The company is working through a “material weakness” in its internal control of how it reports “errors in revenue and operating income amounts associated with a percentage of completion contract” in Iraq, and plans to file reports on the first nine months of 2012 and will restate earnings for several quarters before that. The “unfavorable” adjustments to operating income clipped $24 million from first quarter 2012 results and $55 million from second quarter results.
Weatherford also took some substantial write-downs. As the company explained:
During the third quarter of 2012, the company finalized its goodwill impairment analysis and concluded that the carrying amount of goodwill in the Middle East/North Africa and Sub-Sahara Africa reporting units exceeded the fair value of goodwill and recorded a non-cash charge of $589 million in the second quarter to write-off all the goodwill in these reporting units. There was no goodwill impairment in the Russia reporting unit. During our goodwill impairment analysis, we also identified impairment losses associated with our equity method investments and have recorded a $204 million non-cash charge during the second quarter related to those investments.
The company said it expects to post EPS of $0.20 in the fourth quarter, which is below the current consensus estimate of $0.23. The current consensus estimate for full-year EPS is $0.98 on revenues of $15.36 billion.
Weatherford, like Halliburton Co. (NYSE: HAL) and Baker Hughes Inc. (NYSE: BHI), posted lower profits from North America, where the slowdown in drilling for natural gas has pushed down the rates the companies can charge for rigs. Schlumberger Ltd. (NYSE: SLB) managed to avoid the slowdown in North America on the strength of its international business.
The company’s shares are down about 9.5% in premarket trading this morning, at $9.85 in a 52-week range of $10.59 to $18.33. The consensus target price for the shares was around $16.10 before today’s report.