Bankruptcy's end means payouts to oil producers

12/11/2010 12:00 AM

12/11/2010 2:52 AM

The long bankruptcy of Central Kansas Crude is nearing its end, promising a partial payback to dozens of small oil producers in Kansas.

Central Kansas Crude, based in Pratt, was a middleman in Kansas and Oklahoma, picking up oil from small producers and delivering it to national oil distributor and marketer SemCrude.

When SemCrude declared bankruptcy on July 21, 2008, after collecting a month's worth of oil from producers large and small across the region, Central Kansas was left facing claims worth millions of dollars.

After struggling for months to remain in operation, Central Kansas declared bankruptcy Nov. 17, 2009.

On Tuesday, the bankruptcy court in Wichita is scheduled to rule on a final settlement that completes the liquidation of Central Kansas Crude and divides $7.3 million among the mainly small Kansas and Oklahoma producers.

"The bankruptcy is essentially over," said Jack Marvin of Stinson Morrison Hecker, who is representing Chieftain Oil Co. of Kiowa.

The attorney representing Central Kansas Crude did not return calls seeking comment.

The money comes from the settlement Central Kansas received from the SemCrude bankruptcy.

"I think it was a favorable outcome for the independent oil producers," said Rick Griffin, an attorney with Martin Pringle who represents several claimants.

Central Kansas had a good reputation with its customers, Griffin said, and through no fault of its own got crushed between its suppliers and its customer.

"It was one of the local companies that was doing good work and providing a good service to its customers," Griffin said.

He said checks for the producers probably will be written by the end of the month.

Producers will receive about 35 to 45 percent of the value of their July oil production and 2 to 3 percent of the value of their June oil production. Federal bankruptcy law gives assets delivered in the 20 days immediately before a bankruptcy declaration greater protection than assets delivered earlier.

"Even with that result, it could have been worse," Marvin said.

Thirty companies with Kansas headquarters are listed as having secured claims valued at $4.4 million. Another group of Kansas companies had signed agreements to settle claims, and they will receive part of another $3.9 million.

A number of larger Kansas producers contracted with SemCrude directly and received separate settlements during that case.

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