SandRidge bonds give up recent gains; Energy XXI comes in; Walter lower as coupon payment made

By Stephanie N. Rotondo

Phoenix, May 8 – The distressed debt market ended the week with a positive tone, but the day’s strength did not benefit everyone.

SandRidge Energy Inc. and Energy XXI – both of which had earnings out late Wednesday – saw their bonds in retreat during the session. SandRidge paper had previously been climbing higher, while Energy XXI was mostly steady.

Also weaker was Walter Energy Inc., though a trader noted that there was a good reason for softness in the coal producer’s debt. The company said Thursday that it would in fact make a coupon payment that came due April 15. As such, the bonds – which had previously been trading flat, or without accrued interest – began trading with interest once again, pushing the paper lower.

Advanced Micro Devices Inc. was meantime continuing to move upward. The chipmaker’s debt began to trade up around midweek after the company laid out a new profitability strategy at an analyst day conference.

SandRidge retreats

SandRidge Energy debt was giving up gains in Friday trading, according to a trader.

The trader said the 8 1/8% notes due 2022 were off 1¾ points to 71½. Both the 7½% notes due 2021 and the 8¾% notes due 2020 declined over 2 points, he said, ending at 72 and 77, respectively.

Another market source placed the 2021 issue at 72 bid, down 2¼ points.

On Friday, Moody’s Investors Service cut its rating on the Oklahoma City-based oil and gas company to B3 from B1, citing high leverage concerns and hedging risks.

The downgrade comes just a couple days after the company reported its latest quarterly results.

In addition to seeing a 36% gain in total production for the quarter, SandRidge reported adjusted EBITDA of $182 million, up from $169 million the year before. Adjusted earnings came to $2.3 million, versus $29.5 million the year before.

Still, total net loss surged to over $1 billion. That compared to a loss of $136.34 million the year before.

Energy XXI trickles down

Like SandRidge, Energy XXI was trending lower during Friday’s session, following its own earnings release earlier in the week.

A trader saw the 6 7/8% notes due 2024 at 40½, down half a point. The 7% notes due 2019 meantime closed nearly half a point softer at 49 5/8.

The Houston-based oil and gas company reported its fiscal third-quarter results late Wednesday, showing an adjusted loss that missed expectations.

For the quarter, Energy XXI posted a net loss of $587.2 million, or $6.22 per share. On an adjusted basis, the loss was $102.3 million, or $1.08 per share.

Revenue was $260.2 million.

Analysts polled by Thomson Reuters expected an adjusted loss per share of $1.01, on revenue of $270.9 million.

Production improved by 2,100 BOE/d during the quarter.

The company ended the quarter with $725 million of liquidity.

Walter to make coupon payment

Birmingham, Ala.-based Walter Energy saw its bonds weaken on Friday after the company said Thursday that it would make an interest payment on its 9 ½% notes due 2019 and its 8½% notes due 2021.

The payments came due April 15.

“Levels on the bonds were lower, but it was because they were trading with [accrued interest],” a trader said.

He placed the 9½% notes around 61.

“People were surprised they made the coupon,” the trader noted.

Walter noted in a press release published Thursday that it intended to continue restructuring negotiations with noteholders.

Elsewhere in the coal space, a trader said Arch Coal Inc.’s 7% notes due 2019 fell a point to 20¼, though its 7¼% notes due 2020 rose a point to 35½.

AMD gains traction

Advanced Micro Devices’ bonds continued to rebound in Friday trading.

The bonds began to gain momentum on Wednesday, as the company held its first analyst day since 2012. During the presentation, the company laid out a new strategy intended to help it return to profitability in the second half of the year.

A trader saw the 7% notes due 2024 up 2¼ points at 82½. The 7¾% notes due 2020 were pegged at 86 5/8, up a deuce.

At another desk, a source placed the 7½% notes due 2022 at 88½ bid, up nearly 6 points on the day.

For 2014, AMD posted a loss of $403 million, or 53 cents per share, on revenue of $5.5 billion. The Sunnyvale, Calif.-based company said it was aiming to reach long-term annual earnings of 50 cents per share.

That goal will be achieved in part by paring down the amount of products offered, the company said. Its goal would be to do fewer things, but better.

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