General |
3 Months Ended |
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Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | General The accompanying unaudited Condensed Consolidated Financial Statements of Weatherford International plc (the “Company,” “Weatherford” or “Weatherford Ireland”) are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and include all adjustments (consisting of normal recurring adjustments) which, in our opinion, are considered necessary to present fairly our Condensed Consolidated Balance Sheets at March 31, 2019 and December 31, 2018, Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2019 and 2018 and Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018. When using phrases such as “we,” “us,” and “our,” the intent is to refer to Weatherford International plc, a public limited company organized under the law of Ireland, and its subsidiaries as a whole or on a regional basis, depending on the context in which the statements are made. Although we believe the disclosures in these financial statements are adequate, certain information relating to our organization and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in this Form 10-Q pursuant to U.S. Securities and Exchange Commission (“SEC”) rules and regulations. These financial statements should be read in conjunction with the audited Consolidated Financial Statements for the year ended December 31, 2018 included in our Annual Report on Form 10-K. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results expected for the year ending December 31, 2019. Liquidity Concerns and Actions to Address Liquidity Needs; Going Concern Our bond price decline and our share price decline, as well as our Company’s credit ratings, have over time increased the level of uncertainty in our business and have impacted various key stakeholders, including our employees, our customers and suppliers, and our key lenders. We have experienced losses and negative operating cash flows for multiple years, despite continued focus on our overall profitability, including managing expenses. As shown in our Condensed Consolidated Financial Statements, we incurred operating losses in the first quarter of 2019, requiring us to supplement operating activities with cash from investing and financing activities. As a result of weak energy sector conditions in the first quarter of 2019 in North America, primarily in Canada, combined with seasonal and weather-related disruptions in the United States, Europe and Russia as well as project start-up costs and an unfavorable impact from foreign exchange in Argentina, our operational results, working capital and cash flows were negatively impacted. These industry and company specific conditions led to lower demand for our products and services and significantly lower than expected benefits from our transformation, consequently resulting in lower actual results compared to our expectations for the first quarter of 2019. Finally, the market outlook for our Company and the energy sector continues to be constrained due to the uncertainty of anticipated activity particularly in North America, including lower spending by many of our customers resulting in lower than expected benefits from our transformation. These uncertainties have impacted our Company in several ways, including the retention of our key personnel, access to debt and equity credit at suitable terms, our level of working capital and our ability to execute within our targeted timing on our transformation. These combined factors contributed to our poor financial results for the first quarter of 2019 and have had a significant negative impact on our ability to negotiate acceptable terms with our lenders on new or extended credit facilities and new longer-term debt issuances. As a result, the Company believes that it will not be able to generate sufficient liquidity to service all of its debt and other obligations or comply with its debt covenants at some point within the next twelve months. These conditions raise substantial doubt about our ability to continue as a going concern. To address this projected shortfall in liquidity and capital structure constraints, we expect to reach an agreement in principle with holders of a majority of our unsecured senior notes (the “Consenting Noteholders”) on the terms of a Restructuring Support Agreement (the “RSA”). Furthermore, we are in negotiations for definitive commitments related to debtor-in-possession facilities (“DIP Facilities”), which are expected to be completed in the near term. The capital restructuring transaction is expected to be implemented through cases to be commenced by the Company and certain of its subsidiaries under Title 11 of the United States Bankruptcy Code and an examinership proceeding under the laws of Ireland. There can be no assurances that the capital restructuring transaction as described in the proposed RSA, including entry into the DIP Facilities, will be completed. See “Note 20 – Subsequent Events” for additional details regarding the proposed RSA, the DIP Facilities and the expected capital restructuring transaction. Our unaudited Condensed Consolidated Financial Statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, the reported amounts of revenues and expenses during the reporting period, and disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions, including those related to uncollectible accounts receivable, lower of cost or net realizable value of inventories, assets and liabilities held for sale, derivative financial instruments, intangible assets and goodwill, property, plant and equipment (“PP&E”), right-of-use (“ROU”) lease assets, income taxes, accounting for long-term contracts, self-insurance, foreign currency exchange rates, lease liabilities, pension and post-retirement benefit plans, disputes, litigation, contingencies and share-based compensation. We base our estimates on historical experience, adjusted for current conditions if necessary, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Principles of Consolidation We consolidate all wholly owned subsidiaries and controlled joint ventures. All material intercompany accounts and transactions have been eliminated in consolidation. Revenue Recognition The majority of our revenue is derived from short term contracts. Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Generally, our revenue is recognized for services over time as the services are rendered and we primarily utilize an output method such as time elapsed or footage drilled which coincides with how customers receive the benefit. Contract drilling service revenue is contractual by nature and generally governed by day-rate based contracts. Product sales revenue is recognized at a point in time when control passes and is generally upon delivery but is dependent on the terms of the contract. Our services and products are generally sold based upon purchase orders, contracts or call-out work orders that include fixed per unit prices or variable consideration but do not generally include right of return provisions or other significant post-delivery obligations. We generally bill our sales of services and products upon completion of the performance obligation. Product sales are billed and recognized when control passes to the customer. Our products are produced in a standard manufacturing operation, even if produced to our customer’s specifications. Revenues are recognized at the amount to which we have the right to invoice for services performed. Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, we require payment before the products or services are delivered to the customer. We defer revenue recognition on such payments until the products or services are delivered to the customer. We account for individual products and services separately if they are distinct and the product or service is separately identifiable from other items in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The consideration, including any discounts, is allocated between separate products and services based on their standalone selling prices. The standalone selling prices are determined based on the prices at which we separately sell our products and services. For items not sold separately (e.g. term software licenses in our Production product line), we estimate standalone selling prices using the adjusted market assessment approach. The nature of our contracts give rise to several types of variable consideration, including claims and lost-in-hole charges. Our claims are not significant and lost-in-hole charges are constrained variable consideration. We do not estimate revenue associated with these types of variable consideration. We do not disclose the value of unsatisfied performance obligations for contracts (i) with an original expected length of one year or less and (ii) for which we recognize revenue at the amount to which we have the right to invoice for services performed. The unmanned equipment that we lease to customers as operating leases consist primarily of drilling rental tools and artificial lift pumping equipment and the rental revenue is generally recognized on a straight-line basis. These equipment rental revenues are generally provided based on call-out work orders that include fixed per unit prices and are derived from short-term contracts. Revenue Recognition – Contract Balances The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables, contract assets, and customer advances and deposits (contract liabilities classified as deferred revenues) on the Condensed Consolidated Balance Sheets. Receivables for products and services with customers are included in “Accounts Receivable, Net,” contract assets are included in “Other Current Assets” and contract liabilities are included in “Other Current Liabilities” on our Consolidated Balance Sheets. Consideration under certain contracts such as turnkey or lump sum contracts may be classified as contract assets as the invoicing occurs once the performance obligations have been satisfied while the customer simultaneously receives and consumes the benefits provided. We also have receivables for work completed but not billed in which the rights to consideration are conditional and would be classified as contract assets. These are primarily related to service contracts and are not material to our Condensed Consolidated Financial Statements. We may also have contract liabilities and defer revenues for certain product sales that are not distinct from their installation. Reclassifications Certain reclassifications of the financial statements and accompanying footnotes for the three months ended March 31, 2018 have been made to conform to the presentation for the three months ended March 31, 2019. See “Note 2 – New Accounting Pronouncements” for additional details regarding accounting changes impacting the Condensed Consolidated Financial Statements. |