Weatherford Announces Third Quarter 2020 Results

- Revenues of $807 million declined 2% sequentially, with growth of 2% in North America offset by declines of 3% internationally

- Operating loss of $60 million and adjusted EBITDA of $104 million

- Cash flows from operations of $127 million and unlevered free cash flow of $107 million

- Total cash of $1.3 billion^[1] as of September 30, 2020; completed transactions that enhanced liquidity and removed substantial doubt language from filings

- Hosted 15^th annual Weatherford Enterprise Software Conference with over 500 clients participating worldwide

HOUSTON, Nov. 3, 2020 /PRNewswire/ -- Weatherford International plc (OTC Pink: WFTLF) ("Weatherford" or the "Company") announced today its results for the third quarter of 2020.

Revenues for the third quarter of 2020 were $807 million, a decline of 2% sequentially and 39% year-on-year. Reported operating loss was $60 million in the third quarter of 2020, compared to an operating loss of $497 million in the second quarter of 2020 and $447 million in the third quarter of 2019. The Company's third-quarter 2020 net loss was $174 million, compared to a net loss of $581 million in the second quarter of 2020 and $821 million in the third quarter of 2019. Third-quarter 2020 cash flows from operations were $127 million and capital expenditures were $27 million.

On a non-GAAP basis:

• Adjusted EBITDA ^[2][3] of $104 million improved 32% sequentially and declined 42% year-on-year and associated margins of 13% increased 328 basis points sequentially and declined 72 basis points year-on-year
• Unlevered free cash flow of $107 million^[2] during the quarter was flat sequentially and improved $312 million year-on-year

Girish Saligram, President and Chief Executive Officer, commented, "I am honored by the opportunity to lead Weatherford and I am excited about the Company's potential to create meaningful value for our shareholders. My objective is for Weatherford to continue to partner with our customers to solve their challenges, while also generating sustainable levels of profitability and positive free cash flow. I believe our Company has a unique combination of key attributes that will enable us to achieve this goal, including a comprehensive technology portfolio, a global footprint, deep customer relationships, an extraordinary culture and a talented employee base that is committed to seeing the Company succeed.

"I am pleased with the organization's continued focus on delivering operational excellence, while also implementing structural improvements to minimize the impact of activity reductions and improve the Company's operating efficiency. We delivered sequential revenue growth of 2% in North America and adjusted segment EBITDA margins expanded by 730 basis points in the Western Hemisphere. We implemented actions to exceed our $800 million annualized cost savings plan and expect further cost and efficiency improvements going forward. We are relentlessly focusing on enhancing liquidity, with the new $500 million financing and the generation of over $100 million in free cash flow, bringing total cash ^[1] to approximately $1.3 billion as of September 30, 2020.

"While our market outlook remains cautious, we are encouraged by the fact that we have started to see activity stabilize in certain geographies and a gradual path to recovery in others. We have extended our runway for capitalizing on new opportunities and we will be working as a team to refine the Company's strategy over the coming months, focusing on leveraging our sustainable competitive advantages in order to achieve our objective. I look forward to updating you on our plans and outlook for 2021 early next year."

Note: Upon completing its financial restructuring in late 2019, the Company adopted fresh-start accounting resulting in Weatherford becoming a new entity for accounting and financial reporting purposes. As required by GAAP, results up to and including December 13, 2019 are presented separately as the predecessor period (the "Predecessor" period) and results from December 14, 2019 and onwards are presented as the successor period (the "Successor" period). The results from these Predecessor and Successor periods are not comparable. Nevertheless, for discussion purposes herein, the Company has presented the results of the Predecessor and Successor periods as we believe this provides the most meaningful basis to analyze our results. 

Notes:
^[1] Includes cash and cash equivalents and restricted cash.
^[2] Adjusted EBITDA excludes, among other items, impairments on long-lived assets, including goodwill, property plant and equipment, right-of-use assets, and inventory. Unlevered free cash flow is calculated as cash flows provided by (used in) operating activities, less capital expenditures plus proceeds from the disposition of assets, plus cash paid for interest. Adjusted EBITDA and unlevered free cash flow are non-GAAP measures. Each measure is defined and reconciled to the most directly comparable GAAP measure in the tables below.
^[3] In the first quarter of 2020 the Company began reporting adjusted EBITDA excluding stock-based compensation expense. Additional detail for the current and historical periods is provided in the tables below.

