EX-99.1 2 h79208exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
     
(WEATHERFORD LOGO)   News Release
Weatherford Reports Fourth Quarter Results of $0.21 Per Share
Before Charges, Primarily Tax Reorganization and Bond Tender Premiums
GENEVA, SWITZERLAND, January 25, 2011 — Weatherford International Ltd. (NYSE and SIX: WFT) today reported fourth quarter 2010 income of $156 million, or $0.21 per diluted share, excluding an after tax loss of $210 million. The excluded after tax loss is comprised of the following items:
    $158 million book tax expense primarily incurred in connection with a tax reorganization to migrate Latin America operations out of the U.S. holding structure during the quarter to further strengthen global tax planning efforts. Of this amount, $54 million was a cash charge;
 
    $34 million in bond tender premiums paid for the extinguishment of a portion of senior notes due in 2012 and 2013;
 
    $21 million after-tax reserve taken against Venezuelan account receivables in light of the country’s economic prognosis;
 
    $12 million in after-tax severance related to restructuring initiatives; and
 
    $15 million after-tax gain related to the November 2010 settlement of the TNK-BP put option which settled below the fair value liability recorded in the prior quarter.
The company incurred no net costs related to the government investigations.

 


 

Fourth quarter diluted earnings per share reflect an increase of $0.18 over the fourth quarter of 2009 diluted earnings per share of $0.03, before charges and fair value adjustment for the put option.
Sequentially, the company’s fourth quarter diluted earnings per share, before charges and the fair value adjustment to the put option, were $0.03 higher than the third quarter of 2010.
Fourth quarter revenues of $2,901 million were the highest in company history and produced the highest quarterly sequential growth rate in the recent past. Revenues were 20 percent higher than the same period last year, and 14 percent higher than the prior quarter. International revenues were up 15 percent versus the prior quarter. Eastern Hemisphere revenues increased ten percent sequentially and 13 percent versus the year ago quarter, while North America revenue increased 14 percent and 70 percent, respectively, over the same period. Integrated Drilling, Completion Systems, Drilling Services, Stimulation and Chemicals, and Artificial Lift product lines posted strong sequential growth for the company.
Segment operating income of $421 million improved 89 percent year-over-year and 13 percent sequentially. Margin performance was held back primarily due to asset write-offs, particularly in the Eastern Hemisphere, as well as unfavorable weather conditions in Australia. Asset write-offs, principally on inventory, totaled $50 million during the quarter and negatively impacted earnings per share by approximately $0.05.
The company expects earnings per share before excluded items of $0.27 in the first quarter of 2011 and $1.30 for the full year 2011. The outlook for the international markets in 2011 is

 


 

constructive, as supported by this quarter’s healthy improvement in international revenues. The pace of recovery is expected to accelerate throughout the year and gain further momentum in 2012.
North America
Revenues for the quarter were $1,253 million, which is a 70 percent increase over the same quarter in the prior year and up 14 percent sequentially.
Operating income was $252 million compared to $42 million for the fourth quarter of 2009 and was up $51 million, or 25 percent, sequentially. The current quarter’s margins improved 180 basis points to 20.1%.
Continued gains in the U.S. land market coupled with robust Canadian activity levels led to higher sequential results. Oil directed drilling and liquid rich plays continued to drive activity levels higher, while reduced Gulf of Mexico operations weighted negatively on region results. The Artificial Lift, Drilling Services and Stimulation and Chemicals product lines contributed strong results for the quarter.
Middle East/North Africa/Asia
Fourth quarter revenues of $681 million were 15 percent higher than the fourth quarter of 2009 and 13 percent higher than the prior quarter. On a sequential basis, Algeria and Iraq posted strong performances along with the Completion Systems and Integrated Drilling product lines. Year-over-year, revenue gains were meaningful in Iraq and China.

 


 

The current quarter’s operating income of $53 million decreased 35 percent as compared to the same quarter in the prior year and decreased 22 percent compared to the prior quarter. Asset write-offs and inclement weather in Australia negatively impacted profitability during the quarter.
Europe/West Africa/FSU
Fourth quarter revenues of $524 million were ten percent higher than the fourth quarter of 2009 and six percent higher than the prior quarter. On a sequential basis, the United Kingdom posted strong revenue performance along with the Drilling Services product line.
The current quarter’s operating income of $61 million was up 25 percent compared to the same quarter in the prior year and flat sequentially. Write-offs of inventory negatively impacted profitability in the quarter.
Latin America
Fourth quarter revenues of $442 million were 28 percent lower than the fourth quarter of 2009 and up 31 percent over the prior quarter. Brazil and Colombia throughout the year have delivered exemplary performance and are expected to continue to lead 2011 growth in Latin America as awarded contracts commence.
The current quarter’s operating income of $54 million increased ten percent as compared to the same quarter in the prior year and increased 30 percent compared to the prior quarter.

