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How Analysts View Weatherford’s New CEO
Like other oilfield services companies, Weatherford International PLC (WFT) has had its troubles. The company fired nearly 10,000 employees last year, closed 15 manufacturing and service facilities, and closed nearly 80 operating and non-operating facilities during the year. Every one of those totals exceeded the company's original goals.
On Monday, Weatherford announced that Mark McCollum, formerly chief financial officer of Halliburton Co. (HAL), has been named chairman and CEO of Weatherford. McCollum will join the Swiss-based company in April.
He replaces Bernard J. Duroc-Danner who left the company in November after presiding over a number of acquisitions that, along with the collapse in crude oil prices, led to some serious debt problems. When Duroc-Danner left, Weatherford's debt totaled around $7.5 billion. Under CFO Krishna Shivram, who also served as interim CEO, Weatherford has reduced that to $6.5 billion and set a goal to lower outstanding debt to $3 billion by 2021.
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Last September the company also settled SEC charges that it had inflated earnings by using deceptive income tax accounting. Weatherford agreed to pay a $140 million fine to settle the charges.
The hiring of McCollum puts all that bad stuff behind the company, and both investors and analysts have reacted positively to the new CEO. Griffin Securities, which has a Strong Buy rating on the stock along with a $12 price target, said:
We believe that the shares will rise further over the near and intermediate term on the positive impact of this key hire, possibly limited until Mark starts the job in late April. ... More important, we believe that Mark will have a positive impact on WFT's performance in the upcycle that is still in its early stages and that favors the onshore mix of WFT's product/service lines. ... We believe risk/reward has become more favorable and we are buyers.
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Analysts at Loop Capital reiterated their Buy rating and $8 price target:
We … expect the stock to react very well to the news. While we are surprised that WFT opted to pass on Mr. Shivram, we believe WFT would have been hard-pressed to find a better choice than Mr. McCollum.
Credit Suisse reiterated its Buy rating and $9 price target:
Rock Solid. Mark is a proven, capable executive that has served HAL well. He joined HAL in 2003 and served as Chief Accounting Officer until Dec 2007. From January 2008 through December 2014, he served as CFO. Mark took on the role of Chief Integration Officer during HAL's attempt to merge with BHI, and then resumed his role as CFO in July 2016. At our Vail conference in February, we made the remark to Mark that it seemed his time to take on a CEO role. We were surprised (pleasantly) to see him appointed CEO of WFT, but not surprised to see him move on to a CEO role.
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Weatherford's shares trade up nearly 15% midday Tuesday, at $6.75 in a 52-week range of $3.73 to $8.49. The stock's consensus 12-month price target is $7.38.
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