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Smell Of Weather Turning

08 May 2019 by jbchevrel

The oilfield service specialist company Weatherford International Ltd. (WFT) delayed the release to May 10, planning to file its 10-Q for Q1 the same day, and cancelled its earnings call. The stock lost around a fifth of its value, the CDS did not widen (actually a tad tighter on 5y) but the curve aggressively flatter (-960 on 1s5s -360 on 2s5s), on speculations that this release delay may be driven by negotiations with lenders to extend the maturity date on $543M of credit-line commitments that expire this summer (= revolver outst 317 + available in revolvers 226), according to Bloomberg. If those maturity extensions were not granted, the co’s liquidity could become a problem during 2020, a year when they are due $920m, as they had reported $602m of cash and cash equivalents as of FY-2018. Two weeks ago, the board had asked stockholders to approve a 1:20 reverse stock split to prevent the company from being delisted from NYSE. WFT has indeed been trading below $1 since NOV last year, and the NYSE issued a delisting warning in DEC, with a six-month notice. WFT has struggled since oil prices crashed in H2-2014 (stock is -98.4% since SEP-2014), hasn't made money in many years (last profit: Q3-2014 / 2018 net -$2.8B..) which has eroded its financial profile until we reach a point of no-return where crude prices don’t matter anymore (since early FEB, WTI went 54 -> 62, WFT went 0.91 -> 0.38). While management has tried to use assets’ sale to repay debt, that was possibly not enough, as they got around $3.5B due through H1-2021, this week’s release may prove crucial. WFT was in the CDX IG until the s25 (included), therefore s25/s32 -1.3.