SemGroup Energy Partners developing contingency plans after parent files Chapter 11 bankruptcy

By Jennifer Lanning Drey

Portland, Ore., July 22 - SemGroup Energy Partners, LP is developing a series of financial contingency plans based on various potential scenarios after its parent, privately held SemGroup Holdings, LP, filed for Chapter 11 bankruptcy Tuesday, Michael Brochetti, chief financial officer of SemGroup Energy, said during a company conference call also held Tuesday.

SemGroup Energy is not a party to the bankruptcy; however, the company is uncertain whether its parent - also its main customer - will continue to fulfill obligations under the throughput agreement between the two companies.

"Although no indication has been given that the throughput agreements currently in place with SemGroup LP will not be honored at this time, we are diligently focused on expanding the third-party diversity of our midstream infrastructure," Kevin Foxx, chief executive officer of SemGroup Energy, said during the call.

Sundar Srinivasan, chairman of the board of directors of SemGroup Energy's general partner, said later in the call that there is "a good chance" SemGroup Energy would lose a significant portion of parent business.

Accordingly, the company's newly constituted board of directors has asked management to develop an aggressive plan to gain new customers, develop several cash flow models to address various potential outcomes and create a subcommittee to review all internal relationships with the parent company.

Additionally, the board authorized SemGroup Energy's management to pursue M&A discussions with interested parties, Srinivasan said.

"We feel very confident that we can survive without the parent, but with the uncertainty of what they have done, we will continue to take steps to do that," Foxx said.

Currently outstanding balances between the two companies consist of an $8 million payable for operating expense reimbursement and a $2.7 million receivable, which would typically be due to SemGroup Energy on Aug. 15, Brochetti said.

Current liquidity at SemGroup Energy includes $24 million of cash and $150 million undrawn on its revolving credit facility, which is in default. The company is working with its agent bank to gain a waiver or amendment to the facility, Brochetti said.

SemGroup Energy is a Tulsa, Okla., owner and operator of midstream energy assets. A subsidiary of SemGroup, LP is its general partner.

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