In a nutshell:
-Weatherford is the world’s fourth-largest oilfield services provider
-rose after forecasting increased profits in Mexico through the rest of this year.
-climbed 7.2 percent to $13.59
-Weatherford expects profit margins to rise through the year
-Weatherford finally had met expectations after missing estimates in their last 3 quarters. Investors saw this sign of steadying conditions at the company.
Weatherford International Ltd. (WFT) today reported first quarter 2013 revenues of $3,837 million with net income of $117 million, or $0.15 per diluted share, excluding after-tax losses of $95 million. On a GAAP basis, our net income for the first quarter of 2013 was $22 million, or $0.03 per diluted share. The excluded after-tax losses included:
- $61 million of foreign exchange losses recognized upon the devaluation of the Venezuelan bolivar;
- $18 million in professional fees associated with our income tax remediation efforts;
- $8 million associated with legacy lump sum contracts in Iraq; and
- $8 million in severance, exit and other charges.
The Non-GAAP effective tax rate for the quarter was 28%.
First quarter revenues of $3,837 million were seven percent higher than the same period last year and down five percent sequentially. International revenues of $2,145 million were up 17 percent over the same period in 2012 and down ten percent sequentially. North America revenue of $1,692 million was up one percent sequentially, and down four percent versus the same quarter of 2012.
Segment operating income was $429 million on a GAAP basis. Adjusted for excluded items, segment operating income of $432 million was down eight percent sequentially, and down 23 percent from the same quarter of 2012. On an adjusted basis, corporate expenses were essentially flat compared to the previous quarter.
Consistent with previously published views, the company expects the second half of 2013 to show modest growth in North America revenues and operating income. Latin America will maintain a steady improvement throughout the year. The outlook for the Eastern Hemisphere remains positive with continued expansion in Europe, Sub-Sahara Africa and Russia, with continued recovery in the Middle East/North Africa and Asia Pacific Region.
The Company maintains its estimate of an annual effective tax rate for 2013 of 34%.
North AmericaNorth America revenues for the quarter were $1,692 million, a four percent decrease over the same quarter in the prior year and up one percent sequentially. The quarter's operating income was $224 million, down $134 million, or 37 percent from the same quarter in the prior year and down one percent, sequentially. This result is consistent with the decline in US land rig count relative to the first quarter of 2012 and the continued oversupply of hydraulic fracturing capacity. In addition, the bulk sale of our US guar inventory held at market value reduced North America margins.
Middle East/North Africa/Asia PacificFirst quarter revenues of $785 million were up $190 million, or 32 percent higher than the first quarter of 2012, and $66 million, or eight percent lower sequentially. The sequential decline is typical of seasonal effects in Asia. The current quarter's operating income of $45 million decreased $8 million, or 15 percent from the same quarter in the prior year, and declined 22 percent sequentially.
Europe/Sub-Sahara Africa/RussiaFirst quarter revenues of $633 million were eleven percent higher than the first quarter of 2012 and down five percent from the prior quarter Sequentially, the decline is attributable to normal winter seasonality, and its first quarter impact on the North Sea and Russia. The current quarter's operating income of $65 million was essentially flat when compared to the same quarter in the prior year, and was up $6 million, or 10 percent from the prior quarter.
Latin AmericaFirst quarter revenues of $727 million were up $56 million or eight percent compared to the first quarter of 2012, and down $129 million, or 15 percent sequentially. The current quarter's operating income of $98 million increased 18 percent compared to the same quarter in the prior year, and decreased 22 percent from the prior quarter.
Liquidity and Net Debt Net debt increased $308 million sequentially, primarily as a result of the timing of interest payments associated with our senior notes as well as an increase in working capital of $67 million and certain prepayment items. Driving the change in working capital, days sales outstanding increased to 90 days and days sales in inventory increased to 88 days.
Non-GAAP Performance MeasuresNon-GAAP performance measures and corresponding reconciliations to GAAP financial measures have been provided to offer meaningful comparisons between current results and results in prior operating periods.
