Weatherford Reports Second Quarter Results
Tuesday, July 26, 2011 12:00:00 AM ET Weatherford International Ltd. (NYSE and SIX: WFT) today reported second quarter 2011 income of $126 million, or $0.17 per diluted share, excluding an after-tax loss of $16 million. On a GAAP basis, our net income for the second quarter of 2011 was $110 million, or $0.15 per diluted share. The excluded after-tax loss is comprised of $13 million in severance and exit charges and $3 million in government investigation costs.
(Logo: http://photos.prnewswire.com/prnh/19990308/WEATHERFORDLOGO)
Second quarter diluted earnings per share reflect an increase of $0.09 over the second quarter of 2010 diluted earnings per share of $0.08, before charges. Sequentially, the company’s second quarter diluted earnings per share, before charges, were $0.07 higher than the first quarter of 2011. International markets drove the entire sequential improvement in both revenue and profitability.
Second quarter revenues of $3,052 million were the highest in the company’s history, despite the severe negative impact of Canada’s spring break-up. Revenues were 25 percent higher than the same period last year and seven percent higher than the prior quarter. International revenues were up 14 percent sequentially and up 12 percent versus the year ago quarter. North America revenue was down one percent sequentially and up 46 percent versus the second quarter of 2010. The sequential decline in North America was due to the severe impact of the Canadian break-up. The Canadian results overshadowed a very strong performance in the U.S., where sequential revenue growth outpaced rig count by more than two-to-one and operating margins expanded.
Segment operating income of $421 million improved 36 percent year-over-year and 19 percent sequentially. The company’s international operations provided all of the sequential growth compared to the first quarter of 2011 and delivered 51 percent incremental margins. International operating income was down three percent compared to the year ago quarter.
The company expects earnings per share before excluded items of approximately $0.24 to $0.26 in the third quarter of 2011, supported by a seasonal recovery in Canada and steady improvement in the U.S. and international markets. For full-year 2011, the company anticipates that revenue growth will be approximately 25 percent, which is higher than the 20 percent growth rate estimated last quarter. In addition, the company expects international margins in the fourth quarter of 2011 to be meaningfully higher than full-year 2010 margins of 11 percent.
North America
Revenues for the quarter were $1,344 million, which is a 46 percent increase over the same quarter in the prior year and down one percent sequentially. The Stimulation and Chemicals, Artificial Lift and Well Construction product lines contributed strong results for the quarter.
The current quarter’s operating income was $244 million, up $117 million from the second quarter of 2010 and was down $40 million, or 14 percent, compared to the prior quarter. On a sequential basis, strong growth and steadily expanding margins in the U.S. were offset by the impact of the Canadian break-up.
Middle East/North Africa/Asia
Second quarter revenues of $617 million were two percent higher than the second quarter of 2010 and seven percent higher than the prior quarter. Weather improvements in China and Australia and a stronger Iraq helped offset the impact of a full quarter of reduced activity due to political unrest in the Middle East and North Africa. Libya operating expenses cost almost $0.01 per share. The Well Construction, Integrated Drilling and Artificial Lift product lines posted strong sequential performances.
The current quarter’s operating income of $34 million decreased 54 percent as compared to the same quarter in the prior year and increased $23 million compared to the first quarter of 2011.
Europe/West Africa/FSU
Second quarter revenues of $592 million were 17 percent higher than the second quarter of 2010 and 16 percent higher than the prior quarter. The region had strong performances in the North Sea, Russia and Caspian as the winter seasonality abated. The Completion, Stimulation and Chemicals, Drilling Services and Integrated Drilling product lines had the strongest sequential growth.
The current quarter’s operating income of $93 million was up 37 percent compared to the same quarter in the prior year and up $55 million compared to the prior quarter.
Latin America
Second quarter revenues of $498 million were 21 percent higher than both the second quarter of 2010 and the first quarter of 2011. Argentina, Colombia and Venezuela posted strong sequential performances. The Drilling Services, Stimulation and Chemicals and Artificial Lift product lines benefited from improved demand.
The current quarter’s operating income of $51 million increased 22 percent as compared to the same quarter in the prior year and increased $30 million compared to the prior quarter.
