Williams Merger & Board Turmoil: Staggering New Opportunity – If...

Williams Merger & Board Turmoil: Staggering New Opportunity – If...

Legal media and energy journalists miss the point when they characterize the failed Williams Companies (NYSE: WMB) – Energy Transfer Equity (NYSE: ETE) as a blueprint for getting out of energy deals – the real news is Williams’ future might be boundless, depending on decisions Williams management and board make over the next couple of months.

Let’s hope for the best – here’s how it could work:

The Williams Companies has a unique opportunity to transform itself into America’s first 21st century pipeline company, and create significant value as a stand-alone enterprise. 

Background – Nixed Merger & Board Reshuffle

One of the most watched, debated and traded energy transactions in recent memory is the failed merger of Williams and Energy Transfer Equity, LP (NYSE: ETE). 

Days after Energy Transfer terminated the merger agreement – the legality of which was ruled upon by Vice Chancellor Glasscock in Delaware court only the preceding Friday – almost half of the Williams’ board of directors, including its chairman, resigned following an apparent failed attempt to oust Alan Armstrong, the company’s chief executive officer. 

The stock was off 5% on Friday following news of the resignations.  From all accounts, this would appear to be a company in turmoil as its leadership regroups to chart a new course into the future – albeit on a stand-alone basis.

Williams’ Survive and Thrive Post-Trauma Pedigree

“Adversity does not build character, it reveals it.”  Williams is a proud company that has faced significant adversity before – and come through it. 

Most forget that – after the fall of Enron back in late 2001 – Williams came to the brink of bankruptcy as the company was swept up in the carnage that befell energy companies that aggressively sought to diversify into energy trading and non-energy-related activities – like communications. 

Williams fought back – notably with the support of an emergency, high interest loan from Warren Buffett – and built a “best in class” pipeline enterprise that was worth approximately $38 billion – according to Energy Transfer – at the peak of the “Shale Revolution.”

Williams Can Lead the Energy Revolution

I write and speak constantly about the need for U.S. energy companies to extend the “Shale Revolution” into a broader technological revolution.

This opportunity can and should be Williams’ defining moment.

As massive numbers of talented baby boomers exit our industry at an alarming rate with their millennial replacements years away from the requisite knowledge and experience necessary to successfully operate a modern energy concern, the need to transform our energy businesses into technologically advanced companies is at a crisis point. 

Exactly as we did in the late 1980’s, we are losing talent at a time when the need for both new energy supplies and updated infrastructure is poised to explode.

According to a recent Deloitte report, the global upstream industry is facing a $2 trillion shortfall over the next 5 years just to remain flat in terms of maintaining reserves.  A logical extrapolation is the need for continued midstream development as well, and - the profits could be staggering. 

The Williams Opportunity at 50,000 Feet: A 4 Step Plan

  1. Re-engage in Roll-up Transaction.

    Cash is king!  Before Energy Transfer “compelled” Williams to enter into a potential merger, Williams was in the process of implementing a consolidation transaction by merging with its master limited partnership affiliate – Williams Partners LP (NYSE:  WPZ). 

    At a minimum that transaction would allow for Williams to preserve and redirect cash flow generated by the partnership that would otherwise be required to be distributed to WPZ’s unitholders pursuant to the WPZ limited partnership agreement. 

  2. Strategic Investments in People.

    Every quality leader knows their people are the most important assets.  Williams – like most energy companies – must face the challenge of developing the next generation of petroleum trained professionals.  A bold expanded commitment to hiring and developing the best talent at this time of limited competition for these resources, will pay off in financial and operational success over the mid and long term.

  3. Strategic Investment in Technologies

    Williams should also develop new and innovative midstream gathering, transmission and distribution technologies – and there are plenty of opportunities. Among others, the energy industry is woefully behind in using new techniques to capture and analyze data & remotely monitor and control operations with advanced automation – all newly possible through the Internet of Things (IoT). 

    Williams could, should or must redirect capital to develop or joint venture with technology-focused companies to significantly upgrade its assets. I’ve seen multiple absolutely remarkable new and ready technologies over the past few months.

  4. Get Back to Work

    Williams has world class assets in basins critical to the U.S. energy supplies.   With renewed vision and focus, together with the capital savings that might result from the consolidation of WPZ and WMB, Williams could be poised to yet again rise from the ashes and triumph through the adversity.

Commit to a new and compelling vision and get back to work.

I believe Williams Companies will be a leading success story of our generation.


Attorney Jimmy Vallee is an energy Mergers & Acquisitions lawyer, oil and gas industry commentator, and frequent resource for media outlets including USA Today, U.S. News & World Report, Oil & Gas Monitor and others. His new book, Giant Shifts: Energy Trends Reshaping America’s Future, released in May, 2017 hit #1 in two Amazon categories the week of its launch.
Connect with Jimmy at [hidden email]
Noted Energy Futurist” – Mensa AG 2016

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