Williams expands Haynesville gas ambitions with Trace Midstream acquisition

Williams will acquire the Haynesville gathering and processing assets of Trace Midstream for $950 million, more than doubling the midstream operator's natural gas gathering capacity in the basin, the companies announced March 14.

Trace Midstream is a portfolio company of private equity firm, Quantum Energy Partners.

Once completed, the acquisition will increase Williams' gathering footprint in the Haynesville Shale to 4 Bcf/d, up from 1.8 Bcf/d, at a time of renewed interest from the industry in the basin, due in part to its proximity to the Gulf Coast LNG export corridor.

Russia's invasion of Ukraine has heightened gas supply concerns in Europe and elevated global gas prices, maximizing the utilization of existing US LNG export infrastructure and boosting the outlook for new LNG export projects along the Gulf Coast.

Already, Haynesville rig count and gas production volumes have seen material increases so far this year.

The number of gas rigs operating in the Haynesville reached 63 as of March 11, the highest number since May 2012, data from S&P Global Commodity Insights shows. The pace of additional rigs has picked up sharply over the last month, with the basin adding 13 rigs since Feb. 11.

Haynesville gas production has averaged 13.58 Bcf/d year to date, up around 1.21 Bcf/d, or 10%, from the same time last year.

Louisiana Energy Gateway project

As part of the deal, Williams secured multiple forms of support for its proposed Louisiana Energy Gateway project, which would gather up to 2 Bcf/d of Haynesville gas and transport it south to Transcontinental Pipeline, as well as to industrial customers and LNG exporters.

Rockcliff Energy, which is an affiliate of Quantum, signed a long-term commitment for capacity on Louisiana Energy Gateway, while Quantum took an initial step towards becoming an equity investor and partner in the project, inking a Memorandum of Understanding to create a joint venture with Williams.

In addition to the Rockcliff Energy commitment, Williams also intends to direct some or all of the 500 MMcf/d of Haynesville gas production from its joint operations with GeoSouthern to the proposed project, Chad Zamarin, senior vice president of corporate strategic development, said in a Feb. 22 call with analysts.

Securing sufficient commitments is crucial to the project moving forward, Zamarin said, noting that if the company signs "at least two other sizable commitments alongside our commitment" this year, Williams would commercialize the project in 2022, with an expected in-service of 2024.

'Wellhead to water' low carbon gas corridor

Louisiana Energy Gateway has been touted as the "flagship" of the company's ambitions to build a "wellhead to water" low carbon gas corridor in the basin, moving differentiated gas to Gulf Coast LNG exporters keen on sourcing lower emissions feedgas.

"We really think we're going to be an important player, not in the ownership of the actual LNG facility, but a lot of the key infrastructure that it's going to take to deliver this gas and to be able to do it with a responsibly sourced gas certificate," CEO Alan Armstrong said on the Feb. 22 call.

This ambition has not been lost on investors, with Blake Webster, Quantum's managing director, describing the proposed Louisiana Energy Gateway project as "a critical bridge to connect responsibly sourced Haynesville natural gas with Gulf Coast LNG markets."

Gas producers have committed to undergoing third-party certification for around 45% of current Haynesville gas production by the end of 2022, according to company announcements. The true volume is likely higher, with some companies waiting to receive the assessment results before going public.

William's acquisition of Trace Midstream is expected to close in the second quarter, should the necessary regulatory approvals be granted, according to the March 14 statement.