Weatherford's Board Is Serious About Creating Value

Colin Davies of Bernstein was surprised by Weatherford International Plc (NYSE: WFT)’s move to appoint Halliburton Company (NYSE: HAL) Chief Financial Officer Mark McCollum as president and CEO. Bernstein expected interim-CEO Krishna Shivram to get the role.

Justification For Surprise

Following Bernard Duroc-Danner’s departure in November 2016, Shivram, along with the board, took a number of steps to restructure the firm and refocus the business. During the fourth-quarter earnings call, the analyst felt that Shivram delivered a focused plan forward, stressing on increasing cash flow.

“McCollum's background in finance and integration leads us to believe that Weatherford's board is serious about creating value, and remains focused on managing liquidity needs and streamlining the company's products and operations,” Davies wrote in a note.

With the appointment of McCollum, Krishna Shivram is expected to depart immediately as interim-CEO and from Weatherford.

McCollum — ‘A Solid Pair Of Hands’

That said, Davies opined that McCollum is a “solid pair of hands” as he played a key role in Halliburton's transition from a U.S.-centric pressure pumper to a globally diversified market leader. Under his tenure, Halliburton have grown share internationally, narrowed the margin gap with the market leader and delivered strong returns.

The analyst, who has an Outperform rating on Weatherford shares, expects McCollum to likely build on the strategy laid out by Shivram, and possibly even execute on a tighter timeline/look for more deal opportunities.

With the appointment of McCollum, Weatherford should better execute with a renewed focus on cost discipline, triggering hopes of materially higher margins through the next cycle.

At last check, shares of Weatherford were down 2.55 percent at $51.63. Davies has a price target of $7.

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