Weatherford International plc — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Unaudited consolidated results; amounts below are in U.S. dollars unless noted. Weatherford provides energy-sector equipment and services across Drilling and Evaluation (DRE), Well Construction and Completions (WCC), and Production and Intervention (PRI).
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $938 million | $832 million |
| Operating income (loss) | $18 million | $(13) million |
| Net loss attributable to Weatherford | $(80) million | $(116) million |
| Loss per share, basic and diluted | $(1.14) | $(1.66) |
| Cash from (used in) operations | $(64) million | $74 million |
| Capital expenditures | $20 million | $15 million |
- Revenue increased 13% year over year. Cost of products and services was $682 million; as a share of revenue, it improved to 73% from 76%. Operating margin was approximately 1.9%, versus approximately negative 1.6%.
- Segment adjusted EBITDA rose 38% to $165 million from $120 million. DRE generated $59 million (up 103%), WCC $67 million (up 34%), and PRI $39 million (down 5%).
- Cash, cash equivalents and restricted cash totaled $1.056 billion at quarter-end, including $215 million of restricted cash. Unrestricted cash and cash equivalents were $841 million.
- Total debt was approximately $2.429 billion, including $2.416 billion of long-term debt and $13 million of current borrowings and finance leases. Long-term notes included $300 million due 2024 at 11%, $500 million principal due 2028 at 6.5%, and $1.6 billion principal due 2030 at 8.625%.
- Current assets were $2.889 billion and current liabilities $1.300 billion. The company reported total liabilities of $4.258 billion and shareholders’ equity of $426 million.
Material changes and drivers
- Revenue growth reflected stronger customer activity, technology adoption and service demand. DRE revenue rose 24%, WCC 7%, and PRI 10%.
- Management attributed improved operating performance to increased volumes, product and service mix, cost initiatives and operational efficiency. Selling, general and administrative and research and development costs together declined 5% to $199 million.
- Interest expense fell to $48 million from $70 million, reflecting debt repayments and 2021 refinancing. Other expense increased to $16 million from $4 million, primarily due to foreign-currency forward contract fair-value changes and settlements.
- Operating cash flow swung to a $64 million use from $74 million provided, primarily due to seasonal working-capital needs. Receivables and inventory used $51 million and $31 million of cash, respectively.
- Q1 included $20 million of restructuring charges for a multi-year footprint consolidation and workforce-efficiency initiative, and $19 million of other charges, including $17 million related to Ukraine. The latter included $16 million of write-downs of receivables, inventory and property, plant and equipment.
Outlook, risks and contingencies
- Management expected 2022 consolidated revenue to increase by high single digits to low teens compared with 2021, citing improving customer activity and macroeconomic conditions. It also cautioned that industry results depend on commodity prices, customer spending, geopolitics, ESG-related changes, COVID-19 effects, inflation and supply-chain conditions.
- Projected 2022 capital spending was $175–$200 million; expected interest payments were $215 million for 2022 and approximately $204 million annually thereafter until long-term debt maturity, excluding finance leases.
- Russia accounted for 6% of Q1 revenue. Russia net assets, excluding cash, were reported at $106 million. The company wrote down all its Ukraine assets other than cash and warned that escalation of the conflict or sanctions could reduce revenue or cause further impairments.
- Inflation, higher logistics and supply costs, delivery constraints, customer payment delays, foreign-exchange exposure and the cyclical energy-services market may pressure results and cash generation. Management said $168 million of cash could not be immediately repatriated due to local controls or regulations.
- Outstanding letters of credit totaled $382 million, including $212 million cash collateralized; $46 million remained available under the $215 million LC Credit Agreement. Surety bonds outstanding were $300 million. Calls under letters of credit or bonds could reduce liquidity.
- Accrued litigation and settlements were $45 million. The company warned that adverse outcomes in claims could exceed recorded reserves and be material. A shareholder securities lawsuit was dismissed in 2021 and remained under appeal; its outcome and potential loss could not be reliably predicted.
- The company reported effective disclosure controls as of March 31, 2022 and no material change in internal control over financial reporting during the quarter.
Investor verification checklist
- Track whether revenue growth and the 2022 outlook are achieved, and whether segment margins and PRI performance improve.
- Assess whether working-capital investment and seasonal cash use reverse, and whether unrestricted liquidity is sufficient after restricted cash and collateral requirements.
- Verify progress and costs from the restructuring program, and whether Ukraine-related write-downs or Russia exposure lead to further losses.
- Monitor debt-service requirements, interest expense, refinancing access, and the availability of uncommitted factoring and letter-of-credit facilities.
- Review inflation, supply-chain, customer-collection, sanctions and litigation developments, including possible effects on cash flow and asset values.