American Midstream Partners LP (NYSE: AMID) announced Aug. 8 the approval of its right-of-first-offer to acquire the Eagle Ford full-well-stream gathering system in Gonzales County, Texas from an affiliate of ArcLight Capital Partners LLC.
The rights to construct the Eagle Ford system were sold on July 30 to Republic Midstream LLC, which is a newly formed ArcLight portfolio company, by Penn Virginia Corp. (NYSE: PVA). The board of directors of the American Midstream's general partner approved the exercise of its right-of-first-offer to acquire the system for total consideration not to exceed $110 million.
Denver's American Midstream also executed an option agreement to acquire a 50% interest in Republic from an affiliate of ArcLight. The acquisitions of these assets would complement the partnership’s existing natural gas gathering and re-delivery system in Lavaca County and create a competitive position in a prolific shale play supported by long-term, fee-based agreements with dedicated acreage.
Construction on the Eagle Ford system commenced in the second quarter of 2014 at an estimated total capital expenditure of $100 million incurred by an affiliate of ArcLight. The initial phase of the project is expected to commence operations in the fourth quarter of 2014 and full-system operations are expected in the first quarter of 2015.
The system is expected to include saltwater disposal capabilities as well as full-well-stream gathering and treating infrastructure to manage oil, gas, and water production. Total design capacity is about 95,000 barrels per day of crude oil/water and 15 million cubic feet per day of natural gas. Following the consummation of the transaction as currently contemplated, American Midstream would provide midstream services under a long-term, fee-based agreement with Forest Oil Corp. (NYSE: FST).
American Midstream anticipates the acquisition of the system from Republic will be completed in late 2014 or early 2015.