Falling commodity prices, especially oil, have had a huge negative impact in the energy sector, causing stocks across the board to drop. Despite being bad for most companies, low prices do make acquisitions easier and have in fact encouraged consolidation within the sector. As a result, American Midstream Partners L.P. (NYSE: AMID) is having a public offering to help fund an acquisition of its own.
The company announced Thursday that it priced an underwritten public offering of 7.5 million common units, representing limited partner interests at $11.31 per common unit, with an option to purchase an additional 1.125 million units. The offering is expected to close on September 15.
The underwriters for the offering are Merrill Lynch, Barclays, Citigroup, Deutsche Bank, RBC Capital Markets, Wells Fargo, Ladenburg Thalmann and Wunderlich.
The company intends to use the net proceeds from this offering to fund a portion of the purchase price of an equity interest in a Delaware limited liability company that will indirectly own a portion of the Delta House floating production system and related pipeline infrastructure. Should American Midstream Partners not consummate the Delta House acquisition, it will use the net proceeds of this offering to repay a portion of the outstanding borrowings under its credit facility and for general partnership purposes.
For some background: this is a growth-oriented Delaware limited partnership that was formed in August 2009 to own, operate, develop and acquire a diversified portfolio of midstream energy assets. It is engaged in the business of gathering, treating, processing and transporting natural gas, fractionating natural gas liquids, transporting oil and storing specialty chemical products through its ownership and operation of 12 gathering systems, five processing facilities, three fractionation facilities, four marine terminal sites, three interstate pipelines, five intrastate pipelines and one oil pipeline.
So far in 2015, the company has underperformed the market, in part due to low oil prices. Units are down 33.7% year to date (as of Wednesday’s close) and down 55.2% in the past 52 weeks.
Units of American Midstream Partners were down 15.5% at $10.08 late Thursday morning. The units have a consensus analyst price target of $18.40 and a 52-week trading range of $9.01 to $30.99.
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