Weatherford International Ltd.
EANS-Adhoc: Weatherford Reports Second Quarter 2013 Results
--------------------------------------------------------------------------------
ad-hoc disclosure transmitted by euro adhoc with the aim of a Europe-wide
distribution. The issuer is solely responsible for the content of this
announcement.
--------------------------------------------------------------------------------
Earnings/6-month report
31.07.2013
-- Earnings per Share of $0.15 (non-GAAP)
-- Estimated $153 million potential FCPA and Oil-for-Food U.S. government
settlement
GENEVA, Switzerland, July 31, 2013 -- Weatherford International Ltd. (NYSE /
Euronext Paris / SIX: WFT) today reported results for the second quarter ended
June 30, 2013.
Second Quarter 2013 Highlights
- $0.15 per diluted share (non-GAAP), or net income of $116 million
excluding after-tax losses of $234 million;
- Estimated $153 million potential FCPA and Oil-for-Food settlement with
the U.S. government;
- Free cash flow increased by over $200 million sequentially, driven by
working capital improvements;
- Capital expenditures, net of lost-in-hole, declined 26% compared to the
prior year quarter;
- Revenues of $3,868 million were 3% higher than the same period last
year, and up 1% sequentially;
- International revenues of $2,339 million were up 12% over the same
period in 2012 and up 9% sequentially;
- Eastern Hemisphere operating income margin expanded 155 basis points
sequentially; and
- North America revenues of $1,529 million were down 10% sequentially, and
down 8% from the same quarter of 2012 primarily due to the Canadian
seasonal downturn compounded by severe flooding.
(Logo: http://photos.prnewswire.com/prnh/19990308/WEATHERFORDLOGO )
end of ad-hoc-announcement
================================================================================
Second Quarter 2013 Results
On a GAAP basis, segment operating income was $385 million with a second quarter
net loss of $118 million, or a loss of $0.15 per diluted share. The excluded
after-tax losses included:
- $153 million representing management's best estimate of a potential
settlement with the U.S. government related to the FCPA and oil-for-food
matters, although no agreement has been reached and uncertainties
remain;
- $38 million in severance, exit and other charges;
- $31 million associated with legacy lump sum contracts in Iraq; and
- $12 million related to U.S. government investigations and tax related
professional fees.
The non-GAAP effective tax rate for the quarter was 12%.
Outlook
The Company expects the second half of 2013 to show higher revenue and operating
income in North America compared to the first half of this year with the U.S.
also benefiting from a lower operating cost structure. Latin America will show
improvement in both revenue and profitability in the fourth quarter of 2013. The
outlook for the Eastern Hemisphere remains positive with continued expansion in
Europe, Caspian and Russia along with continued recovery in the Middle
East/North Africa and Asia Pacific region. Increased operating performance in
the second half of the year, as well as further cost reductions and improvements
in capital efficiency measures, all suggest a positive outlook. The Company
expects its 2013 annual effective tax rate to be in the range of 27% to 29%.
Regional Highlights
- North America
North America revenues for the quarter were $1,529 million, an 8% decrease
over the same quarter in the prior year and down 10% sequentially. The
quarter's operating income was $167 million, down $59 million, or 26% from
the same quarter in the prior year and down 25% sequentially. The
sequential decline was largely due to the seasonal effect of the "spring
breakup" in Canada impacting revenues and margins in all product lines,
and was partially offset by increased U.S. Artificial Lift and Well
Construction activity. U.S. year-over-year performance declined, driven
primarily by lower Stimulation profitability.
- Middle East/North Africa/Asia Pacific
Second quarter revenues of $919 million were up $270 million, or 42%
higher than the second quarter of 2012, and $134 million, or 17% higher
sequentially. The current quarter's operating income of $66 million
increased $42 million, or 175% from the same quarter in the prior year,
and increased 47% sequentially due to an increase in our Drilling
Services, Well Construction and Artificial Lift product lines. The Asia
Pacific region generated the highest revenue and operating income in our
history.
