Oil, coal sectors remain under pressure despite surge in oil prices; ‘China cliff’ worrying investors

By Stephanie N. Rotondo

Phoenix, Dec. 1 – The distressed debt market was focused on the energy space again on Monday, which ended weaker even as oil prices experienced a rebound.

West Texas Intermediate crude oil rose $3.16, or 4.78%, to $69.31 per barrel. Brent crude improved $2.73, or 3.89%, to $72.88 per barrel.

Prior to the surge, oil prices had hit new lows, with WTI falling to $65 per barrel.

“All of this energy stuff is down big again,” one trader said. “That’s what is going on with oil at its new low.”

“A lot of the energy credits were getting beat up,” another trader said.

And not just in the oil arena, but in the coal space as well.

“It’s just more negative sentiment in general for these commodity-linked products,” he added.

The trader also noted that the so-called “China cliff” was playing a role in the coal sector.

“If China slows, it’s going to have a massive impact on a number of commodities. There are these supply-demand imbalances putting a lot of pressure on prices.”

Among oil and oil-related names, private exploration and development company Samson Investments Co.’s 9¾% notes due 2020 weakened 4 points to 54½. Linn Energy LLC – another independent oil explorer – meantime saw its 6½% notes due 2019 drop 7 points to 83, while the 6¼% notes due 2019 lost 8½ points to end around 82.

Midstates Petroleum Co. Inc.’s 10¾% notes due 2020 were then seen declining a massive 15 points to 72.

Halcon Resources’ 8 7/8% notes due 2021 were pegged at 68½, off 8½ points.

Even California Resources Corp.’s recently priced issues were under pressure.

The $2.25 billion tranche of 6% notes due 2024 fell almost 5 points to 85½, according to a trader. He noted that the issue was trading in a 95 to 96 context prior to the Thanksgiving holiday.

And, the $1.75 billion of 5½% notes due 2021 declined 5 points to 85.

Both issues priced Sept. 11.

In offshore oil producers, Hercules Offshore Inc. continued to falter.

The 7½% notes due 2021 ended down 6 points at 45½. The 8¾% notes due 2021 slipped only slightly to 46¼, but the 10¼% notes due 2019 dropped 7 points to 54.

A trader noted that the latter’s decline came in just a single trade.

For WT Offshore Inc.’s 8½% notes due 2019, a trader said the paper fell nearly 5 points to close around 83.

In the coal sector, a trader saw Walter Energy Inc.’s 9 7/8% notes due 2020 losing a point in a single trade, closing around 27¾.

The 11% PIK toggle notes due 2020 were down almost 2 points “from about a week ago” to 41.

The trader also saw Arch Coal Inc.’s 7% notes due 2019 declining “a couple [points]” to 39. In Alpha Natural Resources Inc.’s debt, the 6¼% notes due 2021 fell 2 ½ points to 42 5/8, while the 6% notes due 2019 dropped almost 4 points to 45.

The trader said the 7½% notes due 2020 ended off 1½ points at 78¾.

In Cliffs Natural Resources Inc.’s bonds, the 6¼% notes due 2040 weakened a deuce to 63. The 4.8% notes due 2020 also closed at 63, off just under a point.

At another shop, the Arch Coal 7% notes were seen at 39, “down about a point.”

Alpha Natural’s 7½% notes lost about 1½ points to end around 78½, while the 6% notes closed at 45.

That compared to levels around 49 previously.

© 2015 Prospect News.
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