Denbury debt rises despite reporting loss; oil bonds up as crude erases gains; Freddie posts earnings

By Stephanie N. Rotondo

Seattle, Feb. 18 – Distressed bonds were again firm Thursday, as initial gains in crude oil prices helped the struggling oil and gas space continue to climb up.

However, the early gains seen in the commodity eventually faded, causing domestic crude to drop about 1% to $30.35 a barrel.

The commodity had neared $32 a barrel in early trading.

Crude reversed course after the U.S. Energy Information Administration said stockpiles rose 2.1 million barrels last week. Inventories of gasoline and distillates were also higher.

Oil prices have been rising recently as top producers such as Saudi Arabia, Russia, Venezuela and Qatar have proposed freezing production at January levels. Iran, however, has been non-committal on the idea, which has led Iraq to take a wait-and-see approach.

As such, there remains doubt as to whether a freeze could eventually be implemented.

But despite crude’s decline, oil and gas-linked debt was riding the wave upward.

Denbury Resources Inc. paper followed the opposite trajectory of oil, initially starting out weaker and ending stronger. The gyrations came as the company reported a surprise loss for the fourth quarter.

Elsewhere in the sector, Whiting Petroleum Corp.’s 5% notes due 2019 inched up half a point to 48, on “pretty good volume,” a trader said. The 6¼% notes due 2023 were up a similar amount at 47½.

Another market source said Canadian oilsands producer MEG Energy Corp.’s 7% notes due 2024 rose over 2 points to 39¾, while Chesapeake Energy Corp.’s 6 5/8% notes due 2020 put on a point to close at 18½.

Even SandRidge Energy Inc. was better, with a source pegging the 7½% notes due 2021 at 7, up a point.

Standard & Poor’s downgraded SandRidge on Thursday after the Oklahoma City-based company said Wednesday it would not make $21.7 million in interest payments due on its 7½% senior notes due 2023 and 7½% senior convertible notes due 2023.

S&P cut SandRidge’s corporate credit rating to D from SD and its second-lien debt to D from B. The agency said the actions reflected the belief that the company would not make the payments within the 30-day grace period, thereby triggering a default.

Denbury swings to loss

A trader said Denbury Resources’ debt ended with a firm feel, even though another market source had seen the bonds softening in early trading.

The first trader saw the 4 5/8% notes due 2023 inching up over a point to 19¼, as the 5½% notes due 2022 added half a point to close at 21¼.

However, earlier in the day, a source saw the 6 5/8% notes due 2021 trading with a 23 handle, off a deuce.

For the fourth quarter, Plano, Texas-based Denbury reported a loss of $885.1 million, or $2.56 per share. On an adjusted basis, loss per share was a penny.

Revenue came to $269.6 million.

For the year, the company posted a loss of $4.39 billion, or $12.57 per share. Revenue was $1.26 billion.

Additionally, the company said it was looking to spend just $200 million in 2016 on capital expenditures. That was about half of what was spent in 2015.

Still, there were bright spots to the company’s results.

In 2015, free cash flows were $390 million. Of that amount, $220 million was used to reduce bank debt to $175 million, providing Denbury with liquidity of over $1 billion.

At the end of the year, total debt stood at $3.3 billion.

Freddie’s profit improves

Freddie Mac reported earnings early in the day, showing a larger profit than year-ago comparables.

On the news, the GSE’s 8.375% fixed-to-floating rate noncumulative perpetual preferred stock (OTCBB: FMCKJ) were heading higher, trading up 17 cents, or 5.86%, to $3.07.

Over 1.92 million shares traded during the session.

Peer Fannie Mae also saw its preferreds rising, with the 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) gaining 14 cents, or 4.81%, to close at $3.05.

About 1.95 million of those preferreds changed hands.

For the fourth quarter, Freddie reported a profit of $2.16 billion, which compared to a profit of $227 million the year before.

The mortgage giant attributed the surge in profit to higher credit performance and better derivative bets.

Freddie plans to make pay $1.7 billion of said profits to the Treasury, bringing the total given back to taxpayers to over $98 billion. The agency received over $71 billion in bailout funding in 2008.

Fannie is slated to release its quarterly results on Friday.

© 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.