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The transaction establishes 25-year arrangement between the two companies.
Cabot Oil and Gas Corp., which operates several natural gas well sites in Susquehanna County, has announced an agreement to sell its Pennsylvania midstream to Williams Field Services Company, LLC, a subsidiary of Williams Partners L.P.
The deal, which could be finalized in December, calls for Cabot to sell approximately 75 miles of gas gathering pipelines and two existing compressor stations that the company has installed and constructed over the last three years.
The transaction also establishes a 25-year firm gathering arrangement between Cabot and Williams that calls for Williams, in the next two years, to:
• Complete construction of a 32-mile 24-inch high pressure pipeline to the Transco pipeline in Luzerne County from Cabot’s Lathrop Station in Springville Township, Susquehanna County;
• Build about 65 miles of various 16- to 24-inch trunk lines in Susquehanna County;
• Construct two additional compressor stations with a total of 40,000 horsepower.
During the term of the 25-year agreement, Williams also will connect all Cabot drilling program wells with 8-inch and 10-inch gathering lines and deliver Cabot production to five interstate pipeline delivery points.
The deal is worth about $150 million and, in addition, Williams Partners added more than $150 million of expansion capital to fund the 2011 construction phase of additional gathering assets, including compression and dehydration, which will significantly augment the acquired assets, according to a Williams press release.
“This additional expansion in the Marcellus Shale is an ideal growth opportunity for Williams Partners,” said Alan Armstrong, senior vice president of Williams Partners’ midstream business. “We have the opportunity to serve another one of the biggest producers in the Marcellus with the type of large-scale solutions required for Cabot’s rapidly expanding production.
Williams, an Oklahoma-based natural gas transportation company, has a track record that was attractive to Cabot.
“With the exceptional well success we have seen in our Marcellus operations, we needed to adjust the way we thought about infrastructure and take-away capacity going forward,” said Dan O. Dinges, Cabot’s chairman, president and chief executive officer. “Williams Partners L.P. is one of the premier mid-stream providers that has the capabilities to help us make a significant step change in the way we develop this resource and execute our program.”
Cabot, based in Houston, Texas, has been in the news, both national and local, the past two years because of problems with well water supplies in Dimock Township, Susquehanna County.
A state board last week approved funding the construction of a nearly $12 million water line from Montrose to the homes of families whose water wells were allegedly contaminated by natural gas drilling in Susquehanna County.
The board of PENNVEST – the Pennsylvania Infrastructure Investment Authority – voted 9-2, to award an $11.6 million grant and a $172,682 loan to Pennsylvania American Water Co. for more than 12 miles of transmission and distribution lines to serve Dimock Township residents whose wells were affected by methane gas.
The state Department of Environmental Protection has said defective casings on at least three of Cabot’s wells allowed gas to pollute the groundwater. The department fined Cabot more than $240,000 and ordered it to clean up the pollution. Cabot has denied any wrongdoing and is fighting the order.
The deal, which could be finalized in December, calls for Cabot to sell approximately 75 miles of gas gathering pipelines and two existing compressor stations that the company has installed and constructed over the last three years.