Goodrich, peers weaken as OPEC sees lower demand for oil in 2015; Conn’s holds post-earnings

By Stephanie N. Rotondo

Phoenix, Dec. 10 – The oil and gas sectors remained the focus of distressed debt investors on Wednesday following a new report from OPEC that further depressed oil prices.

The pressure on oil came on the heels of news regarding OPEC and its projected demand for its product in 2015. The oil-selling group – which includes countries like Saudi Arabia, Iraq and Kuwait – reduced its projections by 300,000 barrels per day to 28.9 million per day – the lowest output level seen since 2003.

Additionally, Saudi Arabia, Iraq and Kuwait in particular were said to be offering the deepest discounts in six years to its Asian customers.

However, comments made by the Saudi oil minister concerned investors. Ali Al-Naimi intimated that he saw no reason to cut production of oil while responding to reporters’ questions at a United Nations meeting on climate change in Lima, Peru.

Away from those areas, a trader said Conn’s Inc. was holding steady after getting slaughtered in the previous session. Tuesday’s weakness was attributed to a new quarterly report, which showed a surprising swing to a loss.

Goodrich under pressure

Goodrich Petroleum Corp.’s debt was weaker Wednesday, trending in line with the broader markets.

The company also released a capex and operational update on Wednesday.

A trader said the 8 7/8% notes due 2019 declined over 2 points to 53¾.

Goodrich’s preferred issues were also trading down with the market.

The 10% series C cumulative preferreds (NYSE: GDPPC) were off $1.18, or 12.05%, to $8.61, while the 9.75% series D cumulative preferreds (NYSE: GDPPD) fell $1.12, or 12.51%, to $7.83.

As for oil prices, West Texas Intermediate crude oil declined $2.51, or 3.93%, to $61.31 per barrel. Brent crude dropped $2.20, or 3.29%, to $64.64 – the first time the commodity has traded below the $65 mark in at least five years.

Along with the continued retreat of oil, Goodrich also had news of its own on Wednesday.

In a press release issued early in the day, the Houston-based company said it had cut its preliminary capex budget to $150 million from $200 million. Going into the fourth quarter, the company said it had $134.2 million of pro forma liquidity, not counting an expected $20 million reduction due to the sale of its East Texas Cotton Valley assets.

Goodrich opined that the funds would be enough to execute its capital plan.

The company also said that it was looking at ways to divest its Eagle Shale Ford assets, “which would significantly enhance the company's flexibility to further expand its development activities under better market conditions.”

Oil and gas losing steam

But Goodrich wasn’t the only oil name losing ground during midweek trading.

In the preferred stock space, Vanguard Natural Resources LLC’s 7.875% series A cumulative redeemable preferred units (Nasdaq: VNRAP) were also weak, but not as much as Goodrich on a percentage basis.

That issue finished down 19 cents at $19.05.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) ended the day off 29 cents, or 1.54%, at $18.50.

“I’m sure somebody is looking to dump it,” a source said, noting that the units were among the day’s most actively traded securities.

Back in the corporate bond world, a trader said Hercules Offshore Inc.’s 7½% notes due 2021 fell over a point to 44½, though the 8¾% notes due 2021 were deemed unchanged at 48¼.

At the Wells Fargo energy symposium in New York on Wednesday, Hercules’ management said liquidity was key to surviving the current volatility in the energy arena. The Houston-based provider of offshore services to the oil industry currently has about $350 million of liquidity and no debt maturities until 2019.

SandRidge Energy LLC’s 7½% notes due 2021 were meantime pegged at 59¼, off 10 points from Friday levels.

“There are some issues there,” a trader said, pointing to accounting issues that were announced in early November. Because of the issues, the company might have to restate some of its earnings.

As such, it has delayed filing its most recent quarterly report.

A trader also noted that California Resources Corp.’s recently priced debt – the issues priced Sept. 11 – were “very active” and amply softer.

The 6% notes due 2024 fell “3 and change” points to 83¼, on “almost $50 million” in trades. The 5½% notes due 2021 declined 2½ points to 83 7/8.

Hexion infected

A trader said that Hexion Specialty Chemicals’ bonds have been infected with the oil price “contagion” of late, noting that the bonds “really cracked” in Tuesday trading.

According to the trader, the 9% second lien notes due 2020 hit 59 on Tuesday – where it managed to hold in at on Wednesday – which was a 12-point decline.

Over the course of the month, the trader said the debt has lost about 20 points.

“It’s a name that has definitely gotten hammered,” he said. “They have some exposure to E&P.”

In fact, the Ohio-based company sells sands and proppants to the fracking industry.

Conn’s steady – for now

Woodland, Texas-based home goods retailer Conn’s saw its 7¼% notes due 2022 – a Rule144A deal – holding its ground on Wednesday after get beat down on Tuesday.

A trader said the debt closed Wednesday’s session around 71, which was “in line with where it was” on Tuesday. Prior to that, the bonds had been trading around 87.

The trader said Tuesday’s drop came as the company put out “weak numbers” and withdrew its forecast.

“So obviously they took a beating,” he said.

For the third quarter, the company reported a surprise loss of $3.06 million, or 8 cents per share. That compared to a profit of $24 million, or 66 cents per share, the year before.

Revenue improved 19%, however, to $370 million, reflecting the addition of 17 stores in the last year. But same-store sales declined 1%, due in large part to tighter credit standards.

Analysts polled by Thomson Reuters had predicted a profit of 68 cents per share on revenue of $377 million.

Along with the earnings release, Conn’s announced that Brian Taylor, chief financial officer, was resigning, effective immediately. The company also said that it was creating a credit risk and compliance committee to look into its belabored credit operations, which has been underperforming.

Elsewhere in the world of retail, a trader said Claire’s Stores Inc.’s 8 7/8% second-lien notes due 2019 fell a point to 78.

Another trader also deemed the issue down a point, at 78¼.

RadioShack Corp.’s 6¾% notes due 2019 were then seen unchanged at 22. Gymboree Corp.’s 9 1/8% notes due 2018 were also steady, ending at 33½.

Quiksilver Inc.’s 7 7/8% notes due 2018, however, were “down a few points,” according to a trader.

He placed the issue at 83. There was no news to act as a catalyst, he said, “just a weaker market.”

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