@bonfire They just declared bankruptcy but it’s OK, they just got bailed out by a loan from BOA.
Please get your statements accurate and learn what debtor in possession financing means. Basically means that if they default on that last loan, BofA owns the whole shooting match. If there is more than one who providing debtor in possession financing, then the pieces get divvied up amongst the DIP lenders.
What caused the bankruptcy is the reverse side of the speculation. They, SemGroup, had to take delivery on their futures or sell them off. They bought too much at too high of a price. The futures are must complete contracts between the buyer of the future and the seller. With oil, the contract must be sold before the exercise date if you don’t want to take delivery. The price of the contract is small compared to the amount of oil being ‘controlled’ by it. This is extreme leverage. Oil futures trade in amounts of 1000 barrels or 42,000gallons. At $140/barrel, that translates to controlling $140,000 per contract, possibly with as little as $100 per contract. The problem is the price movement.. which can be a doozy.
The thing that has to be remembered is that the whole thing nets out to 0. All the futures will have to be delivered. Too many futures bought early on means too much oil ready for delivery and the speculator gets screwed because they have to find a place to put/sell it.
What is meant by selling off oil, natural gas gathering, transportation and storage assets to meet obligations; is that these items are having to be sold to make good on the underwater futures contracts. It will be interesting to find out how much is left for debtor in possession recovery.
And as for ‘run by Bush Senior’, that is also incorrect. Try Louis Gerstner who is Chairman. Bush Senior acted as adviser for Asian affairs: 4/1998-10/2003. Also CalPERS(California Public Employees Retirement System) is one of the largest holders of Carlyle group.