- Europe/Sub-Sahara Africa/Russia
Second quarter revenues of $681 million were 4% higher than the second
quarter of 2012 and up 8% from the prior quarter. The current quarter's
operating income of $83 million was down 19% when compared to the same
quarter in the prior year, and was up $18 million, or 28% from the prior
quarter. The year-over-year operating income decline resulted from reduced
margins in Russia driven by lower activity levels and the change in
product mix. Sequentially, operating income was up due to increased
activity in Well Construction for Europe.
- Latin America
Second quarter revenues of $739 million were down $43 million or 6%
compared to the second quarter of 2012, and up $12 million, or 2%
sequentially. The decline in revenue in the second quarter compared to the
prior year was largely related to lower activity in Mexico. The current
quarter's operating income of $90 million was flat compared to the same
quarter in the prior year, and decreased 8% from the prior quarter.
Liquidity and Free Cash Flow
Free cash flow increased by over $200 million compared to the prior quarter. The
improvement in cash flow was driven entirely by working capital improvements.
Driving the change in working capital, days sales outstanding decreased to 89
days, and days sales in inventory decreased to 85 days.
Non-GAAP Performance Measures
Unless explicitly stated to the contrary, all performance measures used
throughout this document are non-GAAP. Corresponding reconciliations to GAAP
financial measures have been provided in the following pages to offer meaningful
comparisons between current results and results in prior operating periods.
About Weatherford
Weatherford is a Swiss-based, multinational oilfield service company. It is one
of the largest global providers of technology and services for the oil and gas
industry. Weatherford operates in over 100 countries, and employs over 60,000
people worldwide. For more information, visit www.weatherford.com
Conference Call
The Company will host a conference call with financial analysts to discuss the
quarterly results on July 31, 2013, at 8:30 a.m. eastern daylight savings time,
7:30 a.m. central daylight savings time. Weatherford invites investors to listen
to the call live via the Company's website, www.weatherford.com in the Investor
Relations section. A recording of the conference call and transcript of the call
will be available in that section of the website shortly after the call ends.
Forward-Looking Statements
This press release and the documents referenced herein contain, and the
conference call announced in this release may include, forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. This includes statements related to future levels of earnings, revenue,
expenses, margins, capital expenditures, changes in working capital, cash flows,
tax expense, effective tax rates and net income. Forward-looking statements also
include any statements about the resolution or potential future resolution of
our ongoing remediation of our material weaknesses in internal control over
financial reporting for income taxes and our assessment of the degree to which
historical remediation efforts have been successful to date. It is inherently
difficult to make projections or other forward-looking statements in a cyclical
industry and given the current macroeconomic uncertainty. Such statements are
based upon the current beliefs of Weatherford's management, and are subject to
significant risks, assumptions and uncertainties. These include the company's
inability to design or improve internal controls to address identified issues;
the impact upon operations of legal compliance matters or internal controls
review, improvement and remediation, including the detection of wrongdoing,
improper activities or circumvention of internal controls; difficulties in
controlling expenses, including costs of legal compliance matters or internal
controls review, improvement and remediation; impact of changes in management or
staff levels, the effect of global political, economic and market conditions on
the company's projected results; the possibility that the company may be unable
to recognize expected revenues from current and future contracts; the effect of
currency fluctuations on the company's business; the company's ability to manage
its workforce to control costs; the cost and availability of raw materials, the
company's ability to manage its supply chain and business processes; the
company's ability to commercialize new technology; whether the company can
realize expected benefits from its redomestication of its former Bermuda parent
company; the company's ability to realize expected benefits from its
acquisitions and dispositions; the effect of a downturn in its industry on the
company's carrying value of its goodwill; the effect of weather conditions on
the company's operations; the impact of oil and natural gas prices and worldwide
economic conditions on drilling activity; the effect of turmoil in the credit
markets on the company's ability to manage risk with interest rate and foreign
exchange swaps; the outcome of pending government investigations, including the
Securities and Exchange Commission's investigation of the circumstances
surrounding the company's material weakness in its internal control over
financial reporting of income taxes; the outcome of ongoing litigation,
including shareholder litigation related to the company's material weakness in
its internal control over financial reporting of income taxes and its
restatement of historical financial statements; the future level of crude oil
and natural gas prices; demand for our products and services; levels of pricing
for our products and services; utilization rates of our equipment; the
effectiveness of our supply chain; weather-related disruptions and other
operational and non-operational risks that are detailed in our most recent Form
10-K and other filings with the U.S. Securities and Exchange Commission. Should
one or more of these risks or uncertainties materialize, or underlying
assumptions prove incorrect, actual results may vary materially from those
indicated in our forward-looking statements. Specifically, statements regarding
the current period assume that there will be no subsequent events or other
adverse developments after the date of this press release that cause our
financial statements for the current period, when filed with the SEC, to vary
materially from the amounts herein. We undertake no obligation to correct or
update any forward-looking statement, whether as a result of new information,
future events, or otherwise, except to the extent required under federal
securities laws.
