American Midstream Partners LP (NYSE: AMID) said July 24 it entered an agreement to sell its propane marketing services business to SHV Energy NV for $170 million in cash.
The sale includes American Midstream's 100% interest in Pinnacle Propane’s 40 service locations, Pinnacle Propane Express’ cylinder exchange business and related logistic assets and the Alliant Gas utility system.
American Midstream said the sale provides the company with "significant capital" to be redeployed in its core operating areas of the deepwater Gulf of Mexico (GoM), Permian Basin and East Texas.
“Over the past few months, American Midstream’s management team has communicated its strategy to strengthen the partnership’s competitive position in our core areas, evaluate noncore asset sales and reallocate capital to areas with the greatest long-term value,” Lynn Bourdon, CEO, said in a statement.
Through a series of executed and anticipated transactions, American Midstream expects that substantially all proceeds from the propane sale will be reallocated within the third quarter of 2017. This includes the company's June 2 acquisition of the Viosca Knoll system from Genesis Energy LP (NYSE: GEL) for about $32 million.
Viosca Knoll serves producing fields located in Main Pass, Mississippi Canyon and Viosca Knoll areas in deepwater GoM that connect to several major delivery pipelines, including American Midstream's High Point and Destin pipelines. The acquisition was initially funded with borrowings from the company’s senior secured credit facility and will be repaid with closing of the propane transaction.
Bourdon said the propane sale and Viosca Knoll acquisition are only American Midstream's first steps to implement its strategy.
“Reallocating capital from noncore assets into more strategic investments significantly repositions AMID’s ability to compete and to generate significant unitholder value,” he said.
The company is planning to announce further beneficial outcomes of its capital optimization strategy over the coming months, according to the release.
American Midstream said it will maintain its previously announced 2017adjusted EBITDA guidance of $190 million to $205 million. Based on anticipated outcomes of its growth strategy and other opportunities it is pursuing, the company also expects a material increase in 2018 adjusted EBITDA.
The transaction is anticipated to close third-quarter 2017. Wells Fargo Securities LLC was exclusive financial adviser and Gibson, Dunn & Crutcher LLP was legal counsel to American Midstream for the transaction.
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