This past spring, the
crude credit crunchwas in full swing. Exploration and
production companies like
McMoRan Exploration and
Stone Energy were singing the
borrowin' base blues. Capital was scarce, leading to
deeply dilutiveequity offerings by folks like
Brigham Exploration (Nasdaq: BEXP) and
Delta Petroleum (Nasdaq: DPTR), and a
cut-rate shale sale by
Denbury Resources (NYSE: DNR).
With crude oil back in the comfy $65-to-$75 range, and a
return to remarkably bullish sentiment on the part of
investors, the situation has improved a great deal for oil
and gas companies seeking capital.
Permian player
Concho Resources (NYSE: CXO) went to market
with a $250 million junk bond offering this month, and ended
up selling $300 million of debt priced to yield less than 9%.
Continental Resources (NYSE: CLR) priced $300
million of 8.25% notes at better than $0.99 on the dollar,
for a yield of 8.375%. Compare these results with
Petrohawk Energy 's (NYSE: HK) $600 million
offering in January, at a yield of 12.75%.
Investment grade issuers like
EnCana 's (NYSE: ECA) Cenovus Energy
subsidiary and
Royal Dutch Shell have also found the bond
market receptive to their multibillion-dollar offerings.
Speaking of EnCana, remember when the Canadian company
dropped its decisionto
divide and conquerlast October? Breaking up its
unconventional gas business and Cenovus, its integrated oil
business, required putting new borrowing facilities in place.
With the successful placement of these long-term bonds, and
with a spinoff planned for the end of November, this move by
EnCana is one of the strongest signs of renewed confidence in
today's credit markets.
On the equity side, the biggest evidence of energy sector
enthusiasm is the
proposed IPOof Cobalt International Energy. The offering
date has yet to be determined, so the deepwater explorer
needs the good times to keep rolling, or else it risks a
delay akin to the one experienced by A123 Systems, which is
just now
going publicafter registering with the SEC last
August.
This article was originally published as
More Cash Flowing to the Oil Patchon
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