Oil and gas bonds in focus, playing ‘catch up’ as oil prices surge higher; sector ends mixed

By Stephanie N. Rotondo

Seattle, Jan. 30 – Oil prices surged in the final hour of Friday trading, according to a trader, but that strength was only slightly felt in the distressed debt arena.

“We’re playing catch up now,” he said.

California Resources Corp.’s bonds were “up immediately by a couple points” as oil spiked, the trader noted. He saw the 6% notes due 2024 in an 82 to 83 context, versus previous levels around 81.

The 5½% notes due 2021 were placed around 85, up from 84, while the 5% notes due 2020 pushed up to 86¼ bid, 87 offered.

Comstock Resources Inc. was also higher. A trader pegged the 7¾% notes due 2019 at 51½, up almost a point. The 9½% notes due 2020 closed at the same level, up over a point on the day.

SandRidge Energy Inc. was another name that was trending higher, but that particular name has been moving into higher territory all week. A trader called the 7½% notes due 2021 almost a point better at 70.

CGG, Hercules fall

But not all oil and gas credits were faring better during the session.

CGG SA, a seismic data provider to the oil industry, saw its 6½% notes due 2021 slipping half a point to 77.

Hercules Offshore Inc.’s 7½% notes due 2021 meantime closed around 34¾, down 10 points from the last trades in December, a trader said.

The offshore oil driller said earlier in the week that it was taking five more of its Gulf of Mexico rigs off the market this year.

Also softer were Linn Energy LLC’s 8 5/8% notes due 2020, which dipped half a point to 79½.

And Energy XX I Gulf Coast Inc.’s bonds were straddling the line, as its 7½% notes due 2021 closed a point higher at 46 and its 7¾% notes due 2019 ended a quarter-point weaker at 46¾.

Oil prices were up 7% to 8% in the final minutes of trading on Friday, though they settled back in slightly lower than the intraday high. Some were speculating that the price hike was due to a report from Baker Hughes that indicated the number of rigs drilling in the United States had fallen 7%. That in turn caused some to opine that a slowdown in U.S. oil production would come sooner rather than later.

However, others attributed the rise to month-end short-covering and profit-taking, given that prices have been relatively stable over the last two weeks.

West Texas Intermediate crude gained $2.99, or 6.71%, to end at $47.52 per barrel. Brent crude meantime broke through the $50.00 mark, closing at $52.16 – up $3.03, or 6.17%.

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