American Midstream Partners Strengthens Deepwater GoM Position With $30 Million Dropdown

American Midstream Partners LP (NYSE: AMID) said Oct. 30 it bolstered its position in deepwater Gulf of Mexico (GoM) with a $30 million dropdown acquisition from ArcLight Capital Partners.

The Houston-based company purchased an additional 17% equity interest in the Destin Pipeline from affiliates of ArcLight, which controls the general partner of American Midstream Partners. American Midstream Partners said it expects strong returns from Destin driven by continued development in the deepwater GoM.

Post-closing, American Midstream Partners will own a 66.67% interest in Destin. The company assumed operatorship of Destin from BP Plc (NYSE: BP) in late 2016.

The acquisition of additional Destin interests is an extension of American Midstream Partners' commitment to reallocating capital in a portfolio of interconnected, complementary assets with predictable cash flows, according to the company press release.

In total, American Midstream Partners' 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 provides gas transmission into an active region serving the Southeast market, including gas production from the Midcontinent, East Texas and Terryville regions.

“The drop down of incremental interest in Destin is consistent with our strategy to increase our ownership in strategic fixed fee deepwater Gulf and critical offshore infrastructure,” Lynn Bourdon, chairman, president and CEO, said in a statement. “We will continue to make strategic investments in each of our core areas to further our participation in the value chain that can drive create sustainable distributable cash flow growth to our partnership.”

The Destin pipeline is a FERC-regulated, 255-mile natural gas transport system with total capacity of 1.2 billion cubic feet per day (Bcf/d). The system originates offshore in the prolific Mississippi Canyon and includes connections with four producing platforms, and six producer-operated laterals, including Delta House.

The 120-mile offshore portion of the system terminates at Enterprise Products Partners LP (NYSE: EPD) 1.5 Bcf/d Pascagoula processing plant and is the single source of raw natural gas to the plant. The onshore portion of Destin is the sole delivery point for merchant-quality gas from the Pascagoula plant and extends 135 miles north in Mississippi to transport gas to eleven connected pipelines and storage facilities.

Destin’s onshore pipeline serves as a large header system allowing gas from the Midcontinent, East Texas and Terryville areas to reach premium markets in the Southeast. Contracted volumes on Destin are based on life-of-field dedication, long-term contracts or interruptible volumes as capacity permits.