Liquidity and Net Debt
Net debt for the quarter increased $144 million, with working capital increasing $193 million during the quarter. Recently, the company successfully renegotiated its unsecured revolving credit facility to increase the size of the facility from $1.75 billion to $2.25 billion and extend the scheduled maturity to July 16, 2016.
Reclassifications and Non-GAAP
Non-GAAP performance measures and corresponding reconciliations to GAAP financial measures have been provided for meaningful comparisons between current results and results in prior operating periods.
Conference Call
The company will host a conference call with financial analysts to discuss the 2011 second quarter results on July 26, 2011 at 7:00 a.m. (CDT). The company invites investors to listen to a play back of the conference call and to access the call transcript at the company’s website, http://www.weatherford.com in the "investor relations" section.
Weatherford is a Swiss-based, multi-national oilfield service company. It is one of the largest global providers of innovative mechanical solutions, technology and services for the drilling and production sectors of the oil and gas industry. Weatherford operates in over 100 countries and employs over 58,000 people worldwide.
Contacts: Andrew P. Becnel +41.22.816.1502
Chief Financial Officer
Karen David-Green +1.713.693.2530
Vice President - Investor Relations
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning, among other things, Weatherford’s prospects for its operations which are subject to certain risks, uncertainties and assumptions. These risks and uncertainties, which are more fully described in Weatherford International Ltd.’s reports and registration statements filed with the SEC, include the impact of oil and natural gas prices and worldwide economic conditions on drilling activity, the outcome of pending government investigations, the demand for and pricing of Weatherford’s products and services, domestic and international economic and regulatory conditions and changes in tax and other laws affecting our business. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary materially from those currently anticipated.
Weatherford International Ltd.
Consolidated Condensed Statements of Income
(Unaudited)
(In Thousands, Except Per Share Amounts)
Three Months Six Months
Ended June 30, Ended June 30,
------------------------------ --------------------------------
2011 2010 2011 2010
--------------- ------------- --------------- ---------------
Net Revenues:
North America $ 1,344,245 $ 917,696 $ 2,704,717 $ 1,806,275
Middle East/North Africa/Asia 617,376 602,602 1,192,902 1,164,658
Europe/West Africa/FSU 592,458 506,177 1,102,881 959,936
Latin America 497,735 410,688 907,500 837,361
3,051,814 2,437,163 5,908,000 4,768,230
--------------- ------------- --------------- ---------------
Operating Income (Expense):
North America 243,613 127,001 527,310 235,433
Middle East/North Africa/Asia 33,964 73,993 44,768 149,707
Europe/West Africa/FSU 92,511 67,366 130,015 113,664
Latin America 51,081 41,991 72,172 68,065
Research and Development (62,231) (53,530) (126,778) (102,387)
Corporate Expenses (43,030) (42,670) (98,859) (87,728)
Revaluation of Contingent Consideration - (81,753) - (92,763)
Severance, Exit and Other Adjustments (18,693) (27,309) (39,525) (71,341)
--------------- ------------- --------------- ---------------
297,215 105,089 509,103 212,650
Other Income (Expense):
Interest Expense, Net (113,684) (95,719) (226,190) (191,058)
Devaluation of Venezuelan Bolivar - - - (63,859)
Other, Net (22,367) (14,186) (40,933) (23,404)
--------------- ------------- --------------- ---------------
Income (Loss) Before Income Taxes 161,164 (4,816) 241,980 (65,671)
Benefit (Provision) for Income Taxes:
Provision for Operations (48,955) (42,646) (70,753) (72,529)
Benefit from Devaluation of Venezuelan Bolivar - - - 23,973
Benefit from Severance, Exit and Other Adjustments 2,827 2,888 5,348 5,331
--------------- ------------- --------------- ---------------
(46,128) (39,758) (65,405) (43,225)
Net Income (Loss) 115,036 (44,574) 176,575 (108,896)
Net Income Attributable to Noncontrolling Interest (4,938) (3,316) (7,276) (7,351)
--------------- ------------- --------------- ---------------
Net Income (Loss) Attributable to Weatherford $ 110,098 $ (47,890) $ 169,299 $ (116,247)
Earnings (Loss) Per Share Attributable to Weatherford:
Basic $ 0.15 $ (0.06) $ 0.23 $ (0.16)
Diluted $ 0.15 $ (0.06) $ 0.22 $ (0.16)
Weighted Average Shares Outstanding:
Basic 750,539 743,209 749,003 740,537
Diluted 757,910 743,209 757,763 740,537
Weatherford International Ltd.
