Weatherford International agreed to sell its land drilling operations in Russia and Venezuela to OAO Rosneft for $500 million as the world’s fourth-largest oilfield service provider continues to snip off some of its less-profitable work.

Russia’s largest oil producer will buy 61 land drilling crews and a fleet of workover rigs in Russia from Weatherford and six land-drilling rigs in Venezuela, according to Weatherford’s regulatory filing today. The operations generate half of Weatherford’s revenue in Russia and one third in Venezuela, according to a separate statement today. The deal sells off the least-profitable piece of Weatherford’s land-drilling business, Jeffries Group LLC analyst Brad Handler said in a phone interview from New York.

“This speaks to clear momentum that Weatherford has in purging non-core businesses,” said Handler, who rates the shares a hold and owns none. “The combined Russian and Venezuelan businesses were not very profitable. In light of that, the $500 million price tag feels very healthy to us.”

Weatherford in April pledged to sell or split off as much as $1 billion in assets this year as part of a corporate turnaround plan. Weatherford promised additional steps in the company’s divestment plan over the coming quarters, according to the statement.

Leaner operations

“De-levering our balance sheet is a top priority,” Bernard Duroc-Danner, Weatherford’s CEO, said in the statement. “Although our Russian business will be half its present size, the operations will be much leaner, intensely focused on our core product lines, and therefore more profitable.”

Weatherford has said as recently as May that it planned to divest by first-quarter 2015 its global land-rig business, which has 183 drilling rigs, 284 workover rigs and will account for as much as $1.8 billion in sales this year, according to a slide presentation for the UBS Global Oil and Gas Conference. Workover rigs are primarily used to re-enter an existing well and boost production.

The Russia and Venezuela assets account for about 75% of the global land-rig business, Ben Schuman, an analyst at Drexel Hamilton LLC in Austin, Texas, who rates the shares a hold and owns none, said in a phone interview.

“The sale of such a large portion of them did come as a surprise,” Schuman said. “The company right now is being held accountable for its execution of its turnaround plan more than anything else.”

TNK-BP assets

Meanwhile, Rosneft has pushed to build its own drilling business to cut costs, buying rigs from VTB Group earlier this year, as other Russian oil producers including OAO Lukoil, OAO Gazprom Neft and TNK-BP have sold units.

“The deal fully complies with the adopted Rosneft strategy of the development of in-house service business,” Rosneft CEO Igor Sechin said in a statement July 14.

The deal also sees the development of long-term cooperation between Weatherford and Rosneft and is expected to close in third-quarter 2014, Rosneft said.

Weatherford bought drilling and oilfield service assets in Russia from TNK-BP in 2009 for $489 million before Rosneft’s acquisition of TNK-BP last year. Weatherford may have accounted for about a third of Rosneft’s drilling business last year, Sberbank CIB wrote in a research note.

The Weatherford Russian operation in the deal has about 7,800 employees, while the Venezuelan business has about 375 workers, according to the statement.

Most at stake

Weatherford has the most at stake in Russia among peers with about 5% of its sales coming from the country, Scott Gruber, a New York-based analyst at Sanford Bernstein & Co., said March 3 in a note to clients. The company is expected to generate about $15.6 billion in revenue this year, according to 28 analysts’ estimates compiled by Bloomberg.

Weatherford, which has 14 buy ratings from analysts, 13 holds and two sells, rose 2.5% to $22.44 at 11:50 a.m. in New York. The company is the second-best performer in the Philadelphia Oil Services Index this year, climbing 42%. Nabors Industries Ltd. has risen 71%, the best in the index this year.