Distressed oil, gas bonds reverse course as crude prices get beaten down; Peabody outperforms

By Stephanie N. Rotondo

Phoenix, July 31 – The distressed debt market saw weakness reemerge in the commodity space on Friday, following a sizable decline in benchmark crude oil prices.

“All that stuff that was way up came way back,” a trader said.

West Texas Intermediate crude fell $1.62, or 3.34%, to $46.90 a barrel on Friday. The drop came as a Reuters survey indicated OPEC nations intended to continue churning out oil at record highs, despite the volatility in the market. It was also reported Friday by Baker Hughes that five additional domestic drilling rigs began pumping during the last week.

In response, several oil and gas names were taking hits.

A trader said there was “many, many trades” in SandRidge Energy Inc.’s 8¾% notes due 2020. He deemed the issue down 2½ points at 78.

California Resources Corp.’s 6% notes due 2024 were also busy, the trader said, seeing the paper falling almost 3 points to 79¾.

Even Linn Energy LLC, which had run up recently following its latest earnings release, gave up some of its gains.

A trader pegged the 6½% notes due 2019 at 61½, down nearly 2 points on the day. The 8 5/8% notes due 2020 weakened 3 points to 62, as the 7¾% notes due 2021 declined over 2 points to 58¾.

For its part, Key Energy Services Inc. remained under pressure. Its 6¾% notes due 2021 lost “another point” in Friday trading, a trader said, placing the notes at 49 7/8.

The issue had dropped almost 5 points in Thursday trading as the market reacted to the company’s latest quarterly results.

Away from oil and gas bonds, Peabody Energy Corp. continued to outperform in the coal sector, according to market sources.

One source said the 6¼% notes due 2021 held steady at 28¼. Another source saw the 6½% notes due 2020 rising almost a point to 29¾ bid.

Peabody held up as sector peer Alpha Natural Resources Inc. – which is said to be preparing a bankruptcy filing for Monday – saw its 9¾% notes due 2018 trade at 3 cents on the dollar.

“That one has been sub-10 since mid-June,” a trader said. However, he noted that the paper had traded at 1 earlier in the week.

© 2015 Prospect News.
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