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Weatherford Closes Land Rigs' Divestment to Reduce Debt Load

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Weatherford International plc recently completed its previously announced transaction with ADES International Holding PLC to divest rigs in Algeria and Iraq. It offloaded two onshore rigs in Algeria and two rigs in southern Iraq, yet to be relocated to the acquirer, for a total of $32 million. The transaction tripled ADES International’s fleet size and more than doubled its number of operating rigs.

The recent divestment marks the completion of the larger deal of $287.5 million that includes 31 rigs, of which 12 is in Kuwait, 11 in Saudi Arabia, six in Algeria and two in Iraq’s southern part. The initial divestment deal was signed last July. The funds raised from the transaction were used to lower the company’s debt burden, which was $7.6 billion at the end of 2018. Notably, Weatherford's long-term debt jumped more than 26% in 2016, almost 2% during 2017 and 0.9% in 2018.

To reduce its debt burden, Weatherford aims to carry on with non-core divestments and closing announced sales. Also, the company intends to increase operational efficiency to achieve its target of cutting net debt-to-EBITDA ratio by one third within the end of 2019.

Notably, it has divested around $1 billion worth of assets since 2017-end. The company had offloaded U.S. pressure pumping and pump-down perforation assets for $430 million in December 2017. Moreover, the company has announced the divestment of Laboratory Services for $205 million, which is scheduled to close in first-quarter 2019. Additionally, the company’s divestment of surface data logging business for $50 million is expected to close in the first half of this year.

However, the divestitures are expected to affect the company’s first-quarter 2019 revenues. We expect the company to generate revenues of $1,360 million during the quarter, down 4.4% from the year-ago level.

Price Performance

Baar, Switzerland-based Weatherford has gained 110.8% in the past three months compared with 12.9% collective growth of the industry it belongs to.

 

Zacks Rank and Stocks to Consider

Weatherford presently carries a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks as given below:

Midland, TX-based ProPetro Holding Corp. (PUMP - Free Report) is an oil and gas equipment providing company. In 2019, its bottom line is expected to grow 19.5% year over year. The company currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dril-Quip, Inc. (DRQ - Free Report) is a Houston, TX-based energy equipment services company. Its bottom line in 2019 is expected to increase 76.2% year over year. It currently has a Zacks Rank #2.

Archrock, Inc. (AROC - Free Report) is a Houston, TX-based energy infrastructure company. Its 2019 earnings are expected to increase 39.6% year over year. It currently has a Zacks Rank #2.

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