American Midstream Adds Capacity in Eagle Ford Shale, Boosts Terminal Capacity in Louisiana, Ups 2014 Capex to $70 Million

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Researched by Industrial Info Resources (Sugar Land, Texas)--American Midstream Partners LP (NYSE:AMID) (Denver, Colorado), a leading provider of midstream services in Texas, the Gulf Coast and the Southeastern U.S., reported mixed overall results for the second quarter of 2014. A sharp increase in operating expenses, partly due to expanded drilling activity, offset solid gains from prior acquisitions, particularly in the Eagle Ford Shale.

As part of the ongoing coverage in its North American Oil & Gas Transmission Project Database, Industrial Info is tracking three operational natural gas transmission plants owned by American Midstream: the Sheffield Natural Gas Compressor Station and the Decatur Natural Gas Compressor Station in Muscle Shoals, Alabama, and the Duncanville Bear Creek Compressor Station in Duncanville, Alabama. It is also tracking the 25 million-cubic-foot-per-day refrigeration processing plant in Chatom, Alabama, which is an integral part of the company's Chatom natural gas-gathering system.

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During the quarter, American Midstream agreed to acquire DCP Midstream LLC's (NYSE:DPM) (Denver, Colorado) assets related to natural gas-processing; offshore natural gas-gathering and transportation; and oil gathering. The consideration is valued at about $115 million. Among the facilities to be acquired is the Mobile Bay Gas-Processing Plant in Coden, Alabama.

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Total revenues stood at $77.68 million, an increase of less than 1% from second-quarter 2013. The quarter's gains were driven by added volumes from three major acquisitions: the January 2014 acquisition of the Lavaca System from Penn Virginia Corporation, which strengthened American Midstream's hand in the Eagle Ford Shale; the April 2013 acquisition of the High Point System, which benefited the Transmission segment; and the December 2013 acquisition of Blackwater Midstream, which helped the Terminals segment.

Volumes from the Lavaca System exceeded the company's expectations, causing executives to up the company's 2014 capital expenditure forecast to between $65 million and $70 million, from a forecast of between $55 million and $60 million earlier in the year. Storage operations at Blackwater's terminal in Harvey, Louisiana, began last month, adding 250,000 barrels of capacity and bringing American Midstream's total capacity to 1.7 million barrels.

American Midstream is adding a deepwater ship dock to the Harvey terminal; completion is expected in the first quarter of 2015. Executives say that the company could more than double its total storage capacity over the next 24 to 36 months.

"Year to date, total expansion capital was $10.6 million, and we expect a majority of the remaining 2014 capital expenditure forecast to be allocated to the Lavaca System; construction of a pipeline off our High Point System; and the development of the Harvey terminal, including the development of the deepwater ship dock," said Dan Campbell, the chief financial officer of American Midstream, in a conference call.

American Midstream reported net losses of $1.67 million for the quarter, compared with $22.11 million in losses for second-quarter 2013. Much of last year's losses were attributed to $15.2 million in non-cash impairment charges on gathering assets.

"During the second quarter [of 2014], operating expenses increased 31% over the prior-year quarter, primarily attributable to incremental costs related to the acquired assets, as well as planned maintenance at the Chatom and the Burns Point Plant, and longer-than-expected maintenance at the Bazor Ridge plant in April, in addition to compression costs to support accelerated activity in the Lavaca," Campbell said.

Executives said that results better reflected the company's standing when using the "adjusted EBITDA" method, which deducts the effects of income tax benefits; interest expenses; transaction costs; gains and losses on the sales of assets; depreciation; amortization; accretion expenses; debt issuance costs; non-cash equity compensation expenses; unrealized gains and losses on commodity derivatives; losses on the impairment of property, plants and equipment; and various one-time income gains. Using this method for both years, the second quarter saw income of $6.79 million, compared with $7.45 million in the same period last year.

"As a result of the acquisitions, we anticipate 2015 adjusted EBITDA to more than double compared to our 2014 forecast," said Steve Bergstrom, the executive chairman, president and chief executive officer of American Midstream, in the conference call.

Growth to Continue in Eagle Ford Shale
American Midstream is continuing to develop its role in the Eagle Ford Shale with at least two major moves. First, the company's General Partner recently approved an acquisition of a full-well-stream gathering system in the Gonzales County area of the Eagle Ford Shale, where construction had begun in the second quarter. The system is expected to support about 95,000 barrels per day of crude oil and 15 million cubic feet per day of natural gas. American Midstream expects to complete the acquisition late in this year or early next year, and the system is expected to be fully operational in early 2015.

Secondly, American Midstream recently took advantage of an option agreement to acquire 50% interest in Republic Midstream LLC from an affiliate of ArcLight Capital Partners LLC, which controls the General Partner. Last month, Republic agreed to build and operate a crude oil-gathering system, terminal and pipeline in the Eagle Ford Shale. American Midstream will pay about $200 million when operations begin in the first half of 2015.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.