Williams Cos. Inc., Tulsa, reported an expansion of gas-gathering services in growing dry gas production areas of the Utica shale in eastern Ohio. Williams and Chesapeake Energy Corp. also announced a consolidation of contracts in the Haynesville shale in northwestern Louisiana.
The agreements are intended to optimize production opportunities, streamline fee structures, and restructure commitments to incentivize long-term development. The agreements with Chesapeake were entered into by subsidiaries of Williams Partners LP, of which Williams own 60%.
“This demonstrates our commitment to working with Chesapeake to align our interests on mutual growth,” said Alan Armstrong, Williams chief executive officer. “These new fee structures are designed to promote production in the best locations across a wider footprint in these great basins, which improves the economics on both the drilling and midstream side.”
In the Utica, Williams and Chesapeake executed a long-term, fee-based contract in the dry gas zone where Chesapeake and others are targeting production growth. The agreement extends the length of the Chesapeake acreage dedication to 2035, increases the area of dedication to 190,000 net acres from from 140,000 acres in a strategic area adjacent to Williams’ existing assets, and converts the cost-of-service mechanism to a fixed-fee structure with a minimum volume commitment (MVC).
This change to a fixed-fee contract enhances Williams’ ability to gather third-party volumes and build scale in Utica’s dry gas areas. Williams expects this will provide the opportunity to invest more than $600 million over 5 years to install more than 200 miles of pipeline and related infrastructure.
The companies also executed a new Haynesville contract that consolidates the Springridge and Mansfield contracts into a single agreement with a fixed-fee structure and a contract term to 2035.
The consolidated contract is supported by a MVC and a drilling commitment to turn 140 equivalent wells online before Dec. 31, 2017. This commitment is projected to result in significant production growth in the Haynesville shale asset over the next 2 years.
The combined contract also better aligns producer-midstream interests, simplifies contract administration, optimizes development of the resource across both Springridge and Mansfield areas and extends the Springridge dedication 15 years to 2035.
Contact Paula Dittrick at email@example.com.
*Paula Dittrick is editor of OGJ’s Unconventional Oil & Gas Report.