Intelsat continues heavy trade; Chesapeake firms as maturity eyed; SM Energy results drag down bonds

By Stephanie N. Rotondo

Seattle, Feb. 24 – Intelsat SA was again the dominant name in the distressed debt market on Wednesday, though fresh news out of the oil and gas space was spurring activity there as well.

Chesapeake Energy Corp. released its latest quarterly results on Wednesday, showing a wider loss. The company also cut its capital expenditure budget again, though it maintained that an upcoming maturity would be fully funded.

The bonds traded up on the news, though one trader expressed surprise that the name did not push out Intelsat as most active.

Meanwhile, SM Energy Co.’s debt traded down in response to its fourth-quarter results. The numbers came out late Tuesday, with the company reporting a loss versus a year-ago profit.

Whiting Petroleum Corp. came out with its earnings after the bell, with a conference call slated for Thursday. Ahead of the release, bonds were drifting lower.

The moves in the oil and gas space came as crude oil prices traded all over the place during the midweek session. Domestic crude was initially down on the day, but reversed course as new data from the Energy Information Administration indicated U.S. demand for gasoline was higher than it was a year ago and supplies were down, given that many refineries had slashed production.

That news offset the fact that crude stockpiles rose by 3.5 million barrels last week to hit an all-time high of 507 million barrels.

Intelsat, the dominator

Intelsat bonds continued to be the top trader in the distressed universe on Wednesday, as has been the trend since the company announced its latest quarterly results on Monday.

A trader said there was “heavy volume” in the 5½% notes due 2023, which he saw adding 2½ points to close at 61¼.

The rest of the structure, however, continued to wane.

The trader said the 6 5/8% notes due 2022 fell a point to 42. The 7¾% notes due 2021 were off a similar amount at 22½.

The 7¼% notes due 2019 meantime ticked down a touch to 70¾.

A second market source placed the 6 5/8% notes at 42 bid, off over a point.

After the Luxembourg-based satellite services provider’s numbers were released on Monday, the bonds dropped 8 to 10 points. In Tuesday trading, the debt declined as much as 14 points, depending on the issue in question.

On Monday, Intelsat posted quarterly net income of $49.1 million, or 42 cents per share. On an adjusted basis, EPS was 55 cents.

Revenue for the quarter came to $571.3 million.

Analysts had forecast adjusted EPS of 31 cents per share on revenue of $571.5 million.

For the year, Intelsat reported a profit of $242 million, or $2.06 per share. Revenue was $2.35 billion, down 2.4% year over year.

Adjusted EBITDA was 79 cents, about in line with the previous year.

Looking ahead, Intelsat is projecting full-year revenue between $2.14 billion and $2.2 billion.

In addition to releasing its results, the company also announced that it had hired Guggenheim Securities to look into ways to shore up its balance sheet. The company was not specific on what possibilities it was considering, but did note that the hiring of the adviser was not a precursor to bankruptcy.

As of Dec. 31, Intelsat had debt of $14.6 billion. The company maintained that its liquidity buffer was sufficient, given that it has an untapped revolving credit facility.

On the heels of the news, Standard & Poor’s placed Intelsat on CreditWatch with negative implications, citing the lower-than-expected revenue forecast for 2016.

Chesapeake firms despite loss

Chesapeake Energy debt improved Wednesday, despite the company reporting a wider loss for the fourth quarter.

A trader said the 3¼% notes coming due next month gained 3½ points on the day, ending at 99¼. The trader noted that the company said it fully intended to take out the debt upon maturity.

“It looks like there is still a little doubt or they would be trading at par,” the trader noted.

The 6½% notes due 2017 meantime “shared some of the exuberance,” rising over 3 points to 41.

At another desk, the 6 5/8% notes due 2020 were seen at 20 bid, up half a point.

For the quarter, the Oklahoma City-based oil and gas producer posted a net loss of $2.23 billion, or $3.36 a share. That compared to a profit of $586 million, or 81 cents per share, the year before.

On an adjusted basis, EPS was 16 cents.

Analysts polled by FactSet had predicted a loss of 17 cents per share.

Revenue came in line with estimates, however, falling to $2.65 billion from $5.69 billion.

In an effort to shore up cash and deal with its looming maturities, Chesapeake said it was looking to raise $500 million to $1 billion via asset sales in 2016. Additionally, it opted to cut its capex yet again, this time by 57% to $1.3 billion to $1.8 billion.

The company did manage to alleviate some of its debt burden in 2015, cutting $2.2 billion in debt.

SM down on results

Late Tuesday, SM Energy posted its own quarterly results. Like Chesapeake, it swung to a loss from a year-ago profit.

Come Wednesday, the Denver-based company’s bonds were in decline.

A trader saw the 6 1/8% notes due 2022 falling over 2 points to 38, as the 5% notes due 2024 dipped a point to 37¼.

For the fourth quarter, SM reported a net loss of $340.3 million, or $5.01 per share.

The company had posted a profit the year before.

On an adjusted basis, loss per share was 90 cents.

Revenue was $303.7 million.

Analysts had expected a loss of 60 cents per share on revenue of $362.3 million.

Whiting drops pre-earnings

Leading up to Whiting Petroleum’s after-hours earnings release, the Denver-based oil producer’s debt was driving downward.

A trader said the 5% notes due 2019 declined over 2 points to 39¾. The 5¾% notes due 2021 lost almost 3 points, ending at 39¼.

For the quarter ended Dec. 31, Whiting posted a net loss of $98.7 million, or 48 cents per share. That was better than the $353.7 million loss, or $2.69 per share, the year before.

On an adjusted basis, loss per share was 43 cents.

Revenues, however, fell to $423.5 million from $696.1 million.

The company raised $512 million via asset sales in 2015. That figure was close to Whiting’s planned $500 million capex budget for 2016.

Total laid out for capex was off 80% from 2015 levels.

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