Weatherford International Ltd.
Consolidated Condensed Statements of Operations
(Unaudited)
(In Millions, Except Per Share Amounts)
Three Months Ended Six Months Ended
------------------ ----------------
6/30/2013 6/30/2012 6/30/2013 6/30/2012
--------- --------- --------- ---------
Net Revenues:
North America $1,529 $1,663 $3,221 $3,417
Middle East/North Africa/
Asia 919 649 1,704 1,244
Europe/SSA/Russia 681 653 1,314 1,224
Latin America 739 782 1,466 1,453
3,868 3,747 7,705 7,338
----- ----- ----- -----
Operating Income
(Expense):
North America 167 226 391 584
Middle East/North Africa/
Asia 66 24 111 77
Europe/SSA/Russia 83 102 148 168
Latin America 90 90 188 173
Research and Development (71) (64) (138) (126)
Corporate Expenses (49) (49) (97) (99)
Goodwill and Equity
Investment Impairment - (793) - (793)
US Government
Investigation Loss
Contingency (153) (100) (153) (100)
Other Items (78) (68) (116) (146)
--- --- ---- ----
55 (632) 334 (262)
Other Income (Expense):
Interest Expense, Net (128) (121) (259) (233)
Devaluation of Venezuelan
Bolivar - - (100) -
Other, Net (18) (27) (31) (45)
--- --- --- ---
Loss Before Income Taxes (91) (780) (56) (540)
Benefit (Provision) for
Income Taxes:
Provision for Operations (17) (68) (65) (184)
Adjustments to Provision (3) 5 40 11
--- --- --- ---
(20) (63) (25) (173)
Net Loss (111) (843) (81) (713)
Net Income Attributable to
Noncontrolling Interests (7) (6) (15) (13)
Net Loss Attributable to
Weatherford $(118) $(849) $(96) $(726)
===== ===== ==== =====
Loss Per Share
Attributable to
Weatherford
Basic $(0.15) $(1.11) $(0.12) $(0.95)
Diluted $(0.15) $(1.11) $(0.12) $(0.95)
Weighted Average Shares
Outstanding:
Basic 770 765 770 763
Diluted 770 765 770 763
Weatherford International Ltd.
