As the global economy slows, the energy sec?tor has suffered a selloff as anxious investors fret over weakening demand. In recent months, West Texas Intermediate crude, the US benchmark for oil prices, fell from a high of about $110 per barrel to its current level of about $85 per barrel, while the Eu?ropean benchmark Brent crude dropped from around $130 per barrel to $100 per barrel.
Despite these concerns, reports from the US Depart?ment of Energy and the International Energy Agen?cy show global reserves of crude oil are down, even though energy demand is now projected to grow faster than previously estimated.
So this moment of weakness offers an excellent op?portunity to pick up shares of energy-related com?panies such as Weatherford International (NYSE: WFT), which is currently trading near the bottom of its 52-week range.
In addition to a sluggish macroeconomic environ?ment, Weatherford has also been navigating a tax accounting storm. In March, the company reported it would be forced to restate earnings as far back as 2007 due to an estimated $500 million in tax accounting er?rors related to weak internal controls. That marks the second time the company has had to contend with tax issues in less than a year.
While these tax problems have understandably shaken investors? confidence in management?and claimed the job of the company?s chief accounting of?ficer?they aren?t expected to have a hugely materi?al impact on the company. And malfeasance doesn?t seem to be an issue here. Rather, with 543 subsidiar?ies and other assorted operations spanning the globe, the errors seem to stem from a misinterpretation of ac?counting rules. Tax reporting has also been complicat?ed by the fact that Weatherford has changed its coun?try of domicile twice over the past decade, moving from the US to Bermuda and then to Switzerland.
Nevertheless, Weatherford actually has a lot going for it.
The company is the leading supplier of artificial lift equipment, which is used to increase the flow of liq?uids from wells, boosting production from mature wells and allowing more residual liquids to be re?moved. The technology is also useful in extracting oil from unconventional wells, which are often in low-pressure environments. Additionally, the company has keenly focused on offshore oil projects around the world, which is a corner of the oil market that?s garner?ing increasing attention from major oil producers.
Weatherford has built a strong international busi?ness, particularly in Latin America where there have been a number of new oil discoveries, such as the vast Libra field off the coast of Brazil. The company also has a growing presence in Africa, which has become an increasingly attractive market following a series of major oil and gas finds over the past decade. In the Middle East, the company recently signed an $850 million long-term contract to provide services in Iraq.
Weatherford?s revenue growth has outpaced its in?dustry peers over the past few quarters, which enabled earnings to jump 70 percent in the first quarter from a year ago. Meanwhile, shares of the company?s stock are trading at a discount on both a price-to-book and price-to-sales basis.
All it would take to spur the next ascent in Weath?erford?s shares is a slight improvement in the glob?al economy and energy prices. In the meantime, the company is also an attractive takeover target for its larger competitors, such as Schlumberger (NYSE: SLB) or even Halliburton (NYSE: HAL), which would love to get a hold of Weatherford?s proprietary technologies and book of business.
?
What do you think of this article? Please post your feedback in the ?comments? section below!
Source: http://www.investingdaily.com/15484/energy-stocks-on-sale-buy-the-dip
punxsutawney phil groundhog day ground hog donald trump groundhog day 2012 serrano staten island chuck
No comments:
Post a Comment