 


 

Net Debt and Free Cash Flow
Net debt for the quarter increased $23 million, after payment of $47 million for the settlement of the TNK put, $43 million in bond tender premiums and $38 million in acquisition consideration. Free cash flow (measured by changes in net debt) was $115 million for the full year 2010.
Reclassifications and Non-GAAP
Non-GAAP performance measures and corresponding reconciliations to GAAP financial measures have been provided for meaningful comparisons between current results and results in prior operating periods.
Conference Call
The company will host a conference call with financial analysts to discuss the 2010 fourth quarter results on January 25, 2011 at 8:00 a.m. (CST). The company invites investors to listen to a play back of the conference call and to access the call transcript at the company’s website, http://www.weatherford.com in the “investor relations” section.
Weatherford is a Swiss-based, multi-national oilfield service company. It is one of the largest global providers of innovative mechanical solutions, technology and services for the drilling and production sectors of the oil and gas industry. Weatherford operates in over 100 countries and employs over 55,000 people worldwide.
# # #
             
Contacts:
  Andrew P. Becnel
Chief Financial Officer
  +41.22.816.1502    
 
           
 
  Karen David-Green
Vice President — Investor Relations
  +1.713.693.2530    

 


 

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning, among other things, Weatherford’s prospects for its operations which are subject to certain risks, uncertainties and assumptions. These risks and uncertainties, which are more fully described in Weatherford International Ltd.’s reports and registration statements filed with the SEC, include the impact of oil and natural gas prices and worldwide economic conditions on drilling activity, the outcome of pending government investigations, the demand for and pricing of Weatherford’s products and services, domestic and international economic and regulatory conditions and changes in tax and other laws affecting our business. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary materially from those currently anticipated.

 


 

Weatherford International Ltd.
Consolidated Condensed Statements of Income
(Unaudited)

(In 000’s, Except Per Share Amounts)
                                 
    Three Months     Twelve Months  
    Ended December 31,     Ended December 31,  
    2010     2009     2010     2009  
 
                               
Net Revenues:
                               
North America
  $ 1,252,918     $ 736,443     $ 4,163,662     $ 2,765,707  
Middle East/North Africa/Asia
    681,287       593,154       2,450,292       2,368,118  
Europe/West Africa/FSU
    524,374       478,259       1,980,649       1,616,460  
Latin America
    442,194       618,225       1,616,846       2,076,648  
 
                       
 
    2,900,773       2,426,081       10,211,449       8,826,933  
 
                       
 
                               
Operating Income (Expense):
                               
North America
    252,105       41,625       695,309       197,211  
Middle East/North Africa/Asia
    53,494       82,452       282,496       441,974  
Europe/West Africa/FSU
    60,962       48,893       223,149       230,918  
Latin America
    54,108       49,271       164,783       281,590  
Research and Development
    (57,637 )     (50,216 )     (214,481 )     (194,650 )
Corporate Expenses
    (43,345 )     (48,990 )     (175,166 )     (173,695 )
Revaluation of Contingent Consideration
    15,349       (6,295 )     15,797       21,073  
Exit and Adjustments
    (48,775 )     (26,897 )     (207,236 )     (100,566 )
 
                       
 
    286,261       89,843       784,651       703,855  
 
                               
Other Income (Expense):
                               
Interest Expense, Net
    (115,409 )     (91,902 )     (405,785 )     (366,748 )
Bond Tender Premium
    (43,242 )           (53,973 )      
Devaluation of Venezuelan Bolivar
                (63,859 )      
Other, Net
    (13,966 )     (9,177 )     (49,647 )     (37,633 )
 
                       
 
                               
Income (Loss) Before Income Taxes
    113,644       (11,236 )     211,387       299,474  
 
                               
Benefit (Provision) for Income Taxes:
                               
Benefit (Provision) for Operations
    (30,849 )     2,710       (88,238 )     (10,157 )
Provision for Legal Entity Reorganization
    (157,699 )     (24,190 )     (165,589 )     (24,190 )
Benefit from Devaluation of Venezuelan Bolivar
                23,973        
Benefit from Bond Tender and Exit and Restructurings
    24,301       5,466       57,774       14,798  
 
                       
 
    (164,247 )     (16,014 )     (172,080 )     (19,549 )
 
