Tulsa World: SemGroup will pay more to oil, gas producers

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SemGroup will pay more to oil, gas producers
The added millions pave the way for the company to get out of bankruptcy this year.

By ROD WALTON World Staff Writer
Published: 9/23/2009 2:24 AM
Last Modified: 9/23/2009 3:34 AM

Complete coverage: Read all the stories and documents related to the SemGroup collapse.

SemGroup LP will pay oil and gas producers up to $337 million to smooth a yearlong conflict and pave the way for the Tulsa-based company's exit from Chapter 11 bankruptcy, according to documents filed Tuesday in U.S. Bankruptcy Court in Wilmington, Del.

The settlement, reached Sunday during an all-day mediation, could pay producers $83 million more than offered in SemGroup's last reorganization plan filed last month. The debtor filed its fourth amended plan Tuesday to include details from the mediation settlement.

"The producers' committee unanimously supports the plan as the best way to ensure a prompt and fair resolution," the committee said in SemGroup's disclosure statement.

The producers will drop their case, filed in the Third Circuit U.S. Court of Appeals, in response to the earlier settlement, according to reports. They were trying to override a previous decision by U.S. Bankruptcy Judge Brendan L. Shannon, who ruled that claims by secured lenders such as banks took precedent over unsecured claims by producers.

"Litigation is costly, time consuming and uncertain," the producers' committee statement reads. "In light of these considerations, the producers' committee believes the settlement as embodied in the plan is fair and reasonable."

The

first payback offered to producers last spring would have paid them about 4 cents on the dollar, according to reports. The reorganization plan was first filed in May and has been amended three times.

SemGroup filed for Chapter 11 bankruptcy protection in July 2008 after a cash-flow crisis caused by losing at least $2.4 billion in margin calls on failed oil futures trades. Before that, the company took delivery of at least $400 million worth of oil and gas on credit, producers have said.

Producers would be paid all of their 20-day claims — for oil and gas sold in that period before bankruptcy. About $43 million is set aside as cash payments for those producers who "opt in" to the settlement, according to reports.

Early on, SemGroup was alleged to owe up to $1 billion to producers, royalty owners and other working interests of the oil and gas bought on credit. Oklahoma producers claimed that state law put their product into a "constructive trust" set aside from other claims.

SemGroup is hoping to exit Chapter 11 by offering $2.45 billion in cash and equity to its creditors. The company would distribute about $1.1 billion in cash and $1 billion in new stock when emerging as a public entity by November.

Secured lienholders would receive about 95 percent of the company's value. SemGroup will reserve about $72 million of the cash fund for working capital and corporate operations, according to the plan. The plan requires creditor and court approval.

Shannon will hear testimony about the amended disclosure statement Thursday.

Rod Walton 581-8457
rod.walton@tulsaworld.com By ROD WALTON World Staff Writer

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Some reader comments for this story were copied from "SemGroup’s producers settlement tops $300 million," which was published on 9/22/2009.

	Report Comment smp, (9/22/2009 2:18:24 PM) Glad to see that the producers aren't getting completely screwed in this deal. Let us not forget where the real value comes from...
	Report Comment Hawktalk, (9/23/2009 8:13:24 AM) SemG walks away with $72 million ?
	Report Comment Hawktalk, (9/23/2009 10:03:19 AM) smp: They were offered $.04 on the dollar. What did they get this time around ?
	Report Comment Incredulous, (9/23/2009 10:21:10 AM) At least ther was no crime committed here. In Oklahoma all you you have to be is well connected to avoid crininal charges. Where is Drew?
	Report Comment smp, (9/23/2009 11:25:41 AM) Hawktalk: I'm guessing the total is $337 MM. The article also says $83 MM more than what was offered in the reorganization plan. I'm confused on the facts as to how much is actually owed to producers. $1 BB? $400 MM?
	Report Comment Hawktalk, (9/23/2009 11:54:43 AM) The report should have backed in the new amount and compared it to the earlier $.04 on the dollar.
	Report Comment smp, (9/23/2009 12:10:36 PM) I agree.

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