Tuesday, August 12, 2008

Energy: SemGroup LP Bankruptcy

SemGroup is the Tulsa firm that last month "filed for bankruptcy after running up $2.4 billion in trading debts," as the Tulsa World (www.tulsaworld.com) put it. While "Who cares?" may be a reasonable New Mexico reaction, there may be two effects here.
First, World business editor John Stancavage wonders if SemGroup's hedging activity may have had something to do with oil prices heading north of $140/bbl. A Houston hedge fund manager, John Olson, confirmed for Stancavage that SemGroup likely was speculating. Stancavage said, "Speculating is... where a trader bets on oil prices in hope of making big profits but doesn't actually have a corresponding position to make good on the gamble if prices move unexpectedly." Oil prices started dropping as soon as SemGroup hit the bankruptcy court.
Second, SemGroup's bank was and presumably is BOK Financial, parent of the Bank of Oklahoma, the Bank of Albuquerque and others. The SemGroup situation turned a nice $43.7 million second quarter profit into a loss, the World reports today.
In an August 8 Form 10-Q filing with the the SEC, BOK said, "BOK Financial Corporation reported a net loss of $1.2 million or $0.02 per diluted share for the second quarter of 2008.... Net income for the six months ended June 30, 2008 totaled $61.1 million or $0.90 per diluted share... The Company recognized $87.0 million of pre-tax charges for loan and energy derivative credit exposure to SemGroup LP in the second quarter of 2008. These charges reduced net income by approximately $57.0 million or $0.84 per diluted share... At June 30, 2008, BOK Financial had credit exposure to SemGroup LP and related entities of approximately $147 million consisting of $97 million from energy derivative contracts and $50 million from loans and loan commitments..... BOK Financial recognized a
$26.3 million charge to increase its provision for loan losses and a $60.7 million charge against trading revenue to reduce the estimated fair value of energy derivative contracts."
The World said today that "Thomas S. Kivisto, the former president and CEO of SemGroup LP, resigned from the board of directors of BOK Financial and Bank of Oklahoma on July 16."
Via phone and email, I have requested comment on the effect, if any, on Bank of Albuquerque from BOK Financial corporate communications director Jesse Boudiette. No responses as of 7:50 PM today, August 12. I'll post Mr. Boudiette's response, if any.

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