Oil’s third consecutive gain boosts oil, gas names; iron space rises, Citi sees prices hit $30

By Stephanie N. Rotondo

Phoenix, April 13 – Distressed debt investors were once again keeping an eye on commodities as the overall distressed space ended Monday’s session with a firmer tone.

The oil and gas arena was helped by a third consecutive gain in oil prices. The gains came as the U.S. Energy Information Administration said it expected U.S. production to begin declining amid record stockpiles.

Furthermore, OPEC said reiterated in its monthly bulletin that it alone would not be responsible for bringing stability back to the oil markets, calling for non-OPEC members to also squash production.

West Texas Intermediate crude finished up 32 cents at $51.96 per barrel. Brent crude had a more tepid gain, rising just 9 cents to $57.96.

But modest gains or no, oil and gas names were trending higher.

A trader saw EXCO Resources Inc.’s 7½% notes due 2018 and its 8½% notes due 2022 both closing up a quarter-point at 66¾ and 60, respectively.

Halcon Resources Corp. meantime continued its upward path. The trader said the 8 7/8% notes due 2021 were “kind of active” and nearly 1½ points better at 78.

The bonds began to move up on Thursday, when the company said it had agreed to swap debt for equity with funds managed by Franklin Investments Inc.

In SandRidge Energy Inc. paper, a trader said the 8 1/8% notes due 2022 jumped a deuce to 66¼. Another market source saw the 7½% notes due 2021 at 67¾ bid, up a point on the day.

Seventy Seven Energy Inc.’s 6½% notes due 2022 were another big gainer, improving 8 points to 55½, according to a trader.

And, MidStates Petroleum Co. Inc.’s 9¼% notes due 2021 ended a point higher at 52¾.

Not all oil and gas names could be winners, however. A trader said Energy XXI’s 7½% notes due 2021 closed the session 1½ points weaker at 39.

Iron up, coal mixed

Among other commodities, the trend of the day was similar to that of the oil and gas sector.

In the iron ore arena, a trader saw Cliffs Natural Resources Inc.’s 4 7/8% notes due 2021 putting on over 3 points to close at 45¼. The 5.95% notes due 2018 added half a point, ending at 70¾.

FMG Resources’ 6% notes due 2017 finished up half a point at 97 bid, according to a second source.

The upward move in that space came as Citigroup released a report opining that prices for iron ore – currently sub-$50 – could fall to as low as the $30s, especially if larger producers like Rio Tinto and BHP don’t cut production.

The sector is already plagued by oversupply amid decreasing demand.

Meanwhile, coal names were seen ending the day mixed.

One trader called Alpha Natural Resources Inc.’s 6¼% notes due 2021 down half a point at 24 and Peabody Energy Corp.’s 6¼% notes due 2021 a quarter-point weaker at 59¾.

However, another source deemed Peabody’s 6½% notes due 2020 up 1½ points at 63½ bid.

Activity muted ahead of earnings

Overall, a trader said there was “not a lot of activity in distressed stuff at all.”

The limited liquidity came as really no surprise, however, given that the equity markets were slipping as investors prepared for the official kick-off to earnings season.

Looking forward to Tuesday, JPMorgan Chase & Co. will get the ball rolling in the “big bank” sphere when it releases its latest quarterly results ahead of the market’s open. Intel Corp. will bring its earnings after the market closes, carrying the torch for blue chip companies.

© 2015 Prospect News.
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