Nov 5 Weatherford International will cut
its debt by up to $5 billion in the next two years as it boosts
cash flow and divests assets, the oilfield services company's
CEO said on Tuesday.
Buoyed by higher-than-expected quarterly earnings on Monday
and the announcement that day of a settlement of U.S.
investigations that go back six years, shares of Weatherford hit
their highest since March 2012.
Chief Executive Officer Bernard Duroc-Danner said he
expected Weatherford's debt level to drop by between $3 billion
and $5 billion by the end of 2015. Net debt now stands at $9
The company, the smallest of the sector's big four, will
tighten its focus by divesting businesses with a combined $3.5
billion in revenue. These include its land-rig contracting unit
via a potential initial public offering in the fourth quarter of
The unit, with 183 drilling rigs, 284 workover rigs and
14,000 employees, will generate 2014 revenue of $1.8 billion to
$2 billion and earnings of $350 million to $400 million before
interest, tax, depreciation and amortization, Weatherford said.
"Rigs as a product line aren't a required component of our
strategy anymore," Duroc-Danner said on a conference call. "The
rigs have tremendous potential in their own rights. (The unit)
has strong presence in all of the key markets of the Eastern
Hemisphere where activity over the next 10 years will thrive."
Other units to go are wellheads, drilling fluids, pipeline
and specialty services, and testing and production services.
But the company will stay in pressure pumping, a key part of
the hydraulic fracturing boom. It ranks eighth in North America
by pumping horsepower, but Duroc-Danner does not plan to buy any
of the extra capacity that has left the market glutted.
"I don't believe in consolidation in pressure pumping
because the barriers to entry are too low," he said.
The settled U.S. government charges include Foreign Corrupt
Practices Act breaches, violations in the Iraq oil-for-food
program, and work in sanctioned countries. Weatherford stuck
with estimates of total fines of $253 million, and Duroc-Danner
said if the deals are approved by the courts and regulator, the
final announcement could come in four to six weeks.
Weatherford shares were 2.5 percent higher at $16.87 in
morning trading on the New York Stock Exchange.
Analysts also welcomed the arrival of the company's new
chief financial officer, Krishna Shivram, who joins from
oilfield service industry leader Schlumberger Ltd.
Also, Chief Administrative Officer Dharmesh Mehta will be
promoted to chief operating officer with the retirement next
month of Peter Fontana, the current COO.