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  • Roger S. Conrad

The Wide World of Midstream MLPs

By Elliott H. Gue on Aug. 23, 2016

American Midstream Partners LP slashed its quarterly distribution by 12.7 percent and aims to reduce its annual operating expenditures by 10 percent this year by improving efficiency.

ArcLight Capital Partners has stepped up to the plate to support American Midstream Partners by purchasing common units and convertible preferred shares to help fund capital expenditures and the acquisition of gathering and transportation assets in the Gulf of Mexico.

Management continues to consider further expansions to its Harvey terminal and associated dock space as well as the conversion of an underused natural-gas pipeline that’s part of the High Point system to transport another hydrocarbon.

American Midstream Partners’ recent acquisitions have helped to shore up the distribution and eliminate persistent cash flow shortfalls. Factoring in the MLP’s preferred stock implies distribution coverage of 110 percent to 124 percent, depending on the number of common units created when the Series B shares convert.

The partnership has built a platform in the Gulf of Mexico that should generate solid cash flow, though future growth opportunities could be limited by a lack of drilling activity. The MLP’s hodgepodge of onshore assets is a mixed bag, with the partnership overpaying for Costar Midstream last year.

ArcLight Capital Partners deserves credit for shoring up American Midstream Partners LP’s distribution, but we’re not sold on the MLP’s longer-term strategy.


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    • Elliott H. Gue

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor

    • Roger S. Conrad

      Founder and Chief Analyst: Capitalist Times and Energy & Income Advisor