SAN FRANCISCO (Reuters) - As the smallest of the world's big four oilfield services players, Weatherford International (WFT.N) always seems to have something to prove.
That's especially true now, with its stock suffering since a $500 million accounting error unearthed this year only added to the uncertainty of a separate four-year corruption probe.
Pieced together by acquisitions a decade ago, the perpetual underdog of the full-service oil patch players is also under pressure to demonstrate how its many parts can work together.
Money has poured into the sector as high oil prices boost prospects all around. Yet like industry No. 3 Baker Hughes Inc BHI.N last year, Weatherford is the "show-me" stock of the bunch, according to Dahlman Rose analyst James Crandell, meaning that investors are waiting to be convinced.
"People want to see them put some quarters on the board before they begin to give the company credit," Crandell said.
Investors generally have a good impression of Chief Executive Bernard Duroc-Danner, the smooth-spoken economics Ph.D. who built the company, but many are tired of waiting.
More funds fully sold out of Weatherford WFT.VX in the first quarter than bought initial stakes, according to the latest data, whereas the opposite was true for rivals Baker Hughes, Schlumberger Ltd (SLB.N), and Halliburton Co (HAL.N).
Baker Hughes in particular was handsomely rewarded for reviving its international arm: its stock is up 61 percent in the last year, and five analysts upgraded it in the past 90 days, versus Weatherford's 29 percent rise and no upgrades.
"Right now Weatherford's in the doghouse a bit," Crandell said. "But I'm confident that Weatherford will deliver given the environment I see ahead."
North America's outlook only seems to get better. A survey of 445 exploration and production (E&P) firms by Crandell last month found 2011 spending set to grow 22 percent in the United States and 16 percent in Canada, up from forecasts of 8 percent and 5 percent, respectively, in December.
This spending is boosting the profits of Weatherford and others, but analysts say the real potential is elsewhere.
Duroc-Danner knows this well, having spent years gearing up outside North America to prepare for a battle that pitches his outfit against rivals with deep pockets and solid reputations.
"The overseas stuff is more likely to go to the brass nameplate people, but there is more opportunity <in the United States> for lesser names," said Milt Ezrati, market strategist at Lord Abbett, which sold 36 percent of its Weatherford shares in the first quarter, taking its stake down to 0.8 percent.
Lord Abbett also sold 14 percent of its holding in industry leader Schlumberger. Ezrati, who declined to discuss particular stocks, sees the outlook for energy prices as flat, at best.
Yet oil prices are still around $100 a barrel, giving E&P firms enough profit margin to seek reliability over the value of Weatherford, long seen as the low-cost option in services, said Doug Sheridan, head of EnergyPoint Research in Houston.
"You've got a situation where being the scrappy underdog can only play so long," Sheridan added. "At some point, people look at it and say, 'You're just a scrappy underdog.'"
Duroc-Danner, son of a Total (TOTF.PA) exploration head, became CEO in 1990 at Energy Ventures which, after its $2.5 billion Weatherford Enterra takeover in 1998, took on the new name and went on a three-year spree that swallowed 20 firms.
Sheridan said it could be argued that the company never truly integrated all these operations into a common culture.
A key test was its much-heralded bundled service contract at Chicontepec in Mexico, where it had to scale back last year as the country curtailed some oil developments.
The company has also faced four years of scrutiny of other adventures abroad. Various U.S. agencies are probing its part in Iraq's oil-for-food program, along with its past operations in certain sanctioned countries, including Sudan and Iran.
The Department of Justice and Securities and Exchange Commission are investigating Weatherford's Foreign Corrupt Practices Act (FCPA) compliance and the embezzlement of $175,000 in payments to government officials in Europe, according to company filings, beyond which it cannot comment.
Dan Newcomb, founder of the FCPA practice at law firm Shearman & Sterling, said the cases tend to run about two years, but can drag on depending on the complexity and number of countries involved. Such probes from multiple agencies can be enormously distracting for a company's management, he said.
"During the investigation, everybody's very worried about 'Am I going to get fingered?' -- not just people who might justifiably be worried about it," Newcomb said.
A record $800 million FCPA settlement by Germany's Siemens (SIEGn.DE), which took two years to resolve, is the benchmark.
"Siemens was enormously expensive, but it went to the very top of an organization in many, many countries," Newcomb said. "This (Weatherford) isn't at that level yet."
Weatherford's reputation took another hit in March when it had to adjust its results by $500 million over four years due to "material weakness" in its tax reporting.
The stock is down by a fifth since then, whereas the oil service sector .OSX has declined 4 percent in that time.
But change is afoot. The company is seeking a new top accountant and now has a chief operating officer. The promotion of Peter Fontana to COO late last year left Weatherford's Eastern Hemisphere boss to seek "other opportunities," but gave Dahlman Rose's Crandell reason to believe in the turnaround.
"If the company can get its act together internationally, there's a lot more upside than its peers," said Crandell, who has followed the sector for three decades. "That's a bet I'd be willing to make."
Reporting by Braden Reddall, editing by Dave Zimmerman