The acquisition was announced on 22 January, 2014 and includes a long-term, fee-based gathering agreement, whereby Penn Virginia dedicated for 25 years all current and future natural gas production from the areas served by the system.
The system is currently flowing more than 40 million cubic feet per day between sales volumes and gas lift, with a significant ramp in volumes expected throughout 2014 and thereafter. Production gathered by the system is compressed and delivered to a third party for processing or redelivered to Penn Virginia for gas lift.
Penn Virginia is operating six to seven rigs on the system with nearly 900 remaining drilling locations in the acreage dedicated to American Midstream, and volumes are expected to triple from current operating levels by mid-2015.
The acquisition is expected to be accretive to American Midstream’s expected distribution level for 2014, and creates a competitive position in a strategic shale play with fee-based contracts that are not directly subject to commodity price volatility.
As a result of the acquisition, management intends to recommend to the board of directors an increase in the Partnership’s quarterly distribution of approximately two percent beginning with the distribution for the third quarter 2014, in addition to management’s intent to recommend to the board an approximate two percent increase for the first quarter 2014 distribution associated with the recently closed Blackwater acquisition.
