Weatherford International plc — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a report limited to Q4. Weatherford provides energy equipment and services in approximately 75 countries. In Q4 2021, it changed its reportable segments from geographic regions to Drilling and Evaluation (DRE), Well Construction and Completions (WCC), and Production and Intervention (PRI); prior-period segment data was recast.
Financial performance and position
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $3.645 billion | $3.685 billion |
| Operating income (loss) | $116 million | ($1.486 billion) |
| Net loss attributable to Weatherford | ($450 million) | ($1.921 billion) |
| Operating cash flow | $322 million | $210 million |
| Capital expenditures | $85 million | $154 million |
| Cash and restricted cash | $1.113 billion | $1.285 billion |
| Long-term debt, carrying value | $2.416 billion | $2.601 billion |
Service revenue increased 5% to $2.353 billion, while product revenue fell 10% to $1.292 billion. Costs of services and products were $2.72 billion, or 74.5% of revenue, versus 76.2% in 2020. SG&A and R&D costs totaled $823 million, down 12% year over year. Management attributed improved operating performance to cost reductions, efficiency gains, stronger service activity and the absence of 2020 impairment and restructuring charges.
Segment revenue and adjusted EBITDA were: DRE, $1.066 billion and $186 million; WCC, $1.353 billion and $256 million; PRI, $1.127 billion and $191 million. Total segment adjusted EBITDA was $633 million, up 13%. The company recorded $260 million of net interest expense and a $170 million loss on debt extinguishment and redemption premiums. Income tax expense was $86 million despite a pretax loss; taxes were driven by jurisdictional profits, deemed-profit taxes and withholding taxes.
Material changes and financing
- Revenue declined 1% from 2020, but operating results improved substantially from the prior-year loss, which included $1.053 billion of goodwill and long-lived-asset impairments and $206 million of restructuring charges. No such impairment or restructuring charge was recorded in 2021.
- Operating cash flow rose to $322 million; management said it benefited partly from monetizing working capital accumulated in 2020. Investing cash outflow was $83 million and financing cash outflow was $403 million.
- Weatherford issued $500 million of 6.5% secured notes due 2028 and $1.6 billion of 8.625% senior notes due 2030, repaid its 2024 secured notes, and redeemed most of its 11% Exit Notes. At year-end, $300 million of Exit Notes remained. Refinancing activity generated $170 million of debt-extinguishment losses and redemption premiums.
- Cash and cash equivalents were $951 million and restricted cash was $162 million. The company reported $342 million of outstanding letters of credit and $293 million of surety bonds. It was in compliance with debt and letter-of-credit covenants at year-end; the amended LC facility requires minimum aggregate liquidity of $300 million.
Outlook, risks and contingencies
Management expected 2022 revenue to increase by high single digits to low double digits compared with 2021, as customer activity and energy demand recovered. Planned 2022 capital spending was $175 million to $225 million; expected interest payments were $215 million. Management cited supply shortages, logistics constraints, inflationary pressures and continuing COVID-19 disruption.
Key risks include volatile oil and gas prices and customer spending, the energy transition and ESG-related policy or financing shifts, international political and currency risks, supplier constraints, severe weather, operational accidents, cybersecurity incidents, and the company’s ability to generate cash and service substantial debt. The company recorded a $1.426 billion valuation allowance against deferred tax assets. It reported $40 million of accrued litigation and settlement liabilities and said current litigation was not believed likely to result in material uninsured losses, while noting outcomes could differ. A groundwater remediation plan at a former Texas facility may cost up to $6 million over 10 to 20 years.
Comparisons with periods before December 13, 2019 are not directly comparable because Weatherford emerged from Chapter 11 and adopted Fresh Start Accounting. The auditor issued an unqualified opinion on the financial statements and on the effectiveness of internal control over financial reporting.
Investor verification points
- Assess whether the 2022 revenue and capital-spending outlook was achieved and how recovery translated into sustainable margins.
- Separate recurring operating cash generation from working-capital release and receivables factoring; factoring proceeds were $85 million in 2021.
- Review debt-service capacity, refinancing terms, covenant headroom and the effect of restricted or non-repatriable cash.
- Examine segment trends under the revised reporting structure, especially WCC’s revenue and adjusted EBITDA declines.
- Monitor supply-chain and inflation effects, tax exposures and valuation allowances, litigation developments, and the Texas remediation obligation.