Morning Commentary: Slumping oil sends energy names lower; Cobalt, Goodrich fall; Priceline down

By Rebecca Melvin

New York, Nov. 4 – Convertibles of energy companies fell in early trade Tuesday in response to a tumble in oil prices after Saudi Arabia cut its prices for crude sold in the United States.

West Texas Intermediate crude extended losses from Monday, sliding 2.8% to $76.58 a barrel at late morning in New York, after reaching as low as $75.84.

“Today’s really about oil; it’s going lower caught a lot of people by surprise, and names in energy and the E&P sector are really getting hit hard,” a New York-based trader said.

Cobalt International Energy Inc.’s two convertible bonds slid to the low 70s from the high 70s early Tuesday. They were close to their all-time lows notched in the mid October plunge, the trader said.

The Cobalt 2.625% convertibles were seen at 70 to 71, and the Cobalt 3.125% convertibles were seen at 71 to 71.5 with the underlying shares at $9.80.

“That’s down about 7.5 points” on the day, the trader said.

In addition to the oil price drop, Cobalt reported disappointing third-quarter earnings. Shares of the Houston-based oil and gas company were down $1.73, or 15%, at $9.65.

Goodrich Petroleum Corp.’s 5% convertibles due 2019 slid about 7 point to 75.

Shares of the Houston-based oil and gas company were bouncing back a bit at late morning and were last seen down 5% at $7.29. Goodrich also posted disappointing quarterly results.

Priceline Group Inc.’s convertibles also fell in the early going on Tuesday after the Norwalk, Conn.-based online travel company posted positive earnings but disappointed investors with its current quarter earnings guidance. The company said it expected earnings of $9.40 to $10.10 per share for the quarter, which was below the $10.91 per share expected.

Shares of Herbalife Ltd. also tanked on Tuesday after the company’s disappointing earnings release late Monday. Herbalife’s 2% convertibles were not yet heard. And Regeneron Pharmaceuticals Inc. was in focus after the Tarrytown, N.Y.-based biotechnology company cut its full-year sales forecast for its Eylea macular degeneration drug.

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