Selected Statements of Operations Information
(Unaudited)
(In Millions)
Three Months Ended
------------------
6/30/2013 3/31/2013 12/31/2012 9/30/2012 6/30/2012
--------- --------- ---------- --------- ---------
Net Revenues:
North America $1,529 $1,692 $1,682 $1,725 $1,663
Middle East/
North Africa/
Asia 919 785 851 700 649
Europe/SSA/
Russia 681 633 669 626 653
Latin America 739 727 856 768 782
$3,868 $3,837 $4,058 $3,819 $3,747
====== ====== ====== ====== ======
Three Months Ended
------------------
6/30/2013 3/31/2013 12/31/2012 9/30/2012 6/30/2012
--------- --------- ---------- --------- ---------
Operating Income
(Expense):
North America $167 $224 $226 $297 $226
Middle East/
North Africa/
Asia 66 45 58 36 24
Europe/SSA/
Russia 83 65 59 88 102
Latin America 90 98 125 97 90
Research and
Development (71) (67) (63) (68) (64)
Corporate
Expenses (49) (48) (49) (48) (49)
Goodwill and
Equity
Investment
Impairment - - - - (793)
US Government
Investigation
Loss Contingency (153) - - - (100)
Other Items (78) (38) (111) (87) (68)
$55 $279 $245 $315 $(632)
=== ==== ==== ==== =====
Three Months Ended
------------------
6/30/2013 3/31/2013 12/31/2012 9/30/2012 6/30/2012
--------- --------- ---------- --------- ---------
Product Line
Revenues:
Formation
Evaluation and
Well
Construction(1) $2,361 $2,273 $2,348 $2,128 $2,058
Completion and
Production(2) 1,507 1,564 1,710 1,691 1,689
$3,868 $3,837 $4,058 $3,819 $3,747
====== ====== ====== ====== ======
Three Months Ended
------------------
6/30/2013 3/31/2013 12/31/2012 9/30/2012 6/30/2012
--------- --------- ---------- --------- ---------
Depreciation and
Amortization:
North America $102 $108 $108 $108 $101
Middle East/
North Africa/
Asia 98 93 94 90 85
Europe/SSA/
Russia 68 71 71 63 60
Latin America 68 68 63 61 59
Research and
Development and
Corporate 5 6 7 7 6
$341 $346 $343 $329 $311
==== ==== ==== ==== ====
(1) Formation Evaluation and Well Construction includes Drilling Services,
Well Construction, Integrated Drilling, Wireline and Evaluation Services,
Drilling Tools and Fishing and Re-entry.
(2) Completion and Production includes Artificial Lift Systems, Stimulation
and Chemicals, Completion Systems and Pipeline and Specialty Services.
We report our financial results in accordance with generally accepted accounting
principles (GAAP). However, Weatherford's management believes that certain
non-GAAP financial measures and ratios (as defined under the SEC's Regulation G)
may provide users of this financial information, additional meaningful
comparisons between current results and results of prior periods. The non- GAAP
amounts shown below should not be considered substitutes for operating income,
provision for income taxes, net income or other data prepared and reported in
accordance with GAAP, but should be viewed in addition to the Company's reported
results prepared in accordance with GAAP.
Weatherford International Ltd.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
(In Millions, Except Per Share Amounts)
Three Months Ended Six Months Ended
------------------ ----------------
6/30/2013 3/31/2013 6/30/2012 6/30/2013 6/30/2012
--------- --------- --------- --------- ---------
Operating Income:
GAAP Operating
Income (Loss) $55 $279 $(632) $334 $(262)
Goodwill and
Equity
Investment
Impairment - - 793 - 793
US Government
Investigation
Loss
Contingency 153 - 100 153 100
Legacy Contracts
(a) 21 3 62 24 93
Tax Remediation
and Restatement
Expenses 6 21 11 27 26
Other Adjustments 51 14 (5) 65 27
Non-GAAP Operating
Income $286 $317 $329 $603 $777
==== ==== ==== ==== ====
Income (Loss)
Before Income
Taxes:
GAAP Income (Loss)
Before Income
Taxes $(91) $35 $(780) $(56) $(540)
Goodwill and
Equity
Investment
Impairment - - 793 - 793
US Government
Investigation
Loss
Contingency 153 - 100 153 100
Devaluation of
Venezuelan Bolivar - 100 - 100 -
Legacy Contracts 21 3 62 24 93
Tax Remediation
and Restatement
Expenses 6 21 11 27 26
Other Adjustments 51 14 (5) 65 24
Non-GAAP Income
Before Income
Taxes $140 $173 $181 $313 $496
==== ==== ==== ==== ====
Provision for
Income Taxes:
GAAP Provision for
Income Taxes $(20) $(5) $(63) $(25) $(173)
Goodwill and
Equity
Investment
Impairment - - (1) - (1)
US Government
Investigation
Loss
Contingency - - (1) - (1)
Devaluation of
Venezuelan Bolivar - (39) - (39) -
