Struggling oilfield service company Weatherford to file for Chapter 11 bankruptcy

[Elderberry]

Houston Chronicle by  Sergio Chapa May 10, 2019 Updated: May 11, 2019

The oilfield services company Weatherford International has entered into an agreement with its top creditors that will allow the company to file for a "prepackaged" Chapter 11 bankruptcy — after more than four years without making a profit.

Weatherford said late Friday that the company had reached an agreement with creditors that hold 62 percent of a type of debt known as unsecured senior notes. Although not backed by company assets, unsecured senior notes have greater seniority and pay higher amounts of interest than other forms of debt.

The agreement allows the Swiss company, which has principal operations in Houston, to shed $5.8 billion of its $7.6 billion in long-term debt — in exchange for 99 percent of the stock in the reorganized company. The agreement also provides the company with $1.75 billion in fresh credit and loans.

Weatherford expects to implement the agreement through a "prepackaged" Chapter 11 bankruptcy filing in the United States and similar proceedings in Ireland.

In a statement, Weatherford CEO Mark McCollum said high levels of debt hinder the company's ability to invest in growth and prevent it from completing a Feb. 2018 transformation plan. The agreement, he said, would improve the company's balance sheet without interrupting operations, vendors, customers and employees.

"We expect a restructuring will provide us with improved liquidity and greater financial stability and flexibility to make investments to enhance our platform while we continue to invest in the resources necessary for our business to grow," McCollum said. "We are confident that these steps will allow us to continue our transformation journey and position Weatherford for long-term success."

More: https://www.houstonchronicle.com/business/energy/article/Struggling-oilfield-service-company-Weatherford-13836989.php

My son started with Weatherford right out of the Navy as a tech tearing down oil tools. Around about 4 years later when they laid him off he was a MWD Field Engineer.

[IsailedawayfromFR]

Maybe the company should have remained in Weatherford, Texas rather than high-flying it to relocate to Switzerland.

Seems a few bucks could have been save, no?

[thackney]

Maybe the company should have remained in Weatherford, Texas rather than high-flying it to relocate to Switzerland.

Seems a few bucks could have been save, no?

The moved the headquarters to Switzerland for the same reason as several others, lower taxes.

I worked for a company that moved the headquarters to Switzerland for the same reason.  5 key people moved to Switzerland.  A couple key executives chose to retire instead of move.

It was a cost savings, not a new expense.

[IsailedawayfromFR]

The moved the headquarters to Switzerland for the same reason as several others, lower taxes.

I worked for a company that moved the headquarters to Switzerland for the same reason.  5 key people moved to Switzerland.  A couple key executives chose to retire instead of move.

It was a cost savings, not a new expense.

Well, I just noticed the cost of living in Switzerland is a bit more than Weatherford, and apparently that move to save costs really did not suffice for the company in the end to save it.

Cost savings by reducing taxes I do not view as true cost savings, but a way to increase net income instead.  I view cost savings as typically more of an operational or overhead excercise.

I worked for a company that moved its marine division from New York to Texas  Only 2 of the 54 people in the division wanted to move.  That also was a significant, and real cost savings.

[thackney]

...Cost savings by reducing taxes I do not view as true cost savings, but a way to increase net income instead.  I view cost savings as typically more of an operational or overhead excercise....

Cost saving is saving money on anything you spend money on.  Any cost savings is going to increase net income, or it is not a cost savings.  I think I may be missing your point.

[IsailedawayfromFR]

Cost saving is saving money on anything you spend money on.  Any cost savings is going to increase net income, or it is not a cost savings.  I think I may be missing your point.

I know we are thinking the same way, but there are semantics involved here.

Cost savings is indeed what one spends money on, but taxes is not that, as it is actually a reduction in the amount of income you receive after one's income is reduced by taking into account costs.

Gross income less costs = Net income prior to taxes
Net income prior to taxes less taxes = Net income after taxes

An accountant can weigh in, but typically accounting does not recognize taxes as a cost.

[thackney]

I know we are thinking the same way, but there are semantics involved here.

Cost savings is indeed what one spends money on, but taxes is not that, as it is actually a reduction in the amount of income you receive after one's income is reduced by taking into account costs.

Gross income less costs = Net income prior to taxes
Net income prior to taxes less taxes = Net income after taxes

An accountant can weigh in, but typically accounting does not recognize taxes as a cost.

Thanks, I can agree with that.

[Bigun]

I know we are thinking the same way, but there are semantics involved here.

Cost savings is indeed what one spends money on, but taxes is not that, as it is actually a reduction in the amount of income you receive after one's income is reduced by taking into account costs.

Gross income less costs = Net income prior to taxes
Net income prior to taxes less taxes = Net income after taxes

An accountant can weigh in, but typically accounting does not recognize taxes as a cost.

And that is where they go wrong! 

Taxes, and all the costs of compliance associated with them, are a cost that can only be recovered in any possible combination of three ways. 1. Increased price of products produced.  2. Reduced wages and benefits for workers. 3. Reduced ROI to shareholders in the enterprise. That's it!

