American Midstream Makes Steady Gains in First-Quarter 2012, Sees Strong Growth Ahead in Gulf Coast Region

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Researched by Industrial Info Resources (Sugar Land, Texas)--American Midstream Partners LP (NYSE:AMID) (Denver, Colorado), which provides midstream services for natural gas in the U.S. Southeast and Gulf Coast regions, reported a solid profit for the first quarter of 2012 as higher natural gas liquids (NGL) prices and improved margins kept the company steady amid volatile commodity price movements. American Midstream reported net income of $1.69 million during the quarter, compared with a $3.51 million net loss in first-quarter 2011.

Total revenues stood at $47.71 million, a 25.18% decrease from the same period last year. The Gathering and Processing segment benefited from high NGL prices, which boosted processing margins, and the company's acquisition of half of the non-operating interest in the Burns Point processing plant in St. Mary Parish, Louisiana. The cryogenic processing plant has a design capacity of 160 million cubic feet per day and is owned and operated by Enterprise Products Partners LP (NYSE:EPD) (Houston, Texas). Natural gas throughput volumes averaged 367.3 million cubic feet per day and NGL volumes averaged 51,400 gallons per day, compared with 242.8 million and 55,100 in first-quarter 2011, respectively.

Although the Transmission segment reported a higher gross margin, throughput volumes declined to 393.9 million cubic feet per day, from 446 million in the same period last year, as a result of weaker demand from warmer-than-expected weather. Both the Transmission and the Gathering and Processing segments reported higher revenues from reimbursable projects.

The company incurred $900,000 in capital expenditures during the quarter, about $500,000 of which was for maintenance projects and less than $100,000 of which was for expansion projects. Winter weather typically puts capital expenditures at a lower level than in the second or third quarters.

Industrial Info is tracking two operational natural gas transmission plants owned by American Midstream: the Duncanville Bear Creek Compressor Station in Duncanville, Alabama, and the Decatur Natural Gas Compressor Station in Muscle Shoals, Alabama. The latter is related to the AlaTenn system, which is an interstate natural gas pipeline that delivers natural gas to industrial customers in northwestern Alabama. The AlaTenn system has a capacity of about 200 million cubic feet per day and consists of about 295 miles of pipeline.

"We are not seeing meaningful declines in drilling activity or significant producer shut-ins around our systems," said Brian Bierbach, the president and chief executive officer of American Midstream, in a conference call. "While the current price of natural gas is having a negative impact on certain upstream plays that are heavily exposed to dry gas, the Gulf Coast and shallow-water Gulf of Mexico have been more resilient in many dry gas shale plays, with most of the gas production in the region consisting of associated gas or wet gas supported by favorable oil and NGL prices."

Although revenues were down for both segments, gross margins showed solid improvement:

• The Gathering and Processing segment reported $34.25 million in revenues, a 28.77% decrease from first-quarter 2011, and a $9.42 million gross margin, a 15.32% increase.
• The Transmission segment reported $13.14 million in revenues, a 31.51% decrease from first-quarter 2011, and a $4.76 million gross margin, a 14.86% increase.

American Midstream executives say the company will continue to benefit from strong oil and NGL prices, despite low natural gas prices. Increasing drilling activity by producers at liquids rich plays is expected to provide American Midstream with associated and wet gas volumes at its gathering systems.

"We continue to see resurgence in the industrial and utility sectors of the southeast U.S., driven by low natural gas prices in a recovering economy," Bierbach said in the conference call. "Our transmission systems are strategically located to benefit from this growth in end-user demand."

For more information, visit Industrial Info's North American Oil & Gas Transmission Project Database.

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