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Weatherford International Ltd.$0.63$.023.28%

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 Weatherford Reports Third Quarter 2018 Results
   Monday, October 29, 2018 6:45:00 AM ET

BAAR, Switzerland, Oct.29, 2018 /PRNewswire/ --Weatherford International plc (NYSE: WFT) reported a net loss of $199 million, or a loss of $0.20 per share, for the third quarter of 2018. This compares to a net loss of $256 million, or a loss of $0.26 per share, for the third quarter of 2017.

The non-GAAP net loss for the third quarter of 2018, which excludes unusual charges and credits, was $103 million, or $0.10 diluted loss per share. This compares to a $156 million non-GAAP net loss in the prior quarter, or $0.16 diluted loss per share, and a $221 million non-GAAP net loss for the third quarter of 2017, or $0.22 diluted loss per share.

Significant Highlights

  • Increased segment operating income by 68% sequentially and by $123 million on a year-over-year basis.
  • Reached an agreement with lenders to extend the revolving credit facility.
  • Achieved annualized recurring transformation benefits of $300 million, which represents 30% of the total transformation target.
  • Signed a definitive agreement to divest the laboratory services business for $205 million in cash.
  • Continued to exceed goals for reducing nonproductive time on a year-to-date basis, extending the improvements achieved over the past four years.
  • Extended ForeSite and CygNet SCADA production software availability on the Google Cloud platform.

Revenue in the third quarter of 2018 was $1.44 billion, a modest decrease from the $1.45 billion of revenue recognized in the prior quarter and an approximately 1% decrease from the $1.46 billion of revenue reported for the third quarter of 2017. Sequentially, seasonal improvements in Canada and activity increases in Continental Europe and Asia were offset by lower overall activity levels in the United States and unfavorable foreign exchange rate movements in Latin America.

On a year-over-year basis, higher revenues associated with integrated service projects in Latin America were offset by lower activity levels in Canada as crude oil differentials expanded, which reduced demand for Completions and Production services and products. Results in Russia were negatively impacted by foreign exchange rate effects.

Operating loss for the third quarter of 2018 was $13 million. Segment operating income in the third quarter of 2018 was $116 million, up $47 million, or 68%, sequentially and up $123 million year-over-year.

The sequential improvement was driven by seasonal activity increases in Canada and higher margins across all product line segments on reduced costs and improved efficiencies as a result of the transformation efforts.

Year-over-year operating income improvements were driven by improved efficiencies and reduced expenses as a result of the transformation processes. Higher revenues in Latin America positively impacted operating income, offsetting relatively weak results in Canada.

In the quarter, Weatherford recorded pre-tax charges of $95 million, which consist of $71 million in non-cash impairments and asset write-downs, primarily related to land drilling rigs, $27 million in restructuring and transformation charges, and $8 million in currency devaluation charges, partially offset by an $11 million credit related to the fair value adjustment of the outstanding warrant.

In the third quarter of 2018, incremental recurring benefits as a result of the transformation plan were $27 million. The total recurring transformation benefits recognized during the third quarter were $75 million, or approximately $300 million on an annualized basis, which represents about 30% of the $1 billion target.

Mark A. McCollum, President and Chief Executive Officer, commented, "I am pleased with our third quarter operating results, which once again demonstrate the strength of our transformation and its positive impact on our bottom line. With a $195 million, or 56%, increase in adjusted EBITDA year-to-date compared to this time last year, these results represent a significant achievement and reaffirm the effectiveness of our transformation plan. Our progress reflects the discipline and accountability now being ingrained in our organization.I am confident that, having achieved approximately 30% of our annualized transformation goal, we will reach our $1 billion run-rate improvement target by the end of 2019. I believe we are just starting to see what this company is capable of."

"During the quarter, we fell short of our revenue and cash flow goals, due in large part to transitory supply chain and manufacturing inefficiencies as well as continued challenges converting inventories to cash. We remain intensely focused on generating free cash flow and on reversing these trends."

"The recent announcement of the sale of our laboratory services business earlier this month, combined with the previously announced land drilling rigs divestiture, will generate close to $500 million in cash proceeds, which will be used to reduce debt."

Cash Flow
Net cash used by operating activities was $32 million for the third quarter of 2018, driven by cash payments of $156 million for debt interest and $20 million for cash severance, restructuring, and transformation offset by segment operating income. Third quarter total capital expenditures of $55 million, including investments in held-for-sale land drilling rigs, increased by $7 million, or 15%, sequentially and decreased $10 million, or 15%, from the same quarter in the prior year.

Operating Segments

Western Hemisphere

Third quarter revenues of $762 million were down $7 million, or 1%, sequentially, and down $5 million, or 1%, year-over-year. Compared to the second quarter of 2018, revenues in Canada improved seasonally as the rig count increased following the spring breakup, but were offset by lower results in the United States and negative foreign exchange impacts in Latin America. Year-over-year revenue increases from integrated service projects in Latin America were offset by lower activity levels in Canada as crude differentials expanded,which reduced demand for Completions and Production services and products.

Forward-Looking Statements

This news release contains, and the conference call announced in this release may include, forward-looking statements. These forward-looking statements include, among other things, the Company's quarterly non-GAAP earnings per share, effective tax rate, net debt, forecasts or expectations regarding business outlook, and capital expenditures, and are also generally identified by the words "believe," "project," "expect," "anticipate," "estimate," "outlook," "budget," "intend," "strategy," "plan," "guidance," "may," "should," "could," "will," "would," "will be," "will continue," "will likely result," and similar expressions, although not all forward-looking statements contain these identifying words. Such statements are based upon the current beliefs of Weatherford's management, and are subject to significant risks, assumptions and uncertainties. Should one or more of these risks or uncertainties materialize, or underlying assumptions prove incorrect, actual results may vary materially from those indicated in our forward-looking statements. Readers are also cautioned that forward-looking statements are only predictions and may differ materially from actual future events or results, including possible changes in the expected efficiencies and cost savings associated with our transformation plans; completion of potential dispositions, and the changes in spending and payment timing by our clients and customers. Forward-looking statements are also affected by the risk factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 and those set forth from time-to-time in the Company's other filings with the Securities and Exchange Commission. We undertake no obligation to correct or update any forward-looking statement, whether as a result of new information, future events, or otherwise, except to the extent required under federal securities laws.

We report our financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, Weatherford's management believes that certain non-GAAP financial measures and ratios (as defined under the SEC's Regulation G and Item 10(e) of Regulation S-K) may provide users of this financial information additional meaningful comparisons between current results and results of prior periods and comparisons with peer companies. The non-GAAP amounts shown in the following tables should not be considered as substitutes for operating income, provision for income taxes, net income or other data prepared and reported in accordance with GAAP, but should be viewed in addition to the Company's reported results prepared in accordance with GAAP.

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