[IsailedawayfromFR]

And that is where they go wrong! 

Taxes, and all the costs of compliance associated with them, are a cost that can only be recovered in any possible combination of three ways. 1. Increased price of products produced.  2. Reduced wages and benefits for workers. 3. Reduced ROI to shareholders in the enterprise. That's it!

I think all of us agree that taxes are a negative to making money, @Bigun

We all need to reduce them as much as possible.

For me, I advocate as little tax as possible at the federal level, and make taxes considered necessary at the local level or at most state level.

The closer one can get to the ones making decisions on taxes, the more one can build a fire under them to keep taxes low or lower them.

Very difficult to affect those decision makers if they are in DC.

The bonus in making it local is if they decide to raise them anyway, we can move to a more tax-friendly locale.  That alternative is difficult if it is at the federal level as you are then stuck.

[Bigun]

I think all of us agree that taxes are a negative to making money, @Bigun

We all need to reduce them as much as possible.

For me, I advocate as little tax as possible at the federal level, and make taxes considered necessary at the local level or at most state level.

The closer one can get to the ones making decisions on taxes, the more one can build a fire under them to keep taxes low or lower them.

Very difficult to affect those decision makers if they are in DC.

The bonus in making it local is if they decide to raise them anyway, we can move to a more tax-friendly locale.  That alternative is difficult if it is at the federal level as you are then stuck.

@IsailedawayfromFR

Nothing to argue with there but it is also VERY important for the taxes to be plain and readily apparent to everyone which is definitely NOT the case currently WRT Federal taxes.

[Elderberry]

How Weatherford went from fourth largest oilfield service company to Chapter 11

Houston Chronicle by  Sergio Chapa May 16, 2019

https://www.houstonchronicle.com/business/energy/article/How-Weatherford-went-from-fourth-largest-oilfield-13853975.php

Two decades ago, two oilfield services rivals merged to create a company with big ambitions.

Just as Rupert Murdoch had launched the broadcast company Fox in the 1980s to challenge the established television networks, ABC, CBS and NBC, the merged company, Weatherford International aimed to break into a club also dominated by a Big Three, in this case the oilfield services companies Schlumberger, Halliburton and Baker Hughes.

That led to a buying spree as Weatherford gobbled dozens of smaller companies, with a cash deal here, a stock deal there and lots of borrowing to finance the acquisitions. For a while it seemed to work as Weatherford, which has its principal operations in Houston, grew to become the fourth biggest oilfield services company in the world.

Then, it all came crashing down as Weatherford struggled to integrate the disparate components it added, manage the massive debt it took on to become one of the “Big Four,” and recover from the oil bust that hammered the energy services industry. Today, Weatherford is on the brink of bankruptcy and trading as a penny stock after getting delisted from the New York Stock Exchange. Its stock market value has sunk to just $367 million, a mere one-twentieth of its $7.6 billion debt.

In the high risk energy world, where the right gamble at the right time can yield big rewards, but miscalculations are brutally punished, Weatherford is another example of ambitions outrunning execution, a company whose weaknesses were eventually unmasked by the last oil bust. Weatherford was already struggling when crude prices began their slide in the late 2014 and the resulting crash only made things worse.

The company has not made an annual profit since 2011 while its revenues have fallen by two-thirds over the past five years and its employment by more than half, to 26,500 from a peak of 70,000 in 2013. Weatherford has spent much of the past year selling off assets as it tried to right itself and find a focus and place in the competitive energy services sector. Weatherford declined to comment for this story.

“It’s sad to see a company was once so vibrant to find itself in this kind of position ,” said Drew McManigle, managing director for the Houston office of the energy advisory firm SierraConstellation Partners, “But it happens all the time as we’ve learned in past boom and bust cycles in the industry.”

Meteoric Rise

Weatherford’s roots go back to 1941 when Jesse Hall founded the Weatherford Spring Company in Weatherford, a small town about 30 miles west of Fort Worth. The oil well cementing company quickly found success in Texas and then later overseas servicing the international offshore industry - changing names after buying and merging with other companies as it grew over the decades.

In 1998, $2.6 billion merger between Weatherford Enterra and Energy Ventures Inc., or EVI, created Weatherford International. The merged company’s CEO, Bernard Duroc-Danner, had a vision of Weatherford joining the world’s biggest oilfield services companies and competing with Schlumberger, the industry leader, and the Houston companies Halliburton and Baker Hughes.

With Duroc-Danner at the helm, Weatherford bought 47 smaller oilfield service providers in a series of deals between July 1998 and August 2011, data from Bloomberg shows. Financial terms were only made public for 29 of those deals, which were collectively valued at more than $6.1 billion in various combinations of cash, stock and debt.

More at link.

[thackney]

...The company has not made an annual profit since 2011...

Wow.  No profit in the days of $93~98 oil of 2012~2014!