Oil price rally boosts energy sector; Alpha Natural reports narrower loss; Alliance rebounding

By Stephanie N. Rotondo

Phoenix, Feb. 12 – The distressed debt market was improving Thursday, helped by a strong jobs number and a cease-fire agreement between Ukraine and Russia.

Oil prices were also rallying, which helped to boost the energy sector.

West Texas Intermediate crude rose $2.38, or 4.87%, to $51.22 a barrel. Brent crude increased $2.39, or 4.37%, to $57.05.

Also higher were Alpha Natural Resources Inc.’s bonds. The debt was inching higher on the back of earnings that showed a narrower quarterly loss.

Alliance One International Inc. remained busy, as it has been since the company posted earnings earlier this week. Initially, the earnings weighed on the debt, but the bonds have been rebounding ever since.

“They are not quite to where they were, but they have recovered most of it,” a trader said.

Energy up with oil

Oil and gas bonds were moving up as oil prices rallied on Thursday.

Petroleos de Venezuela SA – which was downgraded by Standard & Poor’s on Wednesday – was gaining strength amid heavy activity, a trader said.

He saw the 8½% notes due 2017 at 62¼, up nearly 2½ points. The 5¼% notes due 2017 put on 1¾ points, closing at 45¼.

Among domestic names, Linn Energy LLC’s 8 5/8% notes due 2020 were a point higher at 88 5/8, according to one trader. Another source placed the 7¾% notes due 2021 at 85¾, up a quarter-point.

SandRidge Energy Inc.’s 7½% notes due 2023 were meantime half a point better at 70¾, while Energy XXI’s 7½% notes due 2021 increased a quarter-point to 50¼.

Hercules Offshore Inc.’s 6¼% notes due 2022 ended a point higher at 38 and the 7½% notes due 2021 finished at 38 5/8, up 1 5/8 points.

Alpha Natural numbers improve

Alpha Natural Resources reported a narrower loss for the fourth quarter, pushing its bonds – and the bonds of its peers – higher.

A trader saw the 6½% notes due 2021 rose 1½ points to 26½, according to a trader. The 9¾% notes due 2018 inched up over a point to 40 3/8.

Another market source pegged the 6¼% notes at 26¼ bid, up almost a point.

In Arch Coal Inc. paper, a trader said the 7% notes due 2019 ended at 27½, up 1¼ points.

Another trader said the issue was a point better at 28. He also noted that Arch paper was “outperforming” Alpha Natural.

For the quarter, Bristol, Va.-based Alpha Natural reported a net loss of $121.7 million, or 55 cents per share. That compared to a loss of $358.8 million, or $1.62 per share, a year earlier.

Excluding certain items, loss per share was 50 cents. On average, analysts polled by Thomson Reuters were predicting a loss of 71 cents per share.

Revenue was down 2.1% at $1.07, beating estimates of $985.4 million.

The narrower loss was attributed in large part to cost-cutting efforts. Total costs during the quarter declined 9% to $1.17 billion.

Following in line with its peers, Alpha Natural also said it cut its 2015 capital expenditure budget to $225 million to $275 million from $275 million to $350 million.

Alliance One rebounding

Alliance One International’s 9 7/8% notes due 2021 were “moving on up, just like the Jefferson’s,” a trader quipped.

The trader saw the issue at 79 7/8, up 5 points on the day.

Another trader said the name “continues to be active,” seeing the issue in a 79 to 80 context.

On Tuesday, investors had weighed down the company’s debt following an earnings release on Monday and a conference call on Tuesday.

But since then, the debt has been rebounding.

For the fiscal third quarter, the Morrisville, N.C.-based tobacco leaf distributor posted sales of $488.9 million, a decline of 25.3%.

The company attributed the decrease to a 21.9% reduction in the amount of full service volumes sold due to deconsolidation of a Brazilian subsidiary, a delayed shipment, less favorable weather conditions and a global oversupply of tobacco.

Gross profit as a percentage of sales was 14.3%, up from 12.8% the year before.

Pretax income came to $11.4 million. Total net income was $1.4 million, or 2 cents per share.

That compared to income of $13.3 million, or 15 cents per share, the year before.

© 2015 Prospect News.
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