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Weatherford (WFT) Posts Wider Q1 Loss, Files for Bankruptcy

Zacks Equity Research

Weatherford International plc WFT reported first-quarter 2019 adjusted loss of 48 cents per share, wider than the Zacks Consensus Estimate of a loss of 13 cents. The figure was also wider than the year-ago loss of 25 cents.

Total revenues of $1,346 million missed the Zacks Consensus Estimate of $1,348 million. Also, the figure declined from $1,423 million in the year-ago quarter.

Weak results in the first quarter were attributed to a plunge in operating income from its Western Hemisphere segment. Lower activity levels and operating margin, which resulted from reduced product sales in Canada, affected the company’s bottom line.

Filing for Chapter 11 Bankruptcy

Through a prepackaged Chapter 11 bankruptcy filing, the company plans to discard $5.8 billion of the total long-term debt, in exchange for 99% of the stock and renewed unsecured bonds. The restructuring move is expected to provide relief to the company from huge debt burden. It has been more than four years since the company reported a profit. Notably, the stock plunged around 60% in the pre-market trading session.

Weatherford International PLC Price, Consensus and EPS Surprise

Weatherford International PLC Price, Consensus and EPS Surprise
Weatherford International PLC Price, Consensus and EPS Surprise

Weatherford International PLC price-consensus-eps-surprise-chart | Weatherford International PLC Quote

Operational Performance

Total operating loss in the quarter came in at $301 million compared with the year-ago loss of $39 million.

In the first quarter, segmental operating income in the Western Hemisphere was $9 million, down 63% year over year primarily due tolower activity levels and operating margin, which resulted from reduced product sales in Canada. Moreover, start-up costs of projects in Latin America and employee retention expenses added to the woes. The negatives were partially offset by improved results from higher integrated service project activity in Latin America.

Segmental operating income in the Eastern Hemisphere was $20 million, up 25% year over year, supported by lower direct expenses and cost improvements from the company’s transformation program.

Total costs and expenses surged from $1,462 million in the year-ago period to $1,647 million in first-quarter 2019, primarily due to the incurrence of a $229-million goodwill impairment charge.

Balance Sheet

As of Mar 31, 2019, Weatherford had only $598 million of cash and cash equivalents, and $7.6 billion in long-term debt.

Zacks Rank and Stocks to Consider

Currently, Weatherford carries a Zacks Rank #3 (Hold), which is subject to change following the bankruptcy filing announcement. Some better-ranked players in the energy space include Hess Corporation HES, Cactus, Inc. WHD and USA Compression Partners, LP USAC. While Hess sports a Zacks Rank #1 (Strong Buy), Cactus and USA Compression hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  

Hess’ earnings are expected to grow 90.5% through 2019.

Cactus’ earnings growth is projected at 11.8% through 2019.

USA Compression’s earnings growth is projected at 97.7% through 2019.

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USA Compression Partners, LP (USAC) : Free Stock Analysis Report
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