American Midstream Partners has completed the previously announced $100m acquisition of a natural gas gathering and redelivery system located in the Eagle Ford shale from a subsidiary of Penn Virginia.
Originally announced on 22 January, the acquisition includes a long-term fee-based approximately 120-mile natural gas gathering agreement, whereby Penn Virginia has dedicated all current and future natural gas production from the areas served by the system for a period of 25 years.
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With an operating capacity of around 90 million cubic feet a day, the system is currently flowing more than 40 million cubic feet a day between sales volumes and gas lift. A significant increase in volume is expected in 2014, expected to triple from existing operating levels by mid 2015.
Penn Virginia operates six to seven rigs on the natural gas system with nearly 900 remaining drilling locations in the acreage, dedicated to American Midstream.
Expected to be accretive to American Midstream’s expected distribution level for 2014, the acquisition creates a competitive position in a strategic shale play with fee-based contracts that are not subject to commodity price volatility directly.
The acquired system will generate approximately $8m of earnings before interest, taxes, depreciation, and amortisation (EBITDA) in 2014, which is set to increase to approximately $25m in 2018.
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By GlobalDataOver the next five years, American Midstream plans to invest between $60m and $70m, including capital expenditures associated with the purchase price adjustment in order to expand the system to accommodate Penn Virginia’s drilling programme.
