Weatherford International plc — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing; the supplied filing text does not provide a standalone fourth-quarter income statement or cash-flow summary. Weatherford is a global oilfield-services company operating in more than 75 countries, reported in Western and Eastern Hemisphere segments.
Key financial results
| Metric | FY2020 | Prior comparable period |
|---|---|---|
| Revenue | $3.685 billion | $5.215 billion for 2019 combined period; down 29% |
| Operating income (loss) | $(1.486) billion | $(1.181) billion for 2019 combined period |
| Net income (loss) attributable to Weatherford | $(1.921) billion | $3.661 billion for the 2019 Predecessor Period, substantially affected by bankruptcy-related gains |
| Operating cash flow | $210 million | $61 million in the 2019 Successor Period; $(747) million in the 2019 Predecessor Period |
| Capital expenditures | $154 million | $250 million in the 2019 Predecessor Period |
| Non-GAAP free cash flow | $78 million | Management-defined measure; 2019 combined-period comparison is not clearly stated as a single figure |
| Cash and restricted cash | $1.285 billion, including $167 million restricted | $800 million, including $182 million restricted, at December 31, 2019 |
| Long-term debt | $2.601 billion | $2.151 billion at December 31, 2019 |
Segment operating income was $55 million, down $139 million from the 2019 combined period: Western Hemisphere contributed $18 million and Eastern Hemisphere $37 million. Consolidated results included $1.236 billion of impairment and other charges and $206 million of restructuring charges. No standalone consolidated margin percentage is stated in the supplied filing text.
Material changes and financial position
- Revenue fell $1.530 billion year over year, primarily from weaker North American activity, with additional declines in Latin America, the Middle East, North Africa, Asia and Russia. Western Hemisphere revenue declined 42%; Eastern Hemisphere revenue declined 15%.
- FY2020 net loss includes $814 million of long-lived-asset impairments, $239 million of goodwill impairment and $138 million of inventory charges reported in “Impairments and Other Charges.” Total inventory charges across income-statement captions were $210 million.
- Cash from operations was positive, largely reflecting collections of receivables, partly offset by interest and severance payments. Cash increased by $485 million during the year, supported in part by financing transactions.
- In August 2020, Weatherford issued $500 million of 8.75% Senior Secured Notes, terminated its ABL facility and increased its letter-of-credit facility to $215 million. It had $2.1 billion of 11% Exit Notes due 2024 and $500 million principal of 8.75% secured notes due 2024. The company estimated annual interest payments of approximately $275 million through maturity.
- At year-end, defined available liquidity was $928 million versus a $175 million minimum-liquidity covenant; secured liquidity was $779 million versus a $125 million minimum. The company reported covenant compliance. It also had $338 million of letters of credit outstanding and $326 million of surety bonds.
Outlook, risks and unusual items
- Management projected approximately $140 million of capital expenditures for 2021 and continued aggressive cost reduction and business realignment. It anticipated a meaningful oil-demand recovery during 2021 but expected multi-year industry dislocation and constraints on revenue, profit and cash-flow growth.
- COVID-19, customer spending cuts, commodity-price volatility, work-site restrictions, supplier and shipping disruptions, and uncertainty about recovery continued to weigh on operations. Management stated it could not estimate the duration or full financial impact of pandemic-related conditions.
- Principal risks include high leverage and substantial interest costs, access to financing, customer payment delays, potential calls on letters of credit or surety bonds, asset-impairment risk, foreign-exchange and geopolitical exposure, environmental and catastrophic-incident liabilities, and climate-related regulation and reduced hydrocarbon demand.
- Comparisons require caution: Weatherford emerged from Chapter 11 in December 2019 and adopted fresh-start accounting, creating a new reporting entity. The 2019 combined-period figures used by management are non-GAAP comparative presentations, and predecessor and successor statements are not directly comparable.
- The company’s ordinary shares were delisted from the NYSE in April 2020 and trade on OTC Pink under WFTLF. Management said it would consider relisting when market conditions were appropriate.
- KPMG issued unqualified opinions on the financial statements and internal controls. A material weakness related to review of long-lived-asset carrying values was reported as remediated by year-end.
- Significant legal matters include shareholder litigation for which the company said the outcome could not be reliably predicted; accrued litigation and settlements were $43 million. A groundwater remediation plan in Midland, Texas may cost up to $6 million over 10–20 years.
Most important facts for investors to verify
- Whether operating cash flow and liquidity remain adequate after recurring interest, restructuring and working-capital requirements.
- Ability to service or refinance approximately $2.6 billion of debt maturing primarily in 2024, while maintaining covenant compliance and access to letter-of-credit capacity.
- Whether revenue, pricing, utilization and segment profitability recover as customer spending and oilfield activity change.
- Assumptions behind the $814 million long-lived-asset impairment and $239 million goodwill impairment, and the potential for further charges.
- Actual 2021 capital spending versus the approximately $140 million projection, and delivery of planned cost reductions.
- Effects of OTC trading, concentrated ownership, and any future relisting on share liquidity and financing access.