Weatherford Dumps Ballast: Should You Buy Now?

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NEW YORK (TheStreet) -- Weatherford International shares have done pretty well, rising 40% so far this year. That's better than the S&P 500's 27% gain, and better than most of Weatherford's peers in the oil-service business.

But the company built by Bernard Duroc-Danner is not out of the financial woods. It has more than $1 in debt for each $3 in assets, its cash position is poor and its profit margin hovers around zero.

The shares are rising because earlier this month it announced a divestiture plan aimed at reducing debt by $3 billion to $5 billion by the end of 2015. Also, this week the company settled foreign bribery charges, deferring two prosecutions and settling a civil case for $253 million. The company last year had earmarked $100 million to settle some charges.

The sales should cut Weatherford's debt by about half. The fines would nearly wipe out a cash position that stood at $316 million at the end of September.

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Weatherford operates out of Houston, but it's technically based in Switzerland, having moved there in 2009 when Transocean was also moving to Switzerland and Halliburton was creating a joint headquarters in Dubai.

At the time there was great fear in the oil patch that the incoming Obama administration would be bad for the oil-service business. In fact, the U.S. oil business has boomed since that time, and this country is on track to become self-sufficient in oil.

The charges alleged by the government include bribery of Middle Eastern and African officials, including abuse of the United Nations' oil-for-food program, with lax controls that included falsified records. Duroc-Danner said after the settlement was announced this week that the charges are now behind the company.

I slammed Duroc-Danner's record one year ago, after the stock fell from a high of more than $25 to a 2012 low of less than $10. It reported $500 in tax errors during 2011, which it called an "honest mistake," then got a new chief financial officer.

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