Weatherford and Hi-Crush Amend Agreement - Analyst Blog

Weatherford International Ltd. WFT entered into an amendment to its supply agreement with Hi-Crush Operating, a subsidiary of Hi-Crush Partners HCLP. The amendment extends the term of the supply agreement by three years, and requires Weatherford to pay a specified price for a minimum volume of frac sand each month.

Weatherford International is one of the world's leading providers of equipment and services used for the drilling, completion and production of oil and natural gas wells. company conducts operations in numerous countries and has service and sales locations in almost all oil and natural gas producing regions in the world. The company's products and services are divided into the following four principal operating divisions: Drilling and Intervention Services; Completion Systems; Artificial Lift Systems; and Compression Services.

In 2014, the company expects revenue growth in North America, Europe/Sub Sahara Africa/Russia and Middle East/North Africa/Asia Pacific regions. However, the company expects the Latin America region to report falling numbers.

Overall, the company expects margins to improve in 2014 with lower costs and growth in more profitable core businesses. The company expects adjusted earnings per share to range between $1.10 and $1.20.

We remain optimistic on Weatherford's operational and financial leverage to international growth in 2014. But the company's debt-heavy balance sheet, weak free cash flow as well as competition from larger peers are causes of concern.

Weatherford currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players in the energy sector like Helmerich & Payne Inc. HP and Warren Resources Inc. WRES. All the stocks sport a Zacks Rank #1 (Strong Buy).