Oil and gas mixed, U.S. oil stockpile increase pressures prices; other commodities also mixed

By Stephanie N. Rotondo

Phoenix, Jan. 22 – The distressed debt market was riding the wave higher with the equity markets Thursday, as the European Central Bank unveiled a trillion-euro quantitative easing program aimed at fighting deflation.

But with the new high-yield issue calendar building and very little credit-specific news to move things around, investors again turned their attention to the oil and gas realm.

The price of crude oil was weaker during the session, driven by a new report from the Energy Information Administration that showed a surprising 10.1 million increase in U.S. stockpiles.

The gain was the largest seen since March 2001.

Additionally, refineries were operating at 85.5% of capacity amid those idled for maintenance. That reflected the lowest level seen since April 2003.

West Texas Intermediate crude dropped $1.25, or 2.62%, to $46.53 per barrel. Brent crude declined 21 cents to $48.82.

Despite the continued decline in oil prices, oil and gas bonds were mixed on the day.

On the upside, a trader saw Samson Investments Co.’s 9¾% notes due 2020 rising nearly 3 points to 29. He also saw Hercules Offshore Inc.’s 6¾% notes due 2022 at 37, up 1½ points.

Seismic data provider CGG SA was also firmer, its 6½% notes due 2021 up almost 2 points to 78½ bid, according to a market source.

Linn Energy LLC and SandRidge Energy Inc. were also pegged at higher levels.

Linn’s 7¾% notes due 2021 closed at 79 bid, a point better, while SandRidge’s 7½% notes due 2021 improved half a point to 64 bid.

As for those oil and gas names that drifted lower, Goodrich Petroleum Corp.’s 8 5/8% notes due 2019 were pegged at 38 by a trader. He said the level was down 9 points from previous trades that occurred earlier in the month.

Energy XXI Gulf Coast Inc.’s bonds were all lower on the day, the trader continued.

The 6 7/8% notes due 2024 fell to 41, off almost 2 points. The 7½% notes due 2021 dipped a point to 41¾.

The 7¾% notes due 2019 meantime declined a whopping 7 points from trades done a week ago, he said, placing the issue at 43.

Resolute Energy Corp.’s 8½% notes due 2020 finished 5 points weaker at 43, the trader said. Like the latter Energy XXI issue, he noted that the last trades in the debt occurred a week or so ago.

Among other commodities, the tone was also mixed during the session.

In coal names, a trader said Alpha Natural Resources Inc.’s 6% notes due 2019 put on nearly a point to close at 27, while the 9¾% notes due 2018 gained half a point to 37.

Arch Coal Inc.’s 8% notes due 2019 closed “pretty much unchanged” at 45.

Rare earth metals company MolyCorp Inc. experienced a slight rally, a trader said, seeing the 10% notes due 2020 half a point firmer at 43¾.

And, iron ore producer Cliffs Natural Resources Inc. saw its 6¼% notes due 2040 holding steady at 62½.

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