Oil and gas names gain traction as crude prices rebound; AK Steel remains firm on price increases

By Stephanie N. Rotondo

Seattle, April 19 – Distressed oil and gas bonds continued to be in focus on Tuesday, as domestic crude oil prices jumped over 3% for the day.

The commodity’s rise came as oil workers in Kuwait went on strike for the third straight day, nearly halving the OPEC-member nation’s daily production. A power outage in Venezuela and a pipeline fire in Nigeria were also weighing on daily production.

Those issues, combined with the looming refinery maintenance season, have some market players thinking the oversupplied oil space could soon rebalance.

The surge came after oil prices got hammered on Monday following a meeting of OPEC and non-OPEC producers in Doha, Qatar, on Sunday. The market had hoped that a deal to freeze production would come out of said meeting, but such a plan failed to come to fruition.

A trader said Chesapeake Energy Corp.’s 8% second-lien notes due 2022 were “active again,” rising over 2 points to close at 61¼.

Another market source saw the 6 5/8% notes due 2020 pushing up a point to 52 bid.

EP Energy Corp.’s 9 3/8% notes due 2020 meantime saw a sizeable gain for the day, as a trader said the issue increased by over 4 points to 61¼. Oasis Petroleum Corp.’s 6 7/8% notes due 2022 also saw a hefty increase, ending up nearly 5 points at 86½.

In Whiting Petroleum Corp. paper, a trader said the 6¼% notes due 2023 jumped “almost 4 points” to 79.

Among preferred stock, the energy space made up a bulk of the day’s biggest percentage gainer category.

Legacy Reserves LP’s 8% series A fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYP) rose 28 cents, or 7.73%, to $3.90. The 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) meantime edged up 24 cents, or 6.52%, to $3.92.

In Vanguard Natural Resources LP, the 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) closed up 19 cents, or 6.55%, at $3.09. The 7.875% series A cumulative redeemable perpetual preferred units (Nasdaq: VNRAP) improved by 26 cents, or 6.36%, ending at $4.35.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) pushed up 3 cents, or 1.19%, to $2.55.

Distributions on all those issues have been suspended.

AK Steel on fire

AK Steel Holdings Corp. debt continued to improve on Tuesday, as investors remained positive about a recent steel price increases.

A trader pegged the 7 5/8% notes due 2021 at 78½, up over 1½ points on the day. Another source placed the 7 5/8% notes due 2020 at 83¾ bid, up 2½ points.

The West Chester, Ohio-based steelmaker announced late last week that it was increasing the current spot prices for all carbon flat-rolled steel by a minimum of $50 per ton, effective immediately on new orders.

On Monday, AK said it was also increasing base prices for stainless steel products. For commodity sheet and strip, specialty sheet and strip, and pipe and tube sheet and strip products, the increase will come via a reduction in the functional discount of 2%. For all remaining stainless steel products, including automotive sheet and strip, prices will increase by $40 per ton.

The stainless steel increases will go into effect May 1.

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