Weatherford International Is Making a Comeback

Weatherford International has had a rough few years, but the company appears to be making a comeback.

Jun 11, 2014 at 11:59AM

Weatherford International (NYSE:WFT) has become one of the oil and gas services sector's greatest turnaround stories. The company has seen its shares jump 49% during the last year, and there is more to come. Weatherford recently inked a contract with one of the world's largest oil and gas companies, and cost cuts continue to push margins wider. 

Too far too fast
Weatherford is somewhat of a victim of its own expansion plans. During the last decade, Weatherford has made more than 100 acquisitions in an attempt to drive growth. However, these acquisitions have only come back to haunt the company. Weatherford is now being forced to sell acquired businesses and slash jobs in order to rerun to health. 

Unfortunately, over-expansion is not Weatherford's only mistake. The company has also fallen afoul of the law.

Illegal activities
Waterford has been accused of both providing equipment to countries under U.S. sanctions and avoiding taxes. Some of these accusations go back to 2003 and are related to Iraq's "oil for food" program. However, these failings are now behind the company. Management settled with the U.S. government for a sum of $253 million at the end of last year. 

Still, Weatherford is struggling to make up for past mistakes. The group is planning to lay off nearly 10% of its workforce during 2014 in an attempt to stem losses. Additionally, plans are in place to generate between $500 million to $1 billion from asset sales this year.

It seems as if things are working, too, as Weatherford reported net income before charges of $99 million for the first quarter of this year; this is up from a loss of $271 million during the fourth quarter of last year. Including restructuring charges, the company reported a loss for the first quarter.

The company's management believes that earnings in the range of $0.21 to $0.23 are achievable for the second quarter. They gave no guidance on how much these earnings would be affected by restructuring, however.

Game changer
Weatherford has recently signed a game-changing deal. The company has entered into a joint venture agreement with China Oilfield Services and Shengli Highland Petroleum Equipment, forming a new equity joint venture company in China.

The aim of the JV is to combine the complementary strengths of the three companies to tap into the vast unconventional resource base in mainland China. The extraction of tight gas is an area where oil service companies like Weatherford and larger peer Schlumberger Limited (NYSE:SLB) are in demand. 

Schlumberger is working with Yanchang Petroleum within China, and the company had 12 rigs operating within the Ordos basin at the end of the first quarter. Schlumberger did note in the first quarter that due to a lower level of activity from national oil companies (NOCs) within China, 2014 is not going to as profitable as 2013.

That said, the company's invaluable experience in the extraction of shale gas and the optimization of oilfield services should ensure that Schlumberger is put at the top of the list when Chinese NOCs look for contractors.

Foolish summary
All in all, it would appear as if Weatherford is making a rapid recovery. The company has settled with the U.S. government over allegations of wrongdoing and is selling off non-core assets to boost margins and pay down debt. The recently signed deal to operate within China should also catapult Weatherford's earnings higher.

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven’t heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America’s greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, “The IRS Is Daring You to Make This Investment Now!,” and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

 

Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers