Chesapeake, California Resources weaken; Momentive earnings drag down chemical names

By Stephanie N. Rotondo

Seattle, Nov. 13 – A distressed debt trader said “oil and gas stuff just got hit” Friday as crude oil prices experienced the largest weekly loss in eight months.

West Texas Intermediate crude declined 2.28% to $40.80.

On Thursday, the U.S. Energy Information Administration reported its seventh consecutive week of inventory gains. Come Friday, active U.S. oil rigs increased for the first time in 11 weeks.

Additionally, the International Energy Agency issued a report that said there were about 3 billion barrels of crude and oil products sitting in warehouses around the globe. The agency also opined that a mild winter will only serve to fuel the oil glut as demand declines.

In the wake of the crude declines, Chesapeake Energy Corp.’s bonds “got whacked,” a trader said.

The trader saw the 6 5/8% notes due 2020 falling to “58-ish” from 62.

Another trader said there was “lots of volume” in Chesapeake’s debt. He pegged the 6 5/8% notes at 58½, off over 3 points. The 5¾% notes due 2023 declined a deuce to 52¾, he said, as the 3.57% notes due 2019 weakened 1½ points to 56¼.

Meanwhile, there were “tons of trades” in California Resources Corp.’s 6% notes due 2024, according to a trader. He called the issue down 3 points at 62.

As for the 5½% notes due 2021, they were down nearly 1½ points at 64½, while the 5½% notes due 2020 slipped “about 2 points” to end at 67.

A second trader saw the 6% notes dropping 3 points to a 62 to 63 context.

On Thursday, California Resources announced an exchange offer for up to $1 billion of the notes for new 8% second-lien notes due 2022.

Among oil and gas preferreds, Goodrich Petroleum Corp.’s 9¾% series D cumulative preferreds (NYSE: GDPPD) gyrated in trading, declining 8 cents, or 4.76%, to $1.60 early in the session. However, the issue staged a comeback, ending the day up 2 cents, or 1.2%, at $1.70.

The 10% series C cumulative preferreds (NYSE: GDPPC) were not as lucky, closing off 12 cents, or 6.98%, at $1.60.

Breitburn Energy Partners LP’s 8¼% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) were meantime initially off 21 cents, or 2.05%, at $10.02, but ultimately finished down just 2 cents at $10.21.

Chemical sector leaks

Elsewhere in the distressed arena, a trader said there was “weakness in a bunch of chemical names” following Momentive Performance Materials Inc.’s earnings release.

For its part, Momentive’s 3.88% notes due 2021 were deemed down 10 points at 70. The trader also saw Hexion Inc.’s 8 7/8% notes due 2018 losing “4 or so [points]” to end at 72.

At another desk, Momentive’s 3.88% notes were called “down a lot, 10 points from the last trade on Nov. 9,” a trader said.

The trader placed the issue at 69¾.

For the third quarter, the Waterford, N.Y.-based specialty chemical maker saw net sales decline 11% to $559 million. The company attributed a majority of the drop to a stronger U.S. dollar.

Segment EBITDA decreased 35% to $41 million.

At the end of Sept. 30, total debt stood at $1.2 billion, unchanged from Dec. 31, 2014. Liquidity was $374 million, including $161 million of unrestricted cash and equivalents and $213 million available under a senior secured asset-based revolving loan facility.

Given the current state of the market, Momentive said in its earnings release that it was “initiating a global restructuring to reduce costs and expects the program to improve its results by $25 million in 2016.”

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.