Weatherford International Ltd. (WFT) estimated a $100 million settlement over its alleged improper sales and also reported on continuing efforts to fix its income tax reporting problems. While the oilfield services company seems to progress toward resolving some issues, the handwriting has been on the wall that Weatherford?s investors risk lawsuit-related losses.
The risks no longer represent mere probabilities. Regulators including the U.S. Department of Justice and Securities and Exchange Commission have been investigating Weatherford over its alleged improper sales in sanctioned countries. The company decided in September 2007 to stop doing business in Cuba, Iran, Sudan and Syria, according to a filing on March 15.? Weatherford emphasized in a press release Tuesday that the actual loss from the multi-agency investigation, which remains unsettled, could be more or less than $100 million.
The SEC and DOJ are also investigating the circumstances surrounding Weatherford?s financial reporting of its income taxes. The company announced on March 1, 2011? that it had needed to make adjustments of around $500 million for the periods from 2007 to 2010, mostly related to its determination of the tax consequences of amounts exchanged between subsidiaries. The adjustment for each year was expected to range between $100 million and $150 million. Weatherford said Tuesday that it continues to analyze the adjustment numbers and they could be subject to further revision.
?Weatherford has committed its full resources to address our income tax accounting issues as quickly and as thoroughly as possible,? its chairman and CEO Bernard J. Duroc-Danner said in the Tuesday statement. ?Our entire senior management team and their respective functional departments?tax, accounting, legal and operations?are working together to achieve our goal.?
Separately, the company also filed a material weakness remediation update on Tuesday that described its efforts to improve its tax process. For example, it said it had aligned non-U.S. tax personnel with the regional finance team and created an organizational structure based on tax functional lines such as planning, accounting, compliance and audits. It also hired an unnamed vice president in tax who ?has experience remediating material weaknesses in income taxes at a prior company? and an unnamed assistant vice president in tax audits who has worked in the area for more than 30 years.
As Weatherford attempts to clean up its financial reporting, regulators are also working on other matters related to allegations of improper sales. The DOJ and SEC have undertaken investigations into Weatherford's participation in the United Nations oil-for-food program governing sales of goods and services into Iraq, as well as its compliance with the anti-bribery law known as the Foreign Corrupt Practices Act. While Weatherford participated in the oil-for-food program until 2003 ? clearly many years ago ? its CEO Duroc-Danner has presided over the company since 1998.
In part due to such red flags, Weatherford?s financial statements reflected an AGR score of 18 as of March, indicating higher accounting and governance risk than 82% of companies. The score has improved only slightly since December 2010, when it was an 11.
Investors have already filed class action lawsuits. A few days after the abovementioned March 1, 2011 filing, investors alleged in the California Central District Court that Weatherford misled them. Another class action lawsuit against the company hit in New York's Southern District Court this March, alleging defendants knew or recklessly failed to inform investors that Weatherford did not properly restate its financial statements from 2007 to 2010, hastily issued its annual regulatory filing for 2010 to give the impression that it remedied its financial reporting from 2007 to 2010, and failed to properly document an additional $225 million in adjustments for financial statements from 2007 to 2010.
It?s always possible that the company?s managers will succeed in cleaning up their act in the year ahead. But the company is rated ?F? on its corporate governance overall, and investors who buy Weatherford stock do expose themselves to risks down the line.
Region: North America
Sector: Energy
Industry: Oil Related Services / Equipment
Market Cap: $ 9,593.4mm (Large Cap)??
ESG Rating:? F
AGR:?? Aggressive (18)
mls superdraft school cancellations bald barbie peoples choice awards deplorable mls draft khloe kardashian
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.