Oil, gas sector improves as oil prices drift down; Alpha Natural weaker; Fannie, Freddie drop

By Stephanie N. Rotondo

Phoenix, May 4 – A modest dip in oil prices did little to change the upward trajectory of the distressed energy sector on Monday.

Oil prices came in as new economic data from China showed that manufacturing had declined, leaving some to speculate that oil demand would follow.

West Texas Intermediate crude then slipped 23 cents to $58.92 per barrel, while Brent crude dipped 6 cents to $66.40.

Among oil and gas names, Halcon Resources Corp. was ticking up a touch, according to a trader.

The trader saw the 9¾% notes due 2020 close slightly higher at 83¾, while the 8 7/8% notes due 2021 put on a quarter point, closing at 80¼.

Linn Energy LLC’s 6¼% notes due 2019 were meantime 1½ points better at 86½, the trader said.

Also on the rise were SandRidge Energy Inc.’s 8 1/8% notes, which ended up nearly a point at 71.

EXCO Resources Inc. then saw its 8½% notes due 2022 inching up half a point to 61.

In names whose bonds are trading much lower, Sabine Oil & Gas Corp.’s 9¾% notes due 2017 put on half a point to 17, while Samson Resources’ 9¾% notes due 2020 fell to just south of 12.

Elsewhere in the commodity realm, coal producers remained weak.

Alpha Natural Resources Inc.’s 9¾% notes due 2018 were pegged down 5 points at 32½ at one desk. Another trader said the issue was “a little bit lower” at 32½ as well.

The first trader also saw the 7½% notes due 2020 at 37¾, though he deemed that paper up about half a point.

The second trader placed the 6¼% notes due 2019 at 19, off for the day.

Freddie earnings on tap

Freddie Mac preferreds were coming in Monday as investors readied for the agency’s first-quarter earnings release on Tuesday.

The 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were off 3 cents at $5 a share. Fannie Mae’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were also weaker, falling 6 cents, or 1.19%, to $5.

The preferreds started to trade up around the middle of the previous week, after it was reported that a memo from the Treasury had surfaced that could be construed to show that the federal government acted in bad faith when it placed the agencies under conservatorship in 2008.

However, the authenticity of the document has been called into question, as well as its bearing on pending shareholder lawsuits.

After that news came out, it was reported that the GSEs are not as stable as some might like to believe. In the event of a severe economic downturn, Fannie and Freddie would require up to $157.3 billion in bailout funds, according to stress test results released by the Federal Housing Finance Agency.

The results could, however, bolster pending lawsuits that allege the government’s takeover of a majority of profits was illegal. Given the conscription, the agencies have been unable to build up any capital cushion.

© 2015 Prospect News.
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