A wider than expected net loss compounded by soaring debt levels are the latest headwinds pilling pressure on Weatherford International PLC (OTCMKTS: WFTIF). The stock has shed more than 95% in market value over the past year, as the onslaught continues to gather pace.
Weatherford International Price Analysis
The filling of Chapter 11 bankruptcy protection has compounded the Company’s woes in the market. The filing is part of an effort that seeks to reduce the Company’s debt burden that currently stands at highs of $7.2 billion.
Weatherford International finds itself in a precarious position after its market outlook turned bearish due to uncertainty over spending by key clients in North America.
For the better part of the past year, the stock has traded in a downtrend as investors sentiments in the stock have continued to edge lower. A plunge to the $0.05 level has all but underscored the bearish pressure fuelling the sell-off.
A closer look at price action, it is clear that the stock is likely to continue edging lower as short sellers remain in firm control. To avert further slides, then the stock will have to rise and find support above the $0.90 resistance level.
What Does Weatherford International Do?
Weatherford International casts itself as an oilfield service company. The firm provides equipment and services for the drilling evaluation and production of oil and natural gas worldwide. The Company also offers artificial lift systems, including reciprocating rod and control systems used in the mining business.
Widening Net Loss And Debt Levels
Weatherford International sentiments in the market have turned from bad to worse on the filling of disappointing financial results for the first three months of the year. A wider than expected net loss affirms the fact that the Company is in deep trouble as the transformational strategy struggles to have the desired impact.
The adjusted net loss for the first quarter stood at 48 cents a share, wider than consensus estimates of 13 cents as well as a net loss of 25 cents reported a year earlier. Revenue in the quarter also shrunk to $1.35 billion from $1.4 billion generated a year earlier.
Weatherford International attributes the weaker than expected financial results to a plunge in operating income from the Western Hemisphere segment. Lower activity levels, as well as operating margins attributed to a reduction in product sales, also piled pressure on the Company’s bottom line.
Total operating loss soared to -$301 million from $39 million reported a year earlier. As of the end of the quarter, the Company had $598 million in cash and cash equivalents, compared to $7.6 billion in long-term debt.
Weatherford has since confirmed plans to restructure its debt through the filing of Chapter 11 bankruptcy protection. Fillings with the U.S Securities and Exchange Commission indicates that the Company is planning to cancel existing unsecured notes as part of the restructuring drive. The embattled oil and natural gas company is also planning to cancel all existing equity as part of the restructuring.
“Despite the challenging market dynamics our industry continues to face, we believe that our transformation strategy, which is designed to improve our execution capabilities, lower our cost structure and create efficiency to allow us to better price our products and services, will position Weatherford for long-term success,” stated Mark McCollum, president and CEO of Weatherford.
Weatherford International finds itself in the current debacle on widening net loss, leaving it unable to roll over debt. The departure of key employees that would have helped execute organizational changes has all but continued to compound the Company’s woes.
The Company has since confirmed plans to carry out a reverse stock split at a ratio of 1-for-20. Weatherford International expects the split to help reduce the risk of the stock being delisted from the New York Stock Exchange.
Weatherford International remains in a precarious position on the filling of bankruptcy protection. Widening net loss, as well as soaring debt levels, continues to evoke serious concerns about long-term prospects and growth metrics among investors.
With the stock currently trading in a steep downtrend, taking a backseat would be the right call waiting for the dust to settle amidst the ongoing restructuring.
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Disclosure: We have no position in WFTIF and have not been compensated for this article.