Distressed energy bonds, preferreds continue to be weak despite domestic oil’s rebound

By Stephanie N. Rotondo

Seattle, Jan. 14 – The distressed energy sector continued to be under pressure on Thursday, despite a gain in domestic oil prices.

The rebound was attributed to short covering and “natural covering” as options were set to expire at the end of the day.

West Texas Intermediate crude rose 2.03% to $31.10 a barrel.

In the common equity markets, oil’s rise prompted investors to snap up energy stocks, thereby pushing prices higher. Elsewhere in the capital structure, the view wasn’t as rosy.

For instance, WPX Energy Inc. saw its 8¼% notes due 2023 dive over 8 points to 65¾.

Oasis Petroleum Inc. was another big loser, the trader said, seeing the 6½% notes due 2021 falling nearly 4 points to 44.

At another desk, a market source deemed MEG Energy Corp.’s 7% notes due 2024 down 5½ points at 59½ bid.

SandRidge Energy LLC’s 7½% notes due 2021 were then pegged at 5¼, off over 2 points.

As for distressed energy preferreds, there was increased activity, though the weak tone remained.

Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) dropped 72 cents, or 14.09%, to $4.39. Legacy Reserves LP’s 8% series B fixed-to-floating rate cumulative redeemable perpetual preferred units (Nasdaq: LGCYO) were also down, losing 40 cents, or 10.96%, to close at $3.25.

Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP), however, closed up $1.32, or 29.4%, at $5.81.

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