Distressed bonds pare week’s gains; Whiting down as drill plan nixed; Denbury mixed; Basic Energy up

By Stephanie N. Rotondo

Seattle, Feb. 19 – The distressed debt market ended Friday with a softer tone after spending much of the week trending higher.

The softness came as the broader markets also lost momentum, driven by renewed declines in oil and a larger-than-expected rise in consumer prices that have some pondering an interest rate hike this year.

For its part, domestic crude prices declined 3.25% on the day, trading south of $30 once again.

Whiting Petroleum Corp. continued to be active, but Friday’s movements were spurred by news the company had shelved a plan to drill 20 new wells at its Bakken and Three Forks sites.

The suspension of the drill plan was attributed to the low oil price environment.

Denbury Resources Inc. meantime traded mixed in the wake of the company’s earnings release on Thursday. The company reported a surprise loss for the fourth quarter, but did end the year with significant liquidity.

Also in the oil and gas arena, Basic Energy Services Inc.’s bonds traded up a touch after the company put out its own earnings release late Thursday.

Away from oil and gas, a trader saw Intelsat SA’s 5½% notes due 2023 falling over 1½ points to 75 3/8. Another market source saw the satellite services provider’s 6 5/8% notes due 2022 sliding nearly 2 points to 63¼.

The Luxembourg-based company is slated to release earnings on Monday.

Whiting dips

A trader said Whiting Petroleum’s 5% notes due 2019 declined over a point to end at 46¾.

The move came as Bloomberg reported that the company was nixing plans to drill 20 new wells. The company is also said to have delayed a gathering pipeline project that Tesoro Logisitscs had been hired to build.

Come Wednesday, the market will get to see just how much low oil prices have impacted the company’s bottom line when Whiting’s latest quarterly results are published.

Denbury mixed

Denbury Resources bonds were mixed in trading, as a trader said the 4 5/8% notes due 2023 “caught a nice little bid,” rising over a point to 20.

However, he said the 5% notes due 2019 dipped half a point to 21.

The Plano, Texas-based oil and gas producer reported earnings on Thursday.

For the fourth quarter, 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.

Basic Energy loss widens

In other earnings news, Basic Energy Services, a Fort Worth, Texas-based provider of well site services to the industry, released its quarterly results late Thursday.

Come Friday, a trader saw the 7¾% notes due 2019 inching up half a point to 19½.

“That’s a rare trade there,” he said.

For the quarter, net loss was $55.2 million, or $1.36 per share. That compared to a loss of $18.8 million, or 45 cents per share, the year before.

Analysts had forecast a loss per share of $1.34.

Revenue dropped dramatically to $161 million from $400.9 million.

The company said it expected the declines to lessen after the first half of the year, attributing the sizeable drop to the fact that many of its customers have delayed capital projects until oil prices improve.

“This lack of visibility and continued market uncertainties prevent us from knowing exactly what our near term results will look like. But based on current activity levels, we anticipate that our Q1 revenue will be down approximately 10% sequentially,” said Roe Patterson, chief executive officer, in the earnings release.

Patterson also noted that the company recently secured a $165 million term loan in an effort to shore up liquidity.

Fannie profit grows

Fannie Mae reported its fourth-quarter and full-year results on Friday. While quarterly profit grew year over year, yearly profit declined.

In response, Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) also declined, falling 2 cents to $3.03. The issue traded about 705,000 times.

By comparison, Freddie Mac’s 8.375% fixed-to-floating rate noncumulative perpetual preferred stock (OTCBB: FMCKJ) barely traded, being exchanged just 37,000 times.

That issue was also down, by 4 cents, or 1.3%, at $3.03.

For the quarter, Fannie posted net income of $2.5 billion, up from $2 billion the year before. For the year, income came to $11 billion, down from $14.2 billion in 2014.

Fannie intends to make a $2.9 billion dividend payment to the Treasury Department, bringing its total returned to taxpayers to $147.6 billion.

The GSE received $116.1 billion in bailout funds in 2008.

Fannie’s earnings came on the heels of Freddie’s own quarterly results, which came out Thursday.

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 the taxpayer to over $98 billion. The agency received over $71 billion in bailout funding in 2008.

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