By Abigail W. Adams
Portland, Me., Jan. 4 – The market was awaiting Sempra Energy’s $1.5 billion offering of series A mandatory convertible preferred stock due 2021, which was expected to price after the market close Thursday, despite a winter storm that froze trading activity in the convertibles space.
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 is the first of the year and will be welcome in a contracted secondary market that has lacked liquidity, sources said.
The winter storm pummeling the North East further reduced trading volume that has been slow in the secondary market since the start of the New Year.
However, convertible notes from several oil and gas companies were active with some making nominal gains.
Convertible notes from Ensco Jersey Financial Ltd., Weatherford International Ltd., Chesapeake Energy Corp. and Oasis Petroleum Inc. all saw trading activity on a day market sources said was generally dead.
The severe weather and bitter cold hitting the North East in the past two weeks has been good news for oil and natural gas companies.
Natural gas prices surged on Thursday as high as 60 times the general level of recent weeks in some places and oil futures closed at their highest levels since 2014 as a spike in demand strained the supply pipeline.
Oil and gas companies have long been a weak link in the economy with energy converts one of only two sectors to underperform in the convertible space in 2017. However, RBC Capital Market analysts believe the sector has hit its low and is in the process of recovery, according to a Forbes report.
The Trump administration announced on Thursday plans to open all U.S. waters to offshore oil and natural gas drilling and is in the process of repealing offshore drilling safety regulations – moves that have been widely praised by the industry.
Ensco gains
Ensco’s 3% convertible notes due 2024 continued to gain strength in active trading on Thursday after a steady climb in the New Year.
The notes reached as high as 94.553 before ending Thursday’s session at 93.813, according to Trace data. The London-based offshore drilling contractor’s equity ended Thursday at $6.82, an increase of 3.26%.
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 Stock News Times.
Weatherford volatile
Weatherford International Ltd.’s 5.875% convertible notes due 2021 gained then weakened then gained during Thursday’s session.
The notes reached a low of 101.5 and a high of 104.25 before ending the day at 103.5, according to Trace data. Weatherford’s stock was up 0.54% to $3.69 in high volume trading Thursday.
The 5.875% notes from the Houston, Texas-based oil and gas wells drilling company 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.
Chesapeake eases
Chesapeake’s 5.5% convertible notes due 2026 saw some action on Thursday, but lost ground as it dipped to a closing trade of 92.43 after trading in the 93 range for much of Wednesday.
The notes contracted alongside the equity of the Oklahoma City, OK-based petroleum and natural gas exploration and production company. Chesapeake’s stock ended Thursday’s session at $4.05, a decrease of 0.37%.
The struggling convertibles traded in the 88 to 90 range for much of December.
Oasis rebounding
Oasis’ 2.625% convertible notes due 2023 continued their rebound during Thursday’s session after taking a hit in mid-December. The notes traded to a low of 107.5 and a high of 109.25 before ending Thursday at 108, according to Trace data.
The Houston, Texas-based petroleum and natural gas exploration company’s equity was up to $8.81, an increase of 0.11%, at market close Thursday.
The 2.625% convertible notes tanked in 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.
Mentioned in this article:
| Sempra Energy: | NYSE: SRE
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| Ensco plc: | NYSE: ESV
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| Chesapeake Energy Corp.: NYSE: CHK
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| Weatherford International plc: | NYSE: WFT
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| Oasis Petroleum Inc.: | NYSE: OAS
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