Last night, oil and natural gas services giant Weatherford International (NYSE:WFT) reported its Q3 results. They showed substantial improvement on the top and bottom line, although they fell just short of analyst projections. There were other encouraging developments for the company during the quarter, but also some negatives. 

A nice net
Weatherford managed to top its results on a year-over-year basis. Revenues came in at nearly $3.9 billion, or 1% higher than the Q3 2013 figure. Net income was $77 million ($0.10 per share), more than triple the $77 million ($0.03) the firm recorded in the same quarter one year ago.

On an adjusted basis, net amounted to $248 million ($0.32 per share) versus Q3 2013's $177 million ($0.23).

The Q3 2014 numbers were inches short of what the market expected. On average, analysts had been anticipating a top line of just under $4.0 billion and adjusted EPS of $0.33.

As a company with a big global footprint, Weatherford is subject to the vagaries of its many markets. As usual, some were outperformers and some were laggards during the quarter.

In the former category is the thriving exploration market of North America, happily enough Weatherford's No. 1 region. North America produced revenues of $1.8 billion in Q3, a substantial 14% higher than the same quarter a year ago.  

Unfortunately, of the company's four geographic areas it was the only one to record an increase. Middle East/North Africa/Asia Pacific slumped by 1% to $808 million. Meanwhile, Europe/Sub-Sahara Africa/Russia saw a 7% decline to $644 million, and Latin America fell 14% to $611 million.

Fixing the finances
So outside of North America and its gains, the income statement wasn't anything to write home about. For the company and its shareholders, the balance sheet held some better news.

To be specific, we're talking about net debt. That line item saw a drop by nearly $720 million from the previous quarter. 

This scope of decline was to be expected, given that Weatherford announced an aggressive set of cost-slicing measures earlier this year. These included job cuts (planned to total around 6,600 individuals, out of the end-2013 total headcount of roughly 67,000) and the closure of what it terms "underperforming operating locations."

These programs have been completed; according to the company they've resulted in savings of around $500 million annually.

The company's also been hanging "for sale" signs on some of its non-core assets. During Q3 it sold its land drilling and workover operations in Venezuela and Russia to the latter country's oil major Rosneft for a cool $500 million. It also closed a $250 million deal to sell its pipeline and specialty services division to fellow oil and gas services multinational Baker Hughes (NYSE:BHI).

Debt and divestments
None of these developments came as much of a surprise, given the well-known robustness of the North American market and Weatherford's stated determination to trim some of its blubber. Encouragingly, the company seems to be following through effectively on its plans.

But that begs the question of whether this will shake out nicely in future results. The company seems to think so; it's going along with the conventional wisdom by predicting continued healthy growth in the North America market. It also expects recovery in its other three regions.

As a result, Weatherford says, it should post an operating margin of 20% by the end of this year, which would add plenty to the bottom line -- in Q3, it was just under 18%.

But it should be noted that in spite of the savings and divestments, that net debt remains high, at over $8 billion. That's a big pile, particularly since it's over half of trailing 12-month revenue, and around 62% of current market capitalization.

So perhaps Weatherford at the moment is a wait-and-see stock. The divestment story isn't over, and it's yet to get firmer control over its debt; its success in both will go a long way in determining how bright its future could be.


Eric Volkman has no position in any stocks mentioned. Nor does The Motley Fool. 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.