Endeavour surges on oilfield deal; USEC flat to lower; Wabash National edges up on hedge

By Rebecca Melvin

New York, May 31 - Endeavour International Inc.'s convertibles looked to have jumped more than 10 points Thursday afternoon along with a 70% surge in the underlying shares after the Houston-based oil and gas company announced that it acquired additional working interest from ConocoPhillips in a North Sea oilfield.

Sealing this oilfield deal by mid-June was critical for Endeavour to be able to make its debt payments, a Connecticut-based analyst said.

USEC Corp. traded actively at pricing that was flat to weaker than the previous range. Market players have been waiting for news by June 1 regarding whether the Bethesda, Md.-based enriched uranium supplier would receive federal funding needed for its operations.

The impetus for most of USEC's convertibles activity was block trades out of a fund that was restructuring prior to month end, a market source said.

Later in the session, the company said it was working on an extension from creditors in order to be able to continue working on a cost-sharing proposal with the U.S. Department of Energy that would allow USEC to proceed with the American Centrifuge research, development and demonstration program.

Elsewhere, Wabash National Corp. traded higher on the day and looked to have improved on a dollar-neutral, or hedged, basis by 0.5 point to 0.75 point, sources said.

"It has a nice profile and actually looks like a convertible," a New York-based trader said of the Wabash convertibles, which were closed at 97.875 bid, 98.375 offered versus a share price of $6.96, according to a second trader.

The trading session marking the end of May was described overall as lackluster, with more sellers than buyers as uncertainty regarding the euro situation and disappointing economic data in the U.S. weighed on equities.

"Converts were slightly sold," a New York-based trader said.

Among economic data was a disappointing ADP jobs report with rising jobless claims, and a revision of first-quarter gross domestic product, which showed the economy slowed more than economists initially thought. GDP was revised down to 1.9% from an earlier estimate of 2.2%.

In addition, Chicago PMI, an index that measures factory output in the Chicago region, dropped to 52.7 from 56.2 last month, and well below economists' expectations. The Chicago PMI reading has dropped for the last three months and sits at its lowest level since September 2009.

Endeavour surges

Endeavour 5.5% convertible senior notes due 2016 were said to have traded at 92.25 versus an underlying share price of $10.50 on Thursday, according to an East Coast-based buysider.

A second source said he had the notes at 90.5 bid, 93.5 offered versus a share price of $10.35, but they didn't trade.

Early in the session, the bonds were offered at about 76, the buysider said.

Shares of the Houston-based oil and natural gas company were trading at about the unchanged mark until about 1:30 p.m. ET, when the company put out a press release announcing the completion of additional working interest in the Alba field.

After that the shares moved straight up, and were halted at one point, ending the session at $9.99, which was up $4.13, or 70.5%.

Given the size of the company, the ConocoPhillips' working interest is a huge deal, a Connecticut-based analyst said.

Endeavour's market capitalization was about $370 million intraday Thursday. It had had a small interest in the Alba field prior to Thursday's news, and the 23.43% additional interest from ConocoPhillips raises Endeavour's total working interest in the field to 25.68%.

The Alba oil field is located in the central North Sea in a reservoir that has been producing since 1994.

Endeavour said in its release that as a result of the completion of the additional working interest in the Alba field, the net proceeds from the 2018 notes offering have been released from escrow. The proceeds are being used to fund the acquisition and repay outstanding amounts under its senior term loan.

An analyst said that if the deal hadn't gone through by mid-June, the company would have had to pay back $500 million of debt.

Earlier this month, on the earnings call, the company disclosed that the deal was not closed because the parties had not come to an agreement on the eventual decommissioning of the oilfield. Endeavour's stock traded down to $8.00 from $12.00 at that time, and continued to drift lower from there.

The Endeavour convertibles had been in the low 90s at the beginning of May with the stock in the $9 range, after being much higher.

USEC flat to lower

USEC's 3% convertibles due 2014 traded at about 40 and also a little lower with a 39 handle, which was down from a previous range of 40 bid, 44 offered.

USEC shares ended the session at $0.7222, which was up a little more than a penny, or 1.7%.

The USEC convertibles were expected to move higher or lower from this level depending on the outcome of financing of the company's operations, market sources said.

USEC said Thursday that based on the progress made to date, and the expected near-term completion of the agreements needed to provide cost-shared funding with the DOE, USEC is working with its creditors to extend for a short time USEC's ability to continue with work on the project until the agreements are finalized.

Currently, USEC's credit facility severely limits corporate funding of the project if no federal cost sharing is made available by June 1.

Pending short-term resolution with the lenders and DOE, USEC expects to continue work on the RD&D program at its facilities in Ohio and Tennessee without disruption, according to a news release.

Mentioned in this article:

Endeavour International Inc. NYSE: END

USEC Corp. NYSE: USU

Wabash National Corp. NYSE: WNC

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