Weatherford reports $60 million charge on Venezuelan currency cut
HOUSTON -- Weatherford will record a $60 million charge in the first quarter of this year due to Venezuela's devaluation of its currency earlier this month, chief financial officer John Briscoe said Wednesday.
"We initiated a program last summer to reduce our exposure to devaluation in Venezuela," Mr. Briscoe told analysts on a conference call. "However, Venezuela is a market where we conduct significant operations, and mitigation of currency exposure takes time."
Facing a budget shortfall after a government-led spending boom, Venezuela devalued the strong bolivar, its local currency, by 32% to VEF6.3 per dollar from VEF4.3.
Oilfield services companies like Weatherford, which provides specialized services to Venezuela's national oil company, Petroleos de Venezuela, tend to receive payments in a mix of U.S. dollars in local currency, leaving them with some exposure to currency devaluations.
In an earlier securities filing, Weatherford had said if Venezuela cut the value of its currency by 10%, that would translate into a $30 million charge for the company. The company reported at the end of the third quarter, it had $298 million denominated in Venezuelan currency, mostly cash and receivables.
The company will treat the loss as an excluded item in its first quarter earnings, which Mr. Briscoe said he expects to come in between 16 and 18 cents per share, below what analysts' had been forecasting.
Weatherford took a bigger hit from the devaluation than some of its larger rivals. Halliburton disclosed in a filing earlier this month that it expects to take a $30 million foreign currency loss as a result of the devaluation. The company said that of its $328 million investment in Venezuela, some $74 million is in monetary assets denominated in local currency.
Baker Hughes said in a filing earlier this month that it expects to incur a $25 million loss in the first quarter due to the devaluation. The company said it earned about 2% of its total consolidated revenue in Venezuela.
"Going forward, although this devaluation will result in a reduction in the U.S. Dollar reported amount of local currency denominated revenues and expenses, we do not believe the impact will be material to our consolidated financial statements," Baker Hughes said.
Dow Jones Newswires