California Resources notes tumbled today as oil hit its lowest level in more than five weeks following a steep decline in crude prices triggered by a bearish U.S. inventories report that showed stronger than expected gains in gas stockpiles alongside a sluggish reduction in crude inventories.
Crude prices fell 3.6% in midday trading, to $44.78 a barrel, based on U.S. benchmark West Texas Intermediate, after a report by the Energy Information Administration (EIA) said gas inventories for the week ended June 9 climbed 2.1 million barrels and crude stockpiles fell by 1.7 million barrels. This compares with a Reuters poll forecasting a decline of 500,000 barrels in gas inventories and drop of 2.7 million barrels in crude stockpiles.
California Resources, whose ability to delever has long hinged on a crude recovery since its ill-timed split from Occidental Petroleum in 2014, saw its 8% 2022 senior secured second-lien notes drops 3.25 points, to 65.75, in afternoon trades.
Corporate and bond ratings are CCC+/Caa2 and CCC+/Caa3, with negative outlooks and a 4 recovery rating on the second-lien notes by S&P Global Ratings.
California Resources shares (NYSE:CRC) were down 8.5% to $10.82 in midday trading.
Other major decliners in the sector included EP Energy’s 9.375% 2020 notes and 8% 2025 notes, which fell 3.75 points and 2.75 points, respectively, according to MarketAxess, to 85 and 79. MEG Energy 7% 2024 notes were also changing hands at a steady clip, losing 1.25 points, to 82, while Whiting Petroleum 5.75% 2021 notes slumped 1.25 points in an active session, to 95.
Offshore drillers also took it on the chin, as Transocean 9% 2023 notes fell 1.312 points, to 104, according to MarketAxess, and Shelf Drilling 9.5% 2020 notes slid three-quarters of a point, to 98.75. — James Passeri
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