Business context and reporting period
Weatherford International plc filed this unaudited Form 10-Q for the three months ended March 31, 2023. The company provides global oilfield equipment and services through Drilling and Evaluation (DRE), Well Construction and Completions (WCC), and Production and Intervention (PRI), operating in approximately 75 countries.
Financial performance
Amounts are in millions of dollars except per-share data and percentages. Comparisons are with the three months ended March 31, 2022.
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $1,186 | $938 |
| Operating income | $185 | $18 |
| Income (loss) before tax | $119 | $(46) |
| Net income (loss) attributable to Weatherford | $72 | $(80) |
| Diluted earnings (loss) per share | $0.97 | $(1.14) |
| Cash from (used in) operating activities | $84 | $(64) |
| Capital expenditures | $64 | $20 |
Revenue increased 26%: services rose 25% to $741 million and products rose 29% to $445 million. Management attributed approximately 80% of revenue growth to higher customer demand. Cost of products and services was 67% of revenue, versus 73% a year earlier; SG&A and R&D together were 18% of revenue, versus 21%. Net income attributable to Weatherford represented approximately 6% of revenue; the prior period had a net loss.
Segment revenue and adjusted EBITDA were: DRE $372 million and $108 million; WCC $421 million and $96 million; PRI $349 million and $68 million. Adjusted EBITDA margins increased year over year in all three segments: DRE 29.0% (from 20.2%), WCC 22.8% (from 19.5%), and PRI 19.5% (from 13.6%).
Balance sheet, debt and liquidity
At March 31, 2023, cash and cash equivalents were $833 million and restricted cash was $150 million, compared with $910 million and $202 million, respectively, at year-end 2022. Total current assets were $3.043 billion and current liabilities were $1.511 billion. Total debt on the balance sheet was $2.187 billion, including $120 million current and $2.067 billion long-term, versus $2.248 billion at December 31, 2022. Shareholders’ equity was $586 million.
Operating cash flow was $84 million, with working-capital outflows including $96 million from receivables and $45 million from inventory. Investing cash outflow was $64 million, primarily capital spending; financing cash outflow was $127 million, including $66 million of debt repayments and $52 million of tax remittances on vested equity awards. Cash, cash equivalents and restricted cash declined by $129 million to $983 million.
The $400 million credit agreement matures in October 2026, subject to covenants and a condition relating to Exit Notes outstanding. At quarter-end, $253 million of letters of credit were issued under the agreement and $147 million remained available for letters of credit. The company also reported $405 million total letters of credit outstanding and $430 million of surety bonds. Approximately $174 million of cash and cash equivalents could not be immediately repatriated.
Material changes and unusual items
- Operating income improved to $185 million from $18 million, reflecting revenue growth, better cost absorption and utilization, no restructuring charge in Q1 2023 (versus $20 million in Q1 2022), and a $5 million net credit in other charges versus a $19 million net charge.
- Net interest expense fell to $31 million from $48 million, partly due to prior debt repayments and higher interest income. Other expense increased to $35 million from $16 million, primarily due to foreign-exchange losses in the Argentine peso.
- Receivables increased to $1.088 billion from $989 million at year-end 2022. Mexico accounted for 27% of net receivables, up from 21%; management reported payment delays occur there but did not expect material write-offs.
- The company repaid or repurchased $66 million of long-term debt during the quarter. After quarter-end, it announced plans to redeem the remaining $105 million principal of 11% Exit Notes on May 22, 2023, at 102.75% of principal plus accrued interest.
Outlook, risks and contingencies
Management expected customer activity to continue growing in 2023, with improvement particularly in international markets, despite recession concerns. Projected 2023 capital spending was $200–$230 million. The filing provides no specific revenue or earnings guidance. Management said results will depend on activity, pricing, work volume, technology offerings and market-share gains, and identified industry cyclicality and sustained cash generation as key long-term considerations.
Key risks include oil and gas price and demand volatility, inflation, recession concerns, supply-chain constraints, geopolitical developments and sanctions, foreign-exchange exposure, customer payment delays, and the company’s ability to service debt and generate operating cash. Russia represented approximately 6% of revenue in both comparative quarters; the company warned that continued conflict or sanctions escalation could reduce revenue or lead to asset impairments. The GAMCO shareholder litigation remained on appeal, with outcome and potential loss not reliably predictable. Accrued litigation and settlements were $44 million. The company also reported $261 million of uncertain tax positions, which could decrease by up to $34 million within twelve months. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether rising activity and improved segment margins persist, and how pricing and inflation affect profitability.
- Whether receivables—particularly in Mexico—and working-capital needs convert to cash as expected.
- Completion and funding of the announced Exit Notes redemption, and compliance with credit-agreement liquidity and leverage covenants.
- Exposure to Russia-related sanctions and asset risk, Argentine peso losses, litigation outcomes and uncertain tax positions.
- Whether 2023 capital spending remains within the projected $200–$230 million range and cash generation supports debt reduction and other requirements.