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Pioneer Natural Resources Latest to Be Bit by SemGroup Downfall

A week after news of SemGroup LP's implosion due to $3.2 billion in crude oil trading losses, the dust is still settling, revealing more creditors with direct exposure to the troubled company (see NGI, July 28). Last Monday Pioneer Natural Resources Co. announced that it has approximately $30 million of unpaid pre-bankruptcy claims for condensate sold to certain subsidiaries of SemGroup.

Late last month SemGroup, a privately owned midstream services giant, announced that it and certain of its subsidiaries filed petitions for reorganization under Chapter 11 of the U.S. bankruptcy code. Pioneer said it is seeking payment of its pre-bankruptcy claim as a critical supplier under a supplier protection program created by SemGroup and approved by a U.S. bankruptcy court in Wilmington, DE, on July 23. The intent of this program is for SemGroup to pay certain critical suppliers their pre-bankruptcy claims in full and continue paying such suppliers in exchange for their willingness to continue performance.

"It is premature at this time to predict the timing of payments under this program," Pioneer said.

The condensate supplied to SemGroup is produced from Pioneer's West Panhandle natural gas field and is processed at Pioneer's Fain plant in the Texas Panhandle. Pioneer said it continues to supply condensate to SemGroup. However, the company noted that it is monitoring SemGroup's situation closely and will sell its condensate to alternate purchasers should it become necessary to do so.

A group of SemGroup creditors have said unauthorized energy trading may have caused the loss. In the bankruptcy court, 11 lenders that participated in the $141 million secured term loan said they objected to SemGroup's request for permission to access cash collateral to maintain normal business operations, warning in a brief filed with the court that any fraudulent trades made by SemGroup could affect their ability to recoup their losses.

TEPPCO Partners LP subsidiary TEPPCO Crude Oil LLC, which does business with SemGroup, said it does not expect to see any fallout, noting that SemGroup has represented less than 3% of the partnership's current crude oil gathering volumes (see related story).

SemGroup is coming under fire from not only creditors, but also from stockholders of its publicly traded subsidiary SemGroup Energy Partners LP (SGLP).

Roy Jacobs & Associates said it has filed an action in the U.S. District Court for the Southern District of New York on behalf of purchasers of the common units of SGLP from Feb. 20 through July 17 for violation of federal securities laws. The complaint alleges that SGLP's parent company was "in financial difficulty" or "at high risk for such financial difficulty" as a result of its "investment in risky crude oil hedge transactions," but hid this from investors in SGLP.

SemGroup's problems became even worse as it was revealed that the Securities and Exchange Commission and the U.S. Attorney's Office in Oklahoma City are investigating the company's collapse.

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