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Weatherford to Slash Debt With Laboratory Business Divestment
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Weatherford International plc recently agreed to divest the laboratory services business for $205 million to a private-equity group, which is led by CSL Capital Management, L.P of Houston. The all-cash deal is expected to help Weatherford reduce its debt burden.
Divestment Plan
Per the deal, the laboratory and geological analysis business of Weatherford, along with its workers and contracts, will join the CSL Capital-led group. The unit is used for studying oil and gas reservoirs, and wells. Following the closure of the deal — which is expected to occur in 2018 — Weatherford plans to increase their focus in the core operations.
Deal Rationale
The sale of the laboratory services business is part of the company’s initiative to come out of the debt hole. Notably, the oilfield service company’s long-term debt jumped more than 26% in 2016 and almost 2% during 2017. Currently, it has a debt burden of $7.6 billion. Cash and cash equivalents fell 40.9% through 2017. The trend continued through the first half of 2018 as well, wherein cash declined 32.3% to $415 million. The rise in debt load and a decline in cash balances created significant balance sheet weaknesses.
More Divestments Ahead
The laboratory services business sale is in line with the company’s divesture program, the objective of which is to increase shareholder value through getting rid of non-core assets. Mark McCollum, the chief executive officer of the company, disclosed plans of selling the U.S. fracking and land rigs businesses of Weatherford, as reported by Reuters last month. In addition to the sale of the rigs, he wants to generate an additional $500 million from asset sales in 2018.
Price Performance
Baar, Switzerland-based Weatherford has lost 29.9% in the past year against the 5.4% collective growth of the industry it belongs to.
Zacks Rank and Stocks to Consider
Currently, Weatherford has a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks given below:
Brazilian state-run Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) has a Zacks Rank #2 (Buy). The company’s earnings for 2018 are expected to surge more than 100% from the 2017 level.
Woodlands, TX-based Anadarko Petroleum Corporation holds a Zacks Rank #2. The company’s earnings for 2018 are expected to surge more than 250% year over year.
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Weatherford to Slash Debt With Laboratory Business Divestment
Weatherford International plc recently agreed to divest the laboratory services business for $205 million to a private-equity group, which is led by CSL Capital Management, L.P of Houston. The all-cash deal is expected to help Weatherford reduce its debt burden.
Divestment Plan
Per the deal, the laboratory and geological analysis business of Weatherford, along with its workers and contracts, will join the CSL Capital-led group. The unit is used for studying oil and gas reservoirs, and wells. Following the closure of the deal — which is expected to occur in 2018 — Weatherford plans to increase their focus in the core operations.
Deal Rationale
The sale of the laboratory services business is part of the company’s initiative to come out of the debt hole. Notably, the oilfield service company’s long-term debt jumped more than 26% in 2016 and almost 2% during 2017. Currently, it has a debt burden of $7.6 billion. Cash and cash equivalents fell 40.9% through 2017. The trend continued through the first half of 2018 as well, wherein cash declined 32.3% to $415 million. The rise in debt load and a decline in cash balances created significant balance sheet weaknesses.
More Divestments Ahead
The laboratory services business sale is in line with the company’s divesture program, the objective of which is to increase shareholder value through getting rid of non-core assets. Mark McCollum, the chief executive officer of the company, disclosed plans of selling the U.S. fracking and land rigs businesses of Weatherford, as reported by Reuters last month. In addition to the sale of the rigs, he wants to generate an additional $500 million from asset sales in 2018.
Price Performance
Baar, Switzerland-based Weatherford has lost 29.9% in the past year against the 5.4% collective growth of the industry it belongs to.
Zacks Rank and Stocks to Consider
Currently, Weatherford has a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks given below:
El Dorado, AR-based Murphy Oil Corporation (MUR - Free Report) carries a Zacks Rank #1 (Strong Buy). The company’s sales for 2018 are expected to grow more than 20% from 2017. You can see the complete list of today’s Zacks #1 Rank stocks here.
Brazilian state-run Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) has a Zacks Rank #2 (Buy). The company’s earnings for 2018 are expected to surge more than 100% from the 2017 level.
Woodlands, TX-based Anadarko Petroleum Corporation holds a Zacks Rank #2. The company’s earnings for 2018 are expected to surge more than 250% year over year.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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