Leading oilfield services' company
Weatherford International Ltd.
) first quarter 2012 adjusted earnings of 25 cents per share came
in below the Zacks Consensus Estimate of 28 cents. However, the
results jumped substantially from the year-earlier earnings of 7
cents, mainly on positive contributions from all its segments.
Total revenue increased 26% year over year to $3,599.0 million,
but failed to meet the Zacks Consensus Estimate of $3,664.0
revenue climbed almost 30% year over year and 3% sequentially to
$1,754.0 million. Artificial Lift, Wireline and Completions made
strong contributions. However, these positives were partly tempered
by the performance of Stimulation, Drilling Tools and Fishing,
which were adversely affected by the timid natural gas environment.
The segment posted an operating income of $359 million compared
with $283.0 million in the year-ago quarter.
Middle East/North Africa/Asia
revenue increased 5% year over year to $605.0 million. However,
sequentially, it declined with decreases in Completions and
Wireline as well as the expected seasonality in China. The
segment's operating income jumped substantially to $48.0 million
from the year-ago level of $10.0 million.
posted revenue of $569.0 million, up more than 11% year over year.
The segment's operating income shot up 50% year over year to $60.0
million. Although the segment registered a year-over-year jump, it
experienced a sequential drop in revenue as well as in the
operating income owing to the normal winter seasonality in the
North Sea and Russia.
revenue surged 64% year over year to $671.0 million. However, it
dropped 8% from the preceding quarter. Operating income expanded
significantly to $87.0 million from the year-ago level of $21.0
As of March 31, 2012, Weatherford had $339 million in cash and
cash equivalents and long-term debt was $5,989.0 million,
representing a debt-to-capitalization ratio of 37.6% (versus 39.7%
in the fourth quarter of 2011). Weatherford spent approximately
$483.0 million in capital expenditures during the first quarter of
2012. The company had earlier highlighted that it expects to spend
between 10% and 15% of its revenues over this year.
The company expects its second quarter 2012 adjusted earnings
per share between 24 cents and 26 cents. With respect to 2012, the
company maintained a positive but careful outlook for its North
American business. The company believes that the depressed natural
gas environment will likely be overshadowed by the predominance of
oil activity in Canada and the U.S. and anticipates modest revenue
and operating income growth compared with 2011.
Weatherford foresees sustained growth and expanding margins in
its Latin America region, underpinned by improvements in Brazil,
Colombia, Mexico and Venezuela.
The company also expects improvements in the Eastern Hemisphere
in 2012, with increases in Europe and Russia, as well as stronger
activity levels in Iraq, Kuwait and Saudi Arabia, Australia and
China. Weatherford also expects continued recovery in the Middle
East/North Africa/Asia Pacific region aided by contributions from
the completion of hostile as well as fresh contracts with healthier
terms and pricing in the second half of 2012.
The effective tax rate is expected to be approximately 35% for
Although we remain optimistic on Weatherford's operational and
financial leverage to international growth in 2012, the company's
debt-heavy balance sheet, its weak capability to generate free cash
flow as well as competition from larger peers such as
) are causes of concern.
Weatherford holds a Zacks #3 Rank, which translates into a Hold
rating for a period of one to three months. Consequently, our
long-term Neutral recommendation remains unchanged at this
The world's largest oilfield services provider, Schlumberger,
recentlyreported first quarter 2012 earnings of 98 cents per share
(excluding special items), beating the Zacks Consensus Estimate by
a penny. The quarter's results also showed a steady improvement
from the year-earlier profit of 71 cents per share. The
year-over-year increase was aided by strong performance in global
exploration and deepwater activity as well as efficiency in
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