American Midstream Partners Seeks Bigger Role in Bakken, Eagle Ford, Keeps 2015 Capex Around $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, upped its investments and acquisitions in the most prosperous U.S. shale plays in first-quarter 2015 as throughput volumes generally strengthened. Net income was reported to be $826 million for the quarter, compared with $400 million in first-quarter 2014.

Industrial Info is tracking $281 million in active projects involving American Midstream and activities at the company's major facilities across the U.S. South, including three natural gas compressor stations in Alabama and another in Louisiana; a natural gas and natural gas liquids (NGL) processing plant in Alabama; and a natural gas treating and extraction plant in Mississippi.

Total revenues for the quarter stood at $64.61 million, a 19.48% decrease from the same period last year. The Transmission segment reported lower average throughput volumes, largely due to producer and pipeline maintenance activities on the High Point System. Throughput volumes in the Gathering & Processing segment were stronger, however, due to the acquisition of Costar Midstream in October 2014, the Main Pass Oil Gathering System in August 2014, and the Lavaca System in January 2014. These acquisitions have more than tripled American Midstream's throughput volumes.

American Midstream also increased capacity at its Westwego and Harvey terminals, the latter by 150,000 barrels to 387,000 barrels, all of which is leased under multi-year, firm storage contracts. Both terminals are located in the Port of New Orleans, Louisiana.

Capital expenditures for the quarter were reported to be $38.9 million, including $1.1 million for maintenance-related projects, compared with total expenditures of $3.9 million in first-quarter 2014. Expenditures in first-quarter 2015 largely went toward the construction of a crude-oil pipeline system in the Bakken Shale, which will transport up to 40,000 barrels per day to the Tesoro Logistics pipeline near Watford City, North Dakota; the construction of the Longview rail facility, which will support the company's off-spec treating operations in eastern Texas; and the Lavaca and Harvey expansions.

"The Costar Midstream acquisition expanded our operations into East Texas, the Permian and the Bakken and added significant incremental margin," said Steve Bergstrom, the executive chairman, president and chief executive officer of American Midstream, in a conference call. "At our Longview asset in eastern Texas, off-spec truck volume has doubled since the acquisition, and we anticipate expanding our off-spec handling with the completion of the rail facility in the second half of this year. Our Costar development projects are in process and on budget, including the Bakken oil-gathering system and the Permian off-spec facility, which are expected to commence operations in the second and fourth quarters, respectively."

Growth capital expenditures for full-year 2015 are estimated to be between $125 million and $135 million, not including any spending on maintenance or acquisitions. Major projects for the year include the continued expansion of Lavaca; the commissioning of the new Bakken system, expected in the second quarter; the completion of the Longview rail facility, expected in the third quarter; and the acquisition of a 50% interest in the Republic Midstream LLC's crude-oil system in the Eagle Ford Shale, expected in the second half of the year.

In July 2014, Republic Midstream agreed 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. Industrial Info is tracking the projects.

"In the Eagle Ford, the Lavaca System continues to exceed our acquisition expectations," Bergstrom said in the conference call. "Volumes have tripled from 40 million a day in early 2014 to our current throughput of approximately 120 million a day, contributing significant year-over-year gross margin growth. The build-out of the main gathering system is substantially complete, and we expect total throughput volumes to increase 10% to 15% from current levels by the end of 2015."

At the Harvey terminal, American Midstream is building out capacity for another 150,000 barrels and a deepwater ship dock, both of which are expected to be completed in the second quarter. When completed, the entire terminal will be able to hold more than 2 million barrels, which would more than double American Midstream's overall storage capacity. The company also plans to extend the High Point System by 15 miles to service a refinery customer in Louisiana, following the execution of a 15-year, fee-based agreement in February; construction will begin in the second quarter and be completed by the end of the year.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five 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.