Weatherford Makes Other Oil-Service Stocks Look Good (Update 1)

NEW YORK (TheStreet) -- The oil-service company that can't seem to find an accountant who can keep the beans counted, Weatherford International (WFT), gave investors one more reason for frustration on Monday.

Weatherford said concurrent with its fourth-quarter earnings that it still hasn't remedied an accounting situation that it revealed about a year ago, in March 2011, and its previously reported financial results for the 2008 through 2011 period are still subject to restatement.

Even though Weatherford released the earnings on Monday, shares were down by 12% on Tuesday after the Presidents' Day holiday on Monday.

The Weatherford trading chart has been so choppy that the stock has been good for a short-term trade from time to time, but for long-term investors it remains the least reliable of oil-service large-cap stocks.

The original revelation of the internal control weakness at Weatherford caused shares to plummet. The negative catalyst was exacerbated by the fact that the oil-service company reincorporated in Switzerland several years ago to maximize tax efficiency, and the March announcement made clear that the company would be paying much higher taxes than it expected. In Monday's fourth-quarter announcement, Weatherford guided to a tax rate of 35% in 2012. This new tax rate was higher than the 28.5% rate that Dahlman Rose had forecast.

According to energy analysis firm Tudor, Pickering, Holt, Weatherford's 2006 tax rate was 28%; before it moved to Switzerland, and since 2003, the tax rate has always been 30% or less.

Weatherford said it expects the audit review to result in roughly $225 million to $250 million of aggregate net adjustments to previously reported financial results for the years 2010 and prior -- roughly two-thirds is attributable to fiscal years ending on or prior to Dec. 31, 2008.

In March, Weatherford had guided to adjustments of $100 million to $150 million, though that didn't include 2011 results for which the company now expects roughly between $490 million and $520 million in income tax.

Operating results in the fourth quarter included the highest level of revenue ever for Weatherford at $3.7 billion. There were no per share earnings results due to the tax situation. The company guided to continuing improvements in international activity and margins.

"The company maintains a positive but measured outlook for its North American business and expects modest profit improvement as compared to 2011. Internationally, the company anticipates continued growth and expanding margins in its Latin America region, underpinned by improvements in Argentina, Colombia, Mexico and Venezuela. Eastern Hemisphere is also expected to improve in 2012, with upticks in Europe and Russia, as well as continued recovery in the Middle East / North Africa / Asia Pacific region with positive contributions from new contracts with better terms and pricing and the completion of existing contracts," Weatherford said in a press release.

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