Williams Nearly Doubles Marcellus Acreage

Williams announced a major acreage acquisition that nearly doubles the company's Exploration & Production holdings in the Marcellus Shale.

Williams has acquired approximately 42,000 net acres from Alta Resources LLC and its partners for $501 million. The acreage is primarily located in Susquehanna County in northeastern Pennsylvania. The company estimates that it represents approximately 1.2 trillion cubic feet equivalent (Tcfe) in total net natural gas reserves potential. Gas in place is estimated to be 100-130 billion cubic feet equivalent (Bcfe) per section.

The company is also purchasing a 5-percent overriding royalty interest on the approximately 48,500 gross acres associated with the acquisition for $84 million, which reduces the royalty burden.

Williams expects to invest additional funds for drilling, completion, seismic and facilities costs totaling approximately $55 million in 2010 growing to $100 million to $200 million by 2012 as operations expand. The company will fund the acquisition and 2010 capital expenditures with cash on hand and subsequent investments will be funded from operating cash flows.

"This acquisition establishes Williams with a significant concentrated acreage position in what we believe is the highest resource potential area of the Marcellus," said Ralph Hill, president of Williams' exploration and production business. "This is our largest Marcellus acquisition to date - and for good reason.

"The rock quality, thickness and density of the shale and gas in place are among the best in the basin - and recent results from other operators in the area have consistently exceeded expectations," Hill said.

He added that Alta Resources' successful track record in mapping shale plays, particularly their development efforts in the Fayetteville Shale, which led to their Marcellus mapping expertise, was one of the key factors in the acquisition. Alta also followed a long-term leasing strategy designed specifically for a rational development plan with substantially no near-term lease expiration.

In addition to the Alta acquisition, Williams also has committed to lease approximately 8,000 net acres in another attractive area of Pennsylvania. Once this deal is completed, the company will hold approximately 94,000 net acres in the Marcellus Shale at an average cost of approximately $7,000 per acre.

"We are very pleased with the position we have accumulated in the Marcellus Shale in just the past 11 months," Hill said.

Steve Malcolm, Williams' chairman, president and chief executive officer, said the acquisition further diversifies Williams' drilling portfolio.

"Our now significant position in the Marcellus Shale builds on our already considerable drilling portfolio that includes our world-class resource in the Piceance Basin," Malcolm said.

"The new position is also consistent with our strategy of moving the overall Williams businesses toward a large-scale presence in Marcellus Shale," Malcolm said. "Our increasing scale will provide more potential opportunities for bolt-on E&P acquisitions as well as Gas Pipeline and Midstream growth opportunities via Williams Partners."

This acquisition was not included in the 2010-12 capital expenditure or other guidance provided on May 5. The company will update its guidance when it reports second-quarter 2010 financial results. The acquisition is also subject to standard closing conditions. Williams expects the transaction to close in third-quarter 2010.


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