American Midstream, JP Energy to merge, form $2-billion MLP

American Midstream Partners LP has agreed to acquire 100% of JP Energy Partners LP in a unit-for-unit merger, creating a $2-billion midstream master limited partnership (MLP) with primary operations in the Permian, Eagle Ford, Bakken, and Gulf of Mexico.

The combined MLP will own and operate more than 3,100 miles of gathering and transportation pipeline; 2.5 bcfd of transportation capacity; six processing plants with 400 MMcfd of processing capacity; three fractionation facilities with 20,000 b/d of capacity; 13.9% interest in the Delta House offshore floating production facility in the deepwater gulf (OGJ Online, Jan. 4, 2016); six million bbl of above-ground liquids storage capacity; and the third-largest wholesale propane business in the US, the firms say.

Benefits of the deal, they say, include the ability to leverage combined positions with crude oil, liquids logistics, and terminals, particularly in the Permian; increase platform for potential third-party acquisitions due to expanded operations and scale, potential for dropdowns and partnership opportunities with ArcLight Capital Partners LLC, the sponsor of both firms, and growth capital availability; and create a path to pro forma liquidity of more than $250 million.

The deal is expected to close in late 2016 or early 2017. The combined partnership will be headquartered in Houston, with Lynn L. Bourdon III, currently chairman, president, and chief executive officer of American Midstream, serving as chairman and chief executive officer of the new MLP; and Eric T. Kalamaras, currently chief financial officer of American Midstream, retaining the same role for the new entity.

JP Energy public unitholders will receive $8.63/common unit based on American Midstream’s closing unit price as of Oct. 21, representing a 14.5% premium to the closing price of JP Energy’s common units of $7.54 on Oct. 21.

In conjunction with the deal, ArcLight will combine the general partners of the two firms.

Earlier this year, American Midstream agreed to acquire 66.7% interest in the Okeanos pipeline, a 100-mile gas gathering system in the gulf, from an affiliate of the partnership’s general partner. Okeanos has total capacity of 1 bcfd and connects two platforms and one lateral, terminating at the Destin Main Pass 260 platform in the Mississippi Canyon area.

Contact Matt Zborowski at matthewz@ogjonline.com.

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