Williams & Atlas Partner for Marcellus Natural Gas Venture

By Christine Buurma and Tess Stynes
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Williams Cos. (WMB) Wednesday said it is forming a natural gas gathering and processing joint venture with Atlas Pipeline Partners LP (APL), in a move that will strengthen Atlas' balance sheet and give Williams a foothold in one of the largest U.S. onshore gas fields.

As tumbling commodity prices and sliding gas demand squeeze small pipeline operators like Atlas Pipeline, Williams and other large, well-capitalized companies have been on the lookout for bargain buys. Companies including Atlas and Crosstex Energy (XTEX) have put transmission and gathering systems on the block, while Spectra Energy Cop. (SE) and Energy Transfer Partners (ETP) have said they would acquire midstream assets at the right price.

"This is an ideal midstream growth opportunity," said Jeff Pounds, a spokesman for Williams. "It gives us a strategic entry into one of the largest emerging natural gas plays in North America."

Atlas Pipeline shares rose sharply on the news, recently trading up 14% at $4.47 apiece. An spokesman for Atlas didn't immediately return a call for comment.

The joint venture will help Atlas to pay down debt, but investors are still awaiting a sale of Atlas' Ozark assets, says Selman Akyol, an analyst with Stifel, Nicolaus & Co. in St. Louis. Atlas has said it plans to divest its Ozark Gas Transmission unit.

"We believe the largest asset has yet to close, that being the Ozark Assets," Akyol said. "Today's transaction generated $90 million in cash and is certainly helpful. We continue to expect additional proceeds from other transactions in terms of significantly reducing debt."

The Williams-Atlas venture will own Atlas Pipeline's existing Appalachian Basin gathering system, which will be operated by Williams. Williams will contribute approximately $102 million and raise $25.5 million in short-term debt in exchange for a 51% stake in the joint venture, which will be called Laurel Mountain Midstream LLC.

Atlas Energy Resources LLC (ATN), a unit of Atlas Pipeline, will be the venture's main customer. Atlas Energy has driven 30% growth in the production area and currently operates 120 wells there. It has agreed to sell two gas processing plants to the venture for $12 million as part of the deal.

The Ozark assets including transmission lines and gathering systems from Oklahoma to Missouri.

Last month, Williams said it would keep its current structure, which includes pipeline, exploration and production segments. The company had considered spinning off businesses as its market value dropped along with commodity prices last year.

Williams' shares were recently up 16 cents, or 1.4%, at $11.54, while units of Atlas Energy Resources were up 8 cents at $10.63.

-By Christine Buurma and Tess Stynes, Dow Jones Newswires; 201-938-2473; tess.stynes@dowjones.com