Oil pares session gains; E&P lower; Energy Future surges on takeover talks; Valeant down on JPMorgan comments

By Colin Hanner

Chicago, July 6 – The distressed debt market was quiet on Thursday, in line with the two prior trading sessions, market sources said.

“We haven’t really opened for business it seems,” a market source said.

“There was a little bit more going on today, but by no means was it active,” another market source said.

Distressed exploration and production companies were on the whole lower as crude oil futures rose slightly on Thursday, which initially gained after the Energy Information Agency reported a higher than expected decrease in U.S. crude inventories for last week.

California Resources Corp. was higher, then lower with the rise and fall of oil, and EP Energy Corp. was fractionally higher.

As Berkshire Hathaway Energy Co. looks closer to closing on a deal to acquire Oncor, Energy Future Holdings Corp. surged on the session. Energy Future is the majority owner of Oncor.

Valeant Pharmaceuticals International Inc. was down nearly a whole point following a blunt outlook by JPMorgan on Thursday, which prompted its stock to plummet as well.

Intelsat SA was slightly lower on the session, though had some notable volume behind it.

E&P lower as oil fades during session

Oil saw a steep rise during the morning session in broader markets, though pared back those gains heading toward close.

West Texas Intermediate crude oil was up 15 cents, or 0.33%, to $45.28, though had been as high as $46.47 during intraday trading. The intraday gain nearly pared Wednesday’s losses, which were brought on by Russia’s hesitance to extend global supply cuts.

Distressed companies seemed to follow the afternoon session more closely, as many dropped for the second-straight session.

California Resources’ 8% notes due 2022 were down ¼ point to 62½, though a market source said the issue was “sideways for the most part,” in line with the price of oil during the day.

Plano, Texas-based Denbury Resources Inc.’s 5½% notes due 2022 were down ¾ point to 56.

Parker Drilling Co.’s 6¾% notes due 2022 were down ¼ point to 77.

Canadian oil sands producer MEG Energy Corp.’s 7% notes due 2024 were down ½ point to 77.

On the other hand, EP Energy’s 9 3/8% notes due 2020 were up ½ point to 78¼.

On Thursday, the EIA reported that U.S. crude inventories decreased by 6.3 million barrels, nearly three times higher than estimates, and total gasoline inventories decreased by 3.7 million barrels.

Production, on the other hand, were higher by both accounts. Crude oil refinery inputs saw a 251,000 increase per day compared to the previous week’s average, and gasoline production increased to 10.4 million barrels per day.

Energy Future surges on Berkshire talks

According to The Wall Street Journal, Berkshire Hathaway Energy is coming close to acquiring Oncor, of which Energy Future holds a significant stake.

On the day, Energy Future’s 11¼% notes due 2017 were up “from the mid-30s to 41,” a trader said.

The potential deal might be worth more than $17.5 billion, the Journal article said.

Valeant lower on ‘long road to recovery’

On the day, Valeant’s 6 1/8% notes due 2025 were down ¾ point to 84¼ on “a handful of trades,” a market source said, in line with the several-point plunge its equities took.

According to Barron’s, JPMorgan’s Chris Schott offered a contrasting viewpoint to the generally resounding path Valeant has taken the past few months.

“Overall, we continue to see a long road to recovery for Valeant and do not see a compelling [sum of the parts] argument given the number of uncertainties that remain for the core business,” Schott wrote in a note.

Intelsat lower

Intelsat caught headlines on Thursday after SpaceX launched a rocket carrying an Intelsat satellite, a possible cause of the bonds activity on the day.

“I don’t know if that was behind the increased activity,” a market source said, adding there was no other “earth-shattering” news that could have caused the movement.

Intelsat Jackson Holdings SA’s 5½% notes due 2023 were down ½ point to 82¾.

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