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Two oil pipeline companies to combine

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World Pipelines,

American Midstream Partners, LP (American Midstream) and JP Energy Partners LP (JP Energy) have recently announced that the two companies have begun the execution of a merger agreement to create a combined midstream platform.

According to the deal, American Midstream will acquire the entirety of JP Energy in a unit-for-unit merger. The companies anticipated that the merger would have minimal, if any, tax recognition for the unitholders.

Alongside this transaction, ArcLight Capital Partners, LLC (ArcLight), the sponsor of both American Midstream and JP Energy, will combine the general partners of the two companies. Upon closing, the combined entity is expected to generate pro-forma adjusted EBITDA of approximately US$185 million, assuming 2016 mid-point guidance from the respective companies, as wel as including run-rate synergies of approximately US$10 million.

The merger will create a diversified midstream business that operates in North American basins including the Permian, Gulf of Mexico, Eagle Ford and Bakken. As a combined partnership, the entity will have an estimated enterprise value of US$2 billion. Moreover, its unitholders are expected to benefit from significantly improved scale and financial flexibility to invest in growth projects, third-party acquisitions and potential drop downs from ArcLight.

Upon completion of the transaction, the combined partnership will own and operate diverse midstream infrastructure representing:

  • Over 3100 miles of gathering and transportation pipeline.
  • Over 2.5 billion ft3/d of transportation capacity.
  • 13.9% interest of offshore floating production facility (FPS) in the deepwater Gulf of Mexico.
  • Other facilities and capabilities.

“The merger elevates and reshapes our two businesses into a new platform that we expect will allow for higher growth, new business opportunities and a stronger financial position than either company could achieve separately,” said Lynn L. Bourdon, III, Chairman, President and Chief Executive Officer of American Midstream.

“We believe that the merger between American Midstream and JP Energy makes a tremendous amount of sense, offering all stakeholders a solidified financial profile on a stronger, more diversified platform with multiple avenues for growth,” added Dan Revers, Managing Partner of ArcLight. “Through the combination, ArcLight can concentrate its financial and strategic support and work even more closely with Lynn and his team to continue the growth of American Midstream.”

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