securities.
"Dynegy and Williams represent a significant portion of the counterparty exposure of utilities and other companies."
Tulsa, Oklahoma-based Williams said it closed a $1.1 billion credit agreement for an amended $700 million secured revolving credit facility and a new $400 million line of credit.
The company also reached a deal with Lehman Brothers and Buffett's Berkshire Hathaway Inc. (NYSE:BRKa - News) for a $900 million senior secured credit agreement, backed by nearly all of the oil and gas interests Williams bought last year with its acquisition of Barrett Resources.
The news of the asset sales trickled in through the course of the morning, and by midday the running tally reached $1.8 billion. Williams said the net proceeds for three of the sales was $1.4 billion, but kept mum on how much it would net from a fourth sale valued at $217 million.
The company sold interests in two pipeline companies for about $1.2 billion to Enterprise Products Partners LP (NYSE:EPD - News), generating $1.1 billion in proceeds.
It also sold natural gas assets in Wyoming for $350 million to the U.S. unit of Encana Corp. (Toronto:ECA.TO - News), North America's top independent oil and gas producer, and the vast majority of its natural gas production properties in the Anadarko basin to Chesapeake Exploration LP for about $37.5 million, netting a total of $308 million.
And Williams said it had agreed to sell a liquefied natural gas facility and pipeline for $217 million to a unit of Dominion Resources Inc. (NYSE:D - News), a move that is expected to reduce Williams' capital expenditure requirements by $105 million for the rest of this year and next.
The financings gives Williams some breathing room as it seeks a partner for or a potential sale of its energy-trading business.
"It's pretty spectacular the amount of stuff they've done in a week, though it's been at the expense of selling some good assets that have contributed to their earnings profile," said Hugh Welton, senior director at rating agency Fitch Ratings.
"The big question mark going forward is what is the future of their energy marketing and trading business, given the contracts they have and the capital requirements."
Williams shares gained as much as $1.30 to $4.25. Shares of Dynegy -- which cut its own deal with Buffett earlier this week, selling its Northern Natural Gas pipeline to a company controlled by Buffett for $928 million -- rose 80 cents, or 33 percent, to $3.20.