An affiliate of ArcLight Capital Partners LLC intends to drop down 25% of ArcLight’s controlling interest in the Delta House semisubmersible floating production system (FPS) and associated oil and natural gas export pipelines, American Midstream Partners LP (AMID) said Aug. 10. ArcLight controls the general partner of AMID.
The FPS and pipelines are in the U.S. Gulf of Mexico (GoM).
An equity consortium led by ArcLight financed Delta House in December 2012. Delta House began operations in 2015’s second quarter, and ArcLight and AMID began formal discussions for the dropdown. AMID executives worked with ArcLight to source and execute the Delta House project. AMID’s focus is on additional, related opportunities in the eastern GoM.
The Delta House dropdown is scheduled to close before the end of the year, for $162 million. ArcLight’s remaining interest in Delta House is potentially available for future dropdowns depending on market conditions and other factors.
The transaction was approved, subject to financing and other closing conditions, by a conflicts committee on the general partner’s board of directors, and by the general partner’s full board, the company added.
Steve Bergstrom, executive chairman, president and CEO of AMID, said the dropdown will expand the company’s reach into the Mississippi Canyon’s operating core.
Delta House is operated by LLOG Exploration Offshore LLC and is in the Mississippi Canyon region of the deepwater GOM. It has nameplate processing capacity of 80,000 barrels of oil per day (Mbbl/d) and 200 million cubic feet per day (MMcf/d) of gas. Peak processing capacity is 100Mbbl/d of oil and 240MMcf/d of gas
Production is supported by tolling agreements with various producers. Delta House began operating in April, and there are six wells online. By the end of this year, eight more are scheduled to come online. Additional wells are in various stages of drilling and completion, and are scheduled to be connected to the FPS in 2016 and beyond.
Evercore Partners was the financial adviser for the conflicts committee, and also provided a fairness opinion. Thomson & Knight LLP was the committee’s legal counsel. BofA Merrill Lynch was ArcLight’s financial adviser and Latham & Watkins LLP was ArcLight’s legal counsel.
American Midstream Partners LP is based in Denver.
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