2010-05-25-2010-05-25-2010-05-25

Purchased 42,000 acres in Marcellus shale in Susquehanna Co., PA.

Tulsa, Oklahoma-based integrated E&P company Williams Co. Inc. (NYSE: WMB) reports it has nearly doubled its holdings in the Marcellus shale with an acquisition of 42,000 net acres in northeastern Pennsylvania from privately held, Houston-based Alta Resources LLC and its partners for $501 million in cash. The acquisition is the company's largest in 2010.

Williams is also purchasing a 5% overriding royalty interest on the approximately 48,500 gross acres associated with the transaction for $84 million, which reduces the royalty burden. Additionally, the company is leasing some 8,000 net acres in another area in Pennsylvania, which will boost its total holdings in the Marcellus to 94,000 net acres, at an average cost of approximately $7,000 per acre.

The acquired acreage from Alta Resources is primarily in Susquehanna County, and contains an estimated 1.2 trillion cubic feet equivalent in total net reserves potential. Gas in place is approximately 100- to 130 billion cubic feet equivalent per section.

Williams anticipates investing an additional $55 million in 2010 for drilling, completion, seismic and facilities costs. The company will fund the acquisition and 2010 capital expenditures with cash.

Williams chairman and chief executive Steve Malcolm says the acquisition diversifies the company's drilling portfolio and "builds on (its) world-class resource in the Piceance Basin."

Malcolm continues, "The new position is also consistent with our strategy of moving the overall Williams businesses toward a large-scale presence in Marcellus shale. 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 (LP)."

Williams E&P president Ralph Hill adds, "This acquisition establishes Williams with a significant concentrated acreage position in what we believe is the highest resource potential area of the Marcellus. 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 notes that Alta Resources' expertise in mapping shale plays, specifically Fayetteville and Marcellus, was a key factor in the acquisition.

Alta Resources, led by Joe Greenberg, was formed in 1999 to explore for oil and gas in the U.S. Alta has a field office in Montrose, Pennsylvania, and has drilled or participated in more than 150 wells in Arkansas, Texas, Louisiana and Alabama, with an overall success rate of 95%.

Alta's partners in the Fayetteville shale in Arkansas were Contango Oil & Gas Co. (NYSE Amex: MCF), Houston, and George P. Mitchell, founder of Mitchell Energy, which was sold to Devon Energy Corp., Oklahoma City, (NYSE: DVN) in 2001.

The deal is expected to close in third-quarter 2010.

Williams focuses on E&P and midstream operations in the Rockies, Gulf Coast, Pacific Northwest, Eastern Seaboard and Marcellus shale regions. Williams Partners is a master limited partnership, in which Williams holds an 84% ownership interest. The partnership holds most of the company's gas pipeline and midstream assets.