Nearly all of the energy producer’s bonds plummeted to their lowest levels ever on Thursday as oil dropped toward a more-than six-year low. Chesapeake notes were the second-most actively traded in the high-yield market, just behind Petrobras Global Finance BV.
One of Chesapeake’s bonds dropped 9 cents on the dollar, while the price of credit-default swaps — used by investors to protect against defaults — rose to the highest ever. The company’s shares sank to a 13-year low.
“We are seeing investors capitulate to the reality of the situation,” said John McClain, a money manager at Diamond Hill Capital Management Inc. in Columbus, Ohio, which oversees $16 billion. “They have a lot of debt, they are burning through cash and their earnings profile is not getting any better. They are trading worse than their credit rating suggests, and there is almost certainly a downgrade coming.”
Gordon Pennoyer, a spokesman for the Oklahoma City-based company, declined to comment.
2) HOUSTON – A year after Saudi Arabia and its oil cartel decided to keep their oil wells running and let plunging prices correct a global oversupply, the number of bankruptcy cases among North American oil drillers has risen to 37.
And that figure could double next year if crude stays cheap, as at least as many oil companies appear to be on the precipice of running out of cash or are coming up on deadlines to pay off their debt, attorneys at Dallas-based Haynes & Boone said Friday.
Sixteen of the bankrupt companies were based in Texas. Most of them were small, and didn’t play a central role in the nation’s energy surge over the last few years. But together they had $13 billion in debt.