Energy names drop; Transocean, Callon, Moss Creek, PBF, Shelf Drilling, Talen sink

By Cristal Cody

Tupelo, Miss., July 19 – Distressed energy bonds sank on Monday as oil prices slid about $5 on production policy plans and stocks faltered on growing Covid-19 cases.

“Energy took the brunt today,” one source said. “Oil got killed.”

Transocean Inc.’s bonds shed about 6 points to 9 points during the session, sources said.

Transocean’s 8% notes due 2027 (Ca/CCC-) plunged 9 points to 70½ bid on $6 million of secondary volume.

The Vernier, Switzerland-based offshore driller’s 6.8% notes due 2038 (C/CCC-/) fell 5 5/8 points to 53 3/8 bid by late afternoon on over $5 million of trading action.

Oil-related names, including Transocean and Occidental Petroleum Corp., were under pressure on Friday and sank further as the markets opened following OPEC’s weekend announcement, sources said.

OPEC announced Sunday that it will steadily end production cuts by September 2022.

West Texas intermediate crude oil benchmark futures for August deliveries plunged $5.39 to settle the day at $66.42, while September deliveries sank $5.21 to settle at $66.35.

North Sea Brent crude oil futures for September deliveries dropped $4.97 to settle Monday at $68.62.

Houston-based Callon Petroleum Co.’s 8% senior notes due 2028 (Caa2/D) were quoted down 6¼ points at 90 bid on $12 million of paper traded by the close.

Houston-based oil and gas exploration company Moss Creek Resources Holdings Inc.’s 7½% senior notes due 2026 (Caa1/B) slipped 6 points to 87 bid on light volume of $1 million, a source reported.

Parsippany, N.J.-based petroleum refiner PBF Energy Inc. subsidiary PBF Holding Co. LLC’s 7¼% senior notes due 2025 (B3/B+/B+) fell 5½ points to end the day at 62½ bid on over $4.5 million of secondary activity.

United Arab Emirates-based Shelf Drilling Holdings Ltd.’s 8¼% senior notes due 2025 (Caa3/CCC+) also declined over 5 points to head out at just under 75 bid on $2 million of issues traded.

Distressed returns down

The S&P U.S. High Yield Corporate Distressed Bond index ended Friday down 0.46% and with month-to-date total returns of minus 2.43%.

The index closed the week with year-to-date total returns of 24.76%.

Overall market tone weakened further on Monday with stock indices down over 1% to 2.09%.

The iShares iBoxx High Yield Corporate Bond ETF shed 59 cents to close at $87.08.

Economic growth has started to moderate with BofA Securities, Inc. analysts tweaking their gross domestic product forecasts to 6½% this year from 7%. Elevated inflation is expected for the near term, according to the BofA Global Research note on Friday.

The past few quarters have been marked by shortages across broad swaths of the economy from factors including Covid disruptions, housing market shifts “and even the damaging winter storm in Texas,” BofA said. “But looking at alternative data sources as well as macro data suggests that these shortages may be easing just as demand for goods slows somewhat.”

Talen Energy drops

Both Talen Energy Supply LLC and Nine Energy Service, Inc. reported losses and other impacts from the Texas winter storm.

Talen’s bonds were seen down about 2 points to 5 points during the session after adding about ¼ point to ¾ point on Friday, market sources said.

“They’re still stuck in the 80s,” one source said. “They’re today at 87, 88. They’ve sold off pretty good. The whole market took a dip here.”

The Woodlands, Tex., and Allentown, Pa.-based power company’s 7¼% notes due 2027 (B3/CCC+/B) were down about 2 points at the 86½ bid area by late afternoon.

Nine Energy’s 8¾% notes due 2023 (Caa2/D) were last seen active on Friday and up 1 point at 60 bid on $5 million of trading supply.

The notes have climbed from 45¼ bid at the year’s start.

The Houston-based oilfield services company is set to post its second-quarter earnings results on Aug. 5.

AMC bonds decline

In other distressed paper active Monday, AMC Entertainment Holdings, Inc.’s bonds sank in heavy trading after softening slightly on Friday, sources said.

AMC’s 12% second-lien senior secured notes due 2026 (Ca/C) skidded 4½ points by the close on Monday to 86 bid on more than $26 million of trading volume.

The Leawood, Kan.-based movie theater owner’s notes declined more than 7 points in the prior week, keeping the company a “speculative name,” a source said.

The issue started the year in the 23¼ bid range.

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