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Weatherford Reports Third Quarter Results

Record revenue drives 136% year-on-year increase in earnings of $0.26 per diluted share, before items

Weatherford logo. (PRNewsFoto/WEATHERFORD INTERNATIONAL) (PRNewsFoto/)

News provided by

Weatherford International Ltd.

Oct 24, 2011, 10:00 ET

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GENEVA, Switzerland, Oct. 24, 2011 /PRNewswire/ -- Weatherford International Ltd. (NYSE / Euronext Paris / SIX: WFT) today reported third quarter 2011 income of $197 million, or $0.26 per diluted share, excluding an after-tax loss of $7 million.  On a GAAP basis, our net income for the third quarter of 2011 was $190 million, or $0.25 per diluted share. The excluded after-tax loss is comprised of $6 million in severance and exit charges and $1 million in government investigation costs.

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

Third quarter diluted earnings per share reflects an increase of $0.15, or 136 percent, over the third quarter of 2010 diluted earnings per share of $0.11, before charges.  Sequentially, the company’s third quarter diluted earnings per share, before charges, was $0.09, or 53 percent, higher than the second quarter of 2011.  Field operations drove the entire sequential improvement in profitability.  Two non-operating items partially offset operating improvements.  First, foreign exchange book losses of $20 million at Weatherford recorded in Other, Net and our share of similar foreign exchange book losses at a minority-owned subsidiary in Russia, which reduced regional operating income by an additional $8 million.  Second, a higher sequential effective tax rate reduced net income by $7 million.

Third quarter revenues of $3,373 million were the highest in the company’s history.  Revenues were 33 percent higher than the same period last year and 11 percent higher than the prior quarter.  North America revenue was up 21 percent sequentially and up 48 percent versus the third quarter of 2010.  The sequential increase in North America was partially due to seasonal recovery from the Canadian break-up experienced in the second quarter of 2011. International revenues were up three percent sequentially and up 22 percent versus the same quarter of 2010.      

Segment operating income of $525 million improved 42 percent year-over-year and 25 percent sequentially.  The company’s North America operations provided all of the sequential growth compared to the second quarter of 2011 and delivered 39 percent incremental margins.  Internationally, Latin America was the strongest contributor with respect to revenue and profit growth.  An $8 million foreign exchange book loss at one of the company’s minority-owned subsidiaries in Russia weighed on Eastern Hemisphere earnings, as the venture recorded a currency loss on its U.S. dollar-denominated debt due to a strengthening of the dollar versus the Russian rouble.

Subject to the risks regarding forward-looking statements highlighted by the company in this press release and its public filings, the company expects earnings per share before excluded items of approximately $0.30 to $0.34 in the fourth quarter of 2011, with profit growth expected in all reporting regions.  With respect to 2012, the company maintains a positive but more measured outlook for its North American business and expects modest revenue growth and margin expansion as compared to 2011 annualized exit rates as a result of strong activity in Canada and in the U.S. oil market.  Internationally, the company anticipates continued growth and expanding margins in its Latin America region, underpinned by improvements in Argentina, Brazil, Colombia, Mexico and Venezuela.  Eastern Hemisphere is also expected to improve in 2012, with upticks in Europe and Russia, as well as a recovery in the Middle East / North Africa / Asia Pacific region with positive contributions from new contracts with better terms and pricing, the completion of existing contracts and activity improvements in North Africa.

North America

Revenues for the quarter were $1,620 million, which is a 48 percent increase over the same quarter in the prior year and up 21 percent sequentially.  The Artificial Lift, Completion Systems, Wireline and Drilling Services product lines contributed strong results for the quarter.

The current quarter’s operating income was $352 million, up $153 million from the third quarter of 2010, and was up $109 million, or 45 percent, compared to the prior quarter.  Strong growth and steadily expanding margins in the U.S. and the recovery from the second quarter’s Canadian break-up contributed to the sequential increase.  

Middle East/North Africa/Asia

Third quarter revenues of $573 million were five percent lower than the third quarter of 2010 and seven percent lower than the prior quarter.  The sequential decline in revenues was principally the result of the deconsolidation of three joint ventures and a decline in activity in Algeria.

The current quarter’s operating income of $15 million decreased 77 percent as compared to the same quarter in the prior year and decreased $19 million compared to the second quarter of 2011.  The mobilization of equipment out of Algeria pending additional tenders weighed on margins, as did a negative swing in Iraq profitability and continuing operating losses in Libya due to political disruptions.

Europe/West Africa/FSU

Third quarter revenues of $589 million were 19 percent higher than the third quarter of 2010 and one percent lower than the prior quarter.  The revenue growth over the same quarter of 2010 came from stronger performance in Russia and the North Sea.    

