What’s Keeping Weatherford Down despite Margin Improvement?

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Part 2
What’s Keeping Weatherford Down despite Margin Improvement? PART 2 OF 6

Weatherford Management: Its Views for 3Q17

Management’s views on energy

Weatherford International’s (WFT) management believes that North American energy upstream companies’ improved activity levels will benefit WFT’s production-related businesses. Mark McCollum, WFT’s chief executive officer, commented in the 2Q17 conference call, “We’ve seen healthy activity levels in the U.S. land market, especially in product lines such as drilling services, wireline and well construction. Pricing and utilization has improved in all product lines as operators increasingly drill wells with complex profiles and longer laterals. As operators continue to move deeper into the well lifecycle, we expect further improvement in our production-related businesses.” WFT makes up 2.8% of the VanEck Vectors Oil Services ETF (OIH). Since June 30, 2017, OIH has fallen 6.0% compared to a 3.0% rise in WFT stock during the period. The energy sector makes up 5.7% of the S&P 500 Index (SPX-INDEX), which has risen 3.0% since June 30, 2017.

WFT’s joint venture plan with Schlumberger

Christoph Bausch, WFT’s chief financial officer, commented in the 2Q17 earnings conference call, “We’re on track to close the OneStim joint venture transaction with Schlumberger in the second half of this year, which will allow us to better capitalize on the recovery in North America land unconventional activity. We’re also following through with marketing of our international land rigs business.” WFT plans to contribute its North America land pressure pumping assets, its multi-stage completions, and its pump-down perforating businesses into the joint venture with Schlumberger (SLB). You can read more on Schlumberger in Schlumberger Sees Twists and Turns before Its Recovery.

Weatherford Management: Its Views for 3Q17

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Weatherford’s 3Q17 growth drivers: Positives

  • WFT expects North America to continue to grow, led by Canada’s rebound from the spring break-up and new contract starts in the United States.
  • WFT expects an increase in its 3Q17 revenue from Europe, Caspian, Russia, and sub-Saharan Africa due to higher activity levels in the North Sea.
  • WFT expects higher 3Q17 revenues from the Middle East and Asia.
  • WFT expects revenue growth and margin expansion in the land rig business.

Weatherford’s 3Q17 growth drivers: Negatives

  • There’s been a recent flattening of the rig count. The US rig count fell 1.0% in the past seven weeks through September 8, 2017.
  • Operating margins in the Middle East, North Africa, and Asia-Pacific are expected to remain flat in 3Q17 due to higher project start-up costs and unfavorable changes in the geographic mix.

Next, let’s take a look at Weatherford International’s revenue and earnings.


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