Weatherford Falls Most Ever as Investors Doubt Growth Plans

  • Fourth-largest oil services firm drops almost 26 percent
  • Company lowered cash flow guidance, missed earnings estimates

Weatherford International Plc is having its worst day ever, losing a quarter of its value as investors doubt its goal of generating about $3 billion of free cash flow by the end of 2020.

The world’s fourth-largest oil services firm was down 25.6 percent to $5.57 at 2:07 p.m., after earlier falling 25.8 percent to as low as $5.55 in New York. That marks the biggest intraday drop since shares began trading in January 1990.

The company lowered its guidance on free cash flow for this year by $200 million to a range of $400 million to $500 million, Chief Financial Officer Krishna Shivram told analysts and investors Thursday on a conference call. He added that the company plans to generate cash flow for each of the next four years in the range of $600 million to $750 million, for a total of as much as $3 billion over that four-year period. The company also plans to delay significant capital spending growth into 2019.

"That’s just not how business actually operates," Brian Uhlmer, an analyst at GMP Securities in Houston who rates the shares the equivalent of a hold and owns none, said Thursday in a phone interview. "You can’t generate substantial revenue increases without investing in your equipment or building working capital."

Weatherford has been working on rebuilding trust with investors. Over the past decade the company has missed analyst estimates more than 20 times, settled a corruption probe and spent more than $150 million in professional fees to fix errors in its accounting.

Excluding certain items, Weatherford lost 29 cents a share in the first quarter, the company said in an earnings statement Wednesday after the close of regular trading. That was worse than the 25-cent average loss of 34 analysts’ estimates compiled by Bloomberg. It also announced another round of 2,000 job cuts and said it doesn’t plan to do any more.

"The magnitude of the downturn continues to weigh on cash flows and leverage concerns combined with unpredictability versus guidance and our model has us taking the approach to ‘shoot-first-ask-questions-later’ in this circumstance," Matt Marietta, an analyst at Stephens Inc. in Houston, wrote Thursday in a note to investors. He downgraded the shares to the equivalent of a sell.

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