Oil, gas eyed after OPEC supply news; Goodrich Petroleum drops 10 points; Quidel on tap

By Rebecca Melvin

New York, Dec. 1 – U.S. convertibles were mostly quiet Monday following last week’s Thanksgiving holiday. But oil and gas convertibles were in focus as market players reevaluated where these issues should be trading in light of OPEC’s decision to keep oil output steady to prevent U.S. competitors from gaining market share.

Oil producer securities were pummeled despite a sharp rebound in oil prices.

“Nobody knows were to trade oil and gas names,” a New York-based trader said.

Fundamental research and how much tolerance for pain there is at any one issuer and how far underwater they are were things that market players were weighing, he said.

Goodrich Petroleum Corp.’s 5% convertibles due 2032 traded down about 10 points to around 60 and were bid lower, sources said, as shares of the Houston-based oil and gas exploration and development company fell 22%.

Other names in focus were Energy XXI Ltd., Emerald Oil Inc., Cobalt International Energy Inc. and BPZ Resources Inc.

Denver-based oil and gas E&P company Emerald Oil was offered at 57 but was not trading and would probably be offered lower, one source said.

Energy-related sectors were also lower. Rail car company Greenbrier Cos. Inc.’s 3.5% convertibles fell more than 20 points amid a 14% drop in its share price.

These shares did not recoup despite a rebound in benchmark U.S. oil prices on the Nymex on Monday. West Texas Intermediate crude bounced $3.18, or 4.8%, to $69.33 a barrel, snapping a four-day long losing streak.

Overall, there were more sellers than buyers, a New York-based trader said of the convertibles market.

In primary market action, San Diego, Calif.-based Quidel Corp., a provider of diagnostic testing solutions, launched an offering after the market close for $150 million of six-year convertible senior notes. The notes were talked to yield 2.75% to 3.25% with an initial conversion premium of 32.5% to 37.5%.

Goodrich drops

Goodrich’s 5% convertibles were said to be bid below 60, but that seemed to be the lowest price at which they traded as the underlying shares of the company skidded 22%, or $1.32, to $4.73.

A month ago, the Goodrich Petroleum convertibles traded at 75.

Fellow Houston-based oil and gas producer Cobalt International saw its 2.625% convertibles indicated lower at 65 from 71 even as Cobalt shares shed a relatively small amount, closing out the session at $8.84, which was down 16 cents, or 1.8%.

“Goodrich was trading in good size,” a Connecticut-based trader said.

A New York-based trader said that Cobalt was normally a name with the firm but that those issues hadn’t traded on the desk on Monday.

BPZ, Emerald shares slide

BPZ’s 8.5% convertible senior notes due 2017 were not seen in trade, but traders were eyeing the issue and wondering where the first print would materialize as shares of the Houston-based oil and gas exploration company cratered 43% to $0.34.

The paper has been offered lower for some time, a Connecticut-based trader said.

BPZ priced an upsized $125 million of 8.5% notes in 2013 at a significant discount to par of 90.

Emerald Oil’s 2% convertibles due 2019 were offered at 57 but not trading.

“They will probably be offered lower,” a trader said.

Emerald Oil shares ended down 45 cents, or 23%, to $1.47.

Quidel to price

Quidel plans to price $150 million of six-year convertible senior notes after the market close on Tuesday.

The registered offering was talked to yield 2.75% to 3.25% with an initial conversion premium of 32.5% to 37.5%.

The notes were being sold via joint bookrunners BofA Merrill Lynch and J.P. Morgan Securities LLC.

The notes are non-callable and have contingent conversion if shares exceed 130% of the conversion price for 20 out of 30 trading days. There is takeover protection.

Proceeds will be used for working capital and other general corporate purposes, which may include acquisitions of products, technologies or businesses, and opportunistic common stock repurchases.

Quidel is a San Diego-based provider of diagnostic testing solutions and cellular-based virology assays.

Mentioned in this article:

BPZ Resources Inc. NYSE: BPZ

Cobalt International Energy Inc. NYSE: CIE

Emerald Oil Inc. NYSE: EOX

Energy XXI Inc. Nasdaq: EXXI

Goodrich Petroleum Corp. NYSE: GDP

Greenbrier Cos. Inc. NYSE: GBX

Quidel Corp. Nasdaq: QDEL

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