                               
Net Income (Loss)
    (50,603 )     (27,250 )     39,307       279,925  
Net Income Attributable to Noncontrolling Interest
    (3,156 )     (3,141 )     (14,793 )     (26,159 )
 
                       
Net Income (Loss) Attributable to Weatherford
  $ (53,759 )   $ (30,391 )   $ 24,514     $ 253,766  
 
                       
 
                               
Earnings (Loss) Per Share Attributable to Weatherford:
                               
Basic
  $ (0.07 )   $ (0.04 )   $ 0.03     $ 0.35  
Diluted
  $ (0.07 )   $ (0.04 )   $ 0.03     $ 0.35  
 
                               
Weighted Average Shares Outstanding:
                               
Basic
    745,925       737,059       743,125       714,981  
Diluted
    745,925       737,059       750,128       723,449  


 

Weatherford International Ltd.
Selected Income Statement Information
(Unaudited)

(In 000’s)
                                         
    Three Months  
    Ended  
    12/31/2010     9/30/2010     6/30/2010     3/31/2010     12/31/2009  
 
                                       
Net Revenues:
                                       
North America
  $ 1,252,918     $ 1,098,757     $ 921,443     $ 890,544     $ 736,443  
Middle East/North Africa/Asia
    681,287       603,249       600,777       564,979       593,154  
Europe/West Africa/FSU
    524,374       495,800       505,774       454,701       478,259  
Latin America
    442,194       336,351       410,277       428,024       618,225  
 
                             
 
  $ 2,900,773     $ 2,534,157     $ 2,438,271     $ 2,338,248     $ 2,426,081  
 
                             
 
                                       
Operating Income (Expense):
                                       
North America
  $ 252,105     $ 201,516     $ 129,361     $ 112,327     $ 41,625  
Middle East/North Africa/Asia
    53,494       68,197       78,009       82,796       82,452  
Europe/West Africa/FSU
    60,962       60,825       62,834       38,528       48,893  
Latin America
    54,108       41,612       37,984       31,079       49,271  
Research and Development
    (57,637 )     (54,457 )     (53,530 )     (48,857 )     (50,216 )
Corporate Expenses
    (43,345 )     (41,969 )     (42,732 )     (47,120 )     (48,990 )
Revaluation of Contingent Consideration
    15,349       90,011       (81,753 )     (7,810 )     (6,295 )
Exit and Adjustments
    (48,775 )     (87,120 )     (27,309 )     (44,032 )     (26,897 )
 
                             
 
  $ 286,261     $ 278,615     $ 102,864     $ 116,911     $ 89,843  
 
                             
Supplemental Information
(Unaudited)

(In 000’s)
                                         
    Three Months  
    Ended  
    12/31/2010     9/30/2010     6/30/2010     3/31/2010     12/31/2009  
 
                                       
Depreciation and Amortization:
                                       
North America
  $ 83,996     $ 81,843     $ 81,040     $ 80,660     $ 83,658  
Middle East/North Africa/Asia
    81,596       75,968       75,139       72,290       72,739  
Europe/West Africa/FSU
    53,095       58,847       52,058       48,958       50,376  
Latin America
    47,377       46,527       44,753       42,479       42,751  
Research and Development
    2,398       2,420       2,324       2,224       1,980  
Corporate
    3,075       3,491       2,943       2,781       2,197  
 
                             
 
  $ 271,537     $ 269,096     $ 258,257     $ 249,392     $ 253,701  
 
                             


 

We report our financial results in accordance with generally accepted accounting principles (GAAP). However, Weatherford’s management believes that certain non-GAAP performance measures and ratios may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. One such non-GAAP financial measure we may present from time to time is operating income or income from continuing operations excluding certain charges or amounts. This adjusted income amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for operating income, net income or other income data prepared in accordance with GAAP. See the table below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three months ended December 31, 2010, September 30, 2010, and December 30, 2009 and for the twelve months ended December 31, 2010 and December 31, 2009. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP.
Weatherford International Ltd.
Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)
(In thousands, except per share data)
                                         
    Three Months Ended     Twelve Months Ended  
    December 31,     September 30,     December 31,     December 31,     December 31,  
    2010     2010     2009     2010     2009  
Operating Income:
                                       
GAAP Operating Income
  $ 286,261     $ 278,615     $ 89,843     $ 784,651     $ 703,855  
Exit and Adjustments
    48,775       87,120       26,897       207,236       100,566  
Revaluation of Contingent Consideration
    (15,349 )     (90,011 )     6,295       (15,797 )     (21,073 )
 
                             
Non-GAAP Operating Income
  $ 319,687     $ 275,724     $ 123,035     $ 976,090     $ 783,348  
 
                             
 
                                       
Income (Loss) Before Income Taxes:
                                       