Leveraging Our Portfolio

The Weatherford team in Brazil has achieved over two years without a lost-time incident as well as a record safety score during its quarterly QHSE review with a customer. These milestones demonstrate the Company's commitment and dedication to high-quality operations and flawless execution as well as high levels of collaboration amongst the One Weatherford team.

Weatherford was awarded a two-year contract by a customer in the Middle East to deliver products and services from our Completions, Liner Hangers and Cementation businesses. Weatherford was able to deliver meaningful value to the customer by leveraging our manufacturing center of excellence in Abu Dhabi.

Weatherford was also awarded the first managed pressure drilling (MPD) contract by a customer in the Middle East. The multi-year contract will deploy Weatherford's intelligent MPD solution across all well types and covers the customer's entire scope of work. The introduction of MPD services will improve the customer's ability to address drilling hazards while enabling them to drill wells faster, cheaper, and safer with less impact on the reservoir.

The Company has and will continue to deploy its innovative solutions to meet customer's needs, including:

• In the United Kingdom, Weatherford successfully deployed its Vero^® automated connection integrity solution to run a chrome completion string in record time on a high-pressure, high-temperature asset. The Vero solution doubled previous run rates and saved the operator two days of rig time;
• A major operator in the United States will deploy the ForeSite^® production optimization software platform across their assets in an entire basin, allowing them to monitor and manage thousands of wells with an exception-based methodology that will help improve production and reduce costs by identifying well reliability issues in advance. This implementation allowed the customer to securely migrate historical production and workover records into ForeSite while also consolidating eight systems; and
• Weatherford will deploy its Centro^™ digital well delivery solution for a national oil company in the Middle East. The service will combine offerings from the Company's directional drilling and MPD businesses and will also utilize our real-time operations center in the region.

Expanding Our Margins

The Company has implemented actions to exceed its previously-announced cost savings plan, which is expected to generate over $800 million of savings on an annualized basis and expects further cost and efficiency improvements going forward.

The impact of the Company's aggressive actions are materializing in our results, with third-quarter 2020 adjusted EBITDA margins increasing 328 basis points sequentially. Compared to the third quarter of 2019, adjusted EBITDA margins were down 72 basis points despite a 39% reduction in revenue over the same period, yielding year-on-year adjusted EBITDA decrementals of 15% (with decrementals calculated as the change in adjusted EBITDA divided by the change in revenues).

Enhancing Our Liquidity

The Company's liquidity position was enhanced during the quarter through both external and internal actions, with total cash increasing by $537 million sequentially to approximately $1.3 billion as of September 30, 2020.

On August 28, 2020 the Company completed a series of financing transactions, including issuing $500 million of senior secured first lien notes (the "Senior Secured Notes"), terminating its senior secured asset-based lending agreement (the "ABL Credit Agreement"), and amending and increasing the size of its senior secured letter of credit agreement (the "LC Credit Agreement") to $215 million.

These transactions meaningfully enhanced the Company's financial strength, with the proceeds of the Senior Secured Notes being used to terminate the ABL Credit Agreement, increase liquidity and support the issuance of letters of credit. In addition, by terminating the ABL Credit Agreement, Weatherford has eliminated the risk of a potential breach of the associated financial covenants. As a result, the Company has alleviated the previously disclosed substantial doubt of our ability to continue as a going concern.

Third-quarter 2020 unlevered free cash flow of $107 million was flat sequentially and improved $312 million year-on-year, due to the monetization of net working capital, reduced capital expenditures and our actions to expand margins.

Results by Operating Segment

Western Hemisphere

Third-quarter 2020 Western Hemisphere revenues of $316 million increased 2% sequentially and decreased 53% year-on-year.

In North America, third-quarter 2020 revenues of $175 million increased by 2% sequentially largely due to increased production and workover activity as well as seasonal activity increases in Canada following spring break-up. The 2% sequential revenue increase compares favorably to the corresponding 28% decline in average North America rig count and is in-line with the estimated growth of hydrocarbon production in North America during the quarter.

