Morning Commentary: OPEC concerns pressure crude prices, energy-linked convertibles; AMD firms

By Stephanie N. Rotondo

Seattle, Nov. 29 – Convertible energy bonds were weakening early Tuesday as increasing concerns about a production cut agreement from OPEC pressured crude oil prices.

Domestic crude dropped as much as 4% in early trading, on talk that Iran and Iraq are pushing back against a deal and Russia – a non-OPEC producer that had previously been in talks with the cartel on the cut – said it would not attend the discussions this week.

In response, Chesapeake Energy Corp.’s 5.5% convertible notes due 2026 dipped to 97.775 bid, 98.295 offered, according to a market source. That compared to previous levels around par.

Weatherford International Ltd.’s 5.875% exchangeable senior notes due 2021 were also softer, opening with a 99 handle and then trading down to 98.75.

On Monday, the Weatherford exchangeables were trading at 102.75.

As for the equity underlying the issues, that was also trending lower.

Chesapeake’s stock (NYSE: CHK) was off 6 cents at $6.28, while Weatherford’s shares (NYSE: WFT) declined 39 cents, or 8.42%, to $4.18.

Away from energy, Advanced Micro Devices Inc.’s 2.125% convertible notes due 2026 were up about a point outright in early dealings.

A market source quoted the issue at 130.5 bid, 131.75 offered.

The stock (Nasdaq: AMD) was similarly higher, inching up 31 cents, or 3.45%, to $9.14 by mid-morning.

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