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WFT

Weatherford

$3.45

-0.715 (-17.19%)

, SLB

Schlumberger

$69.72

2.205 (3.27%)

15:43
01/02/18
01/02
15:43
01/02/18
15:43

Weatherford slides after joint venture becomes asset sale

Shares of Weatherford (WFT) are sliding after the company announced that it was terminating its planned OneStim joint venture with Schlumberger (SLB) and has instead elected to sell the assets to a subsidiary of the latter. JV TERMINATION, ASSET SALE: Weatherford announced on Friday that it has sold its U.S. pressure pumping and pump-down perforating assets to a subsidiary of Schlumberger Limited for $430M in cash. The parties agreed to revised deal terms that reflect an asset sale, as compared to the previously announced OneStim joint venture. As part of this transaction, Schlumberger will take ownership of Weatherford's U.S. pressure pumping and pump-down perforating related facilities and supplier and customer contracts. Additionally, approximately 100 Weatherford employees associated with the pressure pumping and pump-down perforating businesses will transfer to Schlumberger. Weatherford will retain the entirety of its multistage completions portfolio, manufacturing capability and supply chain and will continue to participate in the growing completions markets in both Canada and the U.S. as well as globally. Weatherford will use the proceeds from the sale to reduce outstanding indebtedness. "Although not as originally anticipated, this transaction delivers cash proceeds that enable our company to begin the deleveraging process and, coupled with our transformation plans, will lead to a leaner organization with lower debt and significantly higher profit margins. In addition, retaining 100% of our leading land-based multistage Completions business allows for significant upside potential for Weatherford," stated Mark McCollum, President and CEO of Weatherford. ANALYST VIEWS DIVERGE: Commenting on the news, Suntrust analyst Ken Sill said he views Weatherford's sale of assets as "neutral to modestly positive," noting that the $430M Weatherford receives is only $35M less than he had forecast if a joint venture had been formed. Further, the analyst pointed out that the company retains its international pressure pumping and multi-stage completion products operations, which should be experiencing growing profitability with increasing completion activity in U.S. share plays. He reiterated a Buy rating on Weatherford's shares. His peer at Credit Suisse also told investors in a research note of his own that both companies made correct decisions, but "breaking up is still hard to do." Analyst James Wicklund added that he would be a buyer of Weatherford on weakness, which he sees as overdone. He reiterated an Outperform rating and $5.50 price target on the company's shares. Meanwhile, Gabelli analyst Simon Wong told investors that he views Weatherford abandoning its OneStim joint venture as a disappointment. The revised deal for Weatherford is inferior to the original deal as it sold its pressure pumping assets at a near 50%-60% discount to replacement value and near trough valuation, Wong added. Nonetheless, he acknowledged that the company retaining 100% of its completion business is a positive. This business is broader than and superior to Schlumberger's completion portfolio, and now Weatherford can capture 100% upside in North America due to higher completion activity level from higher U.S. drilling, Wong contended, adding that keeping this with its artificial lift business makes Weatherford a more attractive acquisition target longer-term. The analyst reiterated a Buy rating on Weatherford shares. PRICE ACTION: In afternoon trading, shares of Weatherford have dropped almost 18% to $3.42.

WFT

Weatherford

$3.45

-0.715 (-17.19%)

SLB

Schlumberger

$69.72

2.205 (3.27%)

  • 19

    Jan

  • 02

    Feb

WFT Weatherford
$3.45

-0.715 (-17.19%)

01/02/18
MSCO
01/02/18
NO CHANGE
MSCO
Morgan Stanley says 2018 may be record year for oilfield services M&A
Morgan Stanley analyst Ole Slorer believes large-cap oilfield services stocks are likely to lead a "compelling 2018 mean reversion trade," noting that large-caps have historically outperformed small-caps early in the year. Slorer also believes 2018 may be a record year for oilfield services M&A given the recent industry focus on projects being streamlined to make them economic in a $50-$60 per barrel oil price environment. Large-cap services names include Baker Hughes (BHGE), Schlumberger (SLB), Haliburton (HAL) and Weatherford (WFT). Small-cap services names covered by the firm include RPC, Inc. (RES), Core Laboratories (CLB), C&J Energy Services (CJ), Frank's International (FI), Superior Energy (SPN) and Tetra Technologies (TTI).
01/02/18
RHCO
01/02/18
NO CHANGE
RHCO
Buy
Suntrust says Weatherford asset sale to partner neutral to modestly positive
Suntrust analyst Ken Sill said he views Weatherford's (WFT) sale of its U.S. pressure pumping and pump-down perforating assets to a subsidiary of Schlumberger (SLB) as neutral to modestly positive, noting that the $430M Weatherford receives is only $35M less than he'd forecast if a joint venture had been formed while the company also retains its international pressure pumping and multi-stage completion products operations. The asset sale also gives Weatherford more control over future cash flows, said Sill, who maintains a Buy rating on the shares, which are down 18.5% in afternoon trading.
01/02/18
GABE
01/02/18
NO CHANGE
GABE
Buy
Weatherford asset sale inferior to joint venture, says Gabelli
Gabelli analyst Simon Wong said earlier today that Weatherford (WFT) abandoning its OneStim joint venture with Schlumberger (SLB) is a disappointment. Instead, Weatherford will sell its pressure pumping fleet and pump-down perforating assets to Schlumberger for $430M. The revised deal for Weatherford is inferior to the original deal as it sold its pressure pumping assets at a near 50%-60% discount to replacement value and near trough valuation, Wong wrote in a research note. The company retains 100% of its completion business, however, which the analyst views positively. He notes the business is "broader than and superior to" Schlumberger's completion portfolio. Wong keeps a Buy rating on Weatherford shares. The stock is down 18%, or 77c, to $3.40 in afternoon trading.
01/02/18
FBCO
01/02/18
NO CHANGE
Target $5.5
FBCO
Outperform
Weatherford should be bought on weakness, says Credit Suisse
Credit Suisse analyst James Wicklund notes that Schlumberger (SLB) and Weatherford (WFT) have walked away from the OneStim joint venture, with the former selling its 1M HHP of pressure pumping equipment and pumpdown services for $430M. The analyst believes both companies made correct decisions, but "breaking up is still hard to do." Further, he would be a buyer of Weatherford on weakness, which he sees as overdone. Wicklund reiterates an Outperform rating and $5.50 price target on Weatherford's shares.
SLB Schlumberger
$69.72

2.205 (3.27%)

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