Weatherford International Plc (NYSE:WFT) abandoned its initiatives to raise nearly $1 billion in cash after investors abandoned its stock, indicating that Wall Street’s affection with energy finance is declining along with expectations that oil prices will surge anytime soon.
Earlier in the week, the company revealed that it intended to sell a combination of convertible bonds and shares for unspecified prospective acquisitions. Following the news, WFT shares quickly declined almost 17%, to $8.41, forcing the company to terminate the offerings just few hours after introducing the plan.
Weatherford expressed that while investor interest was encouraging for this offering, they are unwilling to offer securities at prices that do not present the value they have achieved at Weatherford. The about-face prompted the stock to recoup a part of Monday’s losses.
The episode made upset some investors and analysts, who expressed that Weatherford management, had promised to concentrate on reducing debt at the stressed company, which had a tough time in past years with undigested deals and accounting problems. Tudor, Pickering, Holt & Co. stated that there is no sense in sugarcoating the blow to management credibility.
The street’s reaction to the announcement do not goes with investor sentiment earlier in 2015, when energy companies were able to offer record quantities of new bonds and stock to improve their balance sheets, fund acquisitions and replace bank financing.
North American energy producer firms have offered nearly $17 billion of new stock in 2015. A major part of those offerings were witnessed during 1H2015, when many investors projected oil prices to rise and touch the triple-digit levels of 2014. Instead, after a brief up move, the oil prices have plunged below $50 a barrel. This u-turn has left investors with huge losses. Weatherford International Plc (NYSE:WFT) and its peers often suffer during energy-price decline as the gas and oil producers look to cut back on drilling expenses.