American Midstream Benefits from Major Acquisition in Second-Quarter 2013, Sees Strong Future in Eagle Ford

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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 for natural gas in the U.S. Southeast and Gulf Coast regions, saw significant results in the second quarter of 2013 as improvements in the Transmission segment, stemming in part from a key acquisition in April, were offset by a $17 million impairment charge. The company reported net losses of $21.64 million, compared with net income of $2.33 million in second-quarter 2012.

The impairment charge is related to American Midstream's plan to divest "non-strategic" assets in the Gathering and Processing segment in order to focus on long-term opportunities. Company executives noted that income results are different when using the "adjusted EBITDA" method, which deducts the effects of the impairment charge, as well as interest expenses; transaction costs; debt issuance costs; depreciation; accretion; gains and losses on the sales of assets; unrealized gains and losses on commodity derivatives; non-cash equity compensation expenses; and various one-time income gains. Using this method for both years, the second quarter saw income of $5.87 million, a 34.26% increase from the same period last year.

Total revenues stood at $73.83 billion, compared with $39.49 billion in second-quarter 2012. In April, High Point Infrastructure Partners LLC, a portfolio company of ArcLight Capital Partners LLC, acquired 90% of American Midstream GP LLC, the general partner of American Midstream, and all of the subordinated units of American Midstream, from AIM Midstream Holdings LLC. American Midstream acquired the gathering and transmission assets of High Point in the $90 million deal, and stronger second-quarter results in the Transmission segment were driven by the acquisition of the High Point system.

American Midstream also saw stronger margins from contracts related to the Chatom system in the Gathering and Processing segment. However, the segment suffered from lower natural gas liquid (NGL) prices and weaker throughput volumes in the Quivira system and into the Burns Point Gas Plant in St. Mary Parish, Louisiana.

Capital expenditures totaled 4.5 million during the quarter, including $3 million that went toward new developments and $1.3 million that went toward maintenance-related efforts.

As part of the ongoing coverage in its North American Oil & Gas Transmission Project Database, Industrial Info is tracking progress at three operational natural gas transmission plants owned by American Midstream in Alabama and another in Mississippi: the Muscle Shoals Natural Gas Compressor Station and the Decatur Natural Gas Compressor Station in Muscle Shoals, Alabama; the Duncanville Bear Creek Compressor Station in Duncanville, Alabama; and the Bazor Ridge Gas Extraction Plant in Waynesboro, Mississippi.

"The April transaction with ArcLight and High Point Infrastructure Partners is off to a strong start," said Steve Bergstrom, the executive chairman, president and chief executive officer of American Midstream, in a conference call. "Our second-quarter results were solid, and we have made significant progress on the integration of the High Point assets into American Midstream."

American Midstream executives expect capital expenditures on new developments in full-year 2013 to total about $14 million. Adjusted EBITDA is expected to be between $24 million and $27 million. High Point Infrastructure Partners plans to continue developing a major midstream infrastructure project in the Eagle Ford Shale for between $65 million and $75 million. The project, which is a long-term, fee-based agreement to service an independent producer in the oil window of the Eagle Ford, is expected to begin operations in early 2014. After several months of operation, it is expected to be dropped down to American Midstream.

"The [Eagle Ford project] development team, which includes employees of both American Midstream and our general partner, has made significant progress over the last several months, including procurement of the site for the central facility, and much of the required right-of-way, selection and mobilization of the [engineering, procurement and construction] contractors," Bergstrom said in the conference call.

He added: "After the drop down, we will continue to work closely with our general partner to develop and fund expansions of the system. We are optimistic about the prospects for this project and other opportunities in this area of the Eagle Ford. Our producer customer continues to see very positive results for newly drilled wells, and several production companies in the area have drilled new wells with extremely large production volumes."

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