The successful execution of its growth strategy and integration of a trio of accretive acquisitions over the past 18 months helped American Midstream Partners (AMID) deliver strong financial results in 2Q2014, the Denver-based partnership said during a conference call with analysts Monday.
An improved gross margin for 2Q2014 -- $22.2 million, a 21% increase compared to $18.3 million in 2Q2013 -- was due in large part to the January acquisition of the Lavaca System from Penn Virginia Corp. in the Eagle Ford Shale, the acquisition of the High Point System in Southeast Louisiana last year, and the acquisition in December of Blackwater Midstream (see Shale Daily, Dec. 12, 2013).
Last month AMID bulked up on natural gas and oil midstream properties that serve the eastern Gulf of Mexico in a $115 million deal with DCP Midstream LLC (see Daily GPI,July 17). That transaction closed this week.
"The oil gathering assets we acquired from DCP are complementary to our High Point system, and will enable us to compete for expanding shallow-water and deep-water production in the eastern region of the Gulf of Mexico," said AMID CEO Steve Bergstrom. "The Lavaca System in the Eagle Ford is operating above expectations with volumes significantly higher than anticipated...in addition, we recently executed an agreement to add a new third-party producer to the Lavaca System and anticipate adding additional producers by year-end." And, based on continued interest in Blackwater's Harvey terminal, AMID has the opportunity to more than double its total storage capacity over the next 24-36 months, Bergstrom said.
AMID also recently announced the execution of an option agreement with ArcLight Capital, AMID's general partner, to acquire 50% of Republic Midstream for a total consideration of approximately $200 million. An ArcLight affiliate and Republic Midstream recently announced an agreement with Penn Virginia to develop a crude oil gathering system, storage and blending crude oil terminal and an intermediate takeaway pipeline in the Eagle Ford.
"We intend to exercise the option to acquire 50% of Republic Midstream upon commencement of operations, which is expected to be in the first half of 2015," Bergstrom said. "The Republic Midstream deal is consistent with our growth strategy to expand in the Eagle Ford and will generate significant operational and construction synergies with our existing midstream assets in Gonzales and Lavaca County."
The benefits of the acquisitions were partially offset by incremental costs and seasonal factors including lower demand within the transmission segment.