Sabine Oil & Gas May Reject Pipeline Contracts
March 08 2016 - 4:20PM
Dow Jones News
A federal bankruptcy judge dealt a blow to pipeline operators
and other midstream oil companies Tuesday, ruling that Sabine Oil
& Gas Corp. can scrap pipeline deals it made before oil and gas
prices plummeted.
Judge Shelley Chapman of the U.S. Bankruptcy Court in Manhattan
agreed to let Sabine out of the pipeline deals in a closely watched
decision that energy and restructuring experts warn could roil the
so-called midstream sector.
"The court preliminarily finds that none of the covenants run
with the land," Judge Chapman said, potentially knocking down the
pipeline operators' argument that the agreements can't be broken
because they are inextricably tied to the land on which Sabine
operates.
However, the judge added that her ruling isn't binding. She said
the dispute over whether the deals can be broken raises uncertain
legal issues that will have to be addressed later.
Houston-based Sabine sought to exit a contract with an affiliate
of Cheniere Energy Inc. because of the likelihood that it wouldn't
meet the deal's requirement to deliver a certain amount of natural
gas in southern Texas. Sabine also sought to reject another deal it
made with a midstream company that halted construction of its
pipeline in 2014.
Sabine, which sought chapter 11 protection last summer to
restructure some $3 billion in debt, said it could save as much as
$115 million by exiting the deals and wants to be free to negotiate
more favorable contracts.
Write to Tom Corrigan at tom.corrigan@wsj.com
(END) Dow Jones Newswires
March 08, 2016 16:05 ET (21:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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