Weatherford International Ltd.
|
|||||
Consolidated Condensed Statements of Operations
|
|||||
(Unaudited)
|
|||||
(In Millions)
|
|||||
Three Months Ended
|
|||||
3/31/2013
|
3/31/2012
|
||||
Net Revenues:
|
|||||
North America
|
$ 1,692
|
$ 1,754
|
|||
Middle East/North Africa/Asia
|
785
|
595
|
|||
Europe/SSA/Russia
|
633
|
571
|
|||
Latin America
|
727
|
671
|
|||
3,837
|
3,591
|
||||
Operating Income (Expense):
|
|||||
North America
|
224
|
358
|
|||
Middle East/North Africa/Asia
|
45
|
53
|
|||
Europe/SSA/Russia
|
65
|
66
|
|||
Latin America
|
98
|
83
|
|||
Research and Development
|
(67)
|
(62)
|
|||
Corporate Expenses
|
(48)
|
(50)
|
|||
Other Items
|
(38)
|
(78)
|
|||
279
|
370
|
||||
Other Income (Expense):
|
|||||
Interest Expense, Net
|
(131)
|
(112)
|
|||
Devaluation of Venezuelan Bolivar
|
(100)
|
-
|
|||
Other, Net
|
(13)
|
(18)
|
|||
Income (Loss) Before Income Taxes
|
35
|
240
|
|||
Benefit (Provision) for Income Taxes:
|
|||||
Provision for Operations
|
(48)
|
(116)
|
|||
Adjustments to Provision
|
43
|
6
|
|||
(5)
|
(110)
|
||||
Net Income (Loss)
|
30
|
130
|
|||
Net Income Attributable to Noncontrolling Interests
|
(8)
|
(7)
|
|||
Net Income (Loss) Attributable to Weatherford
|
$ 22
|
$ 123
|
|||
Earnings Per Share Attributable to Weatherford
|
|||||
Basic
|
$ 0.03
|
$ 0.16
|
|||
Diluted
|
$ 0.03
|
$ 0.16
|
|||
Weighted Average Shares Outstanding:
|
|||||
Basic
|
769
|
760
|
|||
Diluted
|
773
|
766
|
|||
Weatherford International Ltd.
|
||||||||||
Selected Statements of Operations Information
|
||||||||||
(Unaudited)
|
||||||||||
(In Millions)
|
||||||||||
Three Months Ended
|
||||||||||
3/31/2013
|
12/31/2012
|
9/30/2012
|
6/30/2012
|
3/31/2012
|
||||||
Net Revenues:
|
||||||||||
North America
|
$ 1,692
|
$ 1,682
|
$ 1,725
|
$ 1,663
|
$ 1,754
|
|||||
Middle East/North Africa/Asia
|
785
|
851
|
700
|
649
|
595
|
|||||
Europe/SSA/Russia
|
633
|
669
|
626
|
653
|
571
|
|||||
Latin America
|
727
|
856
|
768
|
782
|
671
|
|||||
$ 3,837
|
$ 4,058
|
$ 3,819
|
$ 3,747
|
$ 3,591
|
||||||
Three Months Ended
|
||||||||||
3/31/2013
|
12/31/2012
|
9/30/2012
|
6/30/2012
|
3/31/2012
|
||||||
Operating Income (Expense):
|
||||||||||
North America
|
$ 224
|
$ 226
|
$ 297
|
$ 226
|
$ 358
|
|||||
Middle East/North Africa/Asia
|
45
|
58
|
36
|
24
|
53
|
|||||
Europe/SSA/Russia
|
65
|
59
|
88
|
102
|
66
|
|||||
Latin America
|
98
|
125
|
97
|
90
|
83
|
|||||
Research and Development
|
(67)
|
(63)
|
(68)
|
(64)
|
(62)
|
|||||
Corporate Expenses
|
(48)
|
(49)
|
(48)
|
(49)
|
(50)
|
|||||
Goodwill and Equity Investment Impairment
|
-
|
-
|
-
|
(793)
|
-
|
|||||
Sanctioned Country Loss Contingency
|
-
|
-
|
-
|
(100)
|
-
|
|||||
Other Items
|
(38)
|
(111)
|
(87)
|
(68)
|
(78)
|
|||||
$ 279
|
$ 245
|
$ 315
|
$ (632)
|
$ 370
|
||||||
Three Months Ended
|
||||||||||
3/31/2013
|
12/31/2012
|
9/30/2012
|
6/30/2012
|
3/31/2012
|
||||||
Product Line Revenues:
|
||||||||||
Formation Evaluation and Well Construction(1)
|
$ 2,273
|
$ 2,348
|
$ 2,128
|
$ 2,058
|
$ 2,034
|
|||||
Completion and Production(2)
|
1,564
|
1,710
|
1,691
|
1,689
|
1,557
|
|||||
$ 3,837
|
$ 4,058
|
$ 3,819
|
$ 3,747
|
$ 3,591
|
||||||
Three Months Ended
|
||||||||||
3/31/2013
|
12/31/2012
|
9/30/2012
|
6/30/2012
|
3/31/2012
|
||||||
Depreciation and Amortization:
|
||||||||||
North America
|
$ 108
|
$ 108
|
$ 108
|
$ 101
|
$ 95
|
|||||
Middle East/North Africa/Asia
|
93
|
94
|
90
|
85
|
83
|
|||||
Europe/SSA/Russia
|
71
|
71
|
63
|
60
|
61
|
|||||
Latin America
|
68
|
63
|
61
|
59
|
55
|
|||||
Research and Development and Corporate
|
6
|
7
|
7
|
6
|
5
|
|||||
$ 346
|
$ 343
|
$ 329
|
$ 311
|
$ 299
|
||||||
(1)
|
Formation Evaluation and Well
Construction includes Drilling Services, Well Construction, Integrated
Drilling, Wireline and Evaluation Services, Drilling Tools and Fishing
and Re-entry.
