Energy names mixed as oil prices ease; coal operator Murray continues gains; Sprint busy

By Paul Deckelman

New York, Jan. 5 – Distressed-debt traders and traders in the notes and bonds of otherwise under-performing companies saw some of the names in the recently red-hot oil and natural gas sector, such as exploration and production operators California Resources Corp., EP Energy Corp., MEG Energy Corp. and driller Ensco plc, come off the highs they had notched on Thursday after opening the year with three consecutive sessions of sizable gains fueled by surging crude oil prices.

Crude prices themselves were lower on Friday after several upside sessions before that.

But other energy credits, such as Continental Resources, Inc. and drillers Noble Holding International Ltd. and Transocean Ltd., were still seen better on the day.

Away from the oil sphere, another energy-related entity – coal producer Murray Energy Corp. – gained solidly in active trading for a second consecutive session.

Apart from energy, drugmaker Valeant Pharmaceuticals International Inc.’s paper was mostly higher.

In telecommunications, several series of wireless provider Sprint Corp.’s bonds were better – but wireline company Frontier Communications Corp. stayed lower.

Oil prices move lower

A trader said that “oil took a little bit of a breather” after several straight sessions on the upside and gains in five out of the previous six trading days.

The key domestic benchmark crude grade, West Texas Intermediate for February delivery, was down by 57 cents in Friday trading on the New York Mercantile Exchange, settling at $61.44, while the key international crude grade – March-contract North Sea Brent – ended off by 45 cents per barrel in London futures trading, closing at $67.62.

Even with those losses, crude remains at the highest level it has been since early in 2015.

“Its’s not really off significantly,” the trader declared. “We’re still in this 45-65 [dollar per barrel] kind of range on oil. I don’t know how high it could go from here – but it’s definitely had a good effect on some of the [issues rated] CCCs and I think guys are looking for an opportunity to buy yield.”

With the rise in energy prices spurring buying in the heretofore shaky energy sector, he said, “you’ve seen the CCC kind of basket moving better and there’s a lot of that kind of paper.

“With a healthy oil market backdrop, you’ve seen guys holding their nose a little bit and buying some of this beaten up CCC type paper.”

One such name has been the most actively traded oil and gas credit, Los Angeles-based exploration and production company California Resources’ 8% second-lien senior secured notes due 2022, considered by some to be a benchmark proxy for the sector as a whole.

That bond firmed off its lows for 2017 in the lower 50s during the summer, rising to the mid-80s by the end of the year and continuing to gain as the New Year opened, peaking at 87½ bid on Thursday.

On Friday, a market source said those notes had retreated by around 1¾ points to 85¾ bid, with over $24 million changing hands.

While noting the drop, the first trader pointed out that “they were off a little bit – but these things have enjoyed a tremendous run,” so naturally, there was going to be some profit-taking.

“Is the market going to just go up and up and up? I don’t think so, so it would be prudent to take some [profits] at some point – it’s had a tremendous run.”

Energy names turn mixed

Taking their cue from the lower oil prices, some of the energy credits which had amassed gains over the previous three trading sessions softened on Friday.

Houston-based exploration and production company EP Energy’s 8% notes due 2025 were seen by a trader down nearly 1½ points on the session at 78½ bid, while its 8% notes due 2024 were down 1 1/8 points at 105 3/8 bid.

Calgary, Alta.-based MEG Energy’s 7% notes due 2024 were off by 1 full point at 89½ bid, London-based oil drilling company Ensco’s 4½% notes due 2024 were likewise 1 1/8 points softer at 88¼ bid, on turnover of more than $27 million.

But some energy-type names managed to hold their own, with Oklahoma City-based E&P operator Continental Resources’ 4 3/8% notes due 2028 firming by 3/16 to 101 9/16 bid, with over $13 million traded.

Noble Holding’s 7¾% notes due 2024 ended up ¼ point on the day at 91¼ bid, while oilfield services sector peer Transocean’s 7¾% notes due 2031 edged upward by 1/16 point to just over 93 bid.

Non-oil names hold gains

Away from the oil E&P and oilfield service companies, a trader said that “today’s volume leader was an oddball leading the pack”– St. Clairsville, Ohio-based coal minder Murray Energy’s 11¼% notes due 2021.

Those bonds had risen more than a deuce on the day on Thursday and tacked on another 1 point Friday on volume of more than $30 million to close at 56 1/16 bid.

The trader speculated that the current cold wave blanketing much of the United States “would be good for coal,” boosting sales to the thermal sector.

Away from there, Laval, Que.-based drug manufacturer Valeant Pharmaceuticals’ 6 1/8% notes due 2025 picked up by ¼ point on the day to 93 7/8 bid and its 5 ½% notes due 2023 rose by a similar amount, on volumes of $22 million and $16 million, respectively.

Among the telecommunications names. Sprint’s 7 1/8% notes due 2024 improved by ¼ point to 103 5/8 bid, while the Overland Park, Kan.-based Number Four U.S. wireless provider’s 8¾% bonds due 2032 gained ½ point to 116 bid, both on over $12 million traded.

But Stamford, Conn.-based wireline telecom provider Frontier Communications’ benchmark 11% notes due 2025 lost nearly 7/8 point on the day to close at 74¾ bid, on turnover of more than $16 million.

© 2015 Prospect News.
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