The current quarter’s operating income of $87 million was up 37 percent compared to the same quarter in the prior year and down $6 million compared to the prior quarter.  The current quarter was negatively impacted by the $8 million of foreign exchange losses discussed above.

Latin America

Third quarter revenues of $592 million were 76 percent higher than the third quarter of 2010 and up 19 percent compared to the second quarter of 2011.  Mexico, Brazil and Venezuela posted strong sequential performances and nearly all product lines experienced quarter on quarter growth.

The current quarter’s operating income of $71 million increased 73 percent as compared to the same quarter in the prior year and increased $20 million compared to the prior quarter.  

Liquidity and Net Debt

Net debt for the quarter increased $301 million, with working capital increasing $333 million during the quarter.  

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 2011 third quarter results on October 25, 2011 at 7:00 a.m. (CDT).  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 59,000 people worldwide.

Contacts:

Andrew P. Becnel

+41.22.816.1502


Chief Financial Officer






Karen David-Green

+1.713.693.2530


Vice President – Investor Relations


Forward-Looking Statements

This press release contains 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, as well as the prospects for the oilfield service business generally and our business in particular.  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 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.  We undertake no obligation to correct or update any forward-looking statement, whether as a result of new information, future events, or otherwise.

Weatherford International Ltd.

Consolidated Condensed Statements of Income

(Unaudited)

(In Thousands, Except Per Share Amounts)






















Three Months


Nine Months




Ended September 30,


Ended September 30,






2011


2010


2011


2010

























Net Revenues:












North America



$ 1,619,601


$ 1,096,963


$ 4,324,318


$ 2,903,238



Middle East/North Africa/Asia



572,707


601,215


1,765,609


1,765,873



Europe/West Africa/FSU



588,572


496,113


1,691,453


1,456,049



Latin America



591,770


335,461


1,499,270


1,172,822






3,372,650


2,529,752


9,280,650


7,297,982













Operating Income (Expense):












North America



352,163


199,029


879,473


434,462



Middle East/North Africa/Asia



15,341


65,718


60,109


215,425



Europe/West Africa/FSU



86,595


63,236


216,610


176,900



Latin America



70,878


40,914


143,050


108,979



Research and Development



(58,888)


(54,457)


(185,666)


(156,844)



Corporate Expenses



(41,981)


(41,907)


(140,840)


(129,635)



Revaluation of Contingent Consideration



-


90,011


-


(2,752)



Severance, Exit and Other Adjustments



(8,402)


(87,120)


(47,927)


(158,461)






415,706


275,424


924,809


488,074













Other Income (Expense):












Interest Expense, Net



(114,448)


(99,318)


(340,638)


(290,376)



Bond Tender Premium



-


(10,731)


-


(10,731)



Devaluation of Venezuelan Bolivar



-


-


-


(63,859)



Other, Net



(26,261)


(12,277)


(67,194)


(35,681)













Income Before Income Taxes



274,997


153,098


516,977


87,427













Benefit (Provision) for Income Taxes:











Provision for Operations



(83,758)


(74,411)


(154,511)


(146,940)


Provision for Legal Entity Reorganization



-


(7,890)


-


(7,890)


Benefit from Devaluation of Venezuelan Bolivar



-


-


-


23,973


Benefit from Severance, Exit and Other Adjustments



1,902


28,142


7,250


33,473






(81,856)


(54,159)


(147,261)


(97,384)













Net Income (Loss)



193,141


98,939


369,716


(9,957)

Net Income Attributable to Noncontrolling Interest



(2,781)


(4,286)


(10,057)


(11,637)

Net Income (Loss) Attributable to Weatherford



$    190,360


$      94,653


$    359,659


$    (21,594)

























Earnings (Loss) Per Share Attributable to Weatherford:











Basic



$          0.25


$          0.13


$          0.48


$        (0.03)


Diluted



$          0.25


$          0.13


$          0.47


$        (0.03)













Weighted Average Shares Outstanding:











Basic



753,896


745,502


750,634


742,192


Diluted



759,946


751,394


758,491


742,192

Weatherford International Ltd.

