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Actionable news in WFT: WEATHERFORD INTERNATIONAL PLC,

Weatherford Headwinds: Revolver Cut, Negative Cash Flow

Summary

Weatherford reported Q1 earnings on Wednesday.

Revenue fell 21% Q/Q, while North America was off 22%.

EBITDA of $100MM was off 57% Q/Q. Negative free cash flow of $212MM was extremely disappointing.

Lenders cut Weatherford's revolver from $2.25B to $1.15B. Total debt/EBITDA of 10.5x remains untenable.

The revolver cut and negative free cash flow could sink Weatherford.

Weatherford International (NYSE:WFT) delivered Q1 earnings yesterday. The company reported revenue of $1.59 billion and a loss per share of $0.29. Analysts were expecting revenue of $1.66 billion. I had the following takeaways on the quarter:

North America Was Hideous

After Halliburton (NYSE:HAL) warned on the dismal outlook for North America, I suspected the region would not be good for Weatherford. The U.S. rig count is at or near record lows which portends a decline in equipment spending. Many shale plays are heavily-indebted and need to cut costs in order to service their debt. That may mean squeezing suppliers like Weatherford.

Total revenue fell 21% sequentially while revenue from North America was off 22%. Halliburton and Baker Hughes (NYSE:BHI) have the heft to provide price concessions to help clients survive in the oil patch; Weatherford's liquidity problems make it difficult for the...


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