Wed, Jan. 28, 7:57 AM
- Weatherford International (NYSE:WFT) discloses that it is eliminating the COO position, with Dharmesh Mehta moving a role as executive VP for corporate strategy.
- The COO position will not be filled as the company adopts a flatter management structure, in an effort to cope with the new global oil environment.
Fri, Jan. 9, 7:55 AM
- Oil and gas companies could cut E&P spending in North America by 30% or more this year if U.S. crude oil prices continue to trade at $50-$60/bbl, Barclays estimates on the basis of a survey of 225 oil and gas companies.
- The firm expects U.S. onshore rig count to fall by 500 rigs over the year to ~1,250 rigs by the end of 2015.
- Barclays says this is only the seventh time in the 30-year history of its survey that global spending is estimated to fall, adding that spending rose by more than 10% the following year after almost every decline.
- In the oilfield services group (NYSEARCA:OIH), the firm initiates Halliburton (NYSE:HAL), Baker Hughes (NYSE:BHI), National Oilwell Varco (NYSE:NOV) and FMC Tech (NYSE:FTI) at Overweight, and Forum Energy Tech (NYSE:FET) and Dril-Quip (NYSE:DRQ) at Underweight; Schlumberger (NYSE:SLB), Cameron (NYSE:CAM), Weatherford (NYSE:WFT) and Superior Energy (NYSE:SPN) are started at Equal Weight.
- ETFs: XLE, ERX, VDE, XOP, ERY, DIG, DUG, IYE, XES, IEO, IEZ, PXE, FENY, PXJ, RYE, FXN, DDG
Wed, Jan. 7, 2:55 PM
- Credit Suisse's James Wicklund suggests avoiding oilfield services stocks, as the firm cuts its earnings estimates on Schlumberger (SLB -0.7%), Weatherford (WFT -0.7%) and Cameron International (CAM +0.9%) by 20% or more.
- The analyst expects the rig count to decline every week for the next three months and fall by another 400-plus rigs; it also believes downside earnings revisions have just started, and the conference calls will be ugly, meaning sector sentiment is bound to get worse.
- "While prices typically bottom in Q1, the duration and magnitude of the slowdown required to balance the markets will require at least a full year, so prices could skip along that bottom for an extended period," Wicklund writes.
Tue, Jan. 6, 12:32 PM
- Oppenheimer’s James Schumm thinks investors should buy high-quality oil services stocks such as Baker Hughes (NYSE:BHI), Halliburton (NYSE:HAL), Schlumberger (NYSE:SLB) and Weatherford (NYSE:WFT).
- Large-cap oil service stocks "should not be this volatile," Schumm writes, noting that the world consumes ~92M bbl/day of oil, and demand is still growing - albeit at a slower rate - and is relatively inelastic, which requires a high level of service investment every year; low investment levels in 2015 will have to be made up in 2016 or 2017, barring a global economic shock.
- Earlier: "Peak pessimism" at hand for oil services stocks, Citi says.
Dec. 10, 2014, 12:58 PM
- Energy stocks are slammed across the board as oil prices take another nosedive (I, II), with the losses heaviest on shares of small, U.S.-based oil and gas producers.
- “Financial leverage is being thrown out the window, and everything else is being purged as well,” says Simmons analyst Bill Herbert, who adds that cuts to production budgets in the coming year likely will mean more pain for oil service companies.
- Among the hardest-hit shares: TPLM -15.2%, CRK -12.4%, GDP -11.9%, NOG -9.5%, AREX -8.6%.
- Investors have been less quick to dump shares of integrated oil companies, but today they have been smacked too: XOM -2.8%, CVX -2.9%, COP -2.3%, BP -2%, RDS.A -2.2%, TOT -2.3%.
- Today's worst performers on the S&P 500 include OKE -8.2%, DNR -7.4%, NE -5.6%.
- Service companies also are down: SLB -2.6%, HAL -2.7%, WFT -6.6%, BHI -2%.