Legacy Contracts 10 5 - 15 -
Tax Remediation and
Restatement
Expenses (1) (3) (3) (4) (6)
Other Adjustments (6) (6) - (12) (3)
Non-GAAP Provision
for Income Taxes $(17) $(48) $(68) $(65) $(184)
==== ==== ==== ==== =====
Net Income (Loss)
Attributable to
Weatherford:
GAAP Net Income
(Loss) $(118) $22 $(849) $(96) $(726)
Total Charges,
net of tax 234 (b) 95 (c) 956 (d) 329 (e) 1,025 (f)
Non-GAAP Net
Income $116 $117 $107 $233 $299
==== ==== ==== ==== ====
Diluted
Earnings
(Loss)
Per Share
Attributable to
Weatherford:
GAAP Diluted
Earnings (Loss)
per Share $(0.15) $0.03 $(1.11) $(0.12) $(0.95)
Total Charges,
net of tax 0.30 0.12 1.25 0.42 1.34
---- ---- ---- ---- ----
Non-GAAP Diluted
Earnings per
Share $0.15 $0.15 $0.14 $0.30 $0.39
===== ===== ===== ===== =====
GAAP Effective Tax
Rate (g) -22% 14% -8% -45% -32%
Annual Effective
Tax Rate (h) 12% 28% 38% 21% 37%
Note (a): The revenues associated with the legacy lump sum contracts in Iraq
were $215 million, $166 million and $39 million for the three months ended June
30, 2013, March 31, 2013, and June 30, 2012 and $380 million and $91 million for
the six months ended June 30, 2013 and 2012, respectively.
Note (b): Non-GAAP adjustments are comprised of (i) $153 million loss accrual
related to US government investigation matters, (ii) $31 million in operating
losses and tax expense related to legacy lump sum contracts in Iraq, (iii) $38
million in other adjustments consisting of severance of $25 million and $13
million in other charges and (iv) $12 million related to US government
investigations and tax related professional fees.
Note (c): Non-GAAP adjustments are comprised of (i) a charge for the
devaluation of the Venezuelan Bolivar of $61 million, (ii) $8 million in
operating losses and tax expense related to legacy lump sum contracts in Iraq,
(iii) tax restatement and remediation expenses of $18 million and (iv) $8
million in other adjustments consisting of severance and other charges including
$3 million in investigation related expenses.
Note (d): Non-GAAP adjustments are comprised of (i) goodwill and equity
method investment impairments of $793 million, (ii) $100 million loss accrual
related to US government investigation matters, (iii) $62 million in operating
losses and tax expense related to legacy lump sum contracts in Iraq, (iv) tax
restatement and remediation expenses of $8 million and (v) $(7) million in other
adjustments.
Note (e): Non-GAAP adjustments are comprised of (i) $153 million loss accrual
related to US government investigation matters, (ii) $39 million in operating
losses and tax expense related to legacy lump sum contracts in Iraq, (iii) tax
restatement and remediation expenses of $23 million, (iv) a $61 million charge
for the devaluation of the Venezuelan Bolivar and (v) $53 million in other
adjustments consisting of $31 million in severance, $10 million in investigation
related expenses and $12 million in other charges.
Note (f): Non-GAAP adjustments are comprised of (i) goodwill and equity
method investment impairments of $793 million, (ii) $100 million loss accrual
related to US government investigation matters, (iii) $93 million in operating
losses and tax expense related to legacy lump sum contracts in Iraq, (iv) tax
restatement and remediation expenses of $20 million and (v) $19 million in other
adjustments.
Note (g): GAAP Effective Tax Rate is GAAP provision for income taxes divided
by GAAP income before income taxes.
Note (h): Annual Effective Tax Rate is the Non-GAAP provision for income
taxes divided by Non-GAAP income before income taxes.
Weatherford International Ltd.
Selected Balance Sheet Data
(Unaudited)
(In Millions)
6/30/2013 3/31/2013 12/31/2012 9/30/2012 6/30/2012
--------- --------- ---------- --------- ---------
Assets:
Cash and Cash
Equivalents $295 $286 $300 $365 $381
Accounts
Receivable,
Net 3,837 3,850 3,885 3,911 3,608
Inventories,
Net 3,637 3,744 3,675 3,676 3,399
Property, Plant
and Equipment,
Net 8,333 8,299 8,299 8,122 7,733
Goodwill and
Intangibles,
Net 4,402 4,485 4,637 4,653 4,581
Equity
Investments 671 660 646 642 629
Liabilities:
Accounts
Payable 2,144 2,191 2,108 2,023 1,635
Short-term
Borrowings and
Current Portion
of Long-term
Debt 2,148 1,896 1,585 1,606 1,263
Long-term Debt 7,087 7,032 7,049 7,300 7,311
Weatherford International Ltd.
