July 31 Weatherford International Ltd has abandoned its ambitions to sell a wide variety of services across the oilfield spectrum, and is instead sharpening its focus on what makes the most money.
The company's chief executive, Bernard Duroc-Danner, on Wednesday attached firm numbers to his long-touted plan to shrink the company to a workable size. Of $16 billion in anticipated revenue for 2013, only $11 billion is core, he said.
"Separating the non-core from our company is just a question of time and methodical execution," Duroc-Danner said. Until March of this year, Duroc-Danner said, he and his team had focused on nothing beyond overcoming accounting troubles that are now largely behind them..
There has been a push in recent years by oilfield service leaders Schlumberger Ltd, Halliburton Co and Baker Hughes Inc to capture a larger share of the spending on oil and gas wells. Weatherford is now sticking to its most profitable niches instead.
Weatherford had said previously that it planned about $1 billion worth of asset sales this year, and Duroc-Danner hoped two transactions would be done in the fourth quarter. One of the sales was not completed because the buyer pulled out, he added.
Next year, another four smaller product lines would be sold, Duroc-Danner said on a conference call to discuss second-quarter results.
"All of these businesses, which are legitimate and have strengths in and of their own, we are probably the wrong owner," Duroc-Danner said. "And our core, on the contrary, we are the right owner."
The $11 billion in core revenue broke down between well construction, formation evaluation, completion and production.
"The company has evolved from one driven by top line (and bottom line) growth and one focused on taking on the big 3 oil service companies to a much more concentrated company - one that is focused on its competitive strengths," Cowen analyst Jim Crandell said in a note to clients on Wednesday.
This marks a reversal for Duroc-Danner, who became CEO in 1990 at a company called Energy Ventures, which merged with Weatherford Enterra takeover in 1998, took on the new name and went on a three-year spree that swallowed 20 firms.
Weatherford is also pulling out of the unprofitable southern Iraq region, while at a company-wide level it is hacking away at its payroll after headcount rose by 15,000 to 70,000 in two years. That compares with 73,000 employees at Halliburton, which has a stock market value four times greater than Weatherford.
A reduction of 3,000 employees would save $90 million annually, or two cents per quarter, starting in the fourth quarter, Duroc-Danner said, with full-year earnings expected to be 88 to 92 cents per share - ahead of most analysts' estimates.
Weatherford shares rose 1.5 percent to $13.96 on Wednesday in New York trading.