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Weatherford International’s Value Drivers in 1Q17

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Dec. 4 2020, Updated 10:51 a.m. ET

Weatherford International’s revenue

Weatherford International’s (WFT) Latin America revenue fell the most (21.0%) from 1Q16 to 1Q17. The fall in revenue for its Europe/Sub-Saharan Africa/Russia region was moderate (~5.0%) during the same period. Revenues from its land drilling rigs have been excluded in this analysis following its decision to divest land drilling assets. National Oilwell Varco’s (NOV) 1Q17 revenues fell 20.0% compared to a year ago. Since the start of 2017, the VanEck Vectors Oil Services ETF (OIH) has fallen 23.0% compared to a 12.0% fall in WFT stock during that period.

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Weatherford International’s operating income

In the North American region, Weatherford cut its operating losses to $18.0 million in 1Q17 compared to $128.0 million a year earlier. Operating income in WFT’s Latin American region fell 80.0% in 1Q17 over 1Q16. WFT also achieved savings from cost reductions following its North American pressure pumping operation shutdown in 1Q17.

Positive value drivers in 1Q17

  • A higher North American rig count positively affected WFT’s artificial lift, completion, drilling services, and wireline product line sales.
  • In Latin America, WFT recorded higher well construction and secure drilling services sales.
  • In Sub-Sahara Africa and Europe, WFT recorded increased low margin product sales.

Negative value drivers in 1Q17

  • lower drilling and contract activity in the Gulf States
  • fall in product sales and weaker pricing in the Middle East/North Africa/Asia Pacific region

How dependent is Weatherford International’s business on the US rig count? Let’s take a look at that in the next part of this series.

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