Weatherford Reports Fourth Quarter 2018 Results

Preferisci Informazione.News su Google

Significant Highlights

Revenues in the fourth quarter of 2018 were $1.4 billion, essentially flat with revenues recognized in the prior quarter and a modest decrease from the $1.5 billion of revenues reported for the fourth quarter of 2017. Sequentially, increases in integrated service project revenues and higher product sales in Latin America and the Eastern Hemisphere were offset by decreased revenues associated with the divestment of the international land rigs and lower activity levels in Canada.

On a year-over-year basis, higher revenues associated with integrated service projects and product sales in Latin America were offset by lower year-end product sales in the Eastern Hemisphere and decreased revenues associated with the divested land drilling rigs in the Middle East and pressure pumping assets in the United States.

Operating loss for the fourth quarter of 2018 was $2.0 billion. Segment operating income in the fourth quarter of 2018 was $102 million, down $14 million, or 12% sequentially, but up $185 million year-over-year.

The sequential decrease in segment operating income was driven primarily by a provision for a litigation settlement in the United States and increased amortization related to digital solutions and cloud-based infrastructure. This was offset by product sales in Latin America and the Eastern Hemisphere and higher margins across all product lines on reduced costs and improved efficiencies as a result of the transformation efforts.

Year-over-year segment operating income increase was driven by improved efficiencies and reduced expenses as a result of the transformation processes. Further, negative impacts from exceptional operating items in both hemispheres and low-margin product sales realized in 2017 did not repeat in 2018.

In the quarter, Weatherford recorded pre-tax charges of $2.0 billion, primarily consisting of a $1.9 billion write-off of a significant portion of the Company's goodwill balance. In addition, the Company also recorded $79 million in impairments and asset write-downs, $36 million in restructuring and transformation charges, and $4 million in currency devaluation charges, partially offset by a $3 million credit related to the fair value adjustment of the outstanding warrant.

In the fourth quarter of 2018, incremental recurring benefits as a result of the transformation plan were approximately $25 million. The total recurring transformation benefits recognized through the fourth quarter were nearly $100 million, or $400 million on an annualized basis, which represents 40% of the $1 billion target.

Mark A. McCollum, President and Chief Executive Officer, commented, "Our adjusted earnings and adjusted EBITDA during the fourth quarter exceeded our forecasts despite rapidly declining oil prices. Our ability to generate better than expected operating results and free cash flow is a testament to the progress we continue to make on our transformation plan and the positive structural changes we have made to our company over the past year. For the full year, we grew adjusted EBITDA by over $330 million, or 80% compared to 2017 levels. Based on the work we have completed on specific transformation initiatives, we continue to believe that we can achieve our $1 billion incremental EBITDA run rate goal by year-end 2019."

"We achieved positive operating cash flow during the quarter and further enhanced our liquidity as we closed the first two tranches of our international land drilling rig sale. Our year-end liquidity position of over $900 million and the recent announcements regarding the divestiture of our laboratory services and surface data logging businesses will continue to improve our net debt position as we move through 2019, giving us sufficient liquidity to continue to execute on our strategic initiatives and pay down our near-term maturities."

Cash Flow

Net cash provided by operating activities was $105 million for the fourth quarter of 2018, driven by a decrease in working capital and a decrease in cash payments for debt interest, offset by $34 million for cash severance, restructuring, and transformation costs. Fourth quarter total capital expenditures of $76 million, including investments in held-for-sale land drilling rigs, increased by $21 million, or 38% sequentially, and decreased by $2 million, or 3% from the same quarter in the prior year.

Operating Segments

Western Hemisphere

Fourth quarter revenues of $776 million were up $14 million, or 2% sequentially, and up $17 million, or 2% year-over-year. Compared to the third quarter of 2018, revenues increased for integrated service projects and fourth quarter product sales in Latin America but were offset by lower activity levels in Canada. Year-over-year revenue increases from integrated service projects in Latin America and managed pressure drilling services in the United States were offset by lower activity levels in Canada and the sale of pressure pumping assets in the United States in the fourth quarter of 2017.

