Paying the pipers

9 March 2016 By Kevin Allison

Insolvent oil and gas drillers can shed contracts with companies that move their product, says a N.Y. judge. The ruling may rattle investors who assumed the agreements supplied safe revenue streams. No need to panic, though: The deals will probably be renegotiated, not canceled.

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Bankrupt energy producer Sabine Oil & Gas can reject certain pipeline contracts, a New York judge ruled on March 8.

The decision means the companies that transport and process crude and natural gas could be exposed to financial trouble in the energy industry.

“The debtors have satisfied the standard for the rejection of the contracts,” said New York Bankruptcy Judge Shelley Chapman. The decision sent shares of major pipeline operators lower.

Advocates for the $500 billion sector have argued that pipeline contracts are bankruptcy-proof, because energy producers have agreed to convey property rights to the operators.

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