http://seekingalpha.com/article/4023574-weatherford-robbing-peter-pay-paul
Robbing Peter To Pay Paul?
The $500 million debt raise amounts to robbing "Peter to pay Paul." A Q1 2015 $395 million principal payment amid cash burn is what triggered the series of capital raises in the first half of 2016. The company's penchant for attracting new investors to repay old ones could brandish its reputation as the oil industry's Bernie Madoff.
The imminent covenant breach was partly due to the fact Weatherford borrowed another $265 million on the revolver to fund its $147 million cash burn in Q3. Through year-to-date September 2016 Weatherford has burned through $547 million. Its EBITDA cannot cover its quarterly interest expense of $129 million, so the hemorrhaging will likely continue in Q4.
Weatherford's $4.4 billion equity market capitalization and $7.1 billion net debt give it an enterprise value of $11.5 billion -- nearly 48x run-rate EBITDA (last 3 quarters annualized). The company could attempt an equity raise in order to fund quarterly cash burn. If the Fed raises interest rates in December the entire market -- and WFT -- could decline. Investors should brace themselves for another equity raise between now and mid-December.
Conclusion
I estimate Weatherford is insolvent by over $3 billion. Given its quarterly cash burn the company might need to raise more capital or go belly-up. WFT is a sell.