American Midstream Partners (AMID) Acquires Additional Minority Interests in Delta House; Updates FY16 Outlook

November 1, 2016 7:28 AM EDT
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American Midstream Partners, LP (NYSE: AMID) announced the simultaneous acquisition and closing of additional minority interests in Delta House, a fee-based, semi-submersible floating production system (FPS), and associated oil and gas pipelines in the Gulf Coast, bringing its total equity interest to 20.14%. The Partnership acquired the additional interests from Red Willow Offshore LLC, LLOG Bluewater Holdings LLC, and Ridgewood Energy Corporation (“Acquisition”) for total consideration of approximately $49 million.

The Acquisition is immediately accretive to Adjusted EBITDA and distributable cash flow and is part of the Partnership’s strategy to build a portfolio of complementary assets across multiple strategic basins. As such, Delta House is directly connected into the Destin and Okeanos pipelines, two strategically located pipelines which the Partnership will be operating this quarter. The integration of the combined assets offers increased service to the Partnership’s customers while capturing additional value for unitholders by transporting natural gas and liquids from wellhead through take-away pipeline.

“We are pleased with the performance of Delta House and the associated strong returns since our initial acquisition. We continue to see substantial resource development where the production growth and producer economics in the Gulf of Mexico are exceeding expectations. To take advantage of significant future production growth, we have decided to increase our investment. We are excited about further integrating this strategic asset as part of our long-term Gulf Coast strategy,” stated Lynn Bourdon III, Chairman, President and Chief Executive Officer. “Delta House is a world-class offshore production handling facility which contributes significant long-term, fee-based cash flows backed by large, well-capitalized integrated oil companies.”

Transaction Funding

The acquisition of additional Delta House interests is accretive to distributable cash flows and further strengthens the Partnership’s leverage profile. The acquisition was funded with the issuance of $35 million, or 2.33 million, Series D convertible preferred units issued to affiliates of ArcLight Capital, LP and approximately $14 million in borrowings under the Partnership’s revolving credit facility. The preferred equity was issued at $15 per unit and will receive preferred distributions equal to the greater of $0.4125 per unit or the distribution paid to the common unitholders. Prior to June 30, 2017, at the option of the Partnership, units can be redeemed at their liquidation value; plus, accrued distributions. After June 30, 2017, ArcLight may cause the Partnership to issue an out-of-the-money warrant agreement for the right to acquire up to 700,000 common units at a strike price of $22 per unit.

Financial Guidance

As a result of continued strong performance of American Midstream’s existing assets, the Partnership expects to be at the higher end of previously announced 2016 Adjusted EBITDA guidance.

Delta House Overview

Delta House is operated by LLOG Exploration Offshore, L.L.C. and is located in the highly prolific Mississippi Canyon region of the deep-water Gulf of Mexico. The facility has 100,000 barrels of crude oil and 240 million cubic feet of natural gas and liquids per day of peak processing capacity. Cash flows for Delta House are supported by long-term volumetric-tiered fee-based tariffs with ship-or-pay components and life-of-lease dedications with investment grade, well positioned counterparties. Delta House commenced operations in April 2015 and currently has eleven wells online. The eleventh well tie-back was online in mid-October and brought the FPS to peak capacity. Producers are continually evaluating additional tie-backs that would likely keep Delta House operating at peak capacity, enabling strong returns for the foreseeable future.

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