What does Weatherford International’s CEO think?
Weatherford International’s (WFT) management expects crude oil price to start stabilizing by the second half of 2016. It plans to keep reducing costs to manage the current uncertainty in the energy market. In the fiscal 4Q15 press release, Weatherford International’s CEO (chief executive officer) Bernard J. Duroc-Danner said, “The near-term outlook is challenging with lower levels of customer activity, continued pricing pressures and seasonal declines across many parts of the Northern Hemisphere. Volatility adds uncertainty to decision making already strained by the distressed level of oil prices. We believe the second half of the year will show a slight recovery underpinned by the stabilizing of commodity prices.”
Can cost restructuring save Weatherford International?
Weatherford’s management is focusing on increasing operating asset efficiency, facility closures, cost reduction, and cash management. This yielded $1.4 billion annualized savings in fiscal 2015. In fiscal 2016, the company plans a further headcount reduction of ~6,000. It also plans to wind down nine manufacturing and services facilities. Fiscal 2016 capex (capital expenditure) is expected to decline 56% compared to fiscal 2015.
Analysts’ targets for Weatherford International
Given the unpredictability of an energy price recovery, Wall Street analysts have varied opinions about WFT’s target prices in the next 12 months. The lowest target price for WFT is $5.50, while the highest is $18. The median target price, surveyed among the sell-side analysts, is $9.65.
Weatherford International is currently trading near $6.40, implying a 50% upside at its median price. National Oilwell Varco (NOV), Weatherford International’s peer, received a $30 median target price. This, relative to its current price of ~$29.20, implies a 3% upside.
WFT is 0.4% of the Vanguard Energy ETF (VDE). The Oil and Gas Equipment and Services industry makes up 15.8% of VDE.
Next, we’ll take a look at Weatherford International’s revenue and earnings.