Sabine can reject midstream contracts, judge rules in closely-watched case

• A U.S. bankruptcy judge says Sabine Oil & Gas (OTCPK:SOGCQ) can reject contracts with midstream companies it made before oil and gas prices plunged.
• But the judge says her ruling is not binding, potentially setting the stage for another legal battle over the pipeline operators' argument that the agreements cannot be broken because they are inextricably tied to the land on which Sabine operates.
• The ruling covers agreements with two companies, including an affiliate of Cheniere Energy (NYSEMKT:LNG), that gather natural gas for Sabine in specific geographic locations; Sabine has said that rejecting the contracts could save as much as $115M for the bankruptcy estate.
• Restructuring and energy experts have warned that a loss for Sabine's pipeline operators could inspire other bankrupt oil and gas producers to seek similar relief, spreading the distress that has plagued them to the midstream companies that process and transport oil and natural gas.
• Similar requests are pending in the chapter 11 cases of companies including Quicksilver Resources (OTCPK:KWKAQ) and Magnum Hunter Resources (OTCPK:MHRCQ); a Delaware judge is expected to rule on KWK's request by the end of the month.
• Pipeline stocks include: KMI, ENB, EEP, SE, SEP, WMB, ETE, ETP, OKS, PAA, PBA, MMP, CQP, BWP, BPL, WES, SXL, NS, NSH, TCP, NGL, DPM, GEL, HEP, APL, SEMG, TLLP, MMLP, TLP, SGU, BKEP