Distressed energy bonds pressured as oil prices continue to retreat; preferreds soften

By Stephanie N. Rotondo

Seattle, Jan. 12 – Distressed commodity-linked bonds were drained Tuesday as oil prices continued to falter.

Domestic crude oil prices weakened 2.32% to $30.68 a barrel.

Oil’s continued decline was made worse Tuesday by the unclear intentions of OPEC. Nigeria’s Emmanuel Kachikwu – the country’s top oil official and OPEC’s outgoing president – indicated in an interview with CNN that some members of the cartel were interested in holding an emergency meeting to decide whether to curtail production.

Suhail Mohammed Al Mazrouei, energy minister of the United Arab Emirates, said he felt it was “unfair” to ask OPEC to unilaterally lower its production.

As oil prices fell, a trader said Oasis Petroleum Inc.’s debt “got hit pretty hard.”

He saw the 6 7/8% notes due 2022 trading with a 57 handle, compared to 62 previously. The 6˝% notes due 2021 slipped to a 55 to 57 zip code, down from 61 on Monday.

In California Resources Corp.’s bonds, a trader said the 6% notes due 2024 went out in a 27 to 28 context versus the 30 to 31 range seen Monday. The 5% notes due 2020 then waned to 33, down from 35.

Among distressed energy preferred stocks, Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) dropped 66 cents, or 14.01%, to $4.05. Vanguard Natural Resources LLC’s 7.625% series B cumulative redeemable preferred units (Nasdaq: VNRBP) meantime lost 81 cents, or 11.96%, closing at $5.96.

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