Sabine Contract Ruling May Spur More Driller Bankruptcies

By Keith Goldberg (March 9, 2016, 5:31 PM EST) -- A bankruptcy judge's ruling that Sabine Oil & Gas Corp. can ditch midstream contracts because they didn't relate to the company's drilling operations will encourage more cash-strapped producers to file for bankruptcy in order to shed unfavorable deals and ratchet up the financial risks for pipeline companies and other midstream firms, experts say.

U.S. Bankruptcy Judge Shelley C. Chapman said Tuesday that Sabine could reject three covenants for gas and condensate gathering services with Nordheim Eagle Ford Gathering LLC and HPIP Gonzales Holdings LLC, saying the company exercised reasonable business judgment and the companies presented no evidence in challenging that judgment....

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