Shares of oil and gas company Weatherford International Ltd. tumbled Tuesday, a day after the oilfield services company disclosed that investors should not rely on previously issued financial statements until it can resolve problems with internal controls on financial reporting.
The Geneva, Switzerland, company also said that it expects to restate earnings for the years 2008-2010.
THE SPARK: Weatherford International made the disclosures Monday as it reported preliminary fourth-quarter results of $254 million in the fourth quarter. Revenue increased 27 percent to $3.71 billion.
Analysts surveyed by FactSet estimated fourth-quarter earnings at 33 cents per share on revenue of $3.59 billion.
Weatherford said managers have not resolved previously disclosed weaknesses in internal controls over financial reporting for income taxes related to current taxes payable, certain deferred tax assets and liabilities, reserves for uncertain tax positions, and current and deferred income tax expenses.
Weatherford will restate earnings for 2008 to 2010. It expects $225 million to $250 million of net adjustments to financial results. The company will not finalize tax accounts for the year that ended December 2011 until it completes the adjustments.
"As a result of the foregoing adjustments, the audit committee of our board of directors concluded ... that investors should no longer rely on our previously issued financial statements," Weatherford stated.
Looking ahead, Weatherford forecast earnings of about 30 cents per share before one-time items in the first quarter. Analysts surveyed by FactSet expect earnings of 34 cents per share.
THE ANALYSIS: Wells Fargo Securities analyst Matthew D. Conlan told clients in a research note that the unexpected announcement overshadowed strong operational results, particularly in Latin America, the Middle East and Asia.
"We are dismayed by the company's continuing tax accounting problems and disappointed by the lower-than-expected Q1 (first quarter) guidance," he wrote.
THE SHARES: Shares of Weatherford fell $2.03, or 11.4 percent, to $15.76 in midday trading. In the past 52 weeks, shares have traded between $10.85 and $25.51.