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Merger with Southcross creates significant Corpus Christi supplier

American Midstream Partners (ticker: AMID) has announced has announced several deals in the past week, for a combined $863 million.

On Wednesday, American Midstream announced the acquisition of Southcross Energy Partners (ticker: SXE) and certain assets of Southcross Holdings. According to American Midstream, the transaction will create a fully integrated midstream platform linking natural gas and NGL supplies to the Gulf Coast.

Southcross holds significant gathering, processing and transmission infrastructure in the Eagle Ford, so the acquisition will increase American Midstream’s presence in the play.

American Midstream Announces $863 Million in Acquisitions

Source: AMID Investor Presentation

In total, after the transaction closes American Midstream will own about 8,000 miles of crude, natural gas and NGL pipelines, with over 2.5 Bcf/d of natural gas transmission capacity. Ten processing plants will have a combined 1 Bcf/d of capacity, while six fractionation facilities will have a total of 111,500 BPD of capacity.

The purchase gives American Midstream the opportunity to concentrate on Corpus Christi, where demand for gas and NGLs is expected to grow quickly. According to IHS, over the next 10 years, Corpus Christi’s demand for gas will increase by 30%, while demand for NGL will grow by 75%, as exports to Mexico via pipeline and internationally via LNG projects come online. Southcross’s Eagle Ford properties will assist with this goal. American Midstream plans to connect every Southcross asset with a corresponding AMID asset.

American Midstream will pay $813 million in an all-equity transaction, with unitholders of Southcross receiving 0.16 AMID units for east SXE unit. The price represents a 5% premium to the 20-day valuation of SXE.

American Midstream Chairman, President and CEO Lynn Bourdon, III, commented, “The addition of the Southcross assets allows us to capture the full midstream value chain in the very prolific Eagle Ford basin. The transaction represents a unique opportunity to expand our onshore gathering, processing and transmission services, linking supplies from the economically attractive Eagle Ford shale to high demand growth markets along the Gulf Coast.”

Drop down, interconnect expands pipeline holdings

American Midstream also completed a drop down transaction today, acquiring the Trans-Union Interstate Pipeline. ArcLight Capital Partners, which controls the general partner of American Midstream, sold this interest for a total consideration of $48 million, including the assumption of $32.5 million in debt. Trans-Union owns a 42-mile, 30-inch diameter gas pipeline which carries 546,000 MMBTU/day running from Sharon Louisiana to El Dorado Arkansas, with a 15-year take-or-pay supply agreement.

In addition, American Midstream announced the completion of a new interconnect today, and has commenced deliveries into its AlaTenn pipeline system with Southern Natural Gas in Alabama. This interconnect allows the pipeline system to participate in the movement of Marcellus gas to the southeast U.S.


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