Business Case Studies, Financial Management & Corporate Finance Case Study, Indage Vintners Limited

Code : FCF0020

Year : 2011

Industry : Energy

Region : USA

Teaching Note:Not Available

Structured Assignment :Not Available

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Introduction:When oil prices increased in the summer of 2008 to $147 a barrel, one of the major corporate sufferers was oil pipeline giant SemGroup Holdings (SemGroup), a $14 billion (sales) private firm in Tulsa, US. SemGroup ended up with losses of $3.2 billion in options trading, including $290 million personally controlled by the chief executive Thomas Kivisto .

The company suffered huge losses as oil prices increased to record levels, undercutting the short crude futures positions the company had entered into in options trading with J. Aron & Co., (the commodities division of Goldman Sachs ) to hedge against its 500,000 barrels-per-day oil trading business. On an average, its short positions were equivalent to 20% of the US's crude oil inventories. On July 17, SemGroup's co-founder and chief executive, Thomas L. Kivisto (Kivisto), was placed on administrative leave. Finally, SemGroup filed for bankruptcy in the Delaware federal court on July 22, 2008, due to the credit crunch. This put paid to any hopes of its meeting its huge margin call requirements...