Net Debt
(Unaudited)
(In Millions)
Change in Net Debt for the Three
Months Ended 6/30/2013:
Net Debt at 3/31/2013 $(8,642)
Operating Income 55
Depreciation and
Amortization 341
Capital
Expenditures (446)
Decrease in Working
Capital 187
Income Taxes Paid (133)
Interest Paid (81)
Acquisitions and
Divestitures of
Assets and
Businesses, Net (22)
Net change in
Billing in Excess/
Costs in Excess (115)
Other (84)
Net Debt at 6/30/2013 $(8,940)
=======
Change in Net Debt for the Six Months
Ended 6/30/2013:
Net Debt at 12/31/2012 $(8,334)
Operating Income 334
Depreciation and
Amortization 687
Capital
Expenditures (846)
Decrease in Working
Capital 120
Income Taxes Paid (257)
Interest Paid (264)
Acquisitions and
Divestitures of
Assets and
Businesses, Net 59
Net change in
Billing in Excess/
Costs in Excess (173)
Other (266)
Net Debt at 6/30/2013 $(8,940)
=======
Components of Net Debt 6/30/2013 3/31/2013 12/31/2012
--------- --------- ----------
Cash $295 $286 $300
Short-term
Borrowings and
Current Portion of
Long-term Debt (2,148) (1,896) (1,585)
Long-term Debt (7,087) (7,032) (7,049)
Net Debt $(8,940) $(8,642) $(8,334)
"Net Debt" is debt less cash. Management believes that Net Debt provides useful
information regarding the level of Weatherford indebtedness by reflecting cash
that could be used to repay debt.
Working capital is defined as accounts receivable plus inventory less accounts
payable.
We report our financial results in accordance with generally accepted accounting
principles (GAAP). However, Weatherford's management believes that certain
non-GAAP financial measures and ratios (as defined under the SEC's Regulation G)
may provide users of this financial information, additional meaningful
comparisons between current results and results of prior periods. The non-GAAP
amounts shown below should not be considered substitutes for cash flow
information prepared in accordance with GAAP, but should be viewed in addition
to the Company's reported cash flow statements prepared in accordance with GAAP.
Weatherford International Ltd.
Selected Cash Flow Data
(Unaudited)
(In Millions)
Three Months Ended Six Months Ended
------------------ ----------------
6/30/2013 3/31/2013 6/30/2012 6/30/2013 6/30/2012
--------- --------- --------- --------- ---------
Net Cash
Provided by
(Used in)
Operating
Activities $252 $(11) $145 $241 $285
Less: Capital
Expenditures
for Property,
Plant and (446) (400) (584) (846) (1,098)
Equipment
Free Cash Flow $(194) $(411) $(439) $(605) $(813)
===== ===== ===== ===== =====
Free cash flow is defined as net cash provided by or used in operating
activities less capital expenditures. Free cash flow is an important indicator
of how much cash is generated or used by our normal business operations,
including capital expenditures. Management uses free cash flow as a measure of
progress on its capital efficiency and cash flow initiatives.
SOURCE Weatherford International Ltd.
Further inquiry note:
Contacts: John H. Briscoe, Senior Vice President and Chief Financial Officer,
+1.713.836.4610; Karen David-Green,Vice President - Investor Relations,
+1.713.836.7430
end of announcement euro adhoc
--------------------------------------------------------------------------------
issuer: Weatherford International Ltd.
Rue Jean-Francois Bartholoni 4-6
CH-1204 Geneva
phone: +41.22.816.1500
FAX: +41.22.816.1599
mail: karen.david-green@weatherford.com
WWW: http://www.weatherford.com
sector: Oil & Gas - Upstream activities
ISIN: CH0038838394
indexes:
stockmarkets: Main Standard: SIX Swiss Exchange, stock market: New York, Euronext
Paris
language: English