Prudent Speculations has some thoughts on "The Fall of Semgroup and its Impact on Oil":
Anyone who follows the MLP sector is undoubtedly aware of the recent implosion of Semgroup Energy Partners (Nasdaq:SGLP). There have been several articles put out by the press that list this event as example #1 on why one should not be involved in the sector, I questioned that thought process in my previous article which can be found here. Today I thought I would briefly touch on the relationship between Semgroup’s demise and the decline in the price of oil. For those in need of a refresher, Semgroup Energy Partner's implosion was caused by the bankruptcy of Semgroup Energy Partne's general partner, Semgroup LP which recently lost nearly$3 billion dollars after positions in oil derivative contracts went against the firm. Prior to the bankruptcy filing, Semgroup LP provided over 90% of Semgroup Energy Parner's revenue.
Additionally, the market was expecting substantial asset dropdowns at Semgroup Energy Partners from the parent company over the next several years. Given the firm’s high level of customer concentration and the markets relatively large expectations for balance sheet growth it was only natural to see the stock plummet after the news broke....MORE, including charts.
And from Naked Shorts:
Things that go BOOM! in the night
Until now a little-known, though large, closely held partnership in Tulsa, Okla., SemGroup transports, stores and distributes crude oil and refined products. It filed for bankruptcy protection last week after losing more than $2.4 billion on energy contracts...Exactly what drove the company to that fate remains unclear, but clues have started to emerge amid court hearings and other ripples from the implosion.
News follows price
According to SemGroup's bankruptcy-court filings, the company found itself without enough cash to cover margin calls and on July 16 handed its trading account with the New York Mercantile Exchange to Barclays PLC, a move that forced SemGroup to recognize losses exceeding $2.4 billion. A Barclays spokesman declined to comment. Another $850 million of unrealized losses were incurred through over the counter trading, documents show.
Nymex WTI crude oil futures topped out on Jul. 14 at $147.90 (intraday) and Jul. 15 at $145.78 (closing). The intraday ($122.50) and closing ($123.26) lows since then were both hit Friday, Jul. 25, representing declines of 17.2 and 15.5 per cent respectively. Mere coincidence, of course.
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