GAAP Income (Loss) Before Income Taxes
  $ 113,644     $ 156,289     $ (11,236 )   $ 211,387     $ 299,474  
Exit and Adjustments
    48,775       87,120       26,897       207,236       100,566  
Revaluation of Contingent Consideration
    (15,349 )     (90,011 )     6,295       (15,797 )     (21,073 )
Devaluation of Venezuelan Bolivar
                      63,859        
Bond Tender Premium
    43,242       10,731             53,973        
 
                             
Non-GAAP Income (Loss) Before Income Taxes
  $ 190,312     $ 164,129     $ 21,956     $ 520,658     $ 378,967  
 
                             
 
                                       
Benefit (Provision) for Income Taxes:
                                       
GAAP Benefit (Provision) for Income Taxes
  $ (164,247 )   $ (7,157 )   $ (16,014 )   $ (172,080 )   $ (19,549 )
Legal Entity Reorganization Charges
    157,699       7,890       24,190       165,589       24,190  
Devaluation of Venezuelan Bolivar
                      (23,973 )      
Benefit from Bond Tender and Exit and Restructurings
    (24,301 )     (28,142 )     (5,466 )     (57,774 )     (14,798 )
 
                             
Non-GAAP Benefit (Provision) for Income Taxes
  $ (30,849 )   $ (27,409 )   $ 2,710     $ (88,238 )   $ (10,157 )
 
                             
 
                                       
Net Income (Loss) Attributable to Weatherford:
                                       
GAAP Net Income (Loss)
  $ (53,759 )   $ 144,846     $ (30,391 )   $ 24,514     $ 253,766  
Total Charges, net of tax
    210,066 (a)     (12,412 )(b)     51,916 (c)     393,113 (d)     88,885 (e)
 
                             
Non-GAAP Net Income
  $ 156,307     $ 132,434     $ 21,525     $ 417,627     $ 342,651  
 
                             
 
                                       
Diluted Earnings (Loss) Per Share Attributable to Weatherford:
                                       
GAAP Diluted Earnings (Loss) per Share
  $ (0.07 )   $ 0.19     $ (0.04 )   $ 0.03     $ 0.35  
Total Charges, net of tax
    0.28 (a)     (0.01 )(b)     0.07 (c)     0.53 (d)     0.12 (e)
 
                             
Non-GAAP Diluted Earnings per Share
  $ 0.21     $ 0.18     $ 0.03     $ 0.56     $ 0.47  
 
                             
Note (a): This amount is comprised of (i) a $34 million premium paid on tendering a portion of our senior notes, (ii) severance costs associated with our restructuring activities, (iii) a $21 million reserve taken against accounts receivable balances in Venezuela due to the country’s economic prognosis and (iv) a $15 million gain on the settlement of contingent consideration included as part of our acquisition of the Oilfield Services Division (“OFS”) of TNK-BP. We also incurred investigation costs in connection with on-going investigations by the U.S. government. In addition, we incurred a tax charge of $158 million primarily as a result of a tax reorganization initiative completed during the fourth quarter of 2010.
Note (b): This amount is comprised of (i) a $90 million gain primarily for the revaluation of contingent consideration included as part of our acquisition of OFS, (ii) a $54 million charge for revisions to our estimates in our project management contracts in Mexico and (iii) a $7 million charge for a premium paid on tendering a portion of our senior notes. We also incurred investigation costs in connection with on-going investigations by the U.S. government and severance charges associated with our restructuring activities. In addition, we incurred a tax charge of $8 million as a result of a legal entity reorganization initiative completed during the third quarter of 2010.
Note (c): This amount represents investigation costs incurred in connection with on-going investigations by the U.S. government and severance charges and facility closure costs associated with the Company’s restructuring activities. In addition, the Company incurred a tax charge of $24 million as a result of a legal entity reorganization initiative completed during the fourth quarter of 2009. These charges were partially offset by a $6 million gain on the revaluation of the contingent consideration included as part of the OFS acquisition.
Note (d): This amount is comprised of (i) a $38 million charge related to our supplemental executive retirement plan that was frozen on March 31, 2010, (ii) a $40 million charge related to the devaluation of the Venezuelan Bolivar, (iii) a $54 million charge for revisions to our estimates in our project based management contracts in Mexico, (iv) a $41 million charge for premiums paid on tendering a portion of our senior notes and (v) a $21 million reserve taken against accounts receivable balances in Venezuela due to the country’s economic prognosis. We also incurred investigation costs in connection with on-going investigations by the U.S. government and severance charges associated with our restructuring activities. In addition, we incurred tax charges of $8 million and $158 million primarily as a result of tax reorganization initiatives completed during the third and fourth quarters of 2010, respectively.
Note (e): This amount represents investigation costs incurred in connection with on-going investigations by the U.S. government and costs related to the Company’s withdrawal from sanctioned countries. Also included are severance charges and facility closure costs associated with the Company’s restructuring activities. In addition, the Company incurred a tax charge of $24 million as a result of a tax reorganization initiative completed during the fourth quarter of 2009. These charges were partially offset by a $21 million gain on the revaluation of the contingent consideration included as part of the OFS acquisition.


