American Midstream Announces 75% Distribution Cut—Some Saw it Coming

American Midstream distribution cut

If you’re a natural gas investor, take note of what happened with American Midstream Partners today. Even if you’re not a natural gas investor, most investors should know about this. On Friday, July 27th, the American Midstream distribution cut was announced, sending the market into a frenzy.

Here’s what we know.

American Midstream Distribution Cut: Surprising?

An American Midstream distribution cut was not something that came out of the blue. For some, yes; but others were expecting it. A few weeks ago, Michael Boyd of Seeking Alpha wrote a report on American Midstream, and it wasn’t exactly positive.

Boyd wrote that a distribution cut was “nearly assured” at the natural gas company. And two weeks later, this prediction became a reality.

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Let’s Talk Numbers

Kicking off the weekend in a not-so-good way, American Midstream disclosed a “revised capital allocation strategy.” This new strategy slashes the company’s quarter two distribution by—wait for it—75%!

From the company’s point of view, this new allocation strategy is meant to “reduce leverage” and “provide capital for strategic growth opportunities.” Moreover, American Midstream believes that it will “create long-term value.”

The market doesn’t seem to agree.

American Midstream Stock (NYSE:AMID)

At press time, American Midstream is trading at $6.65, which puts the stock down 42.42%. Considered to be a small-cap company, American Midstream’s market cap is currently sitting at less than $400M.

The Company

For those who don’t know, and for those interested in knowing more, whether you are already involved in the natural gas industry or are a beginner natural gas investor, American Midstream owns various assets in the Gulf Coast market.

In the past, sources say the company’s management team has performed poorly when making deals, which has caused the stock to flounder.

The Takeaway

What do you think of what happened today? Michael Boyd warns the natural gas market that the American Midstream distribution cut is a learning lesson on “buying too early.”

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Featured image: PublicDomainPictures via Pixabay