Selected Income Statement Information

(Unaudited)

(In Thousands)




























Three Months Ended




9/30/2011


6/30/2011


3/31/2011


12/31/2010


9/30/2010













Net Revenues:












North America

$ 1,619,601


$ 1,344,245


$ 1,360,472


$ 1,263,643


$ 1,096,963



Middle East/North Africa/Asia

572,707


617,376


575,526


684,630


601,215



Europe/West Africa/FSU

588,572


592,458


510,423


528,380


496,113



Latin America

591,770


497,735


409,765


446,162


335,461




$ 3,372,650


$ 3,051,814


$ 2,856,186


$ 2,922,815


$ 2,529,752













Operating Income (Expense):












North America

$    352,163


$    243,613


$    283,697


$    261,145


$    199,029



Middle East/North Africa/Asia

15,341


33,964


10,804


49,222


65,718



Europe/West Africa/FSU

86,595


92,511


37,504


64,398


63,236



Latin America

70,878


51,081


21,091


52,960


40,914



Research and Development

(58,888)


(62,231)


(64,547)


(57,637)


(54,457)



Corporate Expenses

(41,981)


(43,030)


(55,829)


(43,283)


(41,907)



Revaluation of Contingent Consideration

-


-


-


15,349


90,011



Severance, Exit and Other Adjustments

(8,402)


(18,693)


(20,832)


(48,775)


(87,120)




$    415,706


$    297,215


$    211,888


$    293,379


$    275,424




























Three Months Ended




9/30/2011


6/30/2011


3/31/2011


12/31/2010


9/30/2010













Product Line Revenues











Stimulation and Chemicals

$    584,550


$    544,953


$    457,557


$    396,241


$    333,630


Artificial Lift Systems

600,822


535,016


443,691


471,276


417,464


Drilling Services

550,722


487,559


474,440


481,687


428,930


Well Construction

414,593


382,077


346,052


362,668


332,118


Integrated Drilling

331,446


316,554


319,661


356,871


261,974


Completion Systems

269,235


248,850


206,760


256,676


191,559


Drilling Tools

215,720


182,956


220,538


211,823


200,555


Wireline and Evaluation Services

195,731


160,246


188,778


159,426


155,402


Re-entry and Fishing

171,463


159,851


164,274


165,094


153,569


Pipeline and Specialty Services

38,368


33,752


34,435


61,053


54,551




$ 3,372,650


$ 3,051,814


$ 2,856,186


$ 2,922,815


$ 2,529,752




























Three Months Ended




9/30/2011


6/30/2011


3/31/2011


12/31/2010


9/30/2010













Depreciation and Amortization:











North America

$      90,994


$      88,006


$      87,793


$      83,996


$      81,843


Middle East/North Africa/Asia

83,441


82,548


81,380


81,596


75,968


Europe/West Africa/FSU

58,782


57,696


56,594


53,408


56,960


Latin America

50,577


48,722


46,388


47,377


46,527


Research and Development

2,391


2,471


1,964


2,398


2,420


Corporate

2,265


2,725


2,936


3,075


3,491




$    288,450


$    282,168


$    277,055


$    271,850


$    267,209

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 September 30, 2011, June 30, 2011, and September 30, 2010 and for the nine months ended September 30, 2011 and September 30, 2010.  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 Amounts)



































Three Months Ended


Nine Months Ended





September 30,


June 30,


September 30,



September 30,


September 30,






2011


2011


2010



2011


2010

















Operating Income:














GAAP Operating Income


$       415,706


$ 297,215


$       275,424



$       924,809


$       488,074




Severance, Exit and Other Adjustments    


8,402


18,693


87,120



47,927


158,461




Revaluation of Contingent Consideration    


-


-


(90,011)



-


2,752



Non-GAAP Operating Income


$       424,108


$ 315,908


$       272,533



$       972,736


$       649,287
































Income (Loss) Before Income Taxes:














GAAP Income (Loss) Before Income Taxes    


$       274,997


$ 161,164


$       153,098



$       516,977


$         87,427




Severance, Exit and Other Adjustments    


8,402


18,693


87,120



47,927


158,461




Revaluation of Contingent Consideration    


-


-


(90,011)



-


2,752




Devaluation of Venezuelan Bolivar    


-


-


-



-


63,859




Bond Tender Premium    


-


-


10,731



-


10,731



Non-GAAP Income (Loss) Before Income Taxes


$       283,399


$ 179,857


$       160,938



$       564,904


$       323,230
































Benefit (Provision) for Income Taxes:














GAAP Benefit (Provision) for Income Taxes


$       (81,856)


$ (46,128)


$       (54,159)



$     (147,261)


$       (97,384)




Legal Entity Reorganization Charges    


-


-


7,890



-


7,890




Devaluation of Venezuelan Bolivar    


-


-


-



-


(23,973)




Bond Tender, Severance, Exit and Other Adjustments    


(1,902)


(2,827)


(28,142)



(7,250)


(33,473)



Non-GAAP Benefit (Provision) for Income Taxes


$       (83,758)


$ (48,955)


$       (74,411)



$     (154,511)


$     (146,940)
































Net Income (Loss) Attributable to Weatherford:














GAAP Net Income (Loss)


$       190,360


$ 110,098


$         94,653



$       359,659


$       (21,594)




