Midstates Petroleum gives update, bonds weaken; SandRidge under pressure; Alliance One dives

By Stephanie N. Rotondo

Phoenix, Feb. 10 – It was another energy-focused day in the distressed debt market, as oil prices retreated over 4% on the day.

However, the energy sector’s debt ended mixed, as some names had credit-specific news out to help push them around.

For example, Midstates Petroleum Co. Inc. announced the date of its fourth-quarter earnings release and also gave an operational update for said quarter. The update provided a lower EBITDA guidance and announced the hiring of advisers to look into the company’s strategic alternatives.

Away from energy, Alliance One International Inc. paper took a hit after the company reported “bad numbers,” according to a trader.

Bonds were down 9 to 10 points on the news, the trader said.

Midstates update disappoints

Midstates Petroleum’s debt was off as much as 6 points on the day after the company provided an operational update for the fourth quarter.

The Tulsa-based oil and gas company also said it had hired Evercore Group LLC to look into its strategic options.

One trader saw the 9¼% notes due 2021 falling almost 5 points to 53¾, while the 10¾% notes due 2020 were down 3 points to 57½.

Another trader pegged the 9¼% notes in a 53 to 54 context, down from 59.

In a press release published early Tuesday, Midstates said it had scheduled its fourth-quarter earnings release for March 3, with a conference call on March 4. Based on preliminary figures, the company said it was expecting to post adjusted EBITDA of $110 million to $115 million for the quarter.

For the year, that figure is expected to be around $470 million.

SandRidge continues to soften

SandRidge Energy Inc. was also weaker on the day, as investors continued to react hesitantly to news the company was cutting its drilling rig count by 75%.

A trader deemed the 7½% notes due 2021 off 3 points at 72½. The 7½% notes due 2023 fell half a point to 72¼, he said, as the 8 1/8% notes due 2022 lost almost 2 points, closing at 73¼.

Another market source pegged the 2021 paper at 74¼ bid, down a point.

Reuters reported Monday that SandRidge Energy was planning to cut its drill rig count in Oklahoma and Kansas by 75%.

The cut would decrease the amount of operating rigs to eight from 28.

The oil and gas producer is based in Oklahoma City.

Oil sector mixed

Elsewhere in the oil and gas space, bonds were mixed as oil prices ended weaker.

West Texas Intermediate crude fell $2.35, or 4.45%, to $50.51 per barrel. Brent crude lost $1.43, or 2.45%, to close at $56.91.

On the upside, Energy XXI’s 8¼% notes due 2018 finished slightly higher at 70, according to a trader. The 9¼% notes due 2017 were meantime steady at 64.

The company reported a loss for its second fiscal quarter on Monday.

In Linn Energy LLC paper, the 6¼% notes due 2019 were seen improving over a point to 86¾.

On Monday, that company announced that a Securities and Exchange Commission probe into its hedging practices had concluded, with no further action being taken.

Goodrich Petroleum Corp.’s 8 7/8% notes due 2019 were also firm, closing up almost a point to 40¾.

Offshore Group Investment Ltd. was another gainer for the day, as a trader saw the 7 1/8% notes due 2023 rising nearly a point to 66 and the 7½% notes due 2019 up a point at 67½.

On the down side, Samson Investments Co.’s 9¾% notes due 2020 declined 3 points to 36 and Halcon Resources Corp.’s 8 7/8% notes due 2021 dipped to 77.

Quicksilver Resources Inc.’s 9 1/8% notes due 2019 were off a touch at 11, a trader said.

Alliance One stomped down

Alliance One International’s 9 7/8% notes due 2021 dropped 9 to 10 points on the back of the company’s earnings release, a trader reported.

The trader placed the issue in a 72 to 73 zip code.

The earnings came out Monday and a conference call was scheduled for 5 p.m. ET on Tuesday.

For the fiscal third quarter, the Morrisville, N.C.-based tobacco leaf distributor posted sales of $488.9 million, a decline of 25.3%.

The company attributed the decrease to a 21.9% reduction in the amount of full service volumes sold due to deconsolidation of a Brazilian subsidiary, a delayed shipment, less favorable weather conditions and a global oversupply of tobacco.

Gross profit as a percentage of sales was 14.3%, up from 12.8% the year before.

Pretax income came to $11.4 million. Total net income was $1.4 million, or 2 cents per share.

That compared to income of $13.3 million, or 15 cents per share, the year before.

Paul Deckelman contributed to this article

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