Weatherford International plc — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report; the supplied filing text does not provide standalone fourth-quarter financial results. Weatherford provides global oilfield and energy services through Drilling and Evaluation (DRE), Well Construction and Completions (WCC), and Production and Intervention (PRI), operating in approximately 75 countries.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $5.135 billion | $4.331 billion |
| Operating income | $820 million | $412 million |
| Net income attributable to Weatherford | $417 million | $26 million |
| Diluted earnings per share | $5.66 | $0.36 |
| Cash from operating activities | $832 million | $349 million |
| Capital expenditures | $209 million | $132 million |
| Cash and cash equivalents at year-end | $958 million | $910 million |
| Debt carrying value at year-end | $1.883 billion | $2.248 billion |
Revenue increased 19%, driven by higher activity across segments; international revenue grew while North American revenue declined. Cost of products and services fell to 66% of revenue from 70%, and SG&A plus R&D fell to 18% of revenue from 20%. Operating income was approximately 16% of revenue, versus approximately 10% in 2022. Interest expense, net, declined to $123 million from $179 million. The company reported $57 million of net income tax expense; the effective tax rate was 11%.
Segment revenue and adjusted EBITDA were: DRE, $1.536 billion and $422 million; WCC, $1.800 billion and $455 million; PRI, $1.472 billion and $323 million. Segment adjusted EBITDA margins improved year over year to 27.5%, 25.3%, and 21.9%, respectively.
Liquidity, debt, and cash flow
Operating cash flow rose to $832 million, partly reflecting collections and $140 million received in the fourth quarter from the company’s largest Mexican customer through a third-party secured loan arrangement. Investing cash outflow was $289 million, including $209 million of capital spending and net Blue Chip Swap (BCS) security purchases. Financing cash outflow was $514 million, including $386 million of debt repayments and repurchases.
At year-end, restricted cash was $105 million. Weatherford had no borrowings under its $550 million credit agreement, with $376 million of letters of credit outstanding. It also had $594 million of surety bonds outstanding. Debt consisted principally of 6.5% secured notes due 2028 and 8.625% senior notes due 2030; the 11% Exit Notes were fully repaid in 2023. After year-end, the company repurchased $151 million principal of the 2028 notes, leaving $97 million principal outstanding. Management expects annual interest payments of about $144 million and plans 2024 capital spending within a rolling 3–5% of revenue framework.
Material changes and unusual items
- Revenue rose 19% and operating income nearly doubled from 2022; every reportable segment increased revenue and adjusted EBITDA.
- Operating cash flow increased substantially, while capital expenditures also rose. The company reduced debt through repayments and note repurchases.
- The company recorded a $57 million loss on BCS transactions in Argentina, conducted to remit U.S. dollars amid currency controls; other expense, net, was $129 million, primarily reflecting Argentine peso currency losses.
- The fourth-quarter Mexican customer financing arrangement involved a credit default swap (CDS). Its notional balance was $130 million at year-end and increased to $260 million in January 2024 after a further customer payment. Weatherford could owe the outstanding notional, net of recoveries, following a loan default; management reported no known default as of the filing date.
- On February 1, 2024, Weatherford agreed to acquire ISI Holding Company and Probe Technologies to strengthen its wireline business, for $6 million cash and 844,702 shares, with potential additional earnout consideration.
- The Fifth Circuit affirmed dismissal of the GAMCO shareholder litigation in December 2023. Other claims and litigation remain; the filing says unexpected uninsured losses could be material.
Outlook, risks, and contingencies
Management expects customer activity to continue improving and describes the industry outlook as generally positive, citing energy demand and energy-security priorities. It expects demand for advanced technology, digitalization, automation, and efficiency solutions. No quantified revenue or earnings guidance is provided. Results remain sensitive to commodity prices, customer spending, pricing, market share, supply-chain and labor constraints, and geopolitical conditions.
Key risks include the concentration of revenue and receivables with the largest customer in Mexico (about 10% of 2023 revenue and 22% of year-end receivables), the CDS exposure, currency volatility and restrictions on repatriating cash, and continuing operations in Russia amid sanctions and possible nationalization. Russia accounted for approximately 6% of 2023 revenue; year-end Russian operations included $62 million of cash. Other risks include commodity-price cyclicality, supplier disruption, environmental and climate regulation, cybersecurity and operational incidents, tax uncertainty, and debt covenants. Approximately $92 million of cash could not be immediately repatriated at year-end. A Texas groundwater remediation obligation, estimated at up to $11 million over 20–30 years, remained recorded and unchanged.
The company had $1.3 billion of valuation allowances against deferred tax assets and $203 million of uncertain tax positions. Management stated that Ireland’s implementation of the OECD Pillar Two minimum tax was not expected to materially increase taxes, while future adoption elsewhere could. The financial statements received an unqualified audit opinion; KPMG also concluded internal control over financial reporting was effective. The auditor identified impairment-trigger assessment for long-lived assets as a critical audit matter; no long-lived-asset impairment was recorded in 2023.
Important facts for investors to verify
- Whether collections from the largest Mexican customer remain timely, and how the CDS notional balance and credit exposure evolve.
- Whether operating cash flow remains strong after working-capital demands, factoring activity, and the customer-related financing arrangement.
- Progress on debt reduction, interest obligations, covenant headroom, and availability of liquidity after letters of credit and surety commitments.
- Whether the BCS-related losses, Argentine currency exposure, and limits on cash repatriation recur or worsen.
- Actual 2024 activity, margins, and capital expenditures versus management’s qualitative outlook and 3–5% revenue capital-spending framework.
- Developments in Russia, including sanctions, asset restrictions, and potential nationalization; and the terms and integration of the announced acquisitions.