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Red Apple Group to Rescue SemGroup

December 22, 2008
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John A. Catsimatidis, chairman of privately held Red Apple Group, announced last Monday he intends to develop a reorganization plan for SemGroup LP, also a privately held company in Tulsa, OK, that is a major oil and natural gas transportation and storage provider in the Midwest. SemGroup filed for bankruptcy in July, announcing it had sustained $3.2 billion in trading losses.

The losses came in crude deals on the New York Mercantile Exchange and over-the-counter energy derivative markets, SemGroup said at the time, adding that it planned to liquidate most of its assets (see NGI, July 28).

"I strongly believe that reorganization will deliver far more value to SemGroup's creditors than liquidation," Catsimatidis said. "SemGroup has a tremendous portfolio of assets that can be revitalized with a renewed commitment to the company's core businesses. The problem with liquidation is there will likely be nothing left once the assets have been sold -- if they can be sold at all in this environment."

While SemGroup's assets are weighted toward oil refining and transportation, its natural gas gathering and processing assets in the U.S. and Canada aren't too shabby. In Kansas,Oklahoma, and Texas the company's SemGas subsidiary operates four gathering systems with approximately 800 miles of low-pressure gathering lines, three processing plants with a combined capacity of 80 MMcf/d, and two storage projects under development that will offer 11 Bcf of storage.

In Canada SemGroup's subsidiaries include SemCAMS, one of the largest licensed sour gas processor in Alberta, with four gas processing plants and more than 600 miles of gathering pipeline in Alberta, and its SemCanada Energy Co. lays claim to being Canada's leading independent natural gas marketing and energy asset management company.

Catsimatidis, who grew his mega-company from a single grocery store he opened in 1971, said that he had obtained five of the nine seats on SemGroup G.P., LLC's Management Committee, the equivalent of SemGroup LP's board of directors. He plans to work with creditors to develop a reorganization plan that enables SemGroup to repay its debts while preserving a majority of the 2,000 jobs currently at risk.

Catsimatidis successfully reorganized United Refining Co. of Warren, PA, in 1987 and returned 100 cents on the dollar to creditors. In addition to petroleum refining and marketing, Red Apple Group owns real estate, aviation assets, and a supermarket chain.

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