Incorporated: 1998
NAIC: 213111 Drilling Oil and Gas Wells; 23571 Concrete
SIC: 1381 Drilling Oil & Gas Wells
Houston-based Weatherford International, Inc. is one of the top five oilfield service companies in the world, with annual revenues exceeding $2 billion. The company was created in 1998 from the merger of EVI, Inc. and Weatherford Enterra, Inc. The emergent company now operates through three divisions--Completion Systems, Drilling & Intervention Services, and Artificial Lift Systems--offering a broad range of oil-patch services, running from well installation and completion to production enhancements. Among other things, it provides fishing services to remove debris from wells and artificial lift systems for use in oil recovery.
Weatherford International's name can be traced back to the 1940s, when Jess Hall, Sr., formed the Weatherford Spring Company in Weatherford, Texas, a town in north central Texas, about 25 miles west of Fort Worth. The company originated as a provider of oil drilling equipment and services. Over the next couple of decades, when the Weatherford name moved into Europe, Hall's company started acquiring a global reputation as a reliable "scratcher" and "centralizer," terms relating, respectively, to its casing cleaning and directional-drilling control services. A good portion of its business came from well retrieval and fishing service contracts for removing tools and debris from wells.
Weatherford added other services as it grew. Moreover, the oil industry boom of the 1970s encouraged both expansion and diversification. In fact, by the time the petroleum bubble burst in the early 1980s, Weatherford's business had broadened considerably. It was dealing in drilling products and services, cement engineering, production equipment, and specialty items and applications. Still, despite its global range and diversified services, in 1983 the company logged the first net loss in its history.
Under Eugene L. Butler, president and CEO, the company struggled to survive the bad times that closed down a number of over-extended oil service companies. To stay in business, all of them had to compete in a market demanding up to a 70 percent discount for their services. Weatherford refused to succumb to the heaviest pressures, preferring instead to downsize and stress quality goods and services over price. As a result, its sales fell off rather sharply. It withdrew from some unprofitable markets and concentrated on the Gulf Coast, particularly offshore and abroad, where the rig count held up better than it did in the United States. It also reduced its corporate headquarters from five floors to one, cut its domestic work force by 68 percent and its international work force by 39 percent, put in effect graduated, across-the-board salary cuts, and consolidated its manufacturing operations. It was reeling badly from the economic punch, but it survived. It even added some new, specialized services tailor-made to meet some of the industry's changing needs. For example, it combined services and recent technology into a new business, that of reclaiming, stacking, and maintaining pipe taken from wells for companies contracting the service.
Primarily, the company stayed on hold throughout the 1980s. In 1987, Butler revealed that at the beginning of the recession Weatherford had actively pursued a merger with one or more other companies but, for whatever reason, never found any takers. Its only choice was to contain costs by slimming down to its core business. At the same time, Butler also indicated that the company would probably sell eventually, though, he stipulated, it was not going to be given away at "recession prices."
Instead, within a few years Weatherford began an aggressive growth cycle through acquisitions and mergers that transformed it into one of the world's largest oil services companies. In fact, it had already started on that path four years before its 1995 major merger with Enterra Corporation.
At the beginning of the 1990s, Energy Ventures, Weatherford, and Enterra--the three companies that would finally combine to emerge as the newly organized and structured Weatherford International--were all busy growing through vertical expansion and integration.
Energy Ventures (EV) was founded in 1972. It began as an offshore oil and gas explorer and producer. In 1981 it became a 50-50 partner with Northwest Energy in developing an oil field in Hockley County, Texas. By the next year, Northwest had gained about a 25 percent share of EV. Thereafter, Appalachian, EV's majority stock holder, attempted to take control of the company, but its efforts failed when the oil debacle of the mid-1980s trashed its plans. However, EV was liquidated and had to be recreated. It emerged again in 1987 and began an aggressive vertical integration. In the 12 years before its merger with Weatherford Enterra, it made over 40 acquisitions. Among these were Grant Oil Country Tubular, in 1990, and Prideco, in 1995. These two subsidiaries were combined as Grant Prideco, giving parent EV a solid position as a major producer and supplier of drill pipe and tubulars. In 1997, when the company built a manufacturing plant in Canada, it changed its name to EVI.
Enterra, the other company, was a diversified energy service and manufacturing business. It provided products and services worldwide to the petroleum exploration, production, and transmission industries. Its special service areas included the rehabilitation of older pipeline systems and the provision of services and products for drilling and serving both onshore and offshore gas and oil wells. At the time of its merger with Weatherford, Enterra was considered one of the industry's leaders in technological research and development (R & D). It had become an international business in 1988, the year in which, for $35 million, it bought out CRC Evans. In 1994, in a deal valued at over $310 million, it bought Total Energy Services Co., making it one of Weatherford's chief competitors and a logical merger target. It also had an excellent cash flow and zero debt.
Weatherford started its own shopping spree under Phillip Burguieres, who became chairman of the company in April 1991. Within two years, Weatherford bought eight small companies. Then, in the summer of 1993, it worked out a $370 million purchase agreement with Tuboscope Vetco International Inc., also a Houston-based company. The acquisition made Weatherford the sole company offering comprehensive tubular servicing to the oil industry, ranging from tubular running services to pipeline coating and inspection. Additional acquisitions followed through 1993 and into 1994, the year in which, at about the same time, Weatherford bought Odfjell Drilling and Consulting Co. A/S of Norway and Enterra purchased Total Energy Services Co.
