Convertibles continue to improve; energy sector extends gains; Seacor moves up over 90

By Rebecca Melvin

New York, March 4 – Some of the convertibles issuers that have seen their securities rebounding this past week continued to do so on Friday, including beaten down energy names such as Whiting Petroleum Corp., Cobalt International Energy Inc. and Chesapeake Energy Corp., a New York-based market source said.

Cobalt’s 3.125% convertibles due 2024 traded up another couple of points on Friday to end at about 45 as shares of the Houston-based energy exploration and production company gained another 6% to $3.39. In the last week, the bonds have climbed more than 18% and the shares are up 32%.

Chesapeake Energy’s 2.5% convertibles due 2037 edged up to 55 on Friday from 53.75 on Thursday and up from about 43 a week ago. Shares of the Oklahoma City-based natural gas company extended their run this week, jumping another 19%, and putting in a gain of more than 60% this past week with a string of four 20%-plus gains.

Chesapeake’s convertible preferreds also jumped.

Whiting Petroleum’s 1.25% convertibles were indicated to have bumped up to more than 50, which is up from the 30s last week. Shares of the Denver-based energy exploration and production company surged again, closing up 78 cents, or 12%, to $7.09, after gaining 21% on Thursday and 20%, on Wednesday.

Seacor Holdings Inc.’s 2.5% convertibles due 2027 traded up to nearly 91 on Friday, with the underlying shares at $51.75. Earlier in the week the bonds jumped several points to 86.5 bid, 87.5 offered when shares were $48.50.

The Fort Lauderdale, Fla.-based offshore oil, gas and marine equipment company said it bought back bonds.

But even with continuing gains in energy convertibles, the overall convertibles market had “very little focus” on Friday, a New York-based sellsider said.

Tone remained strong, however, and was expected to continue in the same direction next week. “You have the junk rebound and equities are rallying, so that has helped out a lot,” the sellsider said.

Meanwhile, new issuance has dropped precipitously since 2015 when a robust $39.51 billion of new convertible paper came to market. So far this year, there has been only about $1 billion in new issuance, compared to about $13 billion for the first two months of last year, according to Prospect News’ data.

In the broader markets, Treasuries were lower and equities were mostly higher after U.S. non-farm payrolls for February outdid most estimates, coming in at 242,000 jobs for the month, according to the Labor Department report. January’s tally was revised upward as well. And the unemployment rate remained unchanged at 4.9%.

Many market observers were expecting a more modest tally of 190,000 to 200,000 jobs. But despite the blowout headline number, the closely watched average hourly wages declined for the month. And that is predicted to keep a lid on inflation and therefore also on potential Fed rate raises by the central bank.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

Cobalt International Energy Inc. NYSE: CIE

Seacor Holdings Inc. NYSE: CKH

Whiting Petroleum Corp. NYSE: WLL

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