Selected Income Statement Information
(Unaudited)
(In Thousands)
Three Months Ended
-------------------------------------------------------------------------
6/30/2011 3/31/2011 12/31/2010 9/30/2010 6/30/2010
------------- ------------- ------------- ------------- -------------
Net Revenues:
North America $ 1,344,245 $ 1,360,472 $ 1,263,643 $ 1,096,963 $ 917,696
Middle East/North Africa/Asia 617,376 575,526 684,630 601,215 602,602
Europe/West Africa/FSU 592,458 510,423 528,380 496,113 506,177
Latin America 497,735 409,765 446,162 335,461 410,688
$ 3,051,814 $ 2,856,186 $ 2,922,815 $ 2,529,752 $ 2,437,163
Operating Income (Expense):
North America $ 243,613 $ 283,697 $ 261,145 $ 199,029 $ 127,001
Middle East/North Africa/Asia 33,964 10,804 49,222 65,718 73,993
Europe/West Africa/FSU 92,511 37,504 64,398 63,236 67,366
Latin America 51,081 21,091 52,960 40,914 41,991
Research and Development (62,231) (64,547) (57,637) (54,457) (53,530)
Corporate Expenses (43,030) (55,829) (43,283) (41,907) (42,670)
Revaluation of Contingent Consideration - - 15,349 90,011 (81,753)
Severance, Exit and Other Adjustments (18,693) (20,832) (48,775) (87,120) (27,309)
$ 297,215 $ 211,888 $ 293,379 $ 275,424 $ 105,089
Three Months Ended
-------------------------------------------------------------------------
6/30/2011 3/31/2011 12/31/2010 9/30/2010 6/30/2010
------------- ------------- ------------- ------------- -------------
Product Line Revenues
Stimulation and Chemicals $ 544,953 $ 457,557 $ 396,241 $ 333,630 $ 330,483
Artificial Lift Systems 535,016 443,691 471,276 417,464 358,619
Drilling Services 487,559 474,440 481,687 428,930 386,592
Well Construction 382,077 346,052 362,668 332,118 357,096
Integrated Drilling 316,554 319,661 356,871 261,974 317,160
Completion Systems 248,850 206,760 256,676 191,559 177,123
Drilling Tools 182,956 220,538 211,823 200,555 186,236
Wireline and Evaluation Services 160,246 188,778 159,426 155,402 129,365
Re-entry and Fishing 159,851 164,274 165,094 153,569 148,401
Pipeline & Specialty Services 33,752 34,435 61,053 54,551 46,088
------------- ------------- ------------- ------------- -------------
$ 3,051,814 $ 2,856,186 $ 2,922,815 $ 2,529,752 $ 2,437,163
Three Months Ended
-------------------------------------------------------------------------
6/30/2011 3/31/2011 12/31/2010 9/30/2010 6/30/2010
------------- ------------- ------------- ------------- -------------
Depreciation and Amortization:
North America $ 88,006 $ 87,793 $ 83,996 $ 81,843 $ 81,040
Middle East/North Africa/Asia 82,548 81,380 81,596 75,968 75,139
Europe/West Africa/FSU 57,696 56,594 53,408 56,960 52,371
Latin America 48,722 46,388 47,377 46,527 44,753
Research and Development 2,471 1,964 2,398 2,420 2,324
Corporate 2,725 2,936 3,075 3,491 2,943
------------- ------------- ------------- ------------- -------------
$ 282,168 $ 277,055 $ 271,850 $ 267,209 $ 258,570
We report our financial results in accordance with generally accepted accounting principles (GAAP). However, Weatherford’s management believes that certain non-GAAP performance measures and ratios may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. One such non-GAAP financial measure we may present from time to time is operating income or income from continuing operations excluding certain charges or amounts. This adjusted income amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for operating income, net income or other income data prepared in accordance with GAAP. See the table below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three months ended June 30, 2011, March 31, 2011, and June 30, 2010 and for the six months ended June 30, 2011 and June 30, 2010. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP.
