American Midstream Expands Role in Eagle Ford, Other Shale Plays in 2014, Pegs Capex for 2015 at About $130 Million

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Researched by Industrial Info Resources (Sugar Land, Texas)--American Midstream Partners LP (NYSE:AMID) (Denver, Colorado), a provider of midstream services for natural gas in the U.S. Southeast and Gulf Coast regions, reported companywide growth in 2014 as it expanded its Lavaca System in the Eagle Ford Shale, which, along with the acquisition of Costar Midstream in the fourth quarter, boosted results in the Gathering and Processing segment. The Transmission and Terminals segments grew volumes following major acquisitions and expansions. When excluding numerous one-time and extraordinary expenses, using the "adjusted EBITDA" method, American Midstream saw income of $45.55 million for the year, a 42.76% increase from 2013.

The company incurred a $99.9 million asset impairment charge on some non-core, legacy gathering and processing assets where it expects to see weak results due to the recent plunge in commodity prices. Other factors excluded from the adjusted EBITDA numbers include depreciation; amortization; accretion and interest expenses; debt issuance costs; unrealized gains and losses on derivatives; impairment on property, plants and equipment, including noncurrent assets held for sale; and non-cash equity compensation, transaction and income tax expenses. When including these factors, American Midstream saw losses of $98.02 million for the year, compared with losses of $34.04 million in 2013.

Industrial Info is tracking $280 million in projects related to American Midstream's plans to enlarge its role in the Eagle Ford Shale, including the construction of a 170-mile pipeline system that will gather crude from about 200 wells in the Eagle Ford and store it at American Midstream's planned crude oil terminal south of Shiner, Texas. The terminal will feature three crude oil tanks, each with a 60,000-barrel-per-day (BBL/d) capacity; the initial flow will amount to about 40,000 BBL/d. An additional, 30-mile carbon steel pipe will connect the terminal to Kinder Morgan's (NYSE:KMI) (Houston, Texas) southern mainline.

Total revenues stood at $308.4 million, a 4.87% increase from 2013. Following a series of expansions, the Lavaca System has a capacity of about 115 million cubic feet per day, which is triple its capacity upon acquisition in January 2014 and above expectations. The acquisition of the High Point System, which gathers natural gas from areas in and around southeast Louisiana and the Gulf of Mexico, in April 2013 boosted throughputs in the Transmission segment 20% from first-quarter 2013. Storage capacity in the Terminals segment jumped 30% amid ongoing improvements at the Harvey Terminal in the Port of New Orleans.

American Midstream's 2014 acquisitions totaled $600 million and included Costar Midstream, which expanded American Midstream's presence in the East Texas, Permian Basin and Bakken Shale; and the Main Pass Oil-Gathering System, which will open oil-gathering services to offshore producers in the Gulf of Mexico. The company also more than doubled contracted volumes on the Magnolia gathering system and increased volumes about 50% on the AlaTenn system through fee-based firm transportation agreements.

Capital expenditures totaled $90.3 million for full-year 2014, compared with $27.6 million for 2013.

"We attribute our record financial results to the successful execution of our growth strategy, including the restructuring of the majority of our legacy assets, constructing fee-based growth projects and executing on several acquisitions," said Steve Bergstrom, the executive chairman, president and chief executive officer of American Midstream, in a conference call.

American Midstream executives predict growth capital expenditures, which do not include maintenance projects, will continue to increase to between $125 million and $135 million for full-year 2015, while adjusted EBITDA will roughly double to between $85 million and $95 million. The expected growth is attributed to commodity prices, which are forecasted to remain low; a delay in the drop-down of a major system; and the pending acquisition of a 50% interest in Republic Midstream LLC, which plans to build a 170-mile crude oil gathering system, a 144-acre storage and blending crude oil terminal, and a 25-mile intermediate takeaway pipeline in the Eagle Ford Shale.

Among American Midstream's most highly anticipated projects is the startup of operations at a crude oil-gathering project in the Bakken Shale, which is expected in the next few weeks; improved infrastructure for the Lavaca system; the addition of a line in the Louisiana-to-Mississippi Midla system; and extension to the High Point System; and the addition of 300,000 barrels of storage capacity to the Harvey Terminal. Further expansions at Harvey could more than double the company's existing capacity of 1.7 million barrels.

"Our near-term focus is completing fee-based growth projects," Bergstrom said in the conference call. "In the first half of the year, we will bring online the Bakken system and expand the Harvey Terminal. The Bakken's gathering system is strategically located in the prolific producing region of McKenzie County, North Dakota, and has a total design capacity of approximately 40,000 BBL/d. The system will serve an anchor producer under a fee-based transportation agreement, as well as third-party producers."

He added: "We anticipate operations to begin in the next couple of weeks, with ramp up expected over the next few years. In addition, there are significant volumes of crude that are trucked in the immediate vicinity of our system. We installed a truck-handling facility, which we believe will attract meaningful volumes to our system and provide producers access to premium refinery pipeline and rail markets."

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.