[Marxism] Huge oil trading loss sinks energy trader SemGroup

[bauerly@xxxxxxxx]

First of many?

Brad

NEW YORK (Reuters) - SemGroup LP declared bankruptcy on Tuesday after $3.2
billion in oil-trading losses torpedoed what had been the 12th-largest private
U.S. company.

The Tulsa, Oklahoma-based company racked up the massive losses as oil prices ran
up record gains, undercutting short crude futures positions SemGroup bought to
hedge against its 500,000 barrel-per-day trading business.

Officials said SemGroup, in order to meet obligations to creditors, plans to
sell off oil and natural gas gathering, transportation, and storage assets
purchased in a whirlwind of acquisitions since it was founded in 2000.

"We have determined that the best way to maximize value for our creditors is to
undertake a sales process that will transition our valuable businesses to
well-established companies," Terry Ronan, SemGroup's acting chief executive,
said in a statement.

SemGroup was forced to take a $2.4 billion loss on July 16 after it transferred
its NYMEX trading account to Barclays Plc. The firm had accounted for this
position as "loss contingencies," according to its bankruptcy filing in
Delaware federal court.

Included in the NYMEX losses is $290 million owed to SemGroup by a trading
company owned by SemGroup's co-founder and former chief executive, Thomas
Kivisto, who was placed on administrative leave on July 17.

SemGroup had engaged in regular hedging transactions with BOK Financial Corp,
where Kivisto had been a board member since 2006 before resigning on July 16.
As of the end of 2007, SemGroup had hedged 21 million barrels of crude oil with
BOK, which had a fair value of negative $130 million.

At the end of March, this position was worth negative $88 million, said BOK
spokesman Jesse Boudiette, who declined to comment on BOK's current exposure to
SemGroup, saying the bank would not speak publicly about individual clients.

LOSSES

SemGroup, ranked the No. 12 private U.S. company by Forbes.com in 2007, incurred
$850 million in losses on July 17 when its over-the-counter hedging program was
marked to market.

SemGroup listed assets of $6.14 billion and liabilities of $7.53 billion in its
bankruptcy filing. Liabilities included $3.1 billion of total debt, including
$2 billion of secured debt and $594 million in unsecured notes.

SemGroup's financial difficulties were disclosed by its publicly traded
affiliate SemGroup Energy Partners LP (NasdaqGM:SGLP) last week, when it warned
that a liquidity crisis at its parent could lead to a bankruptcy filing.
SemGroup Energy Partners and its general partner are not part of the bankruptcy
filing.

Two hedge funds took control of SemGroup Energy Partners' general partner last
week under the terms of a loan.

SemGroup Energy Partners management said it was confident the partnership could
survive despite SemGroup's bankruptcy and would seek new business from third
parties. The company's board has also authorized management to consider a sale
or merger.

SemGroup Energy Partners also warned it was not ready to say if it would make a
cash distribution to unitholders in the second quarter, though its management
believes parent SemGroup will continue to use its fee-based assets to maintain
operations while in bankruptcy.


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