Weatherford International plc — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Amounts are in millions of dollars, except per-share data. Weatherford provides oilfield equipment and services through Drilling and Evaluation, Well Construction and Completions, and Production and Intervention.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $1,064 | $903 | $2,002 | $1,735 |
| Operating income | $104 | $25 | $122 | $12 |
| Net income (loss) attributable to Weatherford | $6 | $(78) | $(74) | $(194) |
| EPS attributable to Weatherford | $0.08 | $(1.11) | $(1.04) | $(2.77) |
| Segment adjusted EBITDA | $204 | $147 | $369 | $267 |
- Q2 revenue rose 18% year over year; six-month revenue rose 15%. Management attributed growth to stronger demand across all segments.
- Segment adjusted EBITDA margin improved to 19.5% in Q2 from 16.7%; for the first half it improved to 18.8% from 15.7%. The filing cites favorable sales mix, higher margin fall-through, and a more efficient cost structure.
- Q2 cost of products and services was 71% of revenue, versus 75% a year earlier. SG&A and R&D were 21% of revenue, versus 23%.
- For the first half, operating cash flow was a use of $4, versus $120 provided in 2021. Capital expenditures were $44; investing activities provided $7 and financing activities used $25. Operating cash flow reflected working-capital investment and interest payments, partly offset by collections and receivables monetization.
- At June 30, cash and cash equivalents were $879 and restricted cash was $211. Total current assets were $3,010 and current liabilities were $1,383.
- Debt totaled $2,430 on the balance sheet, including $64 current and $2,366 long-term. The principal amounts disclosed were $300 of 11% Exit Notes due 2024, $500 of 6.5% secured notes due 2028, and $1.6 billion of 8.625% notes due 2030. A July 11 notice elected to redeem $50 of Exit Notes by August 10.
Changes versus comparable periods
- All three segments grew revenue in Q2: Drilling and Evaluation 20%, Well Construction and Completions 14%, and Production and Intervention 24%. Segment adjusted EBITDA increased in each segment.
- Interest expense declined to $48 in Q2 and $96 for the first half, from $72 and $142, respectively, reflecting prior refinancing and principal repayments. Other expense rose to $32 in Q2 and $48 for the first half, mainly due to foreign-exchange losses and forward-contract effects.
- Revenue growth and improved operating performance moved Q2 to $6 of net income attributable to Weatherford from a $78 loss; the company remained loss-making for the first half.
Outlook, risks, and notable items
- Management anticipated continued improvement in industry activity and projected 2022 consolidated revenue growth in the mid-teens above 2021 levels. Planned 2022 capital spending was $120–$140; expected interest payments were $213 in 2022.
- Management highlighted inflation, supply-chain and logistical constraints, potential recessionary conditions, commodity-price volatility, customer spending, and the cyclical nature of energy services as risks to activity and margins.
- Russia-related sanctions and the conflict may constrain operations or cause lower revenue or asset impairments. Russia represented 6% of revenue in both Q2 and the first half; net assets there, excluding cash, were $168 at June 30. The company reported a $17 charge related to Ukraine in Q1.
- First-half restructuring charges were $20, primarily for a multi-year footprint-consolidation and workforce-efficiency initiative; the remaining restructuring reserve was $27 at June 30. Q2 other charges/credits included a $14 net credit, primarily from asset-sale gains and collections of previously impaired receivables.
- A short-term receivables monetization transaction generated $59 of net cash proceeds in Q2, with a further $16 received in early July. Management noted that factoring programs are uncommitted and may not remain available.
- Letters of credit outstanding were $378, including $205 cash-collateralized; surety bonds outstanding were $299. Calls under these instruments could reduce available liquidity. The filing also describes ongoing shareholder litigation; the outcome and potential loss could not be reliably predicted.
Important facts for investors to verify
- Whether revenue growth and segment margin improvements persist as inflation, supply constraints, and customer spending evolve.
- Whether operating cash flow turns positive after working-capital investment and whether liquidity depends on further receivables monetization or restricted cash.
- Debt repayment plans, interest burden, and the effect of the Exit Notes redemption after quarter-end.
- Financial and operational exposure to Russia-related sanctions, including potential asset impairment or disruption.
- Potential outcomes of litigation, tax examinations, letters of credit, and surety-bond obligations.