Chesapeake gains on debt buyback news; WebMD jumps after guiding Q1 revenue upward

By Rebecca Melvin

New York, Feb. 24 – Chesapeake Energy Corp.’s convertibles traded up on Wednesday along with a gain in the underlying shares of the Oklahoma City-based energy company after fourth-quarter results came in a little better-than-expected and the company announced debt buybacks, including buybacks of convertibles.

Not only did the company announce it had bought back bonds, but it also said it plans to pay the upcoming maturities with cash on hand, a New York-based convertibles analyst said.

The debt-strapped company, which has been struggling to remain afloat as the period of depressed commodity prices lengthens, cut debt by $2.2 billion.

Chesapeake has been a focus of the market, and its 2.5% convertibles moved up about 10 points in active trade on Wednesday.

The convertibles energy space overall was weaker as oil prices struggled and weighed on equities for much of the session. Crude oil prices were initially trading lower again on Wednesday, but they closed better – with equities matching the turnaround.

West Texas Intermediate crude for April delivery added 34 cents, or 1% to $32.21 a barrel on the New York Mercantile Exchange.

But Whiting Petroleum Corp.’s convertibles were indicated to have dropped another 2 or 3 points to 32.7, compared to 35 on Tuesday, when they had dropped a point or two. Shares of the Denver-based energy exploration and production company closed down 22 cents, or 5.6%, $3.72 on Wednesday.

Away from energy, PTC Therapeutics Inc.’s convertibles continued to drop, moving down another 4 points or more to about 51 after a 25-point plunge on Tuesday. Negative news on the U.S. marketing application for its Translarna drug was behind the collapse.

Elsewhere, WebMD Health Corp.’s convertibles were higher as shares of the Elmwood Park, N.J.-based provider of online medical information jumped 10% on quarterly revenue that beat estimates. The company also guided first-quarter revenue above consensus. WebMD’s 1.5% convertibles due 2020 traded up to 126, which was up from 117 to 119 previously, according to Trace data.

Wright Medical Group NV was also up a bit. The Wright Medical 2% convertibles due 2020 were last at 91.30, which was up from about 89.7, according to Trace data. Shares of Wright Medical were up more than $1.00, or 6.5%, at $18.26 at late morning.

The orthopedic medical device company reported a quarterly loss late Tuesday that was better than expected.

Chesapeake moves higher

Chesapeake’s bonds all moved higher on Wednesday. The Chesapeake Energy 2.5% convertibles due 2037 move up to 43 from about 35 on Tuesday. The move up was initially to about 40, but the bonds extended gains in afternoon trading as more information about the company’s finances came to light.

Chesapeake’s 2.25% convertibles were also up a point, and the Chesapeake near-term 3.25% convertibles added 4 points by midday.

Chesapeake shares closed up 50 cents, or 23%, to $2.69.

The company reported a $2.23 billion loss, or $3.36 a share, compared to a gain of $586 million in the same period a year ago. Excluding one-time items and the smaller number of shares outstanding, Chesapeake’s adjusted loss was 16 cents per share, which matched analysts’ estimates or was a little bit better.

Revenue slumped more than 50% to $2.65 billion, but analysts were expecting only $2.63 billion in revenue.

Chesapeake responded to the slump in commodity prices by shutting down some drilling projects, and it wrote down $2.83 billion in oil and natural gas properties in the fourth quarter. It also dropped its rig count to 14, which is less than 25% of what it was a year ago.

For all of 2015, Chesapeake reported a full-year loss of $14.86 billion, which included $14.53 billion in charges, much of which was from the company reducing the value of its oil and natural gas properties.

Chesapeake also said it planned to cut capital expenditures by one-half or more in 2016 to $1.3 billion to $1.8 billion.

Mentioned in this article:

Chesapeake Energy Corp. NYSE: CHK

PTC Therapeutics Inc. Nasdaq: PTCT

WebMD Corp. Nasdaq: WBMD

Whiting Petroleum Corp. NYSE: WLL

Wright Medical Group NV Nasdaq: WMGI

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