Coverage of the two acquisitions in a single article in The Oil Daily seemed to hint that the two growing competitors were on a collision course.
They did not, however, collide; they simply teamed up, creating the world's sixth largest oil field services company. The deal, the first of two major events that led to the 1998 emergence of a completely restructured Weatherford International, Inc., was hammered out in 1995. Both companies had continued purchasing smaller companies through 1994 and into 1995. Then, in June 1995, they announced the proposed merger, noting that the combined company would boast over $1 billion in assets and annual revenues of more than $850 million. Although the deal was "99% to 100% sure," it required the approval of the Justice Department, with the odds on its blessing set at around 80 percent. The approval was quickly given, though, and by October the merger was a done deal, "a tax-free pooling of interests." Combined, the two companies became Weatherford Enterra Inc., if only temporarily.
Over the next two years, Weatherford Enterra continued to grow and prosper. The trend in the oil field service industry was clearly towards the consolidation of groups of companies into major conglomerates, a trend which seemed to hit one peak in 1998, when there were two important mergers. First, Halliburton Co. and Dresser Industries Inc. completed a stock-swap merger, pushing the resulting company ahead of Schlumberger Ltd. as the world's largest oil field service company. Within a week thereafter, Weatherford Enterra announced its impending merger with EVI. Weatherford's president and CEO, Thomas R. Bates, Jr., said that the joining of the two companies was "a growth story, not a consolidation story that is painful to employees." That may have been so, but the end result, EVI Weatherford, talked and walked pretty much like a consolidated duck. The $2.6 billion stock swap had created the fourth largest oil field service company in the world, a position reflected in its November 1998 change of name to Weatherford International, Inc.
In its first whole year of operations, 1999, in addition to completing the necessary task of restructuring and reorganizing, Weatherford International arranged over a dozen acquisitions and strategic alliances. It also established a state-of-the-art, world-class R & D training and testing facility. At the site, with a derrick, two separate wells, and two additional test cells, Weatherford gained the ability to test its complete inventory of oilfield tools under fully simulated conditions.
There were growing pains, however. The petroleum industry had stagnated in the middle of the decade, and in 1998, when the rig count in North America dropped 38 percent, it went into a recession that even worsened in 1999. In 1998, even though Weatherford International's revenue was up over 1997 figures, its earnings dropped sharply, from $187.8 million to $64.8 million.
In early 1999, the decline in profits compelled Weatherford to lay off 3,300 workers, about 25 percent of its work force, and close 100 North American sales and service facilities. It also cut its capital budget to $90 million, a drop of 50 percent. Further, it shifted it focus to international markets, where the rig count drop was only 15 percent. Even with the retrenchment, 1999 proved to be a grim year. Revenues dropped from over $2 billion to $1.24 billion, producing a net loss of $20.9 million.
Made necessary by its major mergers and acquisitions, the company had known that it had to make some major consolidation and restructuring moves. The industry-wide woes simply exacerbated its reorganization problems, albeit only temporarily. As Bernard J. Duroc-Danner, Weatherford's new CEO indicated, the company's greatest challenge was to assemble all of its acquisitions into a coherent and cohesive whole. By November 1999, the number of acquisitions made since Weatherford Enterra and EVI merged in 1998 had reached 16 with an expenditure of about $500 million.
In its consolidation strategies, including its acquisitions and divestitures, Weatherford seemed to be redefining itself, particularly as it moved into the next century. Major steps included the 1999 merger of the company's gas compression services with GE Capital, a subsidiary of General Electric Co. The result was a new company, Weatherford Global Compression Services, which became the core of one of the four divisions of Weatherford International, Inc. However, two years later, for a large stake in the combined companies, Weatherford sold Weatherford Global Compression Services to Universal Compression Holdings, Inc. In the interim, Weatherford continued to acquire other companies, despite sustaining losses into 2000, when the industry finally recovered and the company returned to profitability. In 1999, it had also divested itself of its major subsidiary, Grant Prideco Drilling Products, by spinning it off to Weatherford shareholders.
Principal Divisions
Weatherford Drilling & Intervention Services; Weatherford Completion Systems; Weatherford Artificial Lift Systems.
Principal Competitors
Baker Hughes Inc.; BJ Services Company; Haliburton Company; Schlumberger Limited; Smith International, Inc.
Further Reading
Dittrick, Paula, "The High-Tech Plumber," Oil and Gas Investor, November 1999, p. 39.
Drummond, Jim, "Quality, Bottom Line Focus Aid Weatherford's Steady Recovery," Oil Daily, January 16, 1985, p. 8.
Fletcher, Sam, "Weatherford International, Enterra to Merge, Creating 6th Largest Oil Field Services Firm," Oil Daily, June 27, 1995, p. 1.
------, "Weatherford International, GE Capital to Merge Gas Compression Groups," Oil Daily, February 4, 1999.
Pybus, Kenneth R., "Weatherford Capturing Another Market with Tuboscope Acquisition," Houston Business Journal, July 26, 1993, p. 10.
Sullivan, R. Lee, "`I Didn't Want to Make Another Mistake'," Forbes, December 20, 1993, p. 226.
Weeden, Scott L., "Service and Supply Sector Starts Across New Frontier," Oil Daily, July 27, 1987, p. 8.
------, "Weatherford Chief Sees Improving Outlook for Oilfield Service Industry," Oil Daily, July 12, 1987, p. 6.
— John W. Fiero
