Morning Commentary: Whiting Petroleum weakens; Energy XXI down; United Tech mandatories in line

By Rebecca Melvin

New York, July 21 – U.S. convertibles saw ongoing weakness in the energy sector early Tuesday despite a bounce back in crude oil prices above $50 per barrel. Convertibles traders were also focused on earnings news.

Whiting Petroleum Corp.’s 1.25% convertibles due 2020 fell another couple of points to a 93 handle, according to Trace data, after dropping a couple of points in Monday. The bonds were recently above par. The common shares of the Denver-based oil and gas E&P company were last up 1% at $25.29.

Energy XXI Ltd.’s 3% convertibles due 2018 took another leg lower to the 12.5 to 13 context after trading at 14 to 15 in recent sessions. The common shares of the Hamilton, Bermuda-based independent oil and natural gas E&P company popped early Tuesday by about 25 cents, or 14.6%, to about $1.90.

The downturn in the bonds of natural resources companies, such as oil and coal names, has been an ongoing theme in both the convertibles and high-yield straight bond markets.

West Texas Intermediate crude for August delivery was back above $50.00 per barrel, after closing down on Monday at $49.96 per barrel.

Elsewhere, United Technologies Corp.’s mandatory convertibles, which mature Aug. 1, were moving lower in tandem with the common shares, which were down about 7% at late morning, after the Hartford, Conn.-based building and aerospace technology company cut full-year guidance, citing weaker sales and headwinds caused by the strong dollar.

The UTX mandatories were down $3.77, or 6.7%, at $52.77 at 10:30 a.m. ET.

Exelixis Inc. continued to trade actively at steady pricing the day after news of a positive late-stage drug study that propelled the 4.25% convertibles up more than 30 points. The common shares of the South San Francisco, Calif.-based biotechnology company were lower in the early going Tuesday.

Traders were also eyeing Illumina Inc., which was slated to report quarterly results after the market close.

The Illumina 0% convertible notes due 2019 were last unchanged at 122, according to Trace data, and the Illumina 0.5% convertible notes due 2021 were a little higher, trading at 130.78 from 128 to 130 on Monday.

The common shares of the San Diego-based developer of genetic research tools were down $7.00, or 3%, at $232.88.

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