For Pipeline Operators, Bigger Is Seeming Better
A recent article in The New York Times reported a case in point for what analysts are describing as a trend among oil and gas pipeline operators to protect themselves against oil price dips by consolidating.
Kelcy L. Warren, who built oil and gas pipeline operator Energy Transfer into an industry leader, is one of the main proponents of the approach.
The article talks about how the Williams Companies and Energy Transfer Equity battled just four years ago to take over a rival operator, but now Williams is busy fending off Energy Transfer’s bid to take it over. Williams apparently rejected Energy Transfer’s $48 billion takeover bid.
According to the article, Williams announced in May it would absorb a subsidiary in a close to $14-billion deal and said Energy Transfer’s offer was too low. Energy Transfer’s proposal would require Williams to abandon the subsidiary transaction. In a news release, Williams said that this requirement “would not deliver value commensurate with what [they expect] to achieve on a stand-alone basis and through other growth initiatives.”
In the Times, Alan S. Armstrong, chief executive of Williams, said, “Our board and management team remain committed to acting in the best interests of shareholders. And in light of the unsolicited proposal, our board believes it is in the best interest of shareholders to conduct a thorough evaluation of strategic alternatives.”
In response to the article and the trend toward consolidation, R.W. Lyall Director of Marketing Greg Hernandez said, “The process of growth is always defined by quick changes, upgrades, and the outflow of new ideas. With this movement to go bigger in the industry, those of us on the supply chain will need to be ready for action, ready to meet the coming demands. This is a very active and exciting time for the American oil and gas industry, and we’re thrilled to be part of it.”