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Crude oil gains prompt rally in distressed energy sector debt; Whiting busy, firm as notes converted
By Stephanie N. Rotondo
Seattle, May 11 – A rally in crude oil prices helped push up distressed oil and gas bonds on Wednesday, continuing the commodity-focused trend.
Whiting Petroleum Corp.’s 5¾% notes due 2021 saw “a fair amount of trading,” a trader said, climbing nearly 3 points to 78¼.
In addition to the rise in oil prices, Whiting announced that it was converting $476.3 million of convertible notes issued back in March into stock.
The March 23 deal swapped $276.7 million of unsecured notes for convertible debt maturing 2018 through 2023. The company will issue 41.8 million new common shares in the mandatory conversion.
Meanwhile, Denbury Resources Inc.’s 6 3/8% notes due 2021 were seen rising a point to 62¾.
Despite the overall upward trend in the energy sector, not all names were following in line.
Southwestern Energy Co.’s 4.95% notes due 2025 slipped over a point to 79¼, according to a trader.
Oil and gas-linked preferreds were also not benefitting from the gains in crude oil.
Legacy Reserves LP’s 8% series A cumulative redeemable perpetual preferred units (Nasdaq: LGCYP) weakened 41 cents, or 7.16%, to 5.32. Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) dipped 6 cents, or 5.5%, to $1.03.
On Monday, Breitburn reported somewhat improved, but still weak, quarterly results. In response, the units declined over 23% in Tuesday trading.
Domestic crude popped over 3% to trade above $46 a barrel – a new high for 2016.
The gain in crude came after the U.S. Energy Information Administration announced that stockpiles dropped 3.4 million barrels last week. Analysts had forecast a build of 714,000 barrels.
In its own report, the American Petroleum Institute predicted a build up of 3.5 million barrels.
The EIA report also showed that gasoline inventories fell 1.2 million barrels, while distillate fuel declined by 1.6 million barrels.
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