Author Topic: Bonds of Commodity Companies  (Read 1250 times)

EricSchleien

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Bonds of Commodity Companies
« on: December 13, 2019, 12:31:13 PM »
Hi All -

I've started to poke around within the Oil & Gas Sector as pretty much anything commodity related has been beaten down. I remember in 2016, there was lots of bond opportunities in some of these names.

Want to start a thread so we can discuss different ideas/opportunities as they come up, and perhaps want some feedback on our ideas.

Best,
Eric



BG2008

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Re: Bonds of Commodity Companies
« Reply #1 on: December 13, 2019, 02:09:24 PM »
Antero Midstream Corp - Pays $1.23 per share and trades at $5.85 for a juicy 21% yield.  They just gave some concession to Antero Resources.  AR is hedged for 2020 and 2021.  So no BK till 2022.  Should get 9 quarters which amounts to  $2.77 which is 47% of your cost.   AM is basically the bond in AR.  AR bonds trade at 8.4-11% yield.  So you pick up 11% more in yield.  AM bonds are trading at 7.6 to 8.2% yield. 

BG2008

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Re: Bonds of Commodity Companies
« Reply #2 on: December 13, 2019, 02:11:50 PM »
Lots of year end tax loss harvesting.  I think AM suffered from this until they recently agreed to reduce fees to AR.  I'm probably not a long term holder of this.   If Nat Gas prices spike up, you should just get out and take your money.  I think we get about 2 years to see a spike in nat gas.   In a BK scenario, I think AM's assets are still needed as it is critical infrastructure.  I'm a big believer that the only way to own O&G assets is via debt, MLP, or a midstream asset.  You can't leave the capital to be re-invested.   

benhacker

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Re: Bonds of Commodity Companies
« Reply #3 on: December 13, 2019, 05:26:25 PM »
Danbury bonds are interesting to me.
Ben Hacker
Beaverton, Oregon - USA

Spekulatius

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Re: Bonds of Commodity Companies
« Reply #4 on: December 13, 2019, 05:40:00 PM »
Danbury bonds are interesting to me.

I have casually followed distressed debt from the 2015/16 crop of  E&P bankruptcies and the recovery rates were mostly awful. Gladly I just looked, but never played in that sandbox. I bought some midstream debt during the 2015 energy credit meltdown and it went very well (OKE debt was paying north of 9% back then and was BB+ rated and never even close to being distressed). There is nothing like this around right now, not even close.
Life is too short for cheap beer and wine.

benhacker

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Re: Bonds of Commodity Companies
« Reply #5 on: December 15, 2019, 01:44:16 PM »
Yeah, totally agree that recovery are garbage.  I would not be buying distressed with hope of recovery in the general case.  My bet on Denbury is that they do not file for a variety of reasons, but agree with you point wholeheartedly.
Ben Hacker
Beaverton, Oregon - USA

lnofeisone

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Re: Bonds of Commodity Companies
« Reply #6 on: December 16, 2019, 01:24:47 AM »
Antero Midstream Corp - Pays $1.23 per share and trades at $5.85 for a juicy 21% yield.  They just gave some concession to Antero Resources.  AR is hedged for 2020 and 2021.  So no BK till 2022.  Should get 9 quarters which amounts to  $2.77 which is 47% of your cost.   AM is basically the bond in AR.  AR bonds trade at 8.4-11% yield.  So you pick up 11% more in yield.  AM bonds are trading at 7.6 to 8.2% yield.

I've been slowly picking up AM shares for tax harvesting. My secondary thesis for selecting AM is the fact $1.23 distribution doesn't show up in some financial filters (e.g., SeekingAlpha hasn't caught up yet but) and looks like updates will show up come January.

BG2008

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Re: Bonds of Commodity Companies
« Reply #7 on: December 21, 2019, 08:50:36 PM »
AM has worked much better than I could've imagined in the last few days.  I bought an initial lot at $7 and then bought a bunch more at $5.25 when they announced the AR/AM deal at a 23% yield.  At one point AM traded at a 4-5% yield.  Of course, that was a unsustainable price.