Williams' Board Okays Spin-off - Analyst Blog

Following the approval by the board of directors, Williams Corporation (WMB) will segregate its exploration and production business, named WPX Energy Inc, by this year-end. The spin-off will be tax free, involving the allocation of all WPX Energy common stock held by Williams to stockholders.

Williams announced the proposed split of its upstream unit in February but later dropped plans for an initial public offering citing volatility and unpredictable market conditions.

For the spin-off, shareholders will receive a dividend of one share of WPX Energy common stock for every three shares of Williams common stock as of December 14. The distribution is expected to take place on December 31.

The fractional shares of WPX Energy will not be distributed. These will be sold collectively in the open market and net proceeds will be issued on a pro rata basis in the form of cash payments to every Williams stockholder who would otherwise hold a WPX Energy fractional share.

WPX common stock will begin trading on the New York Stock Exchange under the ticker symbol "WPX" from January 3 next year. 

Post-split, Williams will operate as a midstream infrastructure and natural gas pipeline firm in North American. Headquartered in Tulsa, OK, the newly formed independent natural gas and oil exploration and production company will focus on operations in key North American oil plays besides activities in southwestern United States and overseas sector – Argentina and Colombia.

We believe that this spin-off will allow both companies to pursue opportunities in their respective market segments and better serve the needs of both investor groups without the constraints of the parent company.

In recent times, many oil and gas companies have segregated their less profitable segments to concentrate on their core business areas. In July, Marathon Oil Corporation (MRO) completed the spin-off of its refining and sales business into an independent and publicly traded company Marathon Petroleum Corporation (MPC), focusing on its profitable business of finding and producing energy.

We maintain a long-term Neutral recommendation on Williams. The company currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

MARATHON PETROL (MPC): Free Stock Analysis Report

MARATHON OIL CP (MRO): Free Stock Analysis Report

WILLIAMS COS (WMB): Free Stock Analysis Report

Zacks Investment Research