American Midstream Partners has agreed to acquire assets from DCP Midstream for consideration of about $115 million. The assets include the Mobile Bay gas processing plant and DCP’s stake in the Main Pass Oil Gathering System. The deal is expected to close in August.
DENVER–(BUSINESS WIRE)–American Midstream Partners, LP today announced the execution of a Purchase and Sale Agreement with an affiliate of DCP Midstream, LLC (“DCP”) to acquire entities holding onshore natural gas processing and offshore natural gas gathering and transportation and oil gathering assets for consideration of approximately $115 million. The acquisition complements American Midstream’s High Point system located in Southeast Louisiana, and improves AMID’s ability to compete for increased shallow-water and deep-water production from new drilling in the prolific oil and gas eastern region of the Gulf of Mexico. The acquisition is expected to be funded through the private placement of American Midstream common units. The acquisition is expected to close in August 2014, subject to approval under Hart-Scott-Rodino and other customary closing conditions.
The assets to be acquired include the Mobile Bay gas processing plant (“Mobile Bay”), Dauphin Island gathering and transmission system (“DIGP”), and DCP’s interest in the Main Pass Oil Gathering System (“MPOG”), which collectively provide strong cash flow visibility with the majority of volumes generated by life-of-lease contracts from a growing, high-quality customer base, including several super major producer customers. Asset details include:
Mobile Bay is a 300 million cubic feet per day (MMcf/d) cryogenic gas processing plant located in Mobile County, Alabama, and is currently operating at nearly 70 percent of available capacity.
DIGP is a 270-mile FERC and non-FERC regulated gas gathering and transmission system that delivers gas to the Mobile Bay plant, and has a design capacity of approximately 1 billion cubic feet per day. Additional production from new and existing customers on DIGP is expected to add approximately 70 MMcf/d in processed volumes at Mobile Bay by the end of 2015 on an exit-rate basis.
MPOG is an oil gathering system with a design capacity of 160 thousand barrels per day. American Midstream will acquire DCP’s 67 percent interest in MPOG. MPOG is operated by Panther Midstream, the minority interest owner.
Total consideration for the assets equates to an Adjusted EBITDA multiple of approximately 8.5x for the next twelve months, which is expected to improve to an Adjusted EBITDA multiple of approximately 6.5x for full-year 2015 as a result of identified increases in throughput volume and cost savings.
“We are excited to acquire assets that complement and enhance our current offshore gas gathering and transmission business in the eastern Gulf of Mexico,” said Steve Bergstrom, Executive Chairman, President and Chief Executive Officer. “The acquisition is consistent with our growth strategy to pursue third-party and bolt-on opportunities, and upon closing the acquisition we will have the ability to offer oil gathering and natural gas processing services to offshore producers, which will allow us to more effectively compete for deep-water Gulf of Mexico production. Drilling and permitting activity in this region of the Gulf continues to increase after the end of the drilling moratorium, and we are well positioned to capture incremental volume. As a result of this accretive acquisition, management intends to recommend to the board of directors an increase to the quarterly distribution of three to five percent for the fourth quarter 2014 distribution.”
2014 Forecast Update
American Midstream updated its forecast for 2014 Adjusted EBITDA to a range of $44 million to $47 million and Distributable Cash Flow to a range of $24 million to $27 million. The updated 2014 forecast includes the assets to be acquired from DCP, including assumptions for costs associated with acquisition integration and company growth, and does not include other acquisitions, drop downs, or asset development projects the Partnership is pursuing. Forecasted growth capital expenditures in 2014, which exclude capital for maintenance, were updated to a range of $65 million to $70 million to account for accelerated capital costs to accommodate faster drilling and higher throughput for the producer customer on the Lavaca natural gas gathering system that is under construction.
About American Midstream Partners, LP
Denver-based American Midstream Partners is a growth-oriented limited partnership formed to own, operate, develop and acquire a diversified portfolio of midstream energy assets. The Partnership provides midstream services in the Texas, Gulf Coast and Southeast regions of the United States. For more information about American Midstream Partners, visit www.AmericanMidstream.com.