New York, November 13, 2012 -- Moody's Investors Service affirmed Weatherford International Ltd.'s (Weatherford, incorporated in Bermuda) Baa2 senior unsecured and Prime-2 commercial paper ratings with a negative outlook. The rating action is in response to the company's identification of a material weakness in internal controls over financial reporting related to the accounting for a percentage of completion contract in Iraq, and continued increases in debt balances.

"Weatherford's latest disclosure of a material weakness represents another internal control challenge for the company, in addition to its previously identified material weakness in internal controls over financial reporting for income taxes," commented Gretchen French, Moody's Vice President. "The material weakness also highlights Moody's continued concern about Weatherford's company-wide controls, particularly given its large breadth of operations. In addition, Weatherford continues to face high and rising debt levels, which limits its financial flexibility."

RATINGS RATIONALE

Weatherford's Baa2 senior unsecured rating is supported by: its scale and leading market positions; its geographic diversification, with a substantial portion of its revenue coming from markets outside the historically more volatile North American market; and its numerous patented products and technologies, which give the company a competitive edge in several markets. While Weatherford's asset profile is indicative of a higher rating, the Baa2 rating is restrained by the company's high financial leverage and lower returns compared to its peers. Weatherford has weak coverage and leverage metrics stemming from acquisitions and periods of sustained negative free cash flow resulting from its aggressive growth profile. In addition, the rating remains restrained by uncertainty about the ultimate outcome of various government investigations.

Management has targeted deleveraging in 2013, with more measured growth and an increased focus on returns on capital employed supporting free cash flow generation. However, there remains a degree of execution risk in achieving lower debt levels.

Revenue recognition issues can potentially be very serious and are typically not seen in investment-grade rated issuers. Weatherford's disclosure of the material weakness and the need for the correction in errors in revenue and operating income for the first and second quarter of 2012 for a total of $24 million and $55 million, respectively, directly impacts key historical credit ratios and raises concerns regarding earnings estimates. With this error, the entire loss on the contract is recognized up front instead of over the remaining life of the contract.

However, the impact on credit ratios is relatively modest, the material weakness appears localized to one contract in Iraq and is expected to be fully remediated by year-end 2012, and Weatherford does not have significant exposure to percentage of completion contracts company-wide. In addition, the company looks to be making progress on becoming current on its historical financial statement filings, with a target completion date of the end of November 2012, and has obtained waivers from its bank lenders and bond holders with respect to its financial reporting covenants.

If Weatherford is unable to become current on its financial statements and remediate its material weaknesses by year-end 2012 or if further material issues are uncovered, the Baa2 rating could be downgraded. In addition, the ratings could be lowered if the company's indebtedness were to become more elevated (debt/EBITDA over 3.5x). While an upgrade is unlikely over the near-term, a significantly lower, sustainable financial leverage profile (debt/EBITDA under 2.5x) and improved margins and returns relative to peers could result in an upgrade.

Weatherford has an adequate liquidity profile. The company maintains a $2.25 billion credit facility maturing in July 2016 to support its $2.25 billion commercial paper program. Drawings on the revolver are not subject to a MAC clause and the company has access to same day availability for draws up to the full facility size. Weatherford has received a waiver from its bank lenders, waiving compliance with its financial reporting obligations to no later than March 19, 2013. The waiver also limits total debt to $10 billion ($8.9 billion at September 30, 2012). Once Weatherford becomes current on its financial statements, the financial covenant limiting debt-to-capitalization to 60% (as compared to an estimated 49% at September 30, 2012) will be re-instated.

Ratings affirmed include:

Weatherford International Ltd. (Bermuda)

.... Senior Unsecured Notes rated Baa2

.Senior Unsecured Shelf Rating (P)Baa2

.Subordinate Shelf Rating (P)Baa3

.Preferred Shelf Rating (P)Ba1

....Commercial Paper Rating P-2

Weatherford International, Inc. (Delaware)

.... Senior Unsecured Notes rated Baa2

.Senior Unsecured Shelf Rating (P)Baa2

.Subordinate Shelf Rating (P)Baa3

The principal methodology used in rating Weatherford was the Global Oilfield Services Industry Methodology published in December 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Weatherford International Ltd., headquartered in Switzerland, is a diversified international energy service and manufacturing company that provides a variety of services and equipment to the oil and gas industry.

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Gretchen French VP - Senior Credit Officer Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Steven Wood MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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