Goodrich rises despite earnings miss; SandRidge profit improves, but bonds dip; Hercules slides

By Stephanie N. Rotondo

Phoenix, Feb. 27 – Friday was a big news day for distressed names, as several companies released earnings and one announced a tender offer.

Goodrich Petroleum Corp. put out its fourth-quarter results early in the session, reporting a loss. The company also announced a new second-lien issue and that it had extended its first-lien loan maturity until 2017.

That news, combined with a gain in oil prices, helped the company’s debt gain ground.

West Texas Intermediate crude gained $1.10, or 2.28%, closing at $49.27 per barrel. Brent crude rose $2.01, or 3.35%, to $62.06.

Also in the energy arena, investors were reacting negatively to SandRidge Energy Inc.’s own earnings release, which came out after the market closed on Thursday.

Like Goodrich, the company said it had amended a loan in order to avoid breaching terms.

Continuing the oil and gas trend, Hercules Offshore Inc.’s bonds remained in retreat Friday, losing as much as 5 points. The company’s debt had dropped as much as 9 points on Thursday after word of a contract termination got out.

Elsewhere in the commodity space, Cliffs Natural Resources Inc. was taking a second stab at a tender offer for its senior notes. The company had nixed a previous exchange offer in December, due to “adverse market conditions.”

However, the market did not take the news all that well and the bonds suffered as a result.

Goodrich misses estimates

Goodrich Petroleum’s earnings fell short of estimates, but its bonds were trending higher anyway, according to a trader.

The trader said the 8 7/8% notes due 2019 rose 2½ points to 44½.

In the company’s preferreds, the 10% series C cumulative preferreds (NYSE: GDPPC) ended up $1.25, or 15.53%, at $9.30. The 9.75% series D cumulative preferreds (NYSE: GDPPD) improved $1.14, or 14.25%, to $9.14..

For the quarter, the Houston-based oil and gas company posted a loss of $225.8 million, or $5.23 per share. On an adjusted basis, the loss was 47 cents per share.

Analysts polled by Zacks Investment Research had forecast a loss of 46 cents per share.

Revenue was $48.6 million for the quarter. That also came in below of expectations of $57 million.

For the full year, net loss increased to $353.1 million, or $8.62 per share. Revenue was $208.6 million.

In addition to announcing its earnings, Goodrich also said that it was planning a $100 million offering of 8% senior secured notes due 2018. The sale will include warrants to purchase up to 4.88 million common shares at an exercise price of $4.66, a 10% premium over Thursday’s closing price.

The company has the option to sell anther $75 million of the notes in the future.

The new issue was not the last of the news the company had to offer. Goodrich said that it had amended its first-lien credit facility in order to extend the maturity to February 2017. The borrowing base was also reset to $200 million and will be reduced to $150 million upon closing of the sale of the second-lien notes.

SandRidge weakens

While investors seemed to take the Goodrich news in stride, they were not as pleased with news from SandRidge Energy – even as the company reported a stronger profit.

A trader said the 7½% notes due 2021 fell nearly a point to 73 5/8, while the 8 1/8% notes due 2022 slipped a quarter-point to 72½.

The 7½% notes due 2023 fell 1½ points to 72, he said.

But another market source deemed the 2021 paper 1½ points higher at 75¼ bid.

The Oklahoma City-based company reported earnings late Thursday. For the fourth quarter, net income improved to $314.1 million, or 48 cents per share, from $73.4 million, or 6 cents per share, the year before.

However, revenue declined over 25% to $346.9 million.

For 2015, SandRidge said its capital budget would be $700 million, a 56% decline year over year. The company also said it was reducing its rig count to 7 by mid-year.

It started the year with 32 rigs.

As the company looks to deal with depressed oil prices – like its sector peers – SandRidge also chose to amend financial covenants on its senior credit facility.

The amendments are valid through June 30, 2016.

Hercules remains weak

A trader said Hercules Offshore’s debt “continued its slide,” which began Thursday after the Houston-based offshore oil producer said that one of its contracts with Saudi Aramco had been terminated.

The trader pegged the 7½% notes due 2019 at 29½, a loss of 5 points. The 10¼% notes due 2019 fell to 36½ from levels around 38.

Saudi Aramco terminated its contract for the Hercules 261 rig, though its contracts on the 262 and 266 rigs are intact. Hercules said it is in negotiations with the company to continue the contract, as well as to possibly reduce rates for the other rigs.

Cliffs attempts second tender

Cliffs Natural Resources announced plans to exchange up to $750 million of its senior notes for new 7¾% senior secured notes due 2020 in a press release on Thursday.

The exchange is the company’s second attempt to complete such an offer. A previous attempt to exchange up to $600 million of its debt for new notes was canceled in early December.

The news resulted in “tons of trades” in the 6¼% notes due 2040 in Friday trading, a trader said. He saw the issue falling 1¼ points to 65 5/8.

The 4.8% notes due 2020 were also “very active,” he said, seeing the paper drop 2 points to 69.

The 5.9% notes due 2020 declined 3 points to 71.

Under the terms of the exchange, the company will accept up to $325 million of the 6¼% notes – there is over $750 million outstanding – and in return, it will give noteholders $730 per each $1,000 of notes validly tendered.

For the 4 7/8% notes due 2021, holders will get $768.75 for each $1,000 of notes. Holders of the 4.8% notes will receive $771.25, while holders of the 5.9% notes will get $810.

The notes will be accepted on a priority basis.

There is a $50 early tender premium on each issue.

The early deadline is March 11 by 5 p.m. ET. Unless extended, the exchange will expire on March 25 at midnight ET.

Weight Watchers sinks

Weight Watchers International Inc.’s term loan B-2 declined to 52½ bid, 54½ offered from 58½ bid, 60½ offered as investors reacted to fourth quarter numbers that came out late Thursday, a trader remarked.

For the fourth quarter, the company reported revenues of $327.8 million, down 10.4% from $366.1 million in the prior year period, and a net loss of $16.1 million, or 28 cents per share, compared to net income of $30.8 million, or 54 cents per share in the previous year.

For full year 2015, the company provided earnings guidance of between 40 cents and 70 cents per fully diluted share.

Weight Watchers is a New York-based provider of weight management services.

Sara Rosenberg contributed to this article

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