Distressed oil, gas bonds mixed as crude hits six-year low; Peabody hires advisor; Verso falls

By Stephanie N. Rotondo

Phoenix, Aug. 13 – Crude oil prices fell to a six-year low on Thursday, but fresh economic data appeared to stem losses in the distressed oil and gas space.

“I would have expected some of the oil names to trade lower,” one trader said, adding that the mixed performance of the equities seemed to limit the distressed arena from sliding too much.

West Texas Intermediate crude oil declined $1.09, or 2.52%, to $42.21 a barrel, as new data showed domestic stockpiles were again on the rise.

However, a gain in retail sales and a decline in jobless claims seemed to appease investors.

A handful of oil and gas bonds even improved on the day, despite the lower crude price.

California Resources Corp.’s 6% notes due 2024 was one such issue. A trader called the paper up half a point at 75¼. Consol Energy Inc.’s 5 7/8% notes due 2022 were also deemed just slightly better at 73½.

At another desk, a market source saw Chesapeake Energy Corp.’s 6 5/8% notes due 2020 inching up a point to 79 bid. However, a second source said that issue fell half a point to 78.

SandRidge Energy Inc. was another name that got mixed reviews on the day. One source pegged the 7½% notes due 2020 at 25 bid, up half a point. Another called the 7½% notes due 2023 steady at 24½.

Energy XXI’s 11% notes due 2020 also “rebounded a touch,” according to a trader. He saw the notes trading up to 64, which he said compared to levels around “61-ish” on Wednesday.

Those notes had been pressured in midweek trading on reports the company was struggling to get a debt swap agreement together. Come Thursday, the company released an operations and production update for fiscal 2016.

For the fiscal year, the company said it is expecting to produce 54,000 to 59,000 barrels of oil per day. Capital expenditures were estimated at $130 million to $150 million.

There were still signs of weakness in the sector, however.

Seventy Seven Energy’s 6½% notes due 2022, for instance, declined 1½ points to 49, a trader said.

He noted that the issue hadn’t traded for awhile.

EXCO Resources Inc.’s 7½% notes due 2018 were also deemed weaker, falling nearly a point to 37½.

Peabody firms

Elsewhere in energy, a trader said coal producer Peabody Energy Corp. experienced “a little correction” in Thursday trading.

Another trader reported that the company had hired BofA Merrill Lynch to advise on the sale of its Australian coal assets.

The first trader saw the 6¼% notes due 2021 rising almost 2 points to 27¾, while the 6% notes due 2018 gained about the same amount, ending at 33 5/8.

He also saw the 10% notes due 2022 closing up 1½ points at 47½.

The second trader said the 10% notes “traded up a touch” to a 47½ to 48 context.

Verso loses strength

Verso Paper Corp.’s 11¾% notes due 2019 came in on Thursday, though sources were not sure what had caused the drop.

The bonds had been up earlier in the week after the company’s reported its second-quarter results.

A trader pegged the notes at 30¼, off “almost 6 points.”

The Memphis-based papermaker released its second-quarter results on Tuesday, reporting a wider net loss of $60 million.

That compared to a loss of $42 million the year before.

Despite the wider loss – attributed in large part to the company’s acquisition of NewPage – net sales jumped 142% to $778 million.

The bump in sales was also attributed to its NewPage acquisition.

In late July, Verso’s debt had taken a hit on a report that showed coated-paper prices had fallen about $20 per ton in that month alone. That report came about a week after Verso made a $79 million interest payment that some investors doubted would be made to begin with.

© 2015 Prospect News.
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