American Midstream Partners LP (NYSE: AMID) announced July 14 it will acquire entities holding onshore natural gas processing and offshore natural gas gathering and transportation and oil gathering assets from DCP Midstream LLC for $115 million.

The acquisition complements Denver-based American Midstream’s High Point system located in Southeast Louisiana, and improves its ability to compete for increased shallow-water and deepwater production from new drilling in the prolific oil and gas eastern region of the Gulf of Mexico (GoM).

The assets to be acquired include the Mobile Bay gas processing plant, Dauphin Island gathering and transmission system, and DCP’s interest in the Main Pass Oil Gathering System, which collectively provide strong cash flow visibility with the majority of volumes generated by life-of-lease contracts from a growing, high-quality customer base, including several super major producer customers.

“The acquisition is consistent with our growth strategy to pursue third-party and bolt-on opportunities, and upon closing the acquisition we will have the ability to offer oil gathering and natural gas processing services to offshore producers, which will allow us to more effectively compete for deepwater Gulf of Mexico production," said Steve Bergstrom, American Midstream executive chairman, president and CEO, in a statement.

Asset details include:

  • Mobile Bay is a 300 million cubic feet per day (MMcf/d) cryogenic gas processing plant located in Mobile County, Ala., and is currently operating at nearly 70% of available capacity;
  • Dauphin Island is a 270-mile FERC and non-FERC regulated gas gathering and transmission system that delivers gas to the Mobile Bay plant, and has a design capacity of 1 billion cubic feet per day (Bcf/d) with additional production from new and existing customers on DIGP is expected to add about 70 MMcf/d in processed volumes at Mobile Bay by the end of 2015 on an exit-rate basis; and
  • Main Pass is an oil gathering system with a design capacity of 160,000 barrels per day (bbl/d). American Midstream will acquire DCP’s 67% interest in MPOG. Main Pass is operated by Panther Midstream, the minority interest owner.

The acquisition is expected to be funded through the private placement of American Midstream common units. The acquisition is expected to close in August.