Weatherford (WFT) Tops Q3 EPS by 4c, Offers Outlook

Weatherford (NYSE: WFT) reported Q3 EPS of ($0.05), $0.04 better than the analyst estimate of ($0.09). Revenue for the quarter came in at $2.24 billion versus the consensus estimate of $2.34 billion.

Outlook

We expect positive free cash flow in the fourth quarter and for the full year driven by further reductions in working capital balances, and continued discipline on capital expenditure spending. The full year forecast for capital expenditures has now been further revised downwards by another $100 million to $650 million, which is 55% lower than 2014 levels.

We successfully completed all of the previously announced headcount reduction of 11,000 during the third quarter. This target has been revised upward to 14,000 with an increased focus on support positions to be completed by year end. In addition to our headcount reductions, we have closed five of our planned seven manufacturing and service facilities. We will close one more by the end of the year, and the remaining closure will occur in 2016. We have also closed over 60 operating facilities across North America through the first half of 2015 and over 70 through September 30, 2015. We plan to close approximately 90 by the end of the year. The aggregate results of these measures will mitigate the effects of the downturn. Market conditions may continue to remain increasingly challenged and to help offset the decline, we plan to further reduce our cost structure to reflect the current environment.

Bernard J. Duroc-Danner, Chairman, President and Chief Executive Officer commented, "Market conditions will experience further near-term activity reductions in the U.S., Latin America, and Sub-Sahara Africa. We believe that Asia Pacific has bottomed out as a market, while we expect the Middle East/North Africa and Russia to remain robust. Over the medium term, we expect commodity prices to recover as the global oil supply and demand forces re-balance, sparking some early activity improvements in the second half of 2016. Pricing will continue to remain weak until 2017.

We will take advantage of this environment and continue to aggressively rationalize our cost base, upgrade our talent bench and generate positive free cash flow from operations. We will continue to exhibit spending restraint and discipline right through 2016 and 2017. Counting all of the cost reduction measures we have undertaken in 2014 and 2015, by the end of this year, we will have generated total cost savings of $2 billion, of which $600 million is as permanent as it is structural. We believe we can exit this down cycle, as a leaner, de-layered, more efficient and streamlined organization, ready to respond to market needs. Our actions will ensure very strong incrementals when the recovery unfolds, both in earnings and in free cash flow.

In the first nine months of 2015, we have recorded overall company decrementals of 28% when compared to 2014. We believe this statistic is among the best in the industry and reflects the focus and discipline we have exhibited this year. In the last downturn in 2009, the comparative number was a poor 140%, meaning that our operating income declined more than revenue.

Our balance sheet will be managed pro-actively with debt paydowns out of free cash flow over the next three years. We feel confident in our ability to de-lever the balance sheet."

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

You May Also Be Interested In

• Tesla plans 'flying' Roadster stunt at SpaceX Texas site as early as August
• Movano (MOVE) Misses Q2 EPS by 195c
• Outlook Therapeutics (OTLK) Misses Q3 EPS by 9c