Shares of Weatherford International (NYSE:WFT) have been in decline for years. The company's burdensome debt load and management's lip service toward turning the business around left investors with little faith that things were ever going to improve at the distressed oil services company. 

This past quarter, though, the company showed a modicum of progress toward becoming a profitable business again. Was this the quarter when things finally turned around at Weatherford? Let's take a look at the fourth-quarter results to see where things could go from here. 

Drilling pipes with an oil rig in the background.

Image source: Getty Images.

Weatherford International: By the numbers

Metric Q4 2018 Q3 2018 Q4 2017
Revenue $1.43 billion $1.44 billion $1.49 billion
Operating income ($1.96 billion) ($13 million) ($1.74 billion)
Net income ($2.1 billion) ($199 million) ($1.94 billion)
EPS (diluted) ($2.10) ($0.20) ($1.95)


Weatherford's revenue decline this past quarter was expected. Not only was oil and gas activity rather muted this past quarter, but the company also sold off several business lines in order to shore up the balance sheet. 

Also in the quarter, the company took a $1.99 billion in asset and goodwill impairments. Absent those charges, management estimates its adjusted EBITDA was $210 million for the quarter. 

Bar chart of WFT operating income by business segment for Q4 2017, Q3 2018, and Q4 2018. Both eastern and western hemisphere segments posted gains comapred to losses this time last year.

Data source: Weatherford International. Chart by author.

The most pleasant surprise in this quarter was that the company reported operating cash flow of $105 million and positive free cash flow. Generating free cash flow hasn't been a common sight in Weatherford's financial statements. Management said that it intends on using free cash flow and proceeds from asset sales to chip away at its debt load. At the end of the quarter, it had a net debt position of $7.39 billion.

What management had to say

More than anything, Wall Street analysts and investors want to see that Weatherford is making progress toward the goals CEO Mark McCollum laid out for the company after more than a year on the job. The fact that it was able to show some progress to this end is largely why shares spiked after reporting earnings

According to McCollum, this past quarter's results should be an early sign that his plan to squeeze profitability out of this company should come to fruition in 2019:

Our adjusted earnings and adjusted EBITDA during the fourth quarter exceeded our forecasts despite rapidly declining oil prices. Our ability to generate better-than-expected operating results and free cash flow is a testament to the progress we continue to make on our transformation plan and the positive structural changes we have made to our company over the past year. For the full year, we grew adjusted EBITDA by over $330 million, or 80% compared to 2017 levels. Based on the work we have completed on specific transformation initiatives, we continue to believe that we can achieve our $1 billion incremental EBITDA run rate goal by year-end 2019.

You can read a full transcript of Weatherford International's conference call here.

Check out the latest earnings call transcripts for companies we cover.

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A one-time blip or a sign things are finally turning around?

The fact that Weatherford International produced free cash flow is a bit of a surprise because it hasn't been able to do so for years, despite management saying that it was a priority. It's worth noting, though, that most of those cash flow gains came from reducing its working capital, so it's no guarantee that we will see a repeat performance.

Weatherford has been a lousy investment for years because of its high debt load and inability to generate cash. It would be great if this were the quarter when the oil services firm turned over a new leaf, but one quarter doesn't make for a turnaround. Until this company can consistently churn out cash and profits and get control of its unruly balance sheet, this stock is still not worth an investment.