Weatherford (WFT) Misses Q1 EPS by 3c, Continues Headcount Cuts

Weatherford (NYSE: WFT) reported Q1 EPS of ($0.29), $0.03 worse than the analyst estimate of ($0.26). Revenue for the quarter came in at $1.59 billion versus the consensus estimate of $1.66 billion.

Outlook

In the first quarter of 2016, we completed 78% of our latest 6,000 headcount reduction target, ceased operations at four of the nine planned manufacturing and service facilities for the year, and shut down 26 operating and other facilities in North America.

As we continue to weather the reality of this downturn, we plan to further reduce our cost structure by another 2,000 in headcount and complete the closing of five additional manufacturing and services facilities. In addition, we expect to close another 30 operating and other facilities by year-end, with a target of completing half of these by the end of the second quarter. We have reduced our full year forecast for capital expenditures to $250 million, 63% lower than our 2015 spending level and 83% below the spend in 2014.

Bernard J. Duroc-Danner, Chairman, President and Chief Executive Officer commented, "During the first half of 2016, we are confronted with an unusually severe market contraction characterized by extremely low levels of customer activity and punitive pricing. We are managing our operations with more cost rationalization, cash discipline and an intensified sales drive, helping our customers improve efficiencies and economics. We are also placing a strategic emphasis on quality and reliability in everything we do. As we approach mid-year, we have now gone beyond leveraging cost, efficiency and performance, and we are strategically and actively safeguarding the critical segments of our core businesses and technology offerings. We believe these deliberate actions will best allow Weatherford to balance the demands of the short-term market against the gains of an eventual recovery. By preserving our deep technical capabilities and managing our global geographical footprint, we are ensuring our Company's future strength. In this way, Weatherford can best respond to upcoming opportunities and further exploit incremental gains, and we expect these to surpass those of prior cycles.

Free cash flow generation remains an unyielding priority. This commitment is well understood, planned for and embraced within the organization. We remain confident that the full year free cash flow will be strong and will be driven by reductions in working capital balances, continued discipline in capital expenditure spending, realized cost reductions, the conclusion and successful settlement of claims relating to the Zubair project and improved net income. We are in the business to make returns for our shareholders and consider free cash flow a primary marker for our success. Net debt will continue to decline. In addition to the closing of our successful equity financing, we have also completed negotiations to refinance our revolving credit facility into multi-year revolving credit and term loan facilities. This liquidity combination will help ensure Weatherford has ample financial flexibility.

As we look forward, we believe the long-term fundamentals of our industry remain intact. The steady increase in world energy demand coupled with the acceleration of production decline rates are forcing a balance between supply and demand. Oil prices are beginning to respond to this gradual tightening of the supply-demand balance. This shift is inevitable, given the extreme cuts in both capital and operating spend by our customer base around the world. The work we are doing now will prove the merits of our direction. As a recovery unfolds, our performance will reflect our transformation in all metrics. Our focus is making our Company what it can be, and what it should be."

For earnings history and earnings-related data on Weatherford (WFT) click here.

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