Weatherford's Financial Collapse Could Kill Halliburton-Baker Hughes Merger

From Seeking Alpha:
Schlumberger (NYSE:SLB), Halliburton and Baker Hughes are considered the top three oil services firms. Weatherford International (NYSE:WFT) is ranked number four, particularly for firms with high exposure to land drillers. Post-deal, it may be logical to assume that Weatherford could be strong enough to maintain a competitive landscape. However, in my opinion, Weatherford may not survive much longer amid a free fall in oil prices and $7.7 billion of debt. 
In Q3, Weatherford experienced a 6% sequential decline in revenue and incurred a $98 million pretax loss. Its North America operations (37% of revenue) are particularly concerning. Loss from operations were $54 million; this followed a $92 million loss in Q2. The competition is so cut throat that in Q3, Weatherford had to scale back two product lines - rentals and pressure pumping - due to "punitive economics." 
$7.7 Billion Debt Load Appears Untenable 
Weatherford built its number four position in the sector via acquisitions when oil prices were much higher. In the process, it also amassed $7.7 billion debt which is at junk levels. It has nearly the same amount of debt as Halliburton ($7.7 billion versus $7.8 billion), though its run-rate EBITDA is nearly one-third less ($1.4 billion versus $4.0 billion). With debt/run-rate EBITDA at over 5x, Weatherford has the worst balance sheet amongst its peers, including National Oilwell Varco (NYSE:NOV) and Oil States International (NYSE:OIS).
Click here to read more.

Connect with us on Facebook and Twitter!

Popular posts from this blog

Pennsylvania Operator To Acquire Three Natural Gas Producers

The Second Largest Oil and Gas Merger - Cabot and Cimarex

Do You Know The History of Fracking?