Weatherford works to turn things around

With a leader from larger rival Halliburton, services company follows a new strategy

The struggling oil field services company Weatherford International made waves in the spring when it poached the chief financial officer of its larger rival Halliburton to serve as its new CEO.

Weatherford, which operates out of Houston, grew rapidly in the 2000s but struggled mightily in the last few years with financial losses, massive layoffs and charges of accounting fraud, ultimately resulting in the departure longtime chairman and CEO Bernard Duroc-Danner. The company shrunk to a distant fourth in the services industry, behind Schlumberger, Halliburton and Baker Hughes.

Perhaps as a result, the Weatherford board passed over internal candidates and hired Mark McCollum from Halliburton to bring his no-nonsense, bottom-line approach to Weatherford.

“We as an organization have admittedly been a bit disjointed at times. That ends now,” McCollum said Friday in an earnings call, his first since taking the job. “We’re dedicating ourselves to moving forward to a stronger, more unified company.”

Many Weatherford investors and analysts praised McCollum’s hiring but acknowledged he faces a difficult road. The company has some $6 billion in debt while generating little free cash, said Byron Pope, an energy analyst with Tudor, Pickering, Holt & Co. in Houston.

“There were real concerns about whether Weatherford was going to survive the industry downturn,” Pope said. “He’ll make some tough decisions for where the road map is headed.”

Weatherford on Friday reported that it narrowed its second quarter loss to $171 million from a $565 million loss during the same period a year earlier and a $448 million loss in the first quarter of 2017.

McCollum said he’s taking a three-pronged approach to complete previously announced plans to sell all or parts of some units, review all of Weatherford’s products and offerings, and squeeze more costs out of operations. He said he expected cost cuts to reach “the Weatherford bone a bit.”

But, he stressed, “If you don’t

make your numbers, if you don’t follow through, then there is a consequence to that as well, which is the hard part of leadership. That’s probably something that’s been missing.”

“This will be cutting into the Weatherford bone a bit,” he added. “And I understand that it’s hard, but it’s going to get done.”

Weatherford already has shrunk dramatically the last few years to fewer than 30,000 workers from 67,000 in early 2014. Last year, the U.S. Securities and Exchange Commission hit Weatherford with its biggest financial penalty of the year, a $140 million fine, for deceptive accounting practices to inflate profits that the agency said extended beyond gross negligence to outright fraud.

The SEC charged that Weatherford overstated its earnings by nearly $1 billion between 2007 and 2012 and had virtually no oversight over its tax department.

It wasn’t long afterward that Duroc-Danner stepped down.

Weatherford is named for the Texas town west of Fort Worth where the company was founded 75 years ago. Weatherford has its main operations in Houston but is now headquartered in Switzerland, as a way to lower its taxes.

Although oil production is booming in U.S. shale plays, especially West Texas’ Permian Basin, Weatherford has a larger international focus, with arguably its greatest strength in the Middle East. Weatherford plans to sell its land drilling business based there, including more than 100 rigs.

McCollum said he hopes to have a deal in place this fall and use the proceeds to cut debt.

Weatherford also plans to close in the second half of the year on its joint venture with Schlumberger. The venture, dubbed OneStim, will specialize in providing technologies and services, such as hydraulic fracturing, that stimulate shale oil and gas wells. Hydraulic fracturing is the process of blasting water, chemicals and sand into the earth to break open shale rock and releaseoilandgas.

They plan to combine Schlumberger’s large hydraulic fracturing fleet of high-horsepower pumps and Weatherford technologies used to stimulate multiple separate horizontal zones within shale wells. Schlumberger would own 70 percent of the joint venture, with the rest owned by Weatherford.