Stressed Out: Weatherford Latest to Join Energy Equity Issuance Club

 | Mar 02, 2016 | 10:28 AM EST
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This article is part of a Real Money series on 20 companies investors should consider adding to their distressed watch list.

Weatherford International (WFT) will be issuing $565 million in equity, the Swiss-based oil and gas services provider announced after Tuesday's market close. The net proceeds of the offering will be used for "general corporate purposes" as well as repaying debts.

The offering, which is priced at $5.65 a share, is at discount to Tuesday's closing price of $6.19. The initial offering was for 80 million shares, but was upsized to 100 million later on Tuesday. Shares of Weatherford plunged in Tuesday's after-hours trading, but rebounded at Wednesday's open. 

Several energy companies this year have already announced plans to issue euqity in an effort to shore up balance sheets and fund capital spending. The total amount of equity issued in the U.S. by energy companies this year is now $11.8 billion, or 43% of the total $27.3 billion in equity issued in the U.S., according to data compiled by Bloomberg. Other companies that have issued equity this year include Enbridge (ENB), Devon Energy (DVN), and Marathon Oil (MRO).

Weatherford's financial position has been hurt by the continued decline in energy prices. In a recent filing with the Securities and Exchange Commission, the company detailed how it has been impacted by low energy prices and the nature of its contracts.

"The declines in commodity prices, the short-term tenor of most of our contracts and the extreme financial stress experienced by our customers (some of whom may have to seek bankruptcy protection) have combined to generate demands by many of our customers for significant reductions in the prices of our products and services," the company said.

In its fourth quarter earnings release, Weatherford reported $6.9 billion in net debt, with nearly $1 billion coming due in 2017. Its debt coming due through 2019 is priced at a slight discount to par, while its longer term issues are priced below 70 cents on the dollar, according to data compiled by Thomson Reuters.

"We have just completed what is probably the most challenging year in our history," CEO Bernard Duroc-Danner said in Weatherford's earnings release.

So far, 2016 may not be bringing more ease.

For more on Real Money's 20 distressed companies to watch:

Stressed Out: Introducing Real Money's Distressed Index

Stressed Out: Ultra Petroleum's Debt Payment Due Today is Ultra Urgent

Stressed Out: Chesapeake Energy Earnings Herald Rough 2016

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