HAL Halliburton Co

One of the biggest drilling contractors in the world abandoned its efforts to raise about $1 billion in cash after investors hammered its stock, in sign that Wall Street's love affair with energy finance is cooling along with hopes that oil prices will rise anytime soon.

Weatherford International Ltd. said Monday morning that it planned to sell a combination of shares and convertible bonds for unspecified potential acquisitions. The company's shares quickly fell about 17%, to $8.41, prompting the company to cancel the offerings just 14 hours after unveiling the plan.

"While investor interest was strong for this offering, we are unwilling to sell securities at prices that do not reflect the value we have created at Weatherford," the company said.

A Weatherford spokeswoman declined to comment beyond the company's press release.

The about-face helped Weatherford's stock regain some of Monday's losses; in 4 p.m. trading Tuesday on the New York Stock Exchange, the shares were up more than 10% at $9.31.

The episode soured some investors and analysts, who said that Weatherford executives had promised to focus on reducing debt at the beleaguered company, which has struggled in recent years with undigested acquisitions and accounting problems. Houston-based energy investment bank Tudor, Pickering, Holt & Co. said in a note to clients that there is "no point to sugarcoating [the] blow to management credibility."

The stock market's reaction contrasts with investor sentiment earlier this year, when energy producers were able to sell record amounts of new stock and bonds to shore up their balance sheets, replace bank financing and fund acquisitions.

North American energy producers have sold about $17 billion of new stock this year, according to a Wall Street Journal analysis of Dealogic data. The bulk of those offerings came during the first part of the year, when many investors expected oil prices to bounce back toward the triple-digit levels of a year ago. Instead, after a brief uptick, U.S. oil prices have ducked back below $50 a barrel.

That's left many investors nursing big losses. Whiting Petroleum Corp., a North Dakota oil producer, put itself on the block early in the year before deciding instead to raise cash selling stock and bonds. Whiting sold $1.05 billion of new shares in late March at $30 apiece; now they are trading for less than $18, a decline of more than 40%.

A few energy companies have succeeded in selling stock recently; Memorial Resources Development Corp., an oil producer, said Tuesday that it sold about $243 million of new shares this week to fund an acquisition of Louisiana drilling land, boosting the size of the offering at the last minute amid strong demand.

Oilfield-service companies like Weatherford, however, have raised less than $500 million this year, according to Dealogic. Such companies often suffer the most during energy-price downturns because the oil and gas producers they work for cut back on drilling and squeeze contractors on pricing.

Weatherford been losing ground to its larger rivals. The company, which is based in Baar, Switzerland, and has its operational headquarters in Houston, has long been a distant fourth to oilfield-services giants Schlumberger Ltd., Halliburton Co. and Baker Hughes Inc.

Halliburton said in November that it planned to buy Baker Hughes for about $35 billion, and Schlumberger last month said it would buy Cameron International Corp., a maker of drilling equipment, for $12.7 billion.

Having more cash on hand would have made Weatherford a stronger player if it bid for businesses Halliburton and Baker Hughes plan to shed in order to pass antitrust scrutiny. Some of those businesses make strategic sense for Weatherford, but investors prefer that the company focus on cleaning up its own house, said William Herbert, co-head of research at Houston-based energy investment bank Simmons & Co. International.

"They don't necessarily want Weatherford to be adventurous with regards to taking advantage of this downturn," Mr. Herbert said. "They don't want this management team to take big bets with the balance sheet."

Under Chairman and Chief Executive Bernard Duroc-Danner, Weatherford grew into the world's fourth largest oilfield-services company by making more than 100 acquisitions over 20 years. But it began to show signs it was overextended, announcing in 2011 that an internal review uncovered tax-accounting errors that prompted multiple restatements of earnings in recent years.

The company agreed in 2013 to pay nearly $253 million to resolve yearslong U.S. government investigations into foreign bribery and trade-sanction violations—problems that the Securities and Exchange Commission attributed to "the nonexistence of internal controls."

More recently Weatherford said it would slim down by selling off business units outside its core and laying off staff. Last year it brought in $1.7 billion by selling "noncore" businesses. In July, Mr. Duroc-Danner told investors, "I think our time is better used focusing on what we have than on sort of daydreaming about what we could be adding or not."

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(END) Dow Jones Newswires

September 22, 2015 18:35 ET (22:35 GMT)

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