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Bankruptcy Courts Allowing Operators to Rip Up Midstream Contracts
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A recent ruling by a federal judge gives E&P companies the ability to wiggle out of pipeline / takeaway deals made prior to the downturn of oil and gas prices.
This precedent comes from a ruling regarding bankrupt Sabine Oil & Gas' challenge regarding its pipeline commitments.
Sabine RulingArguing that its well output was largely below its contract commitment with Cheniere affiliate Nordheim Eagle Ford Gathering LLC, Sabine filed a motion in New York bankruptcy court that requested to be released from the original agreement (which was struck prior to the oil and gas price decline).
Judge Shelley Chapman ruled that Sabine could be let out of the contract, which gives a precedent to other E&Ps who are finding themselves unable to fulfill their midstream contracts.
If the judge had ruled…
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