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American Midstream Announces Significant Midstream Acquisitions in the Prolific Gulf of Mexico and Declares 19th Consecutive Quarterly Distribution

DENVER--(BUSINESS WIRE)--

American Midstream Partners, LP (AMID) (the “Partnership”) today announced the acquisition of interests in strategic Gulf of Mexico midstream infrastructure and incremental ownership in Delta House for total consideration of approximately $225 million.

Highlights include:

  • The Partnership acquired interests in the Destin natural gas pipeline and the Tri-States and Wilprise natural gas liquids (“NGL”) pipelines, all of which are FERC-regulated pipelines that collectively serve as a primary transport system for rich-gas production from the Eastern Gulf of Mexico. The Destin pipeline is supplied by Delta House and various other large Eastern Gulf of Mexico producing fields. The pipeline interests were acquired from an affiliate of the general partner of the Partnership.
  • The Partnership acquired a majority interest in crude, natural gas, and salt water onshore and offshore pipelines located in the Gulf of Mexico, including the Henry Gas Gathering System, from Chevron.
  • The Partnership acquired from an affiliate of its general partner an additional 1 percent interest in Delta House, increasing the Partnership’s total ownership in Delta House to approximately 14 percent.
  • The Partnership also intends to acquire an interest in another offshore natural gas pipeline from an affiliate of its general partner during the second quarter 2016. This potential acquisition is fully funded under the current financing.
  • Total acquisition consideration of approximately $225 million equates to an anticipated multi-year Adjusted EBITDA1 multiple of approximately 6 times.
  • The Partnership revised 2016 guidance with Adjusted EBITDA1 in a range of $125 million to $135 million and Distributable Cash Flow (“DCF”) 1 in a range of $85 million to $95 million, representing year-over-year growth of approximately 100 percent.
  • The Partnership forecasts fee-based cash flow of greater than 90 percent, distribution coverage of greater than 1.5 times, and leverage of approximately 4.0 times in 2016.
  • The acquisitions were funded with preferred equity issued to an affiliate of ArcLight Capital Partners, LLC (“ArcLight”), which controls the general partner of the Partnership, and borrowings on the revolving credit facility.

1Indicates a non-GAAP financial measure.

First Quarter 2016 Distribution

The Board of Directors of the Partnership’s general partner today declared a quarterly cash distribution of $0.4125 per common unit, or $1.65 per unit on an annualized basis. The first quarter 2016 distribution is equal to the Partnership’s minimum quarterly distribution and represents the nineteenth consecutive quarter of distributions.

In light of continued illiquid and unattractive capital market conditions, the Board of Directors made the decision to reduce the distribution per common unit by $0.24, or approximately 13 percent, on an annualized basis to provide the Partnership with incremental liquidity, including foregone incentive distribution right payments, to fund growth projects or reduce borrowings on the revolving credit agreement.

The distribution will be paid May 13, 2016, to unitholders of record as of the close of business May 4, 2016, together with the general partner of American Midstream. The ex-dividend date is May 2, 2016.

Executive Commentary

“We are pleased to announce strategic and accretive acquisitions in the midst of a difficult environment that expand our midstream footprint and further diversify our cash flow profile with investment grade-rated producer customers,” commented Lynn Bourdon, Chairman, President and Chief Executive Officer. “The acquisition of strategic midstream infrastructure serving prolific areas of the Gulf of Mexico is an important step towards transforming American Midstream into a significant and integrated participant in offshore infrastructure, particularly in the deep-water. Our combined interests in the Destin and High Point gathering and transmission systems cover more than 10,000 square miles of active production in the Gulf. In addition, the onshore segment of Destin extends our gas transmission footprint into an active region serving the southeast marketplace. The additional pipeline interests increase our size and scale through incremental fee-based cash flows supported primarily by take-or-pay contracts and life-of-lease dedications. When combined with our onshore gathering, processing, transmission and terminals infrastructure, we remain well positioned to continue operating successfully through the current industry downturn, while positioning the Partnership to achieve significant long-term growth as industry conditions improve.

“In conjunction with completing these strategic acquisitions we have solidified the Partnership’s financial position with significant year-over-year growth of Adjusted EBTIDA and DCF, as well as improved distribution coverage and leverage,” continued Mr. Bourdon. “As part of our 2016 forecast, we intend to pay distributions on all preferred equity at a rate of 50 percent cash and 50 percent PIK for the remainder of 2016, and transition to paying all preferred equity with 100 percent cash beginning next year, resulting in year-end 2017 distribution coverage of approximately 1.2 times. Further, we believe that by re-setting the distribution to the minimum quarterly distribution we are creating additional liquidity to fund growth opportunities, or reduce borrowings on the revolving credit agreement, during a period of significant dislocation in the public equity markets. We are solidly in a position, absent a significant and unforeseen negative event that directly affects the Partnership, to pay at least the minimum quarterly distribution going forward.

“As we look ahead, we are committed to long-term sustainable distribution growth for our unit holders and we intend to invest significant capital during the next several years through a combination of organic growth projects, identified drop-down transactions, and complementary third-party acquisitions like those announced today,” continued Mr. Bourdon. “In the event the capital market dislocation continues and we are unable to access public equity markets, ArcLight has indicated the intent to continue supporting the Partnership by providing American Midstream with access to equity capital. With this continued strong support of ArcLight, we are well positioned to achieve multi-year sustainable cash flow growth that will drive the resumption of distribution growth as early as 2017.”

“The preferred equity transaction is a testament to our strong and continuing support for American Midstream, and the transactions executed today underscore the highly collaborative nature of the working...


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