Energy names firm as oil prices continue gains; Hertz brakes slide seen on Tuesday

By Paul Deckelman

New York, April 5 – With oil priced on the rise for a second consecutive session on Wednesday, traders in distressed debt said that oil and natural gas names such as California Resources Corp., Southwestern Energy Co., MEG Energy and Denbury Resources Inc. were all seen firmer on the day.

The existing bonds of Ultra Petroleum Corp. – currently shopping a big new deal around as part of its bankruptcy reorganization – moved up smartly on the day.

That firmness in the oil and gas sector extended into the contract-drilling space, with better levels seen for the likes of Noble Holdings International and Ensco plc.

However, that strength did not extend to Pacific Drilling SA, whose notes were off.

Away from the energy arena, traders saw vehicle-rental giant Hertz Global Holdings Inc.’s bonds put the brakes on the sharp slide on active volume seen on Tuesday.

Elsewhere, healthcare names remained in flux, particularly drugmakers such as Valeant Pharmaceuticals International, Inc. and Concordia International Corp.

Traders saw firmer levels in retailer Neiman Marcus Group’s paper.

Communications satellite operator Intelsat SA’s various notes were mixed.

Energy names improve

Away from the new or recently priced offerings, a trader said that “all of the energy stuff was snapping back, with oil briefly over $52 [per barrel] at one point.”

Crude eventually came off that peak level, with the benchmark U.S. crude grade, West Texas Intermediate for May delivery, ending up 12 cents a barrel, at $51.15, on the New York Mercantile Exchange, its second consecutive rise after a loss on Monday; WTI had also firmed by 79 cents per barrel on Tuesday.

The trader saw Los Angeles-based oil and natural gas operator California Resources’ 8% notes due 2022 up 3/8 point at 82 3/8 bid on heavy volume.

Another trader said the 8s “were pretty busy today – they were up about ½ point. They probably pulled off a little bit [from their highs] but everything was pretty well-bid for.”

Elsewhere in the sector, the first trader saw Spring, Texas-based Southwestern Energy Co.’s 6.70% notes due 2025 up 5/8 point, trading up to 100 3/8 bid.

Canada’s MEG Energy’s 7% notes due 2024 were better by a deuce on the day, at just over 92½ bid.

Plano, Texas-based energy operator Denbury Resources’ 6 3/8% notes due 2021 were ½ point better at 83½ bid.

A trader saw Ultra Petroleum’s existing 6 1/8% notes due 2024 jumping more than 4 points on the session, ending at 77 bid.

That rise comes as the Houston-based oil and natural gas company’s Ultra Resources, Inc., subsidiary hit the road on Tuesday to market a $1.2 billion two-part offering of senior notes, including $700 million of five-year notes and $500 million of eight-year notes.

Proceeds will go to fund the company’s obligations under its plan of reorganization.

Ultra Petroleum filed for Chapter 11 bankruptcy protection a year ago in April 2016.

Most driller rise

In the contract drilling space, London-based global contract drilling services provider Ensco plc’s 5.20% notes due 2025 were up by 1 point , to 89½ bid.

London-based Noble Holding International’s 5 ¼% long bonds due 2042 ended just under 70 bid, up more than 2 points on the day.

But Houston-based contract driller Pacific Drilling SA’s 5 3/8% notes due 2023 finished down 1 point at 49¾ bid, while its 7¼% notes due 2017 were down ¼ point at 55¾ bid.

Hertz halts slide

Traders said that car-rental giant Hertz’s notes – which had skidded badly in active trading on Tuesday –managed to put the brakes on that downward slide.

A trader said “people were looking for news on that one” that might explain the fall of 1½ to 2 points across the Estero, Fla.-based company’s capital structure.

Some suggested that notes were off in line with weaker March sales reported by Detroit’s no-longer-so-Big Three.

The trader opined that “some thought processes that I had heard were that the used-car market is really soft, so there could be a glut [of vehicles]. Hertz buys lots of cars and turns over its fleet every two years. The valuation of those assets – those cars – may be going lower if the used-car market continues to soften. That’s one kind of theory.”

He also suggested that “people aren’t renting cars as much because Uber is so cheap. It’s more convenient and as cost-effective to go with Uber as it is to rent a car. That’s another part of the overall challenge their business feels.”

Of the notes themselves, he said that “I didn’t see them as active today, not as active [as Tuesday] and relatively unchanged.

Another trader said that the Hertz 6¾% notes due 2019 were “kind of unchanged,” ending around 98 3/8 bid, although he noted that “they’re short,” i.e., a near-maturity, and thus not likely to move very much.

He saw the company’s other bonds as “kind of mixed,” with the 5 7/8% notes due 2020 unchanged around 92½ bid, while its 6¼% notes due 2022 were unchanged at 92½, while the 7 3/8% notes due 2021 were down ½ point, to 96¾ bid.

But he said that “all of this was in minimal trading,’ versus the considerably more active dealings which had been seen on Tuesday.

He meantime saw Hertz rival Avis Budget Car Rental’s 5½% notes due 2023 trading up 1 point, at 95¼ bid.

The Parsippany, N.J.-based company’s 5¼% notes due 2025 were up by 1¾ points, at 91¼ bid.

Drugmakers in retreat

With the possibility that a revamp of U.S. healthcare laws might still make it through Congress this year, some healthcare names were lower, particularly in the pharmaceutical segment.

A trader said Laval, Que.-based Valeant Pharmaceuticals International’s 6 1/8% notes due 2025 were down over 1 point to 74 bid “on some heavy volume.”

Its 5 7/8% notes due 2023 lost 1¾ points to closer at 74¾ bid.

Oakville, Ont.-based Concordia International’s 9% notes due 2022 dropped nearly 2 points on the day, to 68 bid.

Nashville,-based hospital operator HCA Inc.’s 7½% notes due 2022 were unchanged at 114½ bid.

Intelsat notes mixed

A trader said that the Intelsat Connect Finance SA 12½% notes due 2022 were up 1½ points, at 90¼ bid, while the Luxembourg-based communications satellite company’s Intelsat Jackson Holdings SA 7½% notes due 2021 were down ¼ point at 91 bid.

Distressed round-up

Elsewhere, a trader said that Neiman-Marcus Group’s 8¾%notes due 2021 were up ½ point at 57½ bid, with “ a couple of trades in those.”

The Dallas-based high-end department store operator and catalog retailer’s 8% notes due 2021 were unchanged at 60 5/8 bid.

San Antonio, Texas-based broadcasting and outdoor advertising giant iHeartCommunications’ 11¼% notes due 2021 traded down ¼ point to 78 bid.

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