Weatherford Surges as Cash Outlook Improves After Spending Cuts

  • 2015 was the first year since 2010 that cash exceeded spending
  • Company plans to cut another 6,000 workers in first half '16

Weatherford International Plc rose the most in more than four years after boosting projections for 2016 cash flow during the worst crude market downturn since the 1980s.

The world’s fourth largest oil services provider gained 20 percent to $7.53 at 10:23 a.m. in New York, the biggest intraday rise since March 2011.

Weatherford told analysts and investors on a Thursday conference call that after making drastic cuts to its spending, it expects to generate free cash flow in 2016 of $600 million to $700 million. That’s higher than the $495 million average of 12 analyst estimates compiled by Bloomberg. The comments came after the company’s full year 2015 results Wednesday showed it brought in more cash than it spent for the first time since 2010.

"We have geared the company, and will increasingly do so, for a prolonged period of very low activity," Chief Executive Officer Bernard Duroc-Danner said Wednesday in an earnings statement. "We are ready for as protracted a downcycle as markets will dictate."

Weatherford plans to lay off an additional 6,000 workers, about 15 percent of its workforce, over the first half of this year. The latest round of cuts brings to 20,000 the number of people who have been or will be let go by the company globally.

The oil industry has slashed more than 250,000 jobs and trimmed more than $100 billion in spending in the last year, with more cuts expected this year. The service providers, who are now embarking on their fourth round of layoffs, were the first to feel the pain and have so far contributed the largest chunk of job cuts.

Schlumberger Ltd., the world’s largest oil services provider, said last month it cut another 10,000 jobs in the fourth quarter, while its closest rival Halliburton Co. let go of nearly 4,000 additional workers.

Bigger Loss

Weatherford, based in Baar, Switzerland, said fourth-quarter net loss widened to $1.2 billion, or $1.54 a share, from $475 million, or 61 cents, a year earlier. Excluding certain items, the company posted a 13-cent loss, better than the 19-cent average of 33 analyst estimates compiled by Bloomberg.

Over the past decade, Weatherford has missed analyst estimates 20 times, settled a corruption probe and spent more than $150 million in professional fees to fix errors in its accounting. In September, it abandoned plans to raise $1 billion for an acquisition just hours after announcing the move.

The 2015 cash flow figure "feels ok", although a full cash-flow statement and balance sheet was still lacking, Brad Handler, an analyst at Jefferies, wrote Wednesday in a note to investors.

The company, which has 21 buy ratings from analysts, 10 holds and 2 sells, has fallen 25 percent so far this year before today.

Before it's here, it's on the Bloomberg Terminal.