American Midstream Partners LP (AMID)

[stargazer123]

Oil was in the $100 range from 2010 to 2014. During that time AMID rose and reached $30 in July 2014.

Then the bottom fell out of oil. And it continued to fall until just a few months before 2016. People weren't sure that that was the bottom, and commentators stayed negative for awhile.

February of 2016 was the bottom of the bearishness, and February 2016 is when AMID bottomed out at $5.


It climbed up to near $20, but then people became concerned about its debt, and also that it had some underperforming assets that were going to pull it down. The stock drifted down to the $10 range, and then steadied.

It was selling its underperforming parts, and using the money to pay down debt. It tried to acquire SXE, which would be a strong addition, increasing it money flow, but the original dead line to pay for it passed months ago. However, legally they had to acquire it, because of the contract both companies had signed.

They cut their dividend, and the money they save, will allow them to buy SXE. It is not a guarantee that they will buy SXE, but both companies are for the deal, and it would be a legal headache not to do it. So I think it will take place.

The market doesn't seem to think so. SXE's price is way down, and if the deal doesn't go through, it will go way down, because SXE has massive debt problems.

However, if it does go through; oil prices have turned around, and are strong. AMID 'IS' selling its underperforming assets, which will end up making the company a stronger company, plus it will give AMID needed cash.

Then, just like the previous time, when AMID bottomed out at $5 and then started a strong up move on strong oil pricing, AMID could start an up move here. It's dividend has been cut 75% to $0.4124/yr, which at a stock price of $6.60 = a dividend of 6.25%, which is not bad.

AMID's price of $6.60 X.16 = $1.06 (what it would pay for SXE)
SXE closed at $0.79, a 26% discount.
SXE's bid/ask for Monday is way above that at $0.83/$0.87
AMID's Monday bid/ask is $6.55/$7.95, so it looks like it is going to be in the $7 range.

Like you say, people must realize that the selling was way over done.

Long term, this could be a great entry price, especially if AMID raises its dividend in the future.

Just remember, that if AMID doesn't acquire SXE, its price could fall to zero.