 

Weatherford International Ltd.
Consolidated Condensed Balance Sheet
(Unaudited)

(In 000’s)
                 
    December 31,     December 31,  
    2010     2009  
Current Assets:
               
Cash and Cash Equivalents
  $ 415,772     $ 252,519  
Accounts Receivable, Net
    2,618,983       2,504,876  
Inventories
    2,591,940       2,239,762  
Other Current Assets
    1,335,718       1,143,449  
 
           
 
    6,962,413       6,140,606  
 
           
 
               
Long-Term Assets:
               
Property, Plant and Equipment, Net
    6,939,754       6,991,579  
Goodwill
    4,185,477       4,156,105  
Other Intangibles, Net
    740,681       778,786  
Equity Investments
    539,580       542,667  
Other Assets
    246,875       256,440  
 
           
 
    12,652,367       12,725,577  
 
           
 
               
Total Assets
  $ 19,614,780     $ 18,866,183  
 
           
 
               
Current Liabilities:
               
Short-term Borrowings and Current Portion of Long-term Debt
  $ 235,392     $ 869,581  
Accounts Payable
    1,335,020       1,002,359  
Other Current Liabilities
    993,852       924,948  
 
           
 
    2,564,264       2,796,888  
 
           
 
               
Long-term Liabilities:
               
Long-term Debt
    6,529,998       5,847,258  
Other Liabilities
    562,901       423,333  
 
           
 
    7,092,899       6,270,591  
 
           
 
               
Total Liabilities
    9,657,163       9,067,479  
 
           
 
Shareholders’ Equity:
               
Weatherford Shareholders’ Equity
    9,893,701       9,719,672  
Noncontrolling Interest
    63,916       79,032  
 
           
Total Shareholders’ Equity
    9,957,617       9,798,704  
 
           
 
               
Total Liabilities and Shareholders’ Equity
  $ 19,614,780     $ 18,866,183  
 
           

 


 

Weatherford International Ltd.
Net Debt
(Unaudited)

(In 000’s)
         
Change in Net Debt for the Three Months Ended December 31, 2010:
       
Net Debt at September 30, 2010
  $ (6,326,209 )
Operating Income
    286,261  
Depreciation and Amortization
    271,537  
Exit and Adjustments
    48,775  
Revaluation of Contingent Consideration
    (15,349 )
Capital Expenditures
    (258,987 )
Increase in Working Capital
    (74,396 )
Income Taxes Paid
    (92,998 )
Interest Paid
    (66,455 )
Acquisitions and Divestitures of Assets and Businesses, Net
    (33,016 )
TNK Put Settlement
    (46,966 )
Bond Tender Premium
    (43,242 )
Other
    1,427  
 
     
Net Debt at December 31, 2010
  $ (6,349,618 )
 
     
 
       
Change in Net Debt for the Year Ended December 31, 2010:
       
Net Debt at December 31, 2009
  $ (6,464,320 )
Operating Income
    784,651  
Depreciation and Amortization
    1,048,282  
Exit and Adjustments
    207,236  
Revaluation of Contingent Consideration
    (15,797 )
Capital Expenditures
    (976,544 )
Increase in Working Capital
    (242,989 )
Income Taxes Paid
    (350,603 )
Interest Paid
    (421,132 )
Acquisitions and Divestitures of Assets and Businesses, Net
    97,932  
TNK Put Settlement
    (46,966 )
Bond Tender Premium
    (53,973 )
Other
    84,605  
 
     
Net Debt at December 31, 2010
  $ (6,349,618 )
 
     
                         
    December 31,     September 30,     December 31,  
    2010     2010     2009  
Components of Net Debt
                       
Cash
  $ 415,772     $ 951,382     $ 252,519  
Short-term Borrowings and Current Portion of Long-Term Debt
    (235,392 )     (582,628 )     (869,581 )
Long-term Debt
    (6,529,998 )     (6,694,963 )     (5,847,258 )
 
                 
Net Debt
  $ (6,349,618 )   $ (6,326,209 )   $ (6,464,320 )
 
                 
“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.