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Weatherford Management’s Views after 2Q16 Earnings

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Weatherford International’s management views

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How much can WFT save through cost reductions?

Weatherford International doesn’t have much room left to cut costs through headcount reduction. In fact, Weatherford’s management is currently incurring extra costs to maintain additional capacity with a view to address future growth. This costs WFT $50 million a quarter.

However, if crude oil prices lose steam again, WFT claims to bring those extra costs down. In the 2Q16 conference call, Krishna Shivram, WFT’s CFO commented, “Should the industry environment abruptly change back to February levels and persist at those levels, we can eliminate this additional annualized retained cost of $200 million and, furthermore, collapse our operating structure materially to save even more costs.” WFT is 0.34% of the iShares S&P Mid-Cap 400 Value ETF (IJJ).

WFT agrees to pay a penalty on SEC investigation

On September 27, Weatherford International (WFT) disclosed that the Security Exchange Commission’s (or SEC) investigation into WFT’s accounting issues related to income tax was resolved. Following the settlement of the investigation, WFT agreed to pay a civil penalty of $140 million. Read more in Market Realist’s Paying the Price: SEC Finished Investigating Weatherford.

Next, we’ll discuss investors’ short interest in WFT.

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