Weatherford International plc (NYSE:WFT), a company involved in energy and oil, originally announced back in March of last year that it would be forming a joint venture agreement with Schlumberger Ltd. (NYSE:SLB), a company the world’s largest supplier of products and services relating to the oil and gas industry. Recently, however, it was made known that Weatherford would actually be outright selling its US pressure pumping and pump-down perforating assets to a subsidiary of Schlumberger instead of forming a joint venture with the company. As of today, the two companies completed the deal and the results of this change of plan are in – and it’s looking like investors aren’t thrilled about the news.
At the time of writing, Weatherford stock is trading at $3.47, which puts it down $0.70, or 16.79%, from the previous closing price of $4.17.
So, why would this change of plans result in a stock decline for Weatherford? Let’s take a closer look at what actually happened.
Weatherford International sold its US fracking business to a subsidiary of Schlumberger for $430 million. Along with the fracking business, 100 Weatherford employees will join the more than 11,000 employees of Schlumberger. Schlumberger will also be taking over Weatherford’s supplier and customer contracts. Weatherford will be using the money earned from the sale towards helping to reduce its debt, one of the many hardships facing the company since the energy industry’s decline. These difficulties are likely the reason for the change in plans, the joint venture having been meant to have been completed in the latter half of 2017.
Weatherford is standing by its decision and believes that, ultimately, this will help the company not only lower its debt but also to increase its profit margins. Investors don’t seem quite as convinced. Weatherford stock had been on the climb leading up to the disappointing news on December 29, 2017. The stock had grown from $3.36 on December 15 to $4.17 the day of the news. Now that the stock has swung back down, it’s hard to say what exactly will become of the company. Once the disappointment has worn off and the company does start to show the successful results it is hoping for, its stock could climb again, but for now, it seems likely that it will hover in the $3 range, if not continue to decline.
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