|
|||||||||
(2)
|
Completion and Production
includes Artificial Lift Systems, Stimulation and Chemicals, Completion
Systems and Pipeline and Specialty Services
|
|||||||||
We report our financial
results in accordance with 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) may provide users of this financial information additional
meaningful comparisons between current results and results in prior
periods. The non-GAAP financial measures we may present from time to
time include: (1) operating income or income from continuing operations
excluding certain charges or amounts, (2) the provision for income taxes
excluding discrete items and (3) the resulting non-GAAP net income and
per share amounts. These adjusted amounts are not measures of financial
performance under GAAP. Accordingly, these amounts should not be
considered as a substitute for operating income, provision for income
taxes, net income or other data prepared and reported in accordance with
GAAP. See the table below for supplemental financial data and
corresponding reconciliations to GAAP financial measures for the three
months ended March 31, 2013, December 31, 2012, and March 31, 2012.
Non-GAAP financial measures should be viewed in addition to, and not as
an alternative to, the Company's reported results prepared in accordance
with GAAP.
|
Weatherford International Ltd.
|
|||||||||
Reconciliation of GAAP to Non-GAAP Financial Measures
|
|||||||||
(Unaudited)
|
|||||||||
(In Millions, Except Per Share Amounts)
|
|||||||||
Three Months Ended
|
|||||||||
3/31/2013
|
12/31/2012
|
3/31/2012
|
|||||||
Operating Income:
|
|||||||||
GAAP Operating Income
|
$ 279
|
$ 245
|
$ 370
|
||||||
Tax Remediation and Restatement Expenses
|
21
|
50
|
15
|
||||||
Legacy Contracts (a)
|
3
|
30
|
31
|
||||||
Other Adjustments
|
14
|
31
|
32
|
||||||
Non-GAAP Operating Income
|
$ 317
|
$ 356
|
$ 448
|
||||||
Income (Loss) Before Income Taxes:
|
|||||||||
GAAP Income (Loss) Before Income Taxes
|
$ 35
|
$ 89
|
$ 240
|
||||||
Devaluation of Venezuelan Bolivar
|
100
|
-
|
-
|
||||||
Tax Remediation and Restatement Expenses
|
21
|
50
|
15
|
||||||
Legacy Contracts
|
3
|
30
|
31
|
||||||
Other Adjustments
|
14
|
31
|
29
|
||||||
Non-GAAP Income (Loss) Before Income Taxes
|
$ 173
|
$ 200
|
$ 315
|
||||||
Benefit (Provision) for Income Taxes:
|
|||||||||
GAAP Benefit (Provision) for Income Taxes
|
$ (5)
|
$ (203)
|
$ (110)
|
||||||
Devaluation of Venezuelan Bolivar
|
(39)
|
-
|
-
|
||||||
Tax Remediation and Restatement Expenses
|
(3)
|
(7)
|
(3)
|
||||||
Legacy Contracts
|
5
|
34
|
-
|
||||||
Other Adjustments
|
(6)
|
(8)
|
(3)
|
||||||
Non-GAAP Benefit (Provision) for Income Taxes
|
$ (48)
|
$ (184)
|
$ (116)
|
||||||
Net Income (Loss) Attributable to Weatherford:
|
|||||||||
GAAP Net Income (Loss)
|
$ 22
|
$ (122)
|
$ 123
|
||||||
Total Charges, net of tax
|
95
|
(b)
|
130
|
(c)
|
69
|
(d)
|
|||
Non-GAAP Net Income
|
$ 117
|
$ 8
|
$ 192
|
||||||
Diluted Earnings (Loss) Per Share Attributable to Weatherford:
|
|||||||||
GAAP Diluted Earnings (Loss) per Share
|
$ 0.03
|
$ (0.16)
|
$ 0.16
|
||||||
Total Charges, net of tax
|
0.12
|
0.17
|
0.09
|
||||||
Non-GAAP Diluted Earnings per Share
|
$ 0.15
|
$ 0.01
|
$ 0.25
|
||||||
GAAP Effective Tax Rate (e)
|
14%
|
228%
|
46%
|
||||||
Annual Effective Tax Rate (f)
|
28%
|
92%
|
37%
|
||||||
Note (a): The revenues
associated with the legacy lump sum contracts in Iraq were $166
million, $177 million and $51 million in each of the three months ended
March 31, 2013, December 31, 2012, and March 31, 2012, respectively.
