September 11, 2008
Settlement Calls on SemGroup to Pay $4.9M for Obligations
By Marie Price
A federal bankruptcy judge has outlined details of a settlement reached recently between bankrupt SemGroup LP and publicly traded SemGroup Energy Partners, known as SGLP.
The agreed order approved Monday by Judge Brendan Shannon requires SemGroup to provide a $4.9 million letter of credit to secure obligations related to an asphalt agreement, and to reimburse SGLP $3.1 million, due for utility costs, among other terms.
The $4.9 million represents one month at contract minimums.
SGLP President and Chief Executive Officer Kevin Foxx called the settlement reasonable.
"This decision provides SGLP with certain assurances that it will be paid for post-bankruptcy services provided to the private company," Foxx said. "It also provides additional clarity around its relationship with the private company on a prospective basis and allows SGLP to focus on its own independent business plan."
Under the agreement, SGLP is no longer responsible for paying fuel, power and other utility costs to be reimbursed by SemGroup. Instead, SemGroup must pay utility costs directly.
SemGroup and SGLP also ironed out how payments are to be made under a crude oil agreement, an arrangement that is to be evaluated after October.
SGLP will grant an easement to SemGroup to allow it to construct its White Cliffs pipeline across SGLP-owned property in Kansas.
SemGroup has said that when completed, the pipeline will have the capacity to carry 50,000 barrels of crude oil per day between Plattville, Colo., and Cushing, Okla.
According to information from the energy partners firm, SGLP and SemGroup agreed that SGLP is the proper party to receive payments under a third-party storage agreement.
SGLP is not a debtor in the bankruptcy, filed in July by SemGroup and 24 subsidiary companies.
Prior to the bankruptcy, SGLP received between 80 percent and 90 percent of its revenue from SemGroup, exclusive of fuel and power.
SGLP has said that SemGroup's financial condition resulted in SGLP's own default on a credit agreement.
When the settlement was initially hammered out, SemGroup said all of the payments the company agreed to were pre-budgeted, meaning that the settlement would not result in SemGroup having to pay more to cover expenses than it had anticipated.
Originally published by Marie Price.
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