Law360 Quotes John Goodgame on Outlook for Oil and Gas M&A

Akin Gump oil and gas partner John Goodgame has been quoted in the Law360 article “3 Trends Set To Fuel Oil And Gas Deal-Making,” regarding what could spur activity in the coming months in oil and gas mergers and acquisitions.

One factor mentioned in the article, is that investors in public oil and gas companies are increasingly placing an emphasis on returns, which is in contrast to the past when they were focused more on growth.

Goodgame said, “One of the implications of shifting from a growth mindset to a returns-based mindset in the public company context is that cost, especially [general and administrative costs], becomes very important.”

The article reports that some companies are also teaming up on infrastructure projects, particularly if the cost of using capital markets for financing is too high.

“There is a lot of infrastructure build-out going on,” Goodgame said. “Because either equity capital is not available or not available at a price companies are willing to incur, they are having to fund those projects with internally generated cash. So a lot are looking at funding that internally but also pooling resources.”

Goodgame added that there have been “a lot of MLP buy-in transactions or consolidation transactions within an affiliated group. There hasn’t been Midstream Company A merging with Midstream Company B.”

Another factor behind what is likely to be increased M&A activity, according to the article, is growing interest from shareholder activists.

“Any time you have weakness in the stock market in a particular sector, you are going to have activists coming into that sector,” said Goodgame, though many activists have been approaching companies behind the scenes and working toward a resolution before launching into a public fight.

“We are seeing quiet activism,” as Goodgame described it. “A number of investors have come to various management teams and said, ‘Listen, we expect you will focus on these metrics going forward.’”