- ETFs: XLE, ERX, VDE, OIH, ERY, DIG, DUG, IYE, XES, IEZ, PXI, FENY, PXJ, RYE, FXN, DDG
Dec. 9, 2014, 6:42 PM
- Oilfield contractors hired to drill wells and fracture rock will have to lower prices by as much as 20%, analysts say, which could cut more than $3B from the 2015 earnings that had been expected for the likes of Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL), Baker Hughes (NYSE:BHI) and Weatherford International (NYSE:WFT).
- Oil producers will be pushing for discounts wherever they can find them, and may begin to take shape as early as this month, with fracking services perhaps seeing the biggest chunk of pricing discounts because it is the largest part of the cost of drilling a new well.
- Earnings estimates for oil service companies that have been cut since last week will continue to be revised lower, says Credit Suisse's James Wicklund: “We’ve just gotten started.”
Dec. 3, 2014, 3:59 PM
- Oppenheimer initiates coverage on Schlumberger (SLB +1.6%), Halliburton (HAL +1.4%) and Weatherford (WFT +1%) with Outperform ratings and rates oilfield services rival Baker Hughes (BHI +1.6%) at Perform.
- The firm views the drop in oil prices as an opportunity, believing investors should take advantage of recent stock price weakness and build or add to positions in SLB, HAL and WFT; on SLB, Oppenheimer says the stock tends to outperform peers in down markets, and SLB is clearly well positioned to benefit from an increase in E&P spending should oil prices rebound.
- The market is taking a myopic view on HAL's combination with BHI, the firm says, as the proposed merger will create a more valuable entity that can more effectively compete with SLB internationally.
Dec. 2, 2014, 10:33 AM
- BofA Merrill Lynch downgrades the energy sector to Marketweight following OPEC’s decision to maintain rather than cut production, now seeing $70-$75 as Brent crude's 2015 range, while warning of value traps.
- "With the collapse in crude, the sector now trades at a 20% discount to the S&P 500, where it has historically traded in-line with the market," the firm says, "but further estimate cuts are likely to come, [as] prices are falling faster than earnings are deteriorating."
- Seeing WTI possibly falling as low as $50 in the coming month, BofA warns that "volatility in oil prices translates to volatility in earnings."
- For exposure to the sector, the firm prefers big, lower beta stocks such as Exxon Mobil (XOM +0.5%).
- Citi also cautions against assuming that oil prices have found a bottom, and wants to see a more thorough confirmation of a technical base of support before proclaiming anything more than the latest trading bottom; however, Citi's Scott Gruber recommends moving aggressively on oil services if WTI crude falls into the $50s - his top picks, in order, are Baker Hughes (BHI +0.1%), Halliburton (HAL -1.3%) and Weatherford (WFT +2.7%).
- ETFs: XLE, ERX, VDE, OIH, XOP, ERY, FCG, DIG, GASL, DUG, IYE, XES, IEO, IEZ, PXE, PXI, FENY, PXJ, RYE, FXN, DDG
Dec. 1, 2014, 7:46 AM
- Weatherford International (NYSE:WFT) agrees to sell its engineered chemistry and Integrity drilling fluids business to Berkshire Hathaway (BRK.A, BRK.B) unit Lubrizol Corp. for $750M in cash plus a potential increase of $75M for an earnout tied to the post-closing performance of the businesses.
- WFT says the sale is another step in its plan to divest non-core businesses and will bring total 2014 cash divestiture proceeds to ~$1.8B, implying a net debt of $6.6B-$6.8B at year end.
Nov. 24, 2014, 11:31 AM
- Weatherford (WFT +0.2%) is the most vulnerable among the big four oil services companies to falling crude oil prices based on price-to-book valuations, which help offer a sense of where the floor in valuations might be in a down cycle.
- The minimum price-to-book ratio WFT reached during 2010-13 was 0.87x, while today it trades at 1.62x - the potential drop of 46% is the widest of the big four.
- The smallest of the group, WFT's market share in technology-intensive services of less than 10% is about one-third that of Schlumberger (NYSE:SLB) or a merged Halliburton-Baker Hughes (HAL, BHI), according to Morgan Stanley’s Ole Slorer.