Weatherford International Ltd.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
(In Thousands, Except Per Share Amounts)
Three Months Ended Six Months Ended
----------------------------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
June 30, March 31, June 30, June 30, June 30,
2011 2011 2010 2011 2010
--------------------------------------- --------------------------------------- --------------------------------------- --------------------------------------- ---------------------------------------
Operating Income:
GAAP Operating Income $ 297,215 $ 211,888 $ 105,089 $ 509,103 $ 212,650
Severance, Exit and Other Adjustments 18,693 20,832 27,309 39,525 71,341
Revaluation of Contingent Consideration - - 81,753 - 92,763
--------------------------------------- --------------------------------------- --------------------------------------- --------------------------------------- ---------------------------------------
Non-GAAP Operating Income $ 315,908 $ 232,720 $ 214,151 $ 548,628 $ 376,754
Income (Loss) Before Income Taxes:
GAAP Income (Loss) Before Income Taxes $ 161,164 $ 80,816 $ (4,816) $ 241,980 $ (65,671)
Severance, Exit and Other Adjustments 18,693 20,832 27,309 39,525 71,341
Revaluation of Contingent Consideration - - 81,753 - 92,763
Devaluation of Venezuelan Bolivar - - - - 63,859
--------------------------------------- --------------------------------------- --------------------------------------- --------------------------------------- ---------------------------------------
Non-GAAP Income (Loss) Before Income Taxes $ 179,857 $ 101,648 $ 104,246 $ 281,505 $ 162,292
Benefit (Provision) for Income Taxes:
GAAP Benefit (Provision) for Income Taxes $ (46,128) $ (19,277) $ (39,758) $ (65,405) $ (43,225)
Devaluation of Venezuelan Bolivar - - - - (23,973)
Severance, Exit and Other Adjustments (2,827) (2,521) (2,888) (5,348) (5,331)
--------------------------------------- --------------------------------------- --------------------------------------- --------------------------------------- ---------------------------------------
Non-GAAP Benefit (Provision) for Income Taxes $ (48,955) $ (21,798) $ (42,646) $ (70,753) $ (72,529)
Net Income (Loss) Attributable to Weatherford:
GAAP Net Income (Loss) $ 110,098 $ 59,201 $ (47,890) $ 169,299 $ (116,247)
Total Charges, net of tax 15,866 (a) 18,311 (b) 106,174 (c) 34,177 198,659 (d)
--------------------------------------- --------------------------------------- --------------------------------------- --------------------------------------- ---------------------------------------
Non-GAAP Net Income $ 125,964 $ 77,512 $ 58,284 $ 203,476 $ 82,412
Diluted Earnings (Loss) Per Share Attributable to Weatherford:
GAAP Diluted Earnings (Loss) per Share $ 0.15 $ 0.08 $ (0.06) $ 0.22 $ (0.16)
Total Charges, net of tax 0.02 (a) 0.02 (b) 0.14 (c) 0.05 0.27 (d)
--------------------------------------- --------------------------------------- --------------------------------------- --------------------------------------- ---------------------------------------
Non-GAAP Diluted Earnings per Share $ 0.17 $ 0.10 $ 0.08 $ 0.27 $ 0.11
Note (a): This amount is comprised of severance charges of $12 million, net of tax, and costs incurred in connection with on-going investigations by the U.S. government of $3 million. We also incurred charges totaling $1 million, net of tax, for facility closure costs and termination fees.
Note (b): This amount is comprised of a $9 million charge associated with terminating a corporate consulting contract and $8 million for severance costs. We also incurred investigation costs in connection with on-going investigations by the U.S. government.
Note (c): This amount is comprised of an $82 million charge for the revaluation of contingent consideration included as part of our acquisition of the Oilfield Services Division ("OFS") of TNK-BP. We also incurred investigation costs in connection with on-going investigations by the U.S. government and severance charges.
