Widford, the world's fourth largest oil service giant, filed for bankruptcy

Earlier, Widford said it would apply for bankruptcy protection after bondholders approved a restructuring agreement that would reduce total debt by about 70%. Widford has about 26,000 employees worldwide. But there has been no profit for four consecutive years. In May, the company said it planned to file for bankruptcy protection after agreeing with creditors holding 62% of its bonds. Balance sheet restructuring will reduce its total debt from $8.3 billion to about $2.5 billion, almost entirely composed of unsecured bonds.

What has brought down this oil-suit company which has been operating for nearly 80 years? Is there a problem with its own strategic direction and management strategy, or the sudden collapse of international oil prices in mid-2014, or is it affected by the U.S. government's foreign sanctions strategy? Why has a generation of oil-suit giants fallen to such a level?

  Widford was investigated and fined by the government for failing to cooperate with the sanctions initiated by the United States for many times, which had a negative impact on the company's operation. For example, during the United States sanctions against Cuba, Widford employees falsified documents alleging that they were selling products to Venezuela, but ultimately to Cuba as their destination. In July 2007, the media exposed and questioned the establishment and operation of an office in Sudan by Widford Oil Tools Middle East Company, a subsidiary of Widford, which has been banned by the United States since 1997. In response to media and investor inquiries, Widford announced that it would spin off subsidiaries in the U.S. sanctions countries. The following year, Widford withdrew from Sudan and donated equipment in the country to Thisrt No More, a human rights organization, but continued to provide additional equipment, accessories and funds. Widford also paid a huge price for this. Widford is facing heavy debt pressure. By the end of 2018, Widford's outstanding debt was about $10.6 billion, of which $7.06 billion was long-term debt. The present situation is still so embarrassing that Widford is quite helpless for the future. As Widford put it: because of the suspicion of the sustainability of investors, Widford has been unable to obtain any more credit loans. As an expedient measure, selling assets has become one of the best choices. "We continue to seek to sell all remaining rig assets," Widford said. Data show that as of March 31, 2019, the total assets for sale at Widford were $170 million. From the development track of Widford in recent years, in addition to the huge blow from the sharp fall in oil prices, the rapid expansion of previous business is also one of the important reasons for its current predicament. From 2005 to 2017, it can be clearly found that from 2005, with the explosive rise of international oil prices, Widford has entered a very high-speed development period. In 2000, Widford's annual revenue was less than $2 billion, and by the peak of 2013, Widford's annual revenue was $15.263 billion. In just 13 years, its annual revenue increased by nearly 7.6 times.

Widford not only carried out many large-scale acquisitions, but also continued to build infrastructure and expand the market. In 2005, for example, Widford purchased Precision Drilling Services'energy business and international drilling business for a huge sum of $2.88 billion. This acquisition fund, equivalent to 65% of Widford's total revenue in that year, shows its great ambition to expand. In 2009, due to a huge breakthrough in the Russian market, Widford also invested $450 million to acquire shares of TNK-BP Oil Company's oil service company. Under this fierce expansion, Widford's excessive capital intensity has long been reflected in reality. But in the prospects of the oil market, Widford still maintained a rapid expansion strategy. Sale of assets and repayment of debts is only the external manifestation of the adverse operation of Widford, and its internal problems have already appeared as early as 2012. In 2012, two senior accounting executives made unreasonable accounting adjustments to balance the company's profits and losses and solicit investment, which led to overstated earnings. As a result, the Securities and Exchange Commission launched several years of investigation. Widford also postponed the release of its third quarter results in 2012, saying that the first and second quarters of the year were unreliable. In September of the same year, the Swiss Stock Exchange also began investigating Widford's violation of disclosure rules when trading in stocks, which made Widford difficult both inside and outside. In 2016, the US Securities and Exchange Commission issued a $140 million financial fraud ticket to Widford based on the results of the investigation, which hit Widford hard. In addition to the financial scandal, Widford's business income in Venezuela has lost money due to the devaluation of the local currency, which has caused great losses to the company's operation. The abnormal changes of personnel also play a negative role when Widford is not well managed. For example, at the end of 2012, Widford's share price fell to the bottom, but because of the efforts of Financial Director John Brisco, the chaotic Widford regained confidence and its share price rose 73%, but Brisco's resignation in 2013 caused strong anxiety among investors, and the ability of the new Financial Director was questioned by investors. In May 2016, Widford's new financial director said in a conference call that Widford's free cash flow income is expected to decrease by $200 million to $400 million to $500 million. The company plans to generate cash flows of $600 million to $750 million annually over the next four years.