Oil rebounds modestly, pushing oil and gas names higher; Fortescue bonds rise on CEO comments

By Stephanie N. Rotondo

Phoenix, Jan. 29 – The distressed debt market had “a little bit of an upswing,” a trader said Thursday.

Even oil and gas names were mostly better, despite massive spending cuts announced by Big Oil during the session.

In other commodities, Fortescue Metals Group Ltd.’s debt was trending higher as well. According to one news report, the head of the iron ore producer declared that the company would make a good takeover target, though he had yet to receive any interest.

Away from the commodity space, Caesars Entertainment Corp. paper was mixed on the day.

A trader said the 10¼% notes due 2016 inched up half a point to 20 5/8, while the 12¾% notes due 2018 gained a like amount, ending at 19½.

However, the 10% notes due 2018 came in a touch, closing at 18 7/8.

Oil rebound helps bonds

Royal Dutch Shell plc said Thursday that it was cutting investments by $15 billion this year in reaction to declining oil prices.

That news came along with earnings that missed analysts’ estimates.

But Shell wasn’t the only Big Oil company that was looking to shore up its bottom line amid the recent oil rout – Occidental Petroleum Corp. and ConocoPhillips also announced spending cuts.

Despite those announcements, oil prices experienced a modest rebound in Thursday trading, helping several oil and gas names inch higher as well.

West Texas Intermediate crude put on 2 cents, ending at $43.47 per barrel. Brent crude ended 67 cents, or 1.38%, higher at $49.14.

In the oil and gas space, a trader said SandRidge Energy Inc.’s 7½% notes due 2021 edged up a quarter-point to 79¼.

However, another market source deemed the issue off over a point at 68¾.

Samson Investments Co.’s 9¾% notes due 2020 were also a tad higher, closing around 31 3/8, the trader said.

Also, Midstates Petroleum Co. Inc.’s 9¼% notes due 2021 rose almost a point to 52¼, while Energy XXI Gulf Coast Inc.’s 9¼% notes due 2017 gained half a point to 56.

Among oil services providers, Key Energy Services’ 6¾% notes due 2021 improved half a point to 61, and CGG SA’s 6½% notes due 2021 held steady at 77.

Fortescue on the move

Fortescue Metals Group is a “good value” for a potential takeover, according to Nev Power, the company’s chief executive, in an interview with PM, an Australian news radio station.

“I think we represent very good value in today’s market because we have a very low price [to] earnings ratio, even compared to other industry participants,” he said. “I think we will see more people buying into our share registry who are long-term value investors.”

On the heels of that, the iron ore mining company’s debt was moving higher.

A trader said the 6 7/8% notes due 2022 gained 1½ points to 79½.

Another market source saw the 6% notes due 2017 at 97½ bid, up a deuce.

To back up his statements, Power noted that FMG has cut costs, which has been further helped by a decline in the Australian dollar, lower oil prices and freight prices.

Among the company’s sector peers, Cliffs Natural Resources Inc. was weaker in trading.

A trader said the 3.95% notes due 2018 fell 1½ points to 82½, as the 4 7/8% notes due 2021 slid over 2½ points to 70¼.

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