American Midstream Partners, LP has completed the acquisition of entities holding offshore oil gathering assets from an affiliate of DCP Midstream, LLC (“DCP”).
On July 14, 2014, the Partnership announced the execution of a Purchase and Sale Agreement (“PSA”) for the acquisition from DCP of entities holding onshore natural gas processing and offshore natural gas gathering and transportation and oil gathering assets for consideration of approximately $115 million. The assets to be acquired included the Mobile Bay gas processing plant (“Mobile Bay”), Dauphin Island gathering and transmission system (“DIGP”), and DCP’s interest in the Main Pass Oil Gathering System (“MPOG”).
Subsequent to execution of the PSA, DCP notified the Partnership that a material customer would be moving its production from DIGP and Mobile Bay. The loss of such customer’s production constituted a Material Adverse Effect (as defined in the PSA) with respect to such entities. As a result, on August 11, 2014, the PSA was amended to exclude the Mobile Bay and DIGP assets and to include only the acquisition of DCP’s interest in MPOG. In addition, the purchase price was amended to $13.5 million. The acquisition closed on August 11, 2014 and was funded through borrowings on the Partnership’s revolving credit facility.
Total consideration for the MPOG assets equates to an Adjusted EBITDA multiple of approximately 5.0x to 6.0x for the next twelve months and full-year 2015.
“We are excited to acquire a majority interest in MPOG to complement our existing offshore gas gathering and transmission business in the eastern Gulf of Mexico,” said Steve Bergstrom, Executive Chairman, President and Chief Executive Officer.
“While smaller than originally anticipated, the acquisition is consistent with our growth strategy to pursue third-party and bolt-on opportunities and we now have the ability to offer oil gathering services to offshore producers, which will allow us to more effectively compete for deep-water Gulf of Mexico production. As a result of the acquisition and additional growth in the Partnership we anticipate in 2015, we intend to recommend to the Board of Directors an increase to the quarterly distribution of approximately three percent for the fourth quarter 2014 distribution.”
2014 Forecast Update
On July 14, 2014, and in conjunction with the announced acquisition of assets from DCP, American Midstream updated its forecast for 2014 Adjusted EBITDA to a range of $44 million to $47 million and Distributable Cash Flow to a range of $24 million to $27 million.
As a result of the change to the asset acquisition from DCP, and the recently executed amendment to the Partnership agreement in relation to the outstanding Series A Units, the Partnership updated its forecast for 2014 Adjusted EBITDA and Distributable Cash Flow. The updated 2014 forecast also includes assumptions for costs associated with the DCP acquisition integration and near-term company growth, and does not include other acquisitions, drop downs, or asset development projects the Partnership is pursuing.
2014 Adjusted EBITDA is forecasted to be in a range of $42 million to $45 million and Distributable Cash Flow is forecasted in a range of $27 million to $30 million.,