Early today, Weatherford International Ltd. (WFT) reported weaker-than-expected third-quarter 2009 recurring earnings of 13 cents per diluted share, compared to the Zacks Consensus Estimate of 13 cents and year-ago earnings of 55 cents.

The year-over-year decrease primarily reflects the sharp drop in North American revenue on the back of 52% lower rig count. We have adjusted the reported earnings of 11 cents per share for one-time charges (mainly expenses associated with Weatherford’s withdrawal from some countries and severance costs related to restructuring activities) of 2 cents per share.

Total revenue declined more than 15% year-over-year to $2.15 billion. Of this, North America, Middle East/North Africa/Asia, Latin America and Europe/West Africa/CIS segments accounted for 29%, 28%, 24% and 19%, respectively.

North American revenue decreased 47% year-over-year to $620 million on the back of a 52% lower rig count. This segment posted an operating income of $33 million, compared to $313 million in the year-earlier quarter. However, both revenue and operating income have increased on a sequential basis, driven by increased rig count and seasonal recovery in Canada, respectively.

Revenue from Middle East/North Africa/Asia decreased approximately 6% year-over-year to $600.1 million, and operating income declined 30% year-over-year to $102 million. However, revenue slightly increased sequentially, driven by strong performances in Saudi Arabia, Qatar, China and Australia.

Latin American revenue increased 67% year-over-year to $525 million and operating income decreased 22% year-over-year to $54 million. Europe/West Africa/CIS revenue decreased 1% year-over-year to $404 million and operating income decreased 30% year-over-year to $72 million.

While Weatherford’s results were hurt by the poor North American revenue Incorporatedreasing rig count and cyclical recovery in some domestic and international markets will benefit the company, in our view. In addition, the company’s involvement in a number of integrated drilling projects, growing presence in the relatively stable Eastern Hemisphere market and aggressive growth targets for international regions are a few other positives for the near-to-medium term growth trajectory.

Zacks Investment Research
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