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Author: ytm One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35361  
Subject: Opportunities in Natural Gas Company Bonds Date: 1/20/2012 3:25 PM
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As most of you know, the price of natural gas has been tanking and sitting now at two decade historical lows.

This industry is also one that is leveraged in debt, some more than others, between the costs associated with acquiring land to develop and costs for exploration of said land.

But right now, bonds of three specific natural gas companies that I track regularly are trading at new lows.

Venoco 2019 8.875% trading $88 range now. Annual yield > 11.5%
Exco 2018 7.5% trading $89 range now. Annual yield 10%
NRG 2019 8.5% trading $97 range now. Annual yield 9%

Obviously there will be trade off here in the yields/discount to par depending on the credit quality of the specific company, how much debt they have on the books, how much leverage they are utilizing, and the size of the company.

Out of three examples I cited above, NRG is the biggest. But on the other hand, remember, allot of these bonds in this sector will be subordinated and secured by nothing or take a back seat to a senior credit agreement.

Bottom line is as natural gas continues to make new lows, there are some great opportunities on the fixed income side to be had.
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