- Another factor against WFT is its net debt; using management guidance and current consensus profit forecasts, WFT should end the year still more than 2x EBITDA, while the other four are below 1x EBITDA.
Nov. 18, 2014, 6:48 PM
- Halliburton’s (NYSE:HAL) $34.6B buyout of Baker Hughes (NYSE:BHI) has caused HAL shares to plunge 12% since the deal was announced Monday, the worst two-day performance for an acquirer’s stock this year; on average, a company announcing a deal has seen its stock pop 3.1% on the news.
- But analysts say the deal may present game-changing opportunities for a few small and mid-cap oilfield services firms with enough cash on hand to buy a chunk of HAL's expected divestments without diluting their stock or damaging their credit rating.
- Tudor Pickering Holt's Jeff Tillery speculates that Forum Energy Technologies (NYSE:FET), National Oilwell Varco (NYSE:NOV) and GE would be interested in HAL's manufacturing businesses that may come up for bid, while Superior Energy Services (NYSE:SPN) and Frank's International (NYSE:FI) might want certain services-oriented businesses.
- Weatherford (NYSE:WFT) would seem like a logical buyer of some assets and could make it happen with a mix of cash and stock, but RBC's Kurt Hallead thinks HAL might not want to cooperate with a company that could essentially become what Baker Hughes was.
Oct. 24, 2014, 9:44 AM
- Alongside its upgrade of Halliburton, CItigroup also boosts Weatherford International (WFT +0.8%) to a Buy.
- "Perennially, the Achilles’ heel for Weatherford has been free cash flow or lack thereof," said CEO Bernard Duroc-Danner on the earnings call yesterday (transcript). "The commentary is fair, but we are making progress." He notes negative FCF of $1.2B in 2012, and just $500M last year, with continued improvement in the $500M-$700M range expected.
- More: "We believe core revenues and margins in Latin America and the Eastern Hemisphere will improve markedly and deliver in ‘15 positive margin incrementals over ‘14 ... This assessment isn’t a hopeful sentiment. It is based on existing contracts for well construction, lift, completion, and formation evaluation in a number of specific regional markets."
- Previously: Citi buys the dip in Halliburton
Oct. 23, 2014, 10:38 AM
- Weatherford International (WFT -2.7%) opens sharply lower after missing Q3 earnings and revenue estimates; WFT has now missed revenue estimates for seven consecutive quarters.
- A surge in Q3 profit is attributed to cost-cutting initiatives and the asset disposal plan adopted to reduce debt and emphasize primary businesses; during Q3, WFT’s core operating income margin improved by 145 bps to 17.9% from the same period last year, and management foresees it close at 20% by year-end.
- Nevertheless, WFT is still losing more money in 2014 than it did last year, suffered net losses of $109M YTD vs. net losses of $74M at the same point a year ago.
- WFT could announce at least two major divestitures before the end of the year, including one that may occur “imminently” and perhaps within the next week, company execs said on the morning's earnings conference call.
Oct. 23, 2014, 12:57 AM
Oct. 21, 2014, 5:35 PM
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Oct. 17, 2014, 10:17 AM
- Oil services (OIH +4%) stocks rip higher at the open following a strong earnings report from Schlumberger (SLB +7.4%) and as oil prices stabilize.
- Tumbling crude prices haven’t shaken the faith of at least two of the top providers of drilling and production services: SLB CEO Paal Kibsgaard describes the drop as “fear of short-term oversupply” and says the company is not changing a long-term view that its earnings will almost double from last year’s level by 2017, while Baker Hughes (BHI +4.7%) CEO Martin Craighead says his company's customers don't believe crude prices will stay low.
- HAL +5.5%, SPN +5.2%, WFT +5.1%, CAM +2.1%, NOV +2%, FTI +1.8%, DRQ +1.4%.
WFT vs. ETF Alternatives
Weatherford International Ltd provides equipment and services to the oil and natural gas exploration and production industry, both on land and offshore, through its two product service line groups.
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