Morning Commentary: Oil, gas preferreds in retreat as OPEC sees lower demand in 2015

By Stephanie N. Rotondo

Phoenix, Dec. 10 – The preferred stock market was trading off with the broader markets Wednesday following news that OPEC is expecting to see a worsening decline in oil demand in 2015.

On the heels of that, a trader said that “oil and natural gas guys are jumping around again.”

Bellwether name Goodrich Petroleum Corp. was certainly following that trend, despite gaining about 40% to 50% in value on Tuesday in response to a modest surge in oil prices. At mid-morning on Wednesday, the company’s preferreds were seen trading off 10% to 16% or more.

The 10% series C cumulative preferreds (NYSE: GDPPC) were off 99 cents, or 10.11%, at $8.80, while the 9.75% series D cumulative preferreds (NYSE: GDPPD) had fallen $1.50, or 16.76%, to $7.45.

Vanguard Natural Resources LLC’s 7.875% series A cumulative redeemable preferred units (Nasdaq: VNRAP) were also weak but not as much as Goodrich on a percentage basis.

That issue was down 98 cents, or 5.09%, to $18.26.

In early trades, West Texas Intermediate crude oil had declined $1.72, or 2.7%, to $62.10 per barrel. Brent crude had dropped $1.47, or 2.2%, to $65.37.

Back in the primary, a trader said that TravelCenters of America LLC’s $120 million of 8% $25-par senior notes due 2029 had freed to trade.

The deal priced before the market closed on Tuesday.

The trader quoted the issue at $24.60 bid, $24.70 offered.

There was meantime little talk of any other new deals coming for the week, the trader said.

However, the trader speculated that banks – specifically JPMorgan Chase & Co. – might enter the market in early 2015 in order to raise more capital following a new capital requirements rule the Federal Reserve laid out on Tuesday.

Under the new rule, the eight biggest U.S. banks could be forced to raise as much as an additional 1% to 4.5% of risk-adjusted assets by 2019. Across the board, the Fed said banks would likely see a capital shortfall after the new rule goes into effect but that JPMorgan might be the hardest hit, with a projected shortfall of as much as $22 billion.

The bank’s 6.3% series W noncumulative preferreds (NYSE: JPMPE) were trading down 3 cents at mid-morning to $25.30.

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