Fortifying its onshore assets with an offshore stake in the Gulf of Mexico (GOM), Houston-based American Midstream Partners LP anticipates a successful merger with JP Energy Partners LP and more growth to follow, American Midstream CEO Lynn Bourdon told analysts Tuesday on a 3Q2016 earnings conference call.
More than 40% of the rigs in the GOM are extracting resources that will flow through the merged companies' pipelines following the announcement last month of a marriage with JP Energy in a unit-for-unit transaction valued at $2 billion (see Shale Daily, Oct. 24). It bids to create an enterprise with natural gas and oil pipelines and processing capacity stretching from the deepwater GOM into the Permian Basin and through the Eagle Ford and Bakken shales.
"In addition to helping establish [American Midstream] as a player in the offshore market, it is also opened the door for growth through various avenues provided by the significant activity by producers in our operating areas," Bourdon said, adding that the merged company intends to expand its Gulf footprint, both onshore and off. Onshore, he said the company now has local approvals to expand its two-year-old Harvey deepwater oil terminal in New Orleans to 2.5 million bbl.
Bourdon called the JP Energy merger "the next logical step in building an integrated asset portfolio," calling it "more than a transformative event" and labeling it as an "evolutionary change." As part of the combination, American Midstream is slated to provide the bulk of the assets and retain the name and headquarters.
Once completed, the company would control more than 3,100 miles of gathering and transportation pipeline, 2.5 Bcf/d-plus of transportation capacity, six processing plants with 400 MMcf/d and three fractionation facilities with natural gas liquids (NGL) capacity of 20,000 b/d.
During a separate presentation on the earnings call, COO Matt Rowland made it clear that American Midstream has a lot of potential expansions among its existing onshore portfolio of assets and that the company will continue to look for new acquisitions across all of the basins in which it operates.
"We continue to evaluate numerous opportunities in all areas in which we operate to grow our assets," Rowland said. "Specifically, in the Gulf Coast we're looking at infrastructure assets that we can tie in, repurpose, or redirect to meet the changing market dynamics, particularly given the major volume growth as the large E&P companies continue extensive offshore development projects."
American Midstream will continue to try to deliver "strategic and accretive organic growth projects and acquisitions," said Bourdon in outlining the company's focus the rest of this year, along with completing the merger.
In response to questions about decreased flows of natural gas and NGLs in 3Q2016, Rowland and Bourdon attributed the decreases to two major plants being out for a good part of the quarter. Rowland said he expected to be back "to normal operations in terms of revenues and gas flows" in the first quarter.
Bourdon said the NGL facilities are back online, and he expects to maintain throughput across the system "at stable levels. We did have some dips last quarter, but we expect that to return [to normal levels]."
For 3Q2016, American Midstream reported net income of $1.5 million, an increase of 132% from a loss of $4.6 million in the same period last year.