Weatherford International (WFT) reports quarterly earnings April 24th. Analysts expect revenue of $1.46 billion and eps of -$0.22. The revenue estimate implies flat revenue growth sequentially. Investors should focus on the following key items.
Will North America Hold Up?
The OPEC supply cut has help drive brent oil prices above $65. A price of $45 to $50 appears to be threshold for shale oil plays to make money. As they drilling activity picks up the oil companies spend more on equipment and services. That in turn creates more revenue opportunities for servicers like Weatherford. Rising tides lift all boats and this has inured to the benefit of Weatherford.
In Q4 2017 the company generated revenue of $1.5 billion, up 6% Y/Y. Weatherford is known for is out-sized presence in North America. Revenue from the Western Hemisphere (which includes North America) was up by the high single-digits, while revenue from the Western Hemisphere was only up 3%.
North America land drilling has been white hot. In Q4 the rig count was up over 40%, yet Weatherford’s revenue growth in the region did not match the rig count growth. It will likely be strong again this quarter. For the week ended March 29th the U.S. rig count 993, up 20% Y/Y. The question remains, “Can North America hold up?” In Q2 2017 Halliburton’s (HAL) management thought North America shale drillers would eventually tap the brakes on additional E&P. That day may come by the second half of 2018, which could stymie Weatherford’s revenue and earnings growth.