Weatherford International (WFRD) Following Equinor Deal Extension Has Valuation Back In Focus

Equinor contract extension puts Weatherford International in focus

Weatherford International (WFRD) is back on investors’ radar after announcing a two year extension of several frame agreements with Equinor and a larger role in Norwegian offshore projects.

The services group will now act as primary provider of completion systems for Equinor’s Statfjord and Oseberg licenses on the Norwegian Continental Shelf. That expanded scope builds on Weatherford International’s existing completions portfolio aimed at improving well performance and operational efficiency throughout the life of the well.

For context, Weatherford International’s 1-day share price return of 1.33% and 1-year total shareholder return of 28.31% sit against a 30-day share price decline of 16.27%, so momentum has cooled recently after a strong longer term run.

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Weatherford International’s sharp 30 day pullback sits against fresh contract wins and positive recent earnings growth. Is that slump pricing in real business risk, or just a swing in sentiment that valuation now needs to sort out?

Most Popular Narrative: 33% Undervalued

Analysts following Weatherford International see a gap between the last close at $77.92 and their fair value estimate of $117.08, and they link that gap closely to cash generation, portfolio mix, and offshore exposure.

Weatherford International’s emphasis on free cash flow as a primary performance metric, with recent guidance for mid to high 40% free cash flow conversion and net leverage at 0.34x together with about US$1.14b of cash and restricted cash, suggests continued room for stronger free cash flow and balance sheet flexibility that can influence equity valuation metrics.

See why 15 investors see Weatherford International as 33% undervalued.

Result: Fair Value of $117.08 (UNDERVALUED)

Still, the Weatherford International story can be knocked off course if Middle East disruptions drag on, or if further guidance cuts erode investor confidence.

Find out about the key risks to this Weatherford International narrative.

Next Steps

Mixed signals around Weatherford International can feel like noise, so use the details while they are fresh in your mind and weigh both sides using the 4 key rewards and 1 important warning sign.

Looking for more investment ideas beyond Weatherford International?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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