Total Charges, net of tax    


6,500

(a)

15,866

(b)

(12,412)

(c)


40,677

(d)

186,247

(e)


Non-GAAP Net Income


$       196,860


$ 125,964


$         82,241



$       400,336


$       164,653
































Diluted Earnings (Loss) Per Share Attributable to Weatherford:














GAAP Diluted Earnings (Loss) per Share


$             0.25


$       0.15


$             0.13



$             0.47


$           (0.03)




Total Charges, net of tax    


0.01

(a)

0.02

(b)

(0.02)

(c)


0.06

(d)

0.25

(e)


Non-GAAP Diluted Earnings per Share  


$             0.26


$       0.17


$             0.11



$             0.53


$             0.22


































Note (a):  This amount is comprised of severance and exit charges of $6 million, net of tax, and costs incurred in connection with on-going investigations by the U.S. government of $1 million.






Note (b):  This amount is comprised of severance charges of $12 million, net of tax, and costs incurred in connection with on-going investigations by the U.S. government of $3 million.  We also incurred charges totaling $1 million, net of tax, for facility closure costs and termination fees.






Note (c):  This amount is comprised of (i) a $90 million gain for the revaluation of contingent consideration included as part of our acquisition of the Oilfield Services Division ("OFS") of TNK-BP, (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 (d):  This amount is comprised of a $9 million charge associated with terminating a corporate consulting contract and $26 million for severance and exit costs.  We also incurred investigation costs of $5 million in connection with on-going investigations by the U.S. government.






Note (e):  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 management contracts in Mexico and (iv) a $7 million charge for a premium paid on tendering a portion of our senior notes, and (v) a net $3 million charge for the revaluation of contingent consideration.  During the year to date period ended September 30, 2010, we incurred a tax charge of $8 million as a result of a legal entity reorganization initiative completed during the third quarter of 2010. We also incurred investigation costs in connection with on-going investigations by the U.S. government and severance charges associated with our restructuring activities.  

Weatherford International Ltd.

Consolidated Condensed Balance Sheet

(Unaudited)

(In Thousands)

















September 30,


December 31,






2011


2010









Current Assets:








Cash and Cash Equivalents



$       273,562


$      415,772



Accounts Receivable, Net



3,180,861


2,629,403



Inventories



3,071,830


2,590,008



Other Current Assets



1,068,295


856,884






7,594,548


6,492,067









Long-Term Assets:








Property, Plant and Equipment, Net



7,140,692


6,939,754



Goodwill



4,351,160


4,185,477



Other Intangibles, Net



722,315


730,429



Equity Investments



599,730


539,580



Other Assets



258,831


244,347






13,072,728


12,639,587










Total Assets



$  20,667,276


$ 19,131,654









Current Liabilities:








Short-term Borrowings and Current Portion of Long-term Debt



$    1,349,624


$      235,392



Accounts Payable



1,565,728


1,335,020



Other Current Liabilities



1,122,803


1,012,567






4,038,155


2,582,979









Long-term Liabilities:








Long-term Debt



6,266,190


6,529,998



Other Liabilities



466,358


553,830






6,732,548


7,083,828










Total Liabilities



10,770,703


9,666,807









Shareholders' Equity:








Weatherford Shareholders' Equity



9,872,321


9,400,931



Noncontrolling Interest



24,252


63,916


Total Shareholders' Equity



9,896,573


9,464,847










Total Liabilities and Shareholders' Equity



$  20,667,276


$ 19,131,654

Weatherford International Ltd.

Net Debt

(Unaudited)

(In Thousands)













Change in Net Debt for the Three Months Ended September 30, 2011:








Net Debt at June 30, 2011


$     (7,040,880)








Operating Income


415,706








Depreciation and Amortization


288,450








Severance, Exit and Other Adjustments


8,402








Capital Expenditures


(377,088)








Increase in Working Capital


(342,325)








Income Taxes Paid


(59,270)








Interest Paid


(179,248)








Acquisitions and Divestitures of Assets and Businesses, Net


(27,374)








Foreign Currency Contract Settlements


7,218








Other


(35,843)






Net Debt at September 30, 2011


$     (7,342,252)















Change in Net Debt for the Nine Months Ended September 30, 2011:








Net Debt at December 31, 2010


$     (6,349,618)








Operating Income


924,809








Depreciation and Amortization


847,673








Severance, Exit and Other Adjustments


47,927








Capital Expenditures


(1,120,325)








Increase in Working Capital


(821,362)








Income Taxes Paid


(194,730)








Interest Paid


(413,677)








Acquisitions and Divestitures of Assets and Businesses, Net


(65,884)








Foreign Currency Contract Settlements


(82,728)








Other


(114,337)






Net Debