Weatherford International (WFT) Message Board

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Gold/Mining/Energy : Weatherford International (WFT)

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From: Dennis Roth	7/24/2007 7:59:46 AM
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Remains the strongest international growth story; Buy - Goldman Sachs - July 24, 2007 What's changed Adjusted EPS of $0.68 came in below our $0.74 and consensus of $0.71. Management maintained 2007 guidance of 25% growth in Latin America and 40% growth in Eastern Hemisphere. We lowered our 2007 EPS forecast by $0.04 cents to $3.32. We raised our 2008/2009 EPS forecasts by $0.30/$0.34 to $4.25/$4.81. We raised our 12-month price target to $65 (=11.3x 2008 EV/DACF) from $63 due to higher estimates and positive outlook on international growth. Implications (1) We continue to like Weatherford's international growth prospects and think that it will have one of the fastest Eastern Hemisphere growth rates among its peers. In 2Q07, WFT Eastern Hemisphere revenue grew 40% year-over-year, versus SLB 31% and HAL 26%. International growth in one of our favorite themes for the group and WFT is one of our favorite vehicles to invest in this theme. (2) Even though 2Q EPS fell short of published expectations, earnings were not as bad as some feared and the outlook for North America was relatively upbeat. We believe the market's reaction (WFT +3.2% vs. OSX +1.8%) indicates that Canadian weakness was already priced-in. (3) Management expects the Canadian market to recover in 4Q07/1Q08 driven by oil and heavy-oil related activity. Weatherford should benefit from this given its oil exposure in the region (~60% of Canadian exposure). Valuation Weatherford is trading at a 2008 EV-DACF/P-E of 10.3x/13.9x, versus the peer average of 12.0x/15.9x. Key risks Key risks to our thesis include: (1) A U.S./Global recession could result in weaker commodity prices and further E&P capex cuts; and (2) Weakness in natural gas prices could lead to further E&P capex cuts in North America.

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