When Accounting Woes Hit Big Oil (WFT)

Weatherford International (NYSE: WFT) is supposed to be a solid oil services outfit.  It turns out that it may be a misfit when it comes to accounting.  After a 12% drop, it still has a market cap of close to $12 billion.  The company has now told investors that they should not to rely on its prior financial statements.  The reason behind the news is a lack of internal controls.

Sales rose to just over $3.7 billion and estimates were $3.58 billion in sales.  Because of the lack of controls, we do not have a formal earnings figure.  After a 10% year to date rise, today’s loss is one which some may feel could have even been worse. 

At issue for the restatement is about $225 million to $250 million of what the firm called its aggregate net adjustments back to 2010 and before with respect to accounting for income taxes.  This may not fall under true accounting irregularities to some, but this would scare away many timid investors.  The theory of avoiding irregularities is that loose accounting is often followed by problems elsewhere in the company.  It is too soon to know if this is the last drop on the matter or if there are other shoes that will drop. 

After a 12.3% drop to $15.60, Weatherford’s 52-week trading range is $10.85 to $25.51. This is one of those situations where we would be more inclined to take a wait-and-see attitude rather than trying to make any heroic bets.