Oil and gas bonds remain busy as crude prices bounce; Breitburn preferred units fall post-earnings

By Stephanie N. Rotondo

Seattle, May 10 – The distressed bond market was again zeroing in on the energy space as domestic crude prices rebounded.

The nearly 3% rebound came as wildfires in Canada – which have resulted in production disruptions amounting to about 2.5 million barrels per day – and ongoing attacks on Nigeria’s oil infrastructure have offset concerns about increasing inventories.

Chesapeake Energy Corp.’s 8% second-lien notes due 2022 benefitted from the crude rally, closing up over a point to 65, a trader said.

“They traded a bunch,” he added.

Another trader said the debt ended up a deuce for the day.

Chaparral Energy Inc. was also higher, even after the company said late Monday that it and 10 of its subsidiaries had filed for bankruptcy.

One trader placed the 9 7/8% notes due 2020 at 35½.

“That’s about doubled,” he said, though he noted that the issue “trades only about once a month.”

Another trader said the name “looked like it moved up,” seeing prints in a 37 to 38 range later in the day.

Even Weatherford International plc – which got hammered late last week in the wake of poor earnings – got a bit of a boost.

A trader called the 4½% notes due 2022 up over 2 points at 74¼. A second trader placed that issue in the mid-70s and the 5 1/8% notes due 2020 around 80.

“Looks like it rebounded a couple points,” the latter trader said.

Breitburn units fall

Elsewhere in the oil and gas realm, Breitburn Energy Partners LP’s 8.25% series A cumulative redeemable perpetual preferred units (Nasdaq: BBEPP) took a hit in Tuesday trading, as the market reacted to the company’s earnings release.

The units fell 33 cents, or 23.24%, to $1.09. Trading in the paper was above-average for the day.

However, trading in the company’s corporate bonds was on the thin side. A trader said the 7 7/8% notes due 2022 traded only once in small size, ticking up half a point to 8. The 8 5/8% notes due 2020 also saw “small trades as well,” the trader said, as the issue inched up a quarter-point to 77¾.

Late Monday, the Los Angeles-based MLP reported its first-quarter results, showing a loss of $103.8 million, or 54 cents per share. On an adjusted basis, the loss came to 7 cents per share.

By comparison, net loss in the same quarter of 2015 was $58.83 million and $890.88 million in the fourth quarter of 2015.

Revenue was $148 million, versus $306.28 million for the same period of 2015 and $287.46 million for the previous quarter.

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