American Midstream Performs in Line with Expectations in Second-Quarter 2012

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Despite a volatile commodity price environment and low natural gas prices, American Midstream Partners, LP (NYSE:AMID) (Denver, Colorado) managed to perform considerably well in the second quarter of 2012. The partnership (which is involved in gathering, treating, processing and transporting natural gas in the U.S. Southeast and Gulf Coast regions) experienced increases in overall gross margin, as well as gross margin in the Gathering and Processing and Transmission segments. There also were gains in net income and cash flow.

American Midstream announced financial results for the second quarter of 2012 in a conference call on August 15, 2012. Brian Bierbach, president and chief executive officer of the partnership, said, "We are pleased that our assets performed in line with our expectations in the first half of 2012 during a volatile commodity price environment." Both Bierbach and Dan Cambel, chief financial officer, talked about the Chatom acquisition. The partnership paid $55 million in cash for the Chatom processing and fractionation plant in Washington County, Alabama. The plant was previously owned by the affiliates of Quantum Resources Management LLC. American Midstream's acquisition of the 87.4% interest in the Chatom plant closed on July 2, 2012.

"We are excited about the recent addition of the Chatom processing and fractionation facility, and have seen significant interest as we market fractionation and NGL [natural gas liquid] services to producers in the region," Bierbach said. American Midstream's financial results for the second quarter do not include Chatom.

Cambel said that American Midstream had a net income of $2.3 million in second-quarter 2012, after a loss of $4.2 million in the same period the previous year. Cash flow from investing activities was $11 million in second-quarter 2012, after being $5.8 million in the same period in 2011. And cash flow from financing activities was $7.8 million in the second quarter of 2012, after being $2.4 million in the second quarter of 2011.

For the second quarter of 2012, gross margin was $12.7 million, which was a $2.1 million increase (or roughly 20%) compared to the partnership's margin in the same period last year. The increase in gross margin was mainly caused by the 50% non-operated interest in the Burns Point processing plant, which was acquired in the fourth quarter of 2011. The increase also came from higher revenues associated with reimbursable projects in the Transmission and Gathering and Processing segments. However, the increase in margin was partially offset by lower gross margin at processing plants that American Midstream owns. There were lower margins at these plants because of lower natural gas prices as well as lower throughput volumes on several assets in the Gathering and Processing segment.

American Midstream's Transmission segment experienced gains in the second quarter of 2012, compared to the second quarter of 2011. Gross margin for this segment was $3.6 million. In the second quarter of 2011, the transmission segment's gross margin was $2.7 million. Total natural gas throughput volumes averaged 407.8 million cubic feet per day in the second quarter of 2012, compared with 314.1 million cubic feet per day in the same period last year. Throughput increased mainly because of higher demand on American Midstream's Bamagas system and new production on a section of the Midla system.

Gross margin for the partnership's Gathering and Processing segment was $9 million in the second quarter of 2012 and $18.5 million year-to-date. In 2011's second quarter, gross margin for this segment was $7.9 million. However, the increase in gross profit for this segment was partially offset by lower throughput volumes mainly on the Quivira and Offshore Texas system and lower natural gas liquid (NGL) prices.

"As we are all aware, natural gas prices remain low," Bierbach said. "As I overlaid to you in priors calls, we have not seen meaningful declines in drilling activity or significant producer shedding around our systems due to low natural gas prices, primarily because the production around most of our gathering and processing assets is driven by oil and geo-economics."

Bierbach provided some details of the positive and negative aspects of low natural gas prices for American Midstream. Bierbach said that the partnership could experience negative effects on potential future drilling activities around some of its assets if a low non-government organization price environment persists. He also said that sustained low-cost LNG would put pressure on the partnership's financial results; however, Bierbach explained that the biggest impact of low LNG prices happens to be a positive one. For example, existing transmission customers of American Midstream have been expanding their facilities, and industrial companies are looking to construct facilities near the partnership's pipelines.

American Midstream has responded to nearly ten requests for proposals from companies looking to be in close proximity to waterways, which the partnership's pipelines serve. Many new facilities are expected to be built, and this, according to Bierback, will have a meaningful impact on the American Midstream.

Although American Midstream saw many gains in the second quarter, it also saw a few losses. For example, adjusted earnings before interest, taxes, depreciation and amortization (which is known as EBITDA) was $4.4 million in the second quarter after being $4.6 million in the first. The company blamed this decrease on business development costs, as well as costs that come with being a publicly traded company.

Bierbach also mentioned that American Midstream's cost structure was higher in the second quarter because of ongoing investments in business development activities, regulatory requirements associated with being a first-year public company, and expenses related to the Chatom acquisition.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, 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.