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Weatherford (WFT) to Divest Land Drilling Rigs to Lower Debt


Weatherford International plc’s WFT subsidiary has inked a definitive agreement to sell its land drilling rig operations in Algeria, Kuwait and Saudi Arabia to ADES International Holding Ltd and also two idle land rigs in Iraq. The company expects to raise $287.5 million from the divestiture.

The sale comprises 31 land drilling rigs and related contracts along with 2,300 employees and contract personnel. After receiving the required consents, the transaction is expected to be completed in a number of series, mostly in the second half of 2018. In the coming quarters, Weatherford proposes to divest remaining land drilling rigs via a series of smaller sales.

The funds raised from the transaction will be used to lower debt burden of the company, which amounted $7.6 billion as of Mar 31, 2018.

In late 2017, Reuters reported that Weatherford had appointed advisors, including Morgan Stanley, to ease the high debt burden by disposing some units. The asset divestment was scheduled to begin in the first quarter of 2018. Per reports, the assets to be sold off included the company’s drilling tools and wellheads units, the international pressure pumping business along with the artificial lift business.

In 2016, Weatherford had put up the land drilling business for sale at an estimated cost of below $1 billion but failed to strike a deal. Currently, the company plans to sell the business in parts based on regional operations.

Though oil prices are trading around $80 per barrel, Weatherford projects an amount of $500 million in additional proceeds from assets divested through 2018.

Price Performance

In the past three months, Weatherford’s shares have rallied 30.7% compared with the industry’s rise of 11.5%.

Zacks Rank & Key Picks

Weatherford currently carries a Zacks Rank #4 (Sell).

A few better-ranked players in the same sector are Occidental Petroleum Corporation OXY and China Petroleum and Chemical Corporation SNP, also known as Sinopec, and CVR Refining, LP CVRR. All these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Occidental Petroleum is an international oil and gas exploration and production company. It pulled off an average positive earnings surprise of 30.2% in the last four quarters.

Sinopec is one of the largest petroleum and petrochemical companies in Asia. The company delivered an average positive earnings surprise of 492.8% in the trailing four quarters.

Sugar Land, TX-based CVR Refining is an independent downstream energy partnership with refining and associated logistics properties in the Midcontinent United States. The company delivered an average positive earnings surprise of 7.05% in the last four quarters.

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