Occidental Petroleum notes higher on contract; U.S. Steel in focus on ratings outlook

By James McCandless

San Antonio, Dec. 10 – During the Thursday distressed debt session, energy and manufacturing names moved along the forefront.

Occidental Petroleum Corp.’s notes were pushed higher after winning oil exploration rights from the United Arab Emirates.

Sector peer SM Energy Co.’s issues varied after the company received a ratings upgrade during the session.

As oil futures were seen spiking, Antero Resources Corp.’s and Transocean Ltd.’s paper followed suit.

Meanwhile, manufacturing name United States Steel Corp.’s notes diverged in direction amid a positive ratings shift.

Steelmaker Cleveland-Cliffs, Inc.’s issues weakened.

In the chemicals space, Rayonier A.M. Products Inc.’s paper gained as the company brought a new issue to market.

Pet-focused retailer PetSmart, Inc.’s notes moved on separate paths in the wake of its subsidiary’s Q3 earnings report.

Department store chain Nordstrom, Inc.’s issues were under pressure.

Occidental notes better

Occidental Petroleum’s notes were pushed higher on Thursday, traders said.

The 2.9% senior notes due 2024 added ½ point to close at 95¾ bid. The 2.7% senior notes due 2022 improved by ½ point to close at 101 bid.

On Wednesday, news broke that the Houston-based independent oil and gas producer was awarded new oil exploration rights in the United Arab Emirates.

The company will invest up to $140 million to search for petroleum in the new “Onshore Block 5” region in Abu Dhabi.

The move comes after the nations of the Organization of Petroleum Exporting Countries and other producers elected to increase oil output in January.

Earlier in the week, Occidental priced an upsized $2 billion of senior notes in two bullet tranches while increasing the maximum purchase price for its five-series cash tender offer to the same amount.

“With all of the recent factors in the energy space, it looks like bonds in the sector will go into 2021 on a positive outlook,” a trader said.

SM Energy varies

Sector peer SM Energy’s issues varied throughout the day, market sources said.

The 5% senior notes due 2024 held level to close at 80¾ bid. The 6¾% senior notes due 2026 reached up 1¾ points to close at 77½ bid.

In the middle of Thursday activity, the Denver-based producer received a ratings upgrade from S&P Global Ratings.

The agency lifted the company’s ratings to CCC+ from D and its 2022 and 2024 notes to B- from D.

The action follows S&P’s ratings cut on the name’s below-par buybacks of its notes due 2022 and 2024.

In a note, S&P says that the company will likely have difficulties addressing the 2024 notes, though it would have an easier time repaying the approximately $300 million remaining of its 2021 and 2022 notes outstanding.

Oil futures jump

As oil futures were seen spiking, distressed energy tranches followed, traders said.

West Texas Intermediate crude oil futures for January delivery shot up $1.26 to settle at $46.78 per barrel.

North Sea Brent crude oil futures for February delivery ended the session at $50.25 per barrel after adding $1.39.

Denver-based E&P company Antero Resources’ paper was on a similar track.

The 5 5/8% senior notes due 2023 inched up ¼ point to close at 94¼ bid. The 5% senior paper due 2025 gained 3¼ points to close at 87 bid.

Steinhausen, Switzerland-based contract driller Transocean’s notes moved with the trend.

The 7½% senior notes due 2031 popped up 2¾ points to close at 33¼ bid. The 8 3/8% senior notes due 2021 rose 2¾ points to close at 84 bid.

U.S. Steel flat to lower

Meanwhile, U.S. Steel’s issues diverged in direction, market sources said.

The 6¼% senior notes due 2026 lost 1¼ points to close at 94 bid. The 6.65% senior notes due 2037 closed level at 86½ bid.

As the session headed for the close on Thursday, the Pittsburgh-based steel producer received an outlook change from Moody’s Investors Service.

Chiefly, the agency raised its outlook on the company to stable from negative.

Moody’s said in a note that the change reflects improving end markets that U.S. Steel sells to and a robust recovery in flat-rolled and other steel prices.

For the remainder of the year and into 2021, Moody’s expects continued improvement.

On Tuesday, U.S. Steel announced that it would acquire the remaining stake outstanding in Big River Steel for $774 million.

Cleveland-based steelmaker Cleveland-Cliffs’ paper weakened.

The 5 7/8% senior notes due 2027 shaved off ¼ point to close at 101 bid.

Rayonier improves

In the chemicals space, Rayonier’s notes gained, traders said.

The 5½% senior notes due 2024 gained ½ point to close at 86½ bid.

As the session concluded on Thursday, the Jacksonville, Fla.-based subsidiary of chemicals producer Rayonier Advanced Materials Inc. priced a $500 million issue of springing maturity senior secured notes at par to yield 7 5/8%, Prospect News reported.

Concurrently, the company entered into a five-year senior secured asset-based revolving credit facility for up to $200 million.

There is a $100 million sublimit for letters of credit and a $50 million sublimit for swingline loans.

The credit facility will mature on the earliest of the fifth anniversary of the first date on which the commitments become available and 121 days prior to certain other debts.

PetSmart flat to better

Elsewhere, retailer PetSmart’s issues moved on separate paths, market sources said.

The 8 7/8% senior notes due 2025 closed unchanged at 102¼ bid. The 5 7/8% senior notes due 2025 tacked on ¼ point to close at 102¾ bid.

On Tuesday, the Phoenix-based pet supplies chain’s online retail subsidiary Chewy.com issued the results of its third quarter.

The company reported a loss of 8 cents per share and revenues of $1.78 billion, both better than analysts had expected.

The name reported a 45% boost in sales, attributing the metric to the pandemic and overall changes in trends in the pet retail space.

Seattle-based department store name Nordstrom’s paper was under pressure.

The 5% senior notes due 2044 gave up 1½ points to close at 95 bid.

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