JP Energy-American Midstream merger boosts wholesale propane business offering

JP Energy Partners LP and American Midstream Partners LP plan to merge, creating a combined midstream platform with an estimated enterprise value of $2 billion.

In addition, the combination will create the third-largest wholesale propane business in the United States, according to JP Energy.

American Midstream will acquire 100 percent of JP Energy in a unit-for-unit merger, JP Energy says. In conjunction with the transaction, ArcLight Capital Partners, the sponsor of American Midstream and JP Energy, will combine the companies’ general partners.

The merger will create a diversified midstream business operating in North American basins, including the Permian, Gulf of Mexico, Eagle Ford and Bakken. Upon completion of the transaction, the combined partnership will own and operate diverse midstream infrastructure, including:

• More than 3,100 miles of gathering and transportation pipeline
• More than 2.5 billion cu. ft. per day of transportation capacity
• Six processing plants with 400 million cu. ft. per day of processing capacity
• Three fractionation facilities with 20,000 barrels per day of capacity
• 13.9 percent interest of offshore floating production facility in the deepwater Gulf of Mexico
• More than 6 million barrels of aboveground liquids storage capacity

“This merger provides the opportunity for JP Energy unit holders, customers and employees to participate in the creation of a platform of diversified assets with strong growth prospects,” says J. Patrick Barley, president and CEO of JP Energy. “The exchange ratio premium and future growth prospects provide significant investment value to our unit holders.”

In addition, the merger could elevate and reshape both businesses, according to Lynn L. Bourdon III, chairman, president and CEO of American Midstream.

“This transactional combination is the next logical step in expanding services from the wellhead to the end-user market,” Bourdon says. “We will begin to experience the impact of our value chain growth strategy by offering customers a more competitive suite of services that enables us to capture incremental fee opportunities that maximize returns to unit holders. We look forward to creating further alignment with ArcLight as we execute on our long-term growth strategy.”

The transaction is expected to close in late 2016 or early 2017. The combined partnership will have headquarters in Houston. Bourdon will serve as chairman and CEO and Eric T. Kalamaras will serve as CFO of the combined partnership.