Weatherford International plc — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are primarily with Q1 2020. Weatherford provides oilfield equipment and services globally through its Western Hemisphere and Eastern Hemisphere segments.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $832 million | $1.215 billion |
| Operating loss | $13 million | $822 million |
| Net loss attributable to Weatherford | $116 million | $966 million |
| Loss per share | $1.66 | $13.80 |
| Operating cash flow | $74 million | $30 million |
| Non-GAAP free cash flow | $70 million | $(2) million |
Revenue fell 32% year over year, with declines in both segments: Western Hemisphere revenue was $390 million, down 34%, and Eastern Hemisphere revenue was $442 million, down 30%. Segment operating income was $5 million, compared with $47 million. Approximate operating margin was negative 1.6%; net margin was negative 13.2%.
Cash and cash equivalents were $1.177 billion, plus $166 million of restricted cash, at March 31. Current assets were $3.158 billion and current liabilities $1.364 billion. Debt and short-term borrowings totaled approximately $2.613 billion, including $2.098 billion of 11% Exit Notes and $457 million of 8.75% Senior Secured Notes. Management expects about $275 million of annual interest payments until the notes mature in 2024. The filing reports $1.3 billion of total cash including restricted cash; $169 million was not immediately repatriable.
Changes and drivers
The substantially smaller operating and net losses chiefly reflect the absence of Q1 2020 impairments and restructuring charges: Q1 2020 included $640 million of long-lived asset impairments, $167 million of goodwill impairment, $26 million of restructuring charges and $10 million of other charges. Q1 2021 had no significant impairment or restructuring charges. Lower R&D expense and cost-reduction actions also helped, partly offset by lower customer activity. Interest expense increased to $70 million from $58 million, principally reflecting the additional secured notes.
Sequentially, revenue declined 1%: Western Hemisphere revenue grew 5%, supported by DEI sales and seasonal North American activity, while Eastern Hemisphere revenue declined 6%. Eastern Hemisphere posted a $19 million segment operating loss; Western Hemisphere segment operating income was $24 million.
Outlook, risks and contingencies
Management expected 2021 consolidated revenue to align with current activity and be in line with annualized second-half 2020 results, including low- to mid-single-digit growth in the Western Hemisphere and a low-single-digit contraction in the Eastern Hemisphere. It anticipated a gradual industry recovery in the second half of 2021, with higher activity more likely in 2022. Planned 2021 capital spending was $100–$130 million.
Management cited continuing COVID-19 uncertainty, customer access restrictions, travel constraints, supply and shipping delays, and oilfield activity dependence on commodity prices and customer spending. Other risks include customer payment delays, cost-reduction execution, access to refinancing, and potential calls on letters of credit or surety bonds. The company had $328 million of letters of credit outstanding, including $163 million cash collateral, and $321 million of surety bonds.
Accrued litigation and settlements were $44 million. The GAMCO/Utah Retirement Systems securities litigation remained pending, and the company said outcomes and possible losses could not be reliably predicted. Uncertain tax positions totaled $233 million; up to $3 million may decrease within twelve months. The company stated it believed cash on hand and operating cash flow would cover expected obligations. It also expected its SEC registration and proposed Nasdaq listing under WFRD to be completed in Q2 2021, subject to review and listing approval.
Important facts for investors to verify
- Whether customer activity and regional revenue trends develop in line with management’s 2021 outlook, particularly the weaker Eastern Hemisphere outlook.
- Cash generation, cash availability and restrictions, and the capacity to meet substantial interest costs and 2024 debt maturities.
- COVID-19, supply-chain and customer-access impacts, and the potential effect of letters of credit, surety bonds, litigation or tax matters on liquidity.
- Progress and costs of cost-reduction actions, and completion of the proposed SEC registration and Nasdaq listing.