In “Magnum Hunter Looks to Follow Sabine with Rejecting Pipeline Deal,” Reuters Legal explores the repercussions of a ruling whereby energy producers can sever pipeline contracts—a major setback for oil and gas pipeline companies in the sector.
In a prior court ruling, Sabine was allowed to dismiss a pipeline contract, which was the first major trial over whether Chapter 11 bankruptcy could be used to get out of midstream agreements. The ruling increases the sector's exposure to the energy industry's hard times, as well as increasing the risk for master limited partnerships (MLPs) that manage oil and gas infrastructure. The ruling was an impediment to pipeline operators that have been arguing that contracts for transporting oil and gas are basically bankruptcy-proof. Now, on the heels of the Sabine ruling, Magnum Hunter has also waged a contract dispute.
Bankruptcy & Restructuring partner Stephen Rutenberg weighed in on the consequences of the decision, explaining, "This decision, particularly if followed by other courts, could lead to an increase in bankruptcy filings by upstream energy exploration companies as a means to shed or renegotiate their pipeline contracts."
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