Weatherford Int'l Highly Priced

We believe Weatherford International, Ltd. (WFT - Analyst Report) will continue to experience impressive overall geographic growth during 2008. Key growth markets are expected to be North Africa, Russia, Middle East, West Africa, China and Central Europe.

However, we believe that Weatherford’s strong leverage to the current cycle and its growing international presence are adequately reflected in its premium valuation relative to the peer group, thereby leaving our Hold recommendation unchanged. Our preferred names in this space include Baker-Hughes Inc. (BHI - Analyst Report) and National Oilwell Varco Inc. (NOV - Analyst Report).

The company is focusing on improving returns in its core business and enhancing its exposure to faster-growing new technologies and services. The company recently tested new lifting and hazard-reduction technologies that performed very well. The recent successful launch of a compact stratigraphical logging device is further evidence of the company’s consistent new product launches. We expect technology and acquisitions to play a critical role in the company’s growth.

During the first quarter, the Eastern Hemisphere experienced a 9% increase in rig count and a 36% y-o-y growth rate. The company is expected to continue with its recovery process through late 2008 or early 2009 led by heavy oil projects. Near-term domestic growth is expected to continue coming through the robust land-drilling scene. Assuming current commodity prices, U.S. activity levels for 2008 are expected to improve significantly.

While we believe that the company’s new technologies provide growth opportunities, the revenue contribution of these offerings is not large enough to meaningfully improve near-term performance. We also think that it may take some more time and considerable R&D investments in marketing efforts, before the new technologies achieve critical mass. Some of the company’s geographical areas are also underperforming.

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Read the full analyst report on BHI

Read the full analyst report on NOV