Weatherford International Ltd. (WFT)

hollandmarigoldOil and Offshore

Nov 8, 2013 (3 years and 5 months ago)

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Investment Management Program


Weatherford International Ltd. (WFT)


JohnPaul Bennett

12/
18
/0
9

Energy

Oil & Gas Equipment & Services

Large

Growth

11.4

B

1.
85
%

Weight of Portfolio

Morningstar Rating



Key Stock Statistics

Beta




1.
64

ROE (ttm)




7.02

ROA (ttm)




3.90

EPS




2.00

Current Ratio



1.84

Quick Ratio



0.89

Financial Leverage



1.9
9

Debt/Equity



0.5
5

1 Year Return



78.4

3 Year Return



(10.2)

5
Year Return



5.1


Valuation Analysis

P/E




1
5.30

P/B




1.30

P/S




1.20

P/CF




10.7

PEG Ratio




0.
74

Earnings Yield




7.90

Dividend Yield



N/A

YTD Return



(
70.0
)


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Beta

P/E

ROE %

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Hughes
,

Inc.


BHI

1.55

1
5.
35

11.01

Halliburton Company


HAL

1.
42

35.2

12.48

Schlumberger Limited


SLB

1.
18

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18.78

Diamond Offshore

Drilling Inc. DO

0.80

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40.30

Noble Corporation


NE

1.
04

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CGG Veritas


CGV

1.92

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5.87

National Oilwell Varco, Incorporated

NOV

1.
40

13.64

12.55

Transocean, Inc.



RIG

0.74

7.66

18.91


Earnings Growth Estimates

WFT

IND

S&P

Current Quarter


(77.4)

(47.0)

(23.7)

Next Quarter


(33.3)

(29.5)

41.0

Current Year


(69.0)

(37.5)

(54.1)

Next Year



58.1

(3.0)

38.4

Past 5 Years


13.97

N/A

N/A

Next 5 Years


35.0

11.57

4.62


Growth Rates

2005

200
6

200
7

200
8

Latest Qtr

Revenue Growth

38.4

51.8

19.1

22.6

(10.5)

Operating Income

37.0

135.4

21.2

21
.8

(69.1)

EPS


25.1

72.1

24.1

24.8

(73.9






Last Trade

1

Y
r Target

Intrinsic Value

52

W
k Range

$
15.60


$
26.50


$
17.00


$
9.01
-
23.75


Business


Weatherford International, Ltd. is a large
-
cap stock that operates in the oil and gas
equipment and services industry located within the energy sector. WFT provides equipment
and services used for the drilling, completion, and production of oil and natura
l gas wells
worldwide. The company was founded in 1972 and is based in Houston, Texas.
Weatherford International has operations in more than 100 countries with more than 800
locations throughout the world. WFT employs more than 40,000 people worldwide.

They
provide a very diverse and unique business offering an array of services. WFT’s product
offerings can be grouped into 10 service lines:
artificial lift systems, drilling services, well
construction, drilling tools, completion systems, wireline and e
valuation services, re
-
entry
and fishing, stimulation and chemicals, integrated drilling, and pipeline and specialty
services. The company designs and manufactures a variety of drilling tools and other
pressure
-
control equipment. They operate under four
segments: North America, Latin
America, Europe/West Africa/Commonwealth of Independent States, and Middle East/North
Africa/Asia. In July 2008, WFT acquired 69.96% stake in Atlas G.I.P., a Romanian
architecture and engineering company. They also gained t
he acquisition of International
Logging Inc. in August 2008.

WFT is a member of the S&P 500 Index.



Investment Rationale/Risk



After growth of only 12% in 2003, Weatherford's revenue increased 28%
annually (on average) between 2004 and 2008. Operating inc
ome has more than
quadrupled because of expanding profit margins during the same time frame.
However, given our weaker near
-
term outlook, we expect revenue and operating
income to decline in 2009.

WFT reported a
79% decrease

in third quarter net
income due

to
the decline in North America
, with revenues decreasing 47%
against a 52% decline in rig coun
t.



Weatherford's operating strength was on display in 2008, with its operating
margin topping 20%. However, we expect the company's operating margin to
decline
sharply in 2009 as the services industry faces the prospect of an
industrywide oversupply of services equipment because of lowe
r demand from
services customers.



Weatherford ended 2008 with more than $5 billion in debt, and the firm's
debt/EBITDA ratio stan
ds at around 2.2. The firm has spent significantly in
excess of its operating cash flow during the last few years to take advantage of
growth opportunities and has used debt to make up the difference. We consider
the firm's financial health to be fair and
note the firm will need to be far more
prudent with its expenditures going forward if it wants to avoid financial difficulties
in the future.