Williams Cos., Houston, (NYSE: WMB) plans to acquire additional properties in the Piceance Valley in Colorado, east of its existing assets, from an undisclosed private company for approximately $258 million in cash.

The assets include 21,800 net acres, with 28 wells, related gas- and water-gathering facilities, 94 approved drilling permits and more than 800 drillable locations on 10-acre spacing. Proved reserves are approximately 150 billion cu. ft. equivalent, with up to 795 billion cu. ft. equivalent of estimated total net reserves. Current production is 24 million cu. ft. equivalent per day. In addition, the properties contain exploration upside from deeper formations and additional potential locations.

Not including the new properties, Williams owns approximately 190,000 net acres in the Piceance Basin.

President and chief executive Steve Malcolm says, “We’ve identified an opportunistic bolt-on acquisition that allows us to quickly add meaningful reserves, production, cash flows and earnings per share by leveraging off of the strength of our low-cost structure in the Piceance Basin…The anticipated production also can be an important additional supply source for our Northwest Pipeline.”

Williams has entered into new gas price hedges at a Rockies fixed price of $5.23 for 2010 and $5.90 for 2011. The hedges represent about 80% of projected gas revenues from the new properties. The company plans to incrementally add drilling rigs to its Piceance operations, with one additional rig tentatively slated for fourth-quarter 2009, followed by one more in 2010 and two more in 2011. Williams is now running eight rigs in western Colorado.

“This is a rare find,” says Ralph Hill, president of Williams’ exploration and production business. “The existing wells in the area we’re acquiring are very productive, producing a third more gas than Williams’ existing prolific Piceance Valley wells for a similar cost.”

The deal is expected to close near the end of the third quarter.

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