Energy bonds continue retreat despite higher crude oil prices; Halcon Resources hires advisers

By Paul Deckelman

New York, March 9 – Distressed-debt traders said that many of the sector’s most recognizable names were seen mostly lower on the day Wednesday, even as the broader high-yield bond market turned mixed, recovering some of the losses it posted on Tuesday.

Traders said that energy issues continued the retreat that began on Tuesday even though world crude oil prices, whose fall Tuesday was one of the drivers behind that pullback, were on the rebound on Wednesday.

As has been the case pretty much all week so far, the busiest name in the sector was Continental Resources, Inc., whose bonds were lower on the day.

However, a trader noted that despite the two days of pullbacks, Continental is still trading well up from the levels it held last week and in the weeks before that.

Other losers among the oil and natural gas names on Wednesday included Halcon Resources Corp., Whiting Petroleum Corp. and Chesapeake Energy Corp. Halcon announced that it has hired legal and financial advisers to help it get through the current commodities market downturn.

Metals miner and oil and gas operator Freeport-McMoRan Inc.’s bonds were mostly lower despite an increase in copper prices.

Energy stays under pressure

Traders saw oil and natural gas bonds among the day’s most active issues and said that they were mostly lower, extending the declines seen on Tuesday.

They moved down, even though oil prices – which had fallen on Tuesday after having been strongly higher on Monday – seemed to have recovered their former swagger on Wednesday.

The benchmark U.S. crude grade, West Texas Intermediate for April delivery, shot up by $1.79 per barrel in Wednesday trading on the New York Mercantile Exchange, settling at $38.29, in contrast to WTI’s $1.40 per barrel loss on Tuesday, its first such downturn after two straight gains before that.

Meanwhile, the benchmark international grade, Brent crude for May delivery, jumped by $1.42 per barrel in Wednesday dealings on the London ICE Futures Exchange, settling at $41.07, after Tuesday’s $1.19 retreat – Brent’s first loss after six straight sessions on the rise.

But the improvement in oil prices “wasn’t really reflected” in the behavior of the energy credits on Wednesday, a trader said.

Continental falls back

The busiest energy name was Continental Resources’ 5% notes due 2022, with more than $46 million having traded – tops in the junk world apart from the new Sinclair Television Group notes that priced Wednesday.

A trader saw those notes down ¾ point on the day to around the 84 bid level, on top of the more than 3½-point dive the bonds took on Tuesday.

Those losses were in sharp contrast to the almost 1½-point rise in heavy trading seen on Monday.

Another trader saw the Denver-based oil and gas exploration and production company’s paper trading between 84 and 85 bid, which he called “pretty much unchanged from yesterday.”

While acknowledging the downturn over the past two sessions, he noted that those bonds had come very far in bouncing back from the lows seen earlier in the year.

“They’re trading in the 80s this week,” he said, “while they were in the 70s last week and in the 60s for most of February.”

Going back further still, he said that “they were in the 50s in mid-January, when it looked like the world was ending, after having been in the 70s at the beginning of January.

“They climbed back into the 60s in February, and now here we are, in the 80s.”

A market source at another desk noted that some of the other bonds in the Continental Resources capital structure were also off on the session. Its 4½% notes due 2023 were down ¾ point at 81¼ bid, and its 3.8% notes due 2024 lost 5/8 point to end at 74 3/8 bid, both on around $20 million of volume.

Halcon, Whiting also off

Elsewhere in the energy patch, a trader said that “in the more rough-and-tumble names,” Halcon Resources’ 8 5/8% notes due 2020 were down by as much as 1 1/8 point to 61¼ bid, although at another desk, a trader saw those bonds having trimmed their losses a little to finish at 62 bid, down ½ point, with over $29 million having traded.

The Houston-based E&P operator announced that it has retained PJT Partners as financial adviser and Weil, Gotshal & Manges, LLP as legal adviser “to assist the company as it charts a course through this downturn.”

Elsewhere, Denver-based Whiting Petroleum “was active again,” on the downside, with its 5¾% notes due 2021 losing 2½ points to close at 59 bid, with more than $23 million traded.

“Those are definitely not feeling too well,” another trader said, pegging the bonds down 1½ points on the day at 59¾ bid and noting that they had dropped around 2 points on Tuesday.

Chesapeake Energy’s 8% notes due 2022 finished off 1¼ point at 49½ bid, a market source said, with over $16 million of the Oklahoma City-based oiler’s paper changing hands.

Freeport falters

A trader said that Freeport-McMoRan’s 3 7/8% notes due 2023 lost 1½ points, ending in a 68-to-68½ bid context, with around $20 million traded.

The Phoenix-based gold and copper mining company and oil and gas operator’s 3.55% notes due 2022 lost ½ point, closing at 70 bid, with about $12 million traded.

FMG eases again

Also in the mining sector, a trader said that the bonds of Australian iron-ore mining company FMG Resources were off for a second straight session on Wednesday.

He saw its 9¾% notes due 2022 down around ¾ point on Wednesday, finishing at 98½ bid, though on not much volume.

That extended the 6 1/8-point plunge the notes had seen on Tuesday, which in turn had followed Monday’s gain of nearly 6 points, which was driven by a nearly 20% upturn in iron ore prices.

More than $28 million traded on Monday and another $25 million on Tuesday.

Commenting on those gyrations, the trader said that “they popped on Monday, then they pulled back yesterday [i.e., Tuesday] and pulled back a little more today, so they’re about back to Friday’s levels”

Intelsat active

Away from the natural resources names, a trader saw brisk dealings in Intelsat SA’s bonds, opining that he thought the communications satellite company’s paper “may have been a little easier” on the day and quoting its 6 5/8% notes due 2022 down ¼ point to 61¼ bid.

But at another desk, a trader disagreed with that assessment, saying they were “feeling a little better” on “really good volume” of more than $20 million. This trader saw the bonds up about a point at the 61 level.

The Luxembourg-based company’s 7¼% notes due 2020 were seen 7/8 point better at 69 5/8 bid, with over $27 million traded.

© 2015 Prospect News.
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