Note (d): This amount is primarily comprised of a $38 million charge, net of tax, related to our supplemental executive retirement plan that was frozen on March 31, 2010 and a $40 million charge, net of tax, related to the devaluation of the Venezuelan Bolivar. In addition, we incurred a charge of $93 million for the revaluation of contingent consideration included as part of our OFS acquisition. We also incurred investigation costs in connection with on-going investigations by the U.S. government and severance charges and facility closure costs.
Weatherford International Ltd.
Consolidated Condensed Balance Sheet
(Unaudited)
(In Thousands)
June 30, December 31,
2011 2010
------------------- -----------------
Current Assets:
Cash and Cash Equivalents $ 329,555 $ 415,772
Accounts Receivable, Net 3,020,645 2,629,403
Inventories 2,939,356 2,590,008
Other Current Assets 1,075,761 856,884
7,365,317 6,492,067
------------------- -----------------
Long-Term Assets:
Property, Plant and Equipment, Net 7,244,754 6,939,754
Goodwill 4,311,104 4,185,477
Other Intangibles, Net 758,765 730,429
Equity Investments 558,668 539,580
Other Assets 266,020 244,347
13,139,311 12,639,587
------------------- -----------------
Total Assets $ 20,504,628 $ 19,131,654
Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt $ 1,113,724 $ 235,392
Accounts Payable 1,517,806 1,335,020
Other Current Liabilities 1,143,402 1,012,567
3,774,932 2,582,979
------------------- -----------------
Long-term Liabilities:
Long-term Debt 6,256,711 6,529,998
Other Liabilities 551,771 553,830
6,808,482 7,083,828
------------------- -----------------
Total Liabilities 10,583,414 9,666,807
------------------- -----------------
Shareholders’ Equity:
Weatherford Shareholders’ Equity 9,862,322 9,400,931
Noncontrolling Interest 58,892 63,916
------------------- -----------------
Total Shareholders’ Equity 9,921,214 9,464,847
------------------- -----------------
Total Liabilities and Shareholders’ Equity $ 20,504,628 $ 19,131,654
Weatherford International Ltd.
Net Debt
(Unaudited)
(In Thousands)
Change in Net Debt for the Three Months Ended June 30, 2011:
Net Debt at March 31, 2011 $ (6,896,637)
Operating Income 297,215
Depreciation and Amortization 282,168
Severance, Exit and Other Adjustments 18,693
Capital Expenditures (387,587)
Increase in Working Capital (179,314)
Income Taxes Paid (69,928)
Interest Paid (58,504)
Acquisitions and Divestitures of Assets and Businesses, Net (19,121)
Foreign Currency Contract Settlements (35,818)
Other 7,953
-------------------
Net Debt at June 30, 2011 $ (7,040,880)
Change in Net Debt for the Six Months Ended June 30, 2011:
Net Debt at December 31, 2010 $ (6,349,618)
Operating Income 509,103
Depreciation and Amortization 559,223
Severance, Exit and Other Adjustments 39,525
Capital Expenditures (743,237)
Increase in Working Capital (479,037)
Income Taxes Paid (135,460)
Interest Paid (234,429)
Acquisitions and Divestitures of Assets and Businesses, Net (38,510)
Foreign Currency Contract Settlements (89,946)
Other (78,494)
-------------------
Net Debt at June 30, 2011 $ (7,040,880)
June 30, March 31, December 31,
Components of Net Debt 2011 2011 2010
------------------- ------------------- -------------------------------------------------
Cash $ 329,555 $ 249,317 $ 415,772
Short-term Borrowings and Current Portion of Long-Term Debt (1,113,724) (619,490) (235,392)
Long-term Debt (6,256,711) (6,526,464) (6,529,998)
------------------- ------------------- -------------------------------------------------
Net Debt $ (7,040,880) $ (6,896,637) $ (6,349,618)
"Net Debt" is debt less cash. Management believes that Net Debt provides useful information regarding the level of Weatherford indebtedness by reflecting cash that could be used to repay debt.
Working capital is defined as accounts receivable plus inventory less accounts payable.
SOURCE Weatherford International Ltd.
