Oil and gas bonds lose ground as supply worries pressure crude; Intelsat firms; Freddie reports loss

By Stephanie N. Rotondo

Seattle, May 3 – Oil and gas-linked distressed bonds were getting hit Tuesday, as renewed concerns about a supply glut weighed on crude oil prices.

Chesapeake Energy Corp.’s 8% second-lien notes due 2022 were off almost 3 points at 64, according to one trader. Another trader placed the issue at 64 as well, “down a couple points.”

Another market source pegged the 6 5/8% notes due 2020 at 58½ bid, also down nearly 3 points.

Also, the 2.5% convertible notes due 2037 were seen trading just south of 83 by a market source. That was off 6 to 7 points from Friday trades.

The stock (NYSE: CHK) underlying the security meantime dropped 79 cents, or 11.99%, to $5.80.

Whiting Petroleum Corp. was another loser, with a trader calling the 5¾% notes due 2021 down 4½ points at 76½. Its 1.25% convertible notes due 2020 dipped a point to a 72 to 72.5 context.

The equity (NYSE: WLL) lost 50 cents, or 4.63%, ending at $10.29.

Domestic crude prices were down 2.46% on Tuesday, falling to 43.68 a barrel. That was in addition to the nearly 3% loss seen on Monday.

Investors are once again growing more concerned about oversupply, especially as Iraq reported that its shipments from its southern assets averaged 3.364 million barrels per day in April. That was up from an average of 3.286 million bpd seen in March.

Saudi Arabia said that its average production for the month was 10.15 bpd. Chatter is that production could soon grow to near-record highs around 10.5 million bpd.

And, following through on its promise, Iran has ramped up its exports to almost 2 million bpd from just over 1 million bpd at the beginning of the year. The nation saw its oil sanctions lifted in January and has vowed to work its way back up to pre-production levels.

Intelsat gains

Intelsat SA paper was firm for the day, though there was no fresh news to boost the Luxembourg-based satellite services provider.

At one desk, a trader said the 7¼% notes due 2020 were up 1½ points at 74½. He also saw the 5½% notes due 2023 at 66, up over a point.

At another desk, the 6 5/8% notes due 2022 were deemed almost a point better at 66 bid.

Freddie, Fannie slide

Freddie Mac and Fannie Mae preferreds were weaker Tuesday after Freddie reported a loss for the first quarter.

However, Freddie said that while it was skipping this quarter’s dividend payment to the government, it also would not require any further funds from taxpayers.

“So that was a positive for them,” a trader said.

Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) traded down 14 cents, or 3.67%, to $3.67. Fannie’s 8.25% series S fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FNMAS) fell 15 cents, or 3.85%, to $3.75.

For the quarter, Freddie reported a net loss of $354 million. That compared to a profit of $524 million the year before. The mortgage giant attributed the swing to accounting losses of about $1.4 billion on derivatives, as well as another $600 million on interest rates on mortgages and mortgage-backed securities. The agency’s business was touted as “very solid” in a prepared statement.

© 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.