Leading oilfield services company
Weatherford International Ltd.
) reported its preliminary second quarter 2012 adjusted pre-tax
earnings of $276 million - up from $176 million a year before - on
the back of record high sales. Total revenue in the quarter
increased 24% year over year to $3,778.0 million and beat the Zacks
Consensus Estimate of $3,652.0 million.
The Switzerland-based firm has been unable to come out with its net
income for the period due to unresolved accounting problems.
revenue climbed almost 25% year over year to $1,676.0 million.
However, sequentially, it declined by 4%. The sequential decline
was mainly attributable to a low level of operating activity in
Canada due to an extended spring breakup, which impacted all the
product lines negatively.
Further, performance of Stimulation and Chemicals were partly
tempered by the timid natural gas environment. The segment posted
an operating income of $271 million compared with $244.0 million in
the year-ago quarter.
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Middle East/North Africa/Asia
revenue increased 8% year over year and 10% sequentially to $668.0
million. The growth was broad-based and came from increased
operations in China, Turkmenistan, Iraq, Oman, Saudi Arabia and
Australia. The segment's operating income jumped to $44.0 million
from the year-ago level of $34.0 million.
posted revenue of $652.0 million, up nearly 10% year over year. The
segment's operating income increased 35% year over year to $120.0
million. The strong performance of this segment was primarily
backed by robust activities in the U.K., Russia, Kazakhstan and
revenue surged 57% year over year and increased more than 16% from
the preceding quarter to $782.0 million. Operating income expanded
significantly to $104.0 million from the year-ago level of $50.0
As of June 30, 2012, Weatherford had $381 million in cash and cash
equivalents and long-term debt was $7,311.0 million. Weatherford
spent approximately $554.0 million in capital expenditures during
the second quarter of 2012. The company had earlier highlighted
that it expects to spend between 10% and 15% of its revenues over
The company expects its third quarter 2012 earnings per share
between 30 cents and 33 cents. With respect to the balance of 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
Latin America, underpinned by improvements in Argentina, Colombia,
Mexico and Venezuela.
The company also expects improvements in the Eastern Hemisphere in
2012, with increases in Europe, Sub-Saharan Africa and Russia.
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 in the range of 37-39% for this
Although we remain optimistic on Weatherford's operational and
financial leverage to international growth in 2012, its weak
incapability to generate strong free cash flow as well as
competition from larger peers such as
Baker Hughes Inc.
) 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