Morning Commentary: New, upsized Oasis Petroleum drops below par with lower oil prices, stock

By Rebecca Melvin

New York, Sept. 14 – Oasis Petroleum Inc.’s newly priced 2.625% convertibles due 2023 traded down upon release for secondary market dealings on Wednesday after the Houston-based oil and gas company priced an upsized $275 million of the senior notes at the talked, fixed coupon and at the cheap end of premium talk.

The registered convertible deal was initially talked at $250 million in size. The deal’s greenshoe was downsized to $25 million from an initially talked $37.5 million.

The new bond was quoted at 98.125 bid, 98.875 offered at late morning versus a price for the underlying stock at $9.24.

A second source put the bonds are little better at 98.625 bid, 99.625 offered versus a stock price of $9.25.

On a swap basis, they were going to be trading on a 68% delta, the first source said. Although the second source put the delta higher in the mid-70% range.

The common shares of Oasis slumped immediately out of the gate on Wednesday after the overnight deal was priced around 9 a.m. ET. But they recovered some ground to trade last down 49 cents, or 5%, at $9.21.

Oasis Petroleum’s securities are tied to the price of oil, and with the front month of West Texas intermediate oil lower, it weighed on the stock and the bonds, a trader said.

As of late morning, U.S. crude oil for October delivery was at $44.02 per barrel, which was down 88 cents, or nearly 2% on the day.

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