Court Approves Williams' Deal with Bankrupt Chesapeake

HOUSTON (P&GJ) — Tulsa-based pipeline operator Williams on Friday announced that a bankruptcy court has approved its agreement to take ownership of some Chesapeake Energy assets in exchange for accepting lower gas gathering fees.

As part of that agreement, Williams said, it received a payment of $112 million from Chesapeake upon court approval related to all pre-petition and past due receivables associated with midstream expenses per the existing contracts.

Under terms approved by the bankruptcy court, Chesapeake agreed that it will make no attempt to reject Williams' gathering agreements in the Eagle Ford, Marcellus or Mid-Con areas. 

Williams agreed to reduce its gathering fees in the Haynesville in exchange for gaining partial ownership in Chesapeake's 50,000 net South Mansfield mineral acres. Additionally, Chesapeake will enter into a long-term gas supply commitment of a minimum 100 Mdth/d and up to 150 Mdth/d for Williams' Transco Regional Energy Access (REA) pipeline currently under development.

The commitment to REA provides valuable incremental takeaway capacity for Chesapeake’s Marcellus production and the associated Williams gathering systems, Williams said, while adding a valuable capacity commitment to the Transco project.

“Williams has strategically invested in large-scale and essential infrastructure necessary to gather and treat the natural gas that Chesapeake and its joint interest owners produce in the Eagle Ford, Haynesville, and Marcellus,” said Alan Armstrong, Williams president and CEO.

“Our gathering systems are necessary to realize the full potential of these high value reserves, and we are pleased to have been able to work with Chesapeake toward a mutually beneficial outcome that will put Chesapeake on a clear path to a bright future.

In its announcement of the court’s decision, Williams noted that the reduced gathering fees under the agreement are consistent with incentive rates it has offered in the past to attract drilling capital, and are "therefore expected to promote additional drilling across Chesapeake’s prolific Haynesville footprint.

The South Mansfield assets provide an opportunity to grow production volumes and drive growth in fee-based cash flows on  existing spare midstream capacity, Williams said, while also enabling it to "market significant gas volumes for future downstream opportunities."

Williams owns and operates more than 30,000 miles of pipelines system wide – including Transco, the nation’s largest volume and fastest growing pipeline – and handles approximately 30% of the natural gas in the United State.

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