Weatherford Reports Fourth Quarter Results of $0.21 Per Share Before Charges, Primarily Tax Reorganization and Bond Tender Premiums

News provided by

Weatherford International Ltd.

Jan 25, 2011, 01:00 ET

GENEVA, Jan. 25, 2011 /PRNewswire/ -- Weatherford International Ltd. (NYSE / 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.

(Logo:  http://photos.prnewswire.com/prnh/19990308/WEATHERFORDLOGO)

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

+41.22.816.1502

Chief Financial Officer




Karen David-Green

+1.713.693.2530

Vice President – Investor Relations

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 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,

Components of Net Debt

2010

2010

2009


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.

SOURCE Weatherford International Ltd.

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