Stressed Out: Weatherford Latest to Join Energy Equity Issuance Club

 | Mar 02, 2016 | 10:28 AM EST
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

wft

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


Columnist Conversations

Panera continues to power higher today. The stock has been gaining since the early going and is now near the h...
I've been beefing up positions in Sall Beauty Holdings (SBH) shares and selling (shorting) more SBH puts to ta...

BEST IDEAS

REAL MONEY'S BEST IDEAS

News Breaks

Powered by

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.