Halcon slashes drilling budget, bonds weaken; oil, gas names end mixed; Caesars plan approved

By Stephanie N. Rotondo

Phoenix, Jan. 9 – Oil prices were in decline once more on Friday, but it didn’t necessarily drag down the entire distressed debt market with it.

In fact, the oil and gas space ended the day in mixed fashion.

One name in particular – Halcon Resources Corp. – had news of its own that was pushing the company’s bonds around.

The Houston-based independent energy company announced late Thursday that it had cut its drilling and completion budget forecast for the year by about half.

Away from that space, Caesars Entertainment Corp. paper was weaker after the company said its restructuring support plan was officially effective, having secured more than 60% of the necessary noteholders’ approval.

Halcon halves drilling budget

Halcon Resources announced late Thursday that it was again trimming its drilling and completion budget for 2015, chopping it in half.

In reaction to the news, the bonds were seen mixed, according to a trader.

The trader said both the 9¾% notes due 2020 and the 8 7/8% notes due 2021 converged as both were trading at 77½. However, the former issue was off 1½ points, while the former was up a point.

For the year, Halcon expects to spend between $375 million and $425 million on its drilling programs. The company had previously estimated spending of $750 million to $800 million.

Additionally, an average of two rigs will be in operation at its Fort Berthold area assets, while only one will be producing at El Halcon.

The company had initially planned on operating six rigs.

Oil and gas mixed

With oil prices coming in again, the oil and gas sector continued to be in focus.

West Texas Intermediate crude ended at $48.32, off 47 cents. Brent crude dropped 84 cents, or 1.65%, to $50.12.

But the sector did not move as a whole group, leaving some a little better, some a little worse and others unchanged.

A trader said SandRidge Energy Inc.’s 8 7/8% notes due 2022 were nearly a point higher at 65 5/8. Offshore oil driller Hercules Offshore Inc. saw its 10¼% notes due 2019 get almost 3 points better at 56¾.

California Resources Corp.’s 6% notes due 2024 were also a little higher, gaining a quarter-point to close around 82.

However, the CalRes 5½% notes due 2021 were steady, also at 82.

Also holding steady was Parker Drilling Co.’s 6¾% notes due 2022, which finished the day around 76¼.

On the downside were Midstates Petroleum’s 9¼% notes due 2021, which fell half a point to 49¾, according to a trader.

W&T Offshore’s 8½% notes due 2019 were also softer, ending nearly 1 point weaker at 66½.

MolyCorp softer

Among other commodity names, rare earth metals miner MolyCorp Inc. has seen its debt drifting lower of late.

Given the company’s balance sheet issues – and a $105 million coupon payment due this year that is not expected to be paid – chatter is starting to churn that a bankruptcy filing is in the near future.

A trader said the 10% notes due 2020 closed over half a point lower at 50 5/8.

Caesars plan to move ahead

Caesars Entertainment said Friday that it had secured enough noteholder approval to move forward with a restructuring plan that will put its operating unit into bankruptcy.

On Thursday, the company said it had received over 50% of approval from holders of the 11¼% notes due 2017, the 8½% notes due 2020 and the 9% notes due 2020. In Thursday trading, the bonds were moving higher.

But come Friday’s news, the bonds began to dip.

A trader called the 11¼% notes over half a point lower at 74. The 9% notes also traded with a 74 handle, down a quarter-point.

As for the 10% notes due 2018, they were almost half a point weaker at 14¾, the trader said.

Now that the Las Vegas-based casino operator can move forward with its plans, Caesars Entertainment Operating Co. Inc. is expected to file for bankruptcy by Jan. 20.

It would potentially have had to file anyway, given that it missed a December coupon payment.

Upon emergence from bankruptcy, the opco will be converted into a two-sided real estate investment trust, with one side managing the properties and one side owning them.

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