Is Weatherford International Ltd (WFT) Ready for Your Portfolio?

For similar reasons, Weatherford International Ltd (NYSE:WFT) is reducing its presence in Iraq. According to Duroc-Danner:

We are gradually deemphasizing our Iraqi business. The old contracts are finally closing down one after the other. We are likely to take equipment out of the country for redeployment in markets with much higher profitability and returns.

Analytical issues
From an analytical perspective, there are some issues that should be included in any consideration of the attractiveness of Weatherford’s shares:

–The company continues to negotiate with the U.S. government regarding its ultimate Foreign Corrupt Practices Act penalties stemming from previous oil-for-food matters in Iraq. A $153 million accrual was recorded in the June quarter, following a $100 million accrual last year.

–Weatherford International Ltd (NYSE:WFT) appears to be on the verge of emerging from tax allocation issues that have played the company for some time and required significant restatements. Despite the light that appears to be visible at the end of the tax issue tunnel, the length of time that’s been required for the matter to be cleared up is disconcerting.

–As I wrote in another recent piece, there continues to be considerable scuttlebutt regarding the possibility of the company being acquired. General Electric Company (NYSE:GE) is the name mentioned most frequently as a potential purchaser. And while Weatherford may remain independent indefinitely, the possibility of the company being acquired should at least be considered.

Foolish takeaway
My overall assessment of the desirability of initiating or adding to positions in Weatherford International Ltd (NYSE:WFT) boils down to careful monitoring of the company, while exercising caution in acquiring shares at this juncture. It seems to me that, for a host of reasons, Schlumberger, for instance, currently represents a far more compelling opportunity for participating in the integrated services portion of the oil and gas sector.

Fool contributor David Smith has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company.

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