|
||||||||
Note (b): Non-GAAP
adjustments are comprised of (i) a charge for the devaluation of the
Venezuelan Bolivar of $61 million, (ii) tax restatement and remediation
expenses of $18 million, (iii) $8 million in operating losses and tax
expense related to legacy lump sum contracts in Iraq, (iv) $8 million in
other adjustments consisting of severance and other charges including
$3 million in investigation related expenses.
|
||||||||
Note (c): Non-GAAP
adjustments are comprised of (i) tax restatement and remediation
expenses of $43 million, (ii) $64 million in operating losses and tax
expense related to legacy lump sum contracts in Iraq, (iii) $23 million
in other adjustments consisting of severance and other charges including
$7 million in investigation related expenses.
|
||||||||
Note (d): Non-GAAP
adjustments are comfprised of (i) tax restatement and remediation
expenses of $15 million, (ii) $31 million in operating losses and tax
expense related to legacy lump sum contracts in Iraq, (iii) $29 million
in other adjustments consisting of severance and other charges including
$2 million in investigation related expenses.
|
||||||||
Note (e): GAAP Effective Tax Rate is GAAP provision for income taxes divided by GAAP income before income taxes.
|
||||||||
Note (f): Annual Effective Tax Rate is the Non-GAAP provision for income taxes divided by Non-GAAP income before income taxes.
|
Weatherford International Ltd.
|
||||||||||||
Selected Balance Sheet Data
|
||||||||||||
(Unaudited)
|
||||||||||||
(In Millions)
|
||||||||||||
3/31/2013
|
12/31/2012
|
9/30/2012
|
6/30/2012
|
3/31/2012
|
||||||||
Assets:
|
||||||||||||
Cash and Cash Equivalents
|
$ 286
|
$ 300
|
$ 365
|
$ 381
|
$ 339
|
|||||||
Accounts Receivable, Net
|
3,850
|
3,885
|
3,911
|
3,608
|
3,358
|
|||||||
Inventories, Net
|
3,744
|
3,675
|
3,676
|
3,399
|
3,301
|
|||||||
Property, Plant and Equipment, Net
|
8,299
|
8,299
|
8,122
|
7,733
|
7,591
|
|||||||
Goodwill and Intangibles, Net
|
4,485
|
4,637
|
4,653
|
4,581
|
5,152
|
|||||||
Equity Investments
|
660
|
646
|
642
|
629
|
634
|
|||||||
Liabilities:
|
||||||||||||
Accounts Payable
|
2,191
|
2,108
|
2,023
|
1,635
|
1,684
|
|||||||
Short-term Borrowings and Current Portion
|
||||||||||||
of Long-term Debt
|
1,896
|
1,585
|
1,606
|
1,263
|
1,902
|
|||||||
Long-term Debt
|
7,032
|
7,049
|
7,300
|
7,311
|
5,989
|
|||||||
Weatherford International Ltd.
|
||||||
Net Debt
|
||||||
(Unaudited)
|
||||||
(In Millions)
|
||||||
Change in Net Debt for the Three Months Ended 3/31/2013:
|
||||||
Net Debt at 12/31/2012
|
$ (8,334)
|
|||||
Operating Income
|
279
|
|||||
Depreciation and Amortization
|
346
|
|||||
Other Items
|
38
|
|||||
Capital Expenditures
|
(400)
|
|||||
Increase in Working Capital
|
(67)
|
|||||
Income Taxes Paid
|
(124)
|
|||||
Interest Paid
|
(183)
|
|||||
Acquisitions and Divestitures of Assets and Businesses, Net
|
81
|
|||||
Other
|
(278)
|
|||||
Net Debt at 3/31/2013
|
$ (8,642)
|
|||||
Components of Net Debt
|
3/31/2013
|
12/31/2012
|
||||
Cash
|
$ 286
|
$ 300
|
||||
Short-term Borrowings and Current Portion of Long-term Debt
|
(1,896)
|
(1,585)
|
||||
Long-term Debt
|
(7,032)
|
(7,049)
|
||||
Net Debt
|
$ (8,642)
|
$ (8,334)
|
||||
"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.
|
|||||||
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