What is the main purpose of the Credit Agreement entered into by Williams Production RMT Company?

The Credit Agreement's primary purpose is to establish the framework for entering into bilateral hedge agreements. These agreements are designed to protect Williams Production RMT Company against risks associated with fluctuations in oil and natural gas prices, as well as basis risk.

What are the implications of the restrictions and covenants within the Credit Agreement for investors?

The restrictions on granting liens, selling assets, incurring debt, and engaging in related-party transactions can limit the subsidiary's operational flexibility and potential growth. Furthermore, events of default, such as a change of control or significant debt acceleration, could trigger the termination of valuable hedging contracts, potentially leading to financial obligations and impacting overall profitability.

When does this Credit Agreement expire, and what happens if the company defaults?

The Credit Agreement is set to expire on December 31, 2011. If an event of default occurs (such as a cross-acceleration of debt exceeding $50 million or a change of control), the hedging agreements entered into under this credit facility could be terminated. Depending on the market value of these hedges, the company might be required to make termination payments or could receive payments.

WMB 8-K: Material Agreements

Summary

This 8-K filing by The Williams Companies, Inc. (WMB) on March 1, 2007, primarily details the entry into a material definitive agreement by its wholly-owned subsidiary, Williams Production RMT Company. This agreement, a Credit Agreement dated February 23, 2007, establishes the terms and conditions for bilateral hedge agreements aimed at mitigating risks associated with oil and natural gas price fluctuations and basis risk for the subsidiary. The Credit Agreement, which terminates on December 31, 2011, is guaranteed by Williams Production Company, LLC. It includes significant restrictions on the business operations of the subsidiary and WPC, such as limitations on liens, mergers, asset sales, indebtedness, related-party transactions, and equity distributions. Furthermore, it outlines affirmative covenants and events of default, including a cross-acceleration clause for significant debt and change of control provisions, which could lead to the termination of hedging arrangements and potential termination payments.

Key Highlights

1Williams Production RMT Company, a WMB subsidiary, entered into a Credit Agreement on February 23, 2007.
2The Credit Agreement governs bilateral hedge agreements to manage oil and natural gas price risk and basis risk.
3The agreement terminates on December 31, 2011.
4Williams Production Company, LLC, provides a guarantee for the Credit Agreement.
5The agreement imposes substantial restrictions on WPC and the subsidiary regarding liens, mergers, asset sales, debt, related-party transactions, and equity distributions.
6Key default triggers include cross-acceleration of debt above $50 million and change of control events.
7Breach of covenants or default events could lead to termination of hedges and potential termination payments.

WILLIAMS COMPANIES, INC. 8-K Report, Material Agreement (Mar 1, 2007)

Summary

Key Highlights

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