John Goodgame Comments on MLP Liquidity Crunch

Akin Gump oil and gas partner John Goodgame was quoted in the SNL Financial article “Energy MLPs may look to ’08-’09 for ‘self-help’ to fight liquidity crunch” on how midstream energy companies and master limited partnerships (MLPs) can end their liquidity crisis without shrinking their distributions or banking on expensive capital markets to raise funds.

The article reports that, during the heat of the financial crisis, many midstream and downstream businesses turned to aggressive growth capital scale-backs because they were wary about slashing their distributions. Goodgame, however said it is not very easy for midstream entities, particularly pipeline operators, to reduce capital expenditures on projects they have already committed to build.

“Reducing CapEx for a midstream company is a little more complicated than for an upstream company, which has a more linear relationship to revenue flow,” he said. “If you're looking at a 30-mile pipeline, you don’t generate any revenue until you build the 30th mile.”