Morning Commentary: Snow won’t stop Sempra pricing; oil and gas converts active

By Abigail W. Adams

Portland, Me., Jan. 4 – Sempra Energy’s $1.5 billion issuance of series A mandatory convertible preferred stock due 2021 is still expected to price after the market close Thursday, despite a winter storm that may blanket Wall Street with 8 to 12 inches of snow, according to a market source.

Price talk is for a dividend of 6% to 6.5% and an initial conversion premium of 17.5% to 22.5%. The large issuance will be welcome in a contracted secondary market that has lacked liquidity, sources said.

Convertible notes from several oil and gas companies were active in early trading Thursday. Ensco Jersey Financial Ltd.’s 3% convertible notes due 2024 continued to make gains in the New Year.

The notes firmed in early trading Thursday around 93 as the underlying equity decreased 2.08% to $6.47.

Ensco’s 3% notes have slowly gained in 2018, jumping about 3 points on Tuesday and another 3 points on Wednesday. The notes were trading in the 88 range at the end of 2017.

There is a significant short interest in Ensco shares with 16.7% sold short, according to the Stock News Times.

Weatherford International Ltd.’s 5.875% convertible notes due 2021 and Oasis Petroleum Inc.’s 2.625% convertible notes due 2023 rebounded in early trading Thursday after both notes took recent hits.

Weatherford’s 5.875% convertible notes traded in the 103.6 to 104.75 range early in Thursday’s session, according to Trace data. Weatherford stock was up 1.09% to $3.71 in high volume trading early Thursday.

The 5.875% notes dropped more than 5 points on Tuesday to trade in the 101 range.

Tuesday was the first trading day since Weatherford announced it had scrapped a joint venture with Schlumberger, a Houston, Texas-based oilfield services company, for its North American pressure pumping and well completion operation, in favor of divestment.

The notes were previously in the 107 to 108 range.

Oasis’ 2.625% convertible notes due 2023 also continued to rebound after taking a hit in mid-December. The notes were trading in the 108 to 109 range early in Thursday’s session.

Oasis stock was down 0.23% to $8.78 in early trading Thursday.

The 2.625% convertible notes tanked mid-December when investors responded negatively to the company’s acquisition of acreage in the oil and natural gas rich Delaware basin.

The notes, which were trading in the 111 to 114 range, dipped as low as 100.15 following the Dec. 11 announcement, but have slowly regained their footing.

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