Fourth quarter segment operating income of $56 million was down $22 million sequentially and up $91 million year-over-year. The sequential decrease was the result of a provision for a litigation settlement in the United States this quarter and negative impacts from the reduced activity levels in Canada. The year-over-year improvement was driven by higher integrated service projects activity in Latin America and the positive impacts from our transformation efforts, which overcame lower operating results in Canada and a negative foreign exchange impact in Latin America. In addition, certain operating charges realized during the fourth quarter of 2017 did not repeat this year.

Operational highlights in the Western Hemisphere during the quarter include:

Eastern Hemisphere

Fourth quarter revenues of $653 million were down $29 million, or 4% sequentially and down $78 million, or 11% year-over-year. Sequential revenues declined in the Middle East associated with the completion of our land drilling rigs divestiture, offset by higher managed pressure drilling sales in Continental Europe and Production activity in the Middle East. Adjusting for the impact of the land rigs divestiture, revenues increased by approximately 1% sequentially. The year-over-year decrease was driven by a reduction of revenue associated with the completed closings of our land drilling rigs divestiture and lower Production product sales in the Middle East.

Fourth quarter segment operating income of $46 million was up $8 million sequentially and up $94 million year-over-year. The sequential improvement resulted from a favorable revenue mix in Continental Europe and Asia combined with cost savings and operational improvements from transformation initiatives. Compared to the fourth quarter of 2017, operating income improved as a result of the incremental benefits from our transformation program and the reduction of low-margin product sales.

Operational highlights in the Eastern Hemisphere during the quarter include:

Reclassifications

In 2018 we adopted pension accounting standards on a retrospective basis, reclassifying the presentation of non-service cost components of net periodic pension and post-retirement cost from operating income to non-operating Other Income (Expense), Net. All prior periods have been restated to conform to the current presentation within the Condensed Consolidated Statements of Operations and other financial information in the following pages.

About Weatherford

Weatherford is one of the largest multinational oilfield service companies providing innovative solutions, technology and services to the oil and gas industry. The Company operates in over 80 countries and has a network of approximately 700 locations, including manufacturing, service, research and development and training facilities and employs approximately 26,500 people. For more information, visit http://www.weatherford.com and connect with Weatherford on LinkedIn, Facebook, Twitter and YouTube.

Conference Call

The Company will host a conference call with financial analysts to discuss the quarterly results on February 1, 2019, at 8:30 a.m. Eastern Time (ET), 7:30 a.m. Central Time (CT). Weatherford invites investors to listen to the call live and review related presentation materials via the Company's website. Conference call details and presentation materials can be found at https://www.weatherford.com/en/investor-relations/investor-presentations. A recording of the conference call and transcript of the call will be available in the Investor Relations section of the website shortly after the call ends.

Forward-Looking Statements

This news release contains, and the conference call announced in this release may include, forward-looking statements. These forward-looking statements include, among other things, the Company's quarterly non-GAAP earnings per share, effective tax rate, net debt, forecasts or expectations regarding business outlook, and capital expenditures, and are also generally identified by the words "believe," "project," "expect," "anticipate," "estimate," "outlook," "budget," "intend," "strategy," "plan," "guidance," "may," "should," "could," "will," "would," "will be," "will continue," "will likely result," and similar expressions, although not all forward-looking statements contain these identifying words. Such statements are based upon the current beliefs of Weatherford's management, and are subject to significant risks, assumptions and uncertainties. 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. Readers are also cautioned that forward-looking statements are only predictions and may differ materially from actual future events or results, including possible changes in the expected efficiencies and cost savings associated with our transformation plans; completion of potential dispositions, continued compliance with NYSE listing standards, and the changes in spending or payment timing by our clients and customers. Forward-looking statements are also affected by the risk factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 and those set forth from time-to-time in the Company's other filings with the Securities and Exchange Commission. 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.

We report our financial results in accordance with U.S. 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 and Item 10(e) of Regulation S-K) may provide users of this financial information additional meaningful comparisons between current results and results of prior periods and comparisons with peer companies. The non-GAAP amounts shown in the following tables should not be considered as 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.

Logo - https://mma.prnewswire.com/media/73933/weatherford_international_logo.jpg