Third-quarter 2020 revenues of $141 million in Latin America increased 2% sequentially, with activity in Argentina and Colombia beginning to recover from shutdowns associated with the COVID-19 pandemic which was partially offset by reduced activity and lower customer spending in other countries.

Third-quarter 2020 adjusted segment EBITDA of $29 million increased $23 million sequentially and associated margins of 9% increased by 730 basis points versus the second quarter of 2020. The growth in adjusted segment EBITDA was driven by increased activity in North and Latin America as well as the impact of the Company's cost reduction actions, as evidenced by adjusted segment EBITDA decrementals of 9% year-on-year.

Eastern Hemisphere

Third-quarter 2020 Eastern Hemisphere revenues of $491 million declined 4% sequentially and 23% year-on-year.

In the Middle East, North Africa, and Asia, third-quarter 2020 revenues of $319 million declined 6% sequentially, primarily due to reduced drilling activity in the Middle East associated with OPEC+ production cuts and the COVID-19 pandemic, which were partially offset by growth in Asia associated with increased Production and Completions product sales.

Third-quarter 2020 revenues in Europe, Sub Saharan Africa and Russia of $172 million increased 1% sequentially, as activity increases in Europe due to the easing of restrictions associated with the COVID-19 pandemic were partially offset by lower Production and Completions product sales in Russia.

Third-quarter 2020 adjusted segment EBITDA of $104 million increased $4 million sequentially and associated margins of 21% improved 160 basis points versus the second quarter of 2020. The increase in adjusted segment EBITDA was driven by the Company's cost savings efforts and a one-time benefit related to capital sales made during the third quarter of 2019, which were partially offset by lower activity levels in the Middle East.

Restructuring Charges

Weatherford recorded restructuring and other charges of $47 million during the quarter related to the Company's headcount reductions, facility consolidation, and other activities.

About Weatherford 

Weatherford is a leading wellbore and production solutions company. Operating in more than 80 countries, the Company answers the challenges of the energy industry with its global talent network of approximately 18,000 team members and approximately 400 operating locations, including manufacturing, research and development, service, and training facilities. Visit https://www.weatherford.com/ for more information or connect on LinkedIn, Facebook, Twitter, Instagram, or YouTube.

Conference Call Details

Weatherford will host a conference call on Wednesday, November 4, 2020, to discuss the results for the third quarter ending September 30, 2020. The conference call is scheduled to begin at 8:00 a.m. Eastern Time (7:00 a.m. Central Time).

Listeners are encouraged to download the accompanying presentation slides which will be available in the investor relations section of the Company's website.

Listeners can access the conference call online at https://www.weatherford.com/en/investor-relations/investor-news-and-events/events/ or by dialing +1 877-328-5344 (within the U.S.) or +1 412-902-6762 (outside of the U.S.) and asking for the Weatherford conference call. Listeners should log in or dial in approximately 10 minutes prior to the start of the call.

A telephonic replay of the conference call will be available until November 18, 2020, at 5:00 p.m. Eastern Time. To access the replay, please dial +1 877-344-7529 (within the U.S.) or +1 412-317-0088 (outside of the U.S.) and reference conference number 10148387.

Contacts

For Investors:
Sebastian Pellizzer
Senior Director, Investor Relations
+1 713-836-7777
investor.relations@weatherford.com

For Media:
Christopher Wailes
Director, Global Media Engagement
+1 832-851-8308
christopher.wailes@weatherford.com

Forward-Looking Statements

This news release contains forward-looking statements concerning, among other things, the Company's quarterly and full-year net debt, forecasts or expectations regarding business outlook, cost savings plans, 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 cautioned that forward-looking statements are only predictions and may differ materially from actual future events or results, including the price and price volatility of oil and natural gas; the extent or duration of business interruptions, demand for oil and gas and depressed commodity prices associated with COVID-19 pandemic; general global economic repercussions related to COVID-19 pandemic; the macroeconomic outlook for the oil and gas industry; and operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions; our ability to generate cash flow from operations to fund our operations; and the realization of additional cost savings and operational efficiencies. 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, 2019, the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and June 30, 2020, 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.