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Equity Bottom-Up

Falling oil prices over the past several months have pushed oilfield service stocks into very cheap territory. West Texas Intermediate crude has fallen from over $65/bbl in late April to about $51/bbl today, below our midcycle forecast of $55/bbl. Our median covered oilfield service company is trading at a 20% discount to fair value. Valuations look about as cheap as they did last December, when many names breeched 15-plus year lows
For oilfield service companies, we think the market is…

Financially beleaguered Weatherford was sunk by a perfect storm in the first quarter. On May 10 post-market close, the company released disastrous first-quarter results and announced a plan to sign a restructuring support agreement with its creditors and subsequently file for chapter 11 bankruptcy. After reviewing the RSA and revising our forecasts for the company, we are reducing our fair value estimate to $0.15 per share from $1.75 previously
Under the terms of the RSA, unsecured noteholders…

CEO Mark McCollum came aboard in March 2017, and many wondered whether it was the dawn of a new era for Weatherford. Although we think this management team will surpass its predecessors (a low bar, to be sure), we don’t think it is well positioned by the Weatherford portfolio of business lines to create substantial amounts of shareholder value.In most business lines, Weatherford holds second-tier status beneath the top three oilfield-services firms: Schlumberger, Halliburton, and Baker Hughes…

We are placing Weatherford under review due to its abrupt postponement of its first quarter earnings release. The release had been originally scheduled for Wednesday, May 8, but the company announced Wednesday morning that it would be postponing the release until Friday, May 10. No reason was given for the decision, but Weatherford shares plummeted over 30% following the announcement. Given the uncertainty and lack of transparency, we feel it is appropriate to withhold our recommendation on the…

We are lowering our fair value estimate for Weatherford to $1.75 from $2 per share, primarily due to heightened financial distress risk, which we have reflected in a slightly increased cost of capital. We have also slightly lowered our near-term profitability assumptions to reflect possible operational disruptions (loss of customers, for example) due to financial distress risk. Our no-moat rating remains unchanged
Although we think the risk of bankruptcy remains remote, shareholders could lose…

Switzerland

Weatherford International plc is a Swiss-based, multinational oilfield service company.  The Company provides mechanical solutions, technology and services for the drilling and production sectors of the oil and gas industry.

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