Weatherford International Ltd (NYSE:WFT) saw share prices stumble into 2018 ahead of gloomy prospects for some of the company’s future ventures. With share prices down by as much as 20 percent in the past year, many onlookers and early financial backers of Weatherford are beginning to question whether 2018 is the year the company’s fate turns around, or crashes and burns.
A rough 2017
Weatherford had a particularly rough year, with share prices continuing to follow a trend of gradual and serious decline. The company’s fate has largely mirrored that of crude oil prices, which remain lackluster. The global oil industry had early hopes that it would be buoyed by the election of gas and crude oil friendly president Donald Trump, but executives at Weatherford may have invested too much confidence in the future of crude.
Regardless of what broader trends are saying about the oil market, investors interested in Weatherford in particular will want to know how the company has shaped up in the past few years. Investigating its recent performance, financial backers of Weatherford will find themselves seriously wanting; stocks have steadily fallen, plunging in 2016 and 2017 in particular, and corporate shakeups have done little to bring in increased revenue figures.
Some still remain confident in Weatherford’s future, however, insisting that future ventures by the company could reap in high profits for decades to come, providing it finds the right field or project. After news recently surfaced that Weatherford decided to scrap a joint venture, however, some may be worried that the company’s future prospects are looking grimmer by the month.
For Weatherford to continue to enjoy the financial backing of Wall Street, it will need to do more to show it’s eagerly exploring ventures that can help it out of its current straits. The company will soon find it’s entirely uncompetitive against its leading contenders if it fails to get any large projects rolling by the end of the year, at the absolute latest. With share prices grimly staring at investors, serious clout will be put on executives to make large changes as soon as possible.
Can crude make a comeback?
Many of the same questions that dog Weatherford’s future prospects can also be applied to the broader oil industry it’s a part of. As more ecofriendly energy alternatives like solar and wind become cheaper and more widely adopted, companies like Weatherford will struggle to generate the kind of demand oil has created in the past. The company’s wise investing in future energy systems, then, could be its ticket to long-term success despite its current woes and tax problems.
Having to contend with some serious competition from increased natural gas drilling in recent years, however, particularly with fracking becoming so popular in states like Pennsylvania, Weatherford may yet find itself in a corner. Until some solution can be figured out to oil’s existing price problems, companies like Weatherford may find themselves financially stranded.
With Weatherford having recently sold its hydraulic fracturing business to Schlumberger, a serious (and much larger) rival, analyst may be left exasperated and unclear of what else the company can do to rescue itself. The energy market is entirely unforgiving to non-entrepreneurial companies that fail to develop long-term ambitions that can seriously become a reality, and Weatherford’s lack of an existing joint venture or game plan to overcome existing energy crises seems worrying to many onlookers.
The company is also seriously straddled by its debt, too. Weatherford has nearly $8 billion in debt, a figure that could climb in coming years if oil prices remain low and it fails to scratch together any ventures with competitors. While the company can sell units to raise cash in order to pay off that mountain of debt, investors will be looking for increased revenues to show that its debt-dilemma is nothing more than a temporary rut.
Furthermore, for Weatherford to find success in its industry, it will need the proper tools and employees for the job. Skilled workers and drilling equipment are in incredibly high demand currently, and Weatherford’s existing equipment is rapidly growing older and in need of tune ups before it can be safely used. Before it can climb out of its rapidly deepening debt hole, then, Weatherford will need to refurbish its equipment and ensure its workers possess the necessary skills to make it in today’s rapidly evolving energy market.
Weatherford’s grave hasn’t been entirely dug for it yet, and the company could yet strike black gold in an oilfield that could see it mount an impressive comeback. It’s nonetheless chained down by debt and facing serious competition in an industry it doesn’t seem prepared to evolve with, however, and there’s little reason to believe its share prices will spike up soon. For Weatherford to survive 2018, it needs to shape up quickly.