Asset Sales in the Pipeline
By ROD WALTON; JOHN STANCAVAGE
Read previous stories and court filings about SemGroup.
To view an investor slide show from May showing details about SemGroup LP and SemGroup Energy Partners, including a map of assets, go to: tulsaworld.com/semslide
Tulsa-based SemGroup LP, in Chapter 11 bankruptcy since July 22, is getting closer to selling its assets to pay its debts.
SemGroup acting president and CEO Terry Ronan said earlier this week that the company is seeking well-established companies that can utilize SemGroup’s properties and staff. In fact, negotiations have begun on some potential sales.
“We have already received significant interest in our assets because of our talented and experienced employees, unique industry position, expansive customer base and premier service capabilities,” Ronan said.
Analysts have said they believe the energy company has plenty to offer buyers.
At a May investor conference in New York, SemGroup’s leaders said the company had $4.94 billion in assets, with property, plants and equipment accounting for about $1.25 billion of that amount.
The process to negotiate with buyers and obtain the best sales prices is expected to take a while. In the meantime, company officials want to keep SemGroup operating to protect those assets.
As a result, U.S. Bankruptcy Judge Brendan L. Shannon in Wilmington, Del., this week gave initial approval for SemGroup to receive $150 million in “debtor in possession” financing from Bank of America and other lenders.
Shannon will rule on SemGroup receiving an additional $100 million at an Aug. 18 hearing. Company attorneys argue that their client needs the money to continue operations through the next quarter and beyond.
Even though the company is in Chapter 11 bankruptcy, which involves reorganization, the stated goal is to sell all assets.
SemGroup employs about 400 people in Tulsa and 2,000 worldwide.
“We hope this process results in as many employees as possible keeping a job,” SemGroup spokesman Lance Ignon said Friday in an interview.
The company’s fall came after it faced large cash demands from margin calls related to hedging transactions. Overall, SemGroup racked up more than $2.4 billion in debt through transactions on the oil futures market.
Suppliers have filed demands for at least $1 billion in oil and other assets that SemGroup’s subsidiaries took possession of on credit in the weeks before the bankruptcy.
It is unknown how long it will take to liquidate SemGroup’s assets.
“We have no timetable for when we expect to finalize any of the potential asset sales, but this clearly is a top priority for the company,” Ignon said.
Potential buyers could include some local businesses. Many Tulsa and Oklahoma companies are in the midstream side of energy — storing and moving fuels — while regional, national and international firms also operate in the area.
SemGroup LP spun off some of its assets to form SemGroup Energy Partners, or SGLP, in a public offering last year. SGLP is not named as a debtor in the bankruptcy case, and two hedge funds stepped in last month to take control of the board and basically separate the public company from its liquidating parent operation.
SGLP owns $262 million worth of assets, including 1,150 miles of pipeline, and 311 transport vehicles and railcars. It operates in 23 states.
SemGroup Energy Partners gets up to 90 percent, or about $130 million annually, of its revenue through services with the parent company, which now does not have a controlling interest. SGLP will have to find other customers to make up for the loss if SemGroup LP goes out of business. The public company also has about $295 million worth of debt, an upside-down debt-to-capital ratio.
SemGroup LP subsidiaries
SemCrude: Handles crude oil supplies and delivery to refiners.
SemFuel: Distributes refined energy products.
SemGas: Gathers natural gas.
SemMaterials: Handles asphalt operations.
SemStream: Conducts natural gas liquids and propane operations.
SemCanada: Oversees Canadian operations.
SemCams: Responsible for sour gas processing in Canada.
SOURCE: SemGroup Web site.
What does SemGroup LP own?
According to an online slide presentation from SemGroup’s May investor conference in New York, Sem- Group LP had $4.94 billion in assets. Property, plants and equipment accounted for the biggest chunk –$1.25 billion. Specifically, its midstream assets included:
3,139 miles of pipeline
25.2 million barrels of owned and/or leased oil storage
53 owned and/or leased asphalt, natural gas liquid and refined products terminals
10 natural gas processing plants
2,038 transport vehicles and railcars
Note: Assets exclusive of SemGroup Energy Partners LP.
SOURCE: SemGroup. Data as of March 31.
Rod Walton 581-8457, John Stancavage 581-8314
john.stancavage@tulsaworld.com
Originally published by ROD WALTON AND JOHN STANCAVAGE World Staff Writers.
(c) 2008 Tulsa World. Provided by ProQuest Information and Learning. All rights Reserved.