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Weatherford International Plc (NYSE:WFT) has moved to quash investors’ concerns over its ability to meet debt covenants, by raising new debt through the issuance of a fresh batch of securities. The oil field equipment and services company has already issued 84.5 million of ordinary stock at a price of $5.40 each, and now expects gross proceeds of about $456 million.

Growing Debt Concerns

The company also issued warrants for the purchase of an additional 84.5 million ordinary shares from which it expects an additional $543 million. Weatherford says it will use part of the net proceeds to repay its credit facility.

The company sinking itself deeper into the debt market has not gone well with some investors. The stock shedding more than 4% in market value in the aftermath of the offering all but affirms waning investor confidence about the company’s long-term prospects.

While resorting to equity offerings to offset liquidity risks is sometime inevitable, Stephen’s analyst Mathew Marietta believes the same could come to haunt Weatherford.

“We continue to warn investors regarding the structural balance sheet issues and lack of cash flows and the deals highlight contradictions in management press releases and commentary about positive cash flow and its confidence it will not violate covenants,” said Mr. Marietta.

Stock Dilution

 Dilution of stock is another issue that investors will have to contend with, given the increase in the number of shares in the market. Weatherford resorting to raising more debt all but affirms the challenges it continues to face as oil prices struggle to stabilize above the $50 a barrel mark.

 A good number of companies have trimmed their expenditure on new projects all but making it extremely difficult for the company to generate some revenue from its core business. The company has lost a lot of money this year, a situation that has not been helped by disappointing earnings reports.

Weatherford International Plc (NYSE:WFT) losing $1.8 billion in the third quarter should continue to send shivers among investors given the uncertainty that continues to grip the industry.

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Steve Kanaval: Portfolio Manager/Writer/ Market Analyst Steve began his career in the Trading Pits in Chicago making markets at the Chicago Mercantile Exchange (NYSE:CME) the Chicago Board of Trade and the CBOE in the early 80’s. He ran the Morgan Stanley Derivative Prop Trading for the firm specializing in Index Arbitrage. He continued his career as a Trader/Portfolio Manager for multiple Hedge Funds during the Internet Boom of the 90’s managing large portfolios. Steve is known as an expert in MicroCap Technology Stocks and the emerging Digital Currency markets as a Portfolio Manager for his Family Office. Steve has managed portfolio’s in volatile asset classes for 3 decades as a commodity trader, hedge fund manager and digital currency trader and miner. Steve publishes his views on the asset classes in a public forum and has published more than 10,000 articles simplifying these complex and volatile assets for readers. His work is published on multiple sites including Bloomberg, Equities.com, Hacked.com, CryptoCurrencyNews as a paid contributor. His work includes research, journalism and archived video on important market volatility related to stocks, digital currency and other volatile misunderstood asset classes. He offers a humorous, unique insight and the related back stories and drivers for readers interested in volatility and emerging market assets. Full disclosure Steve is long 25 digital currencies and sits on the board of multiple public companies involved in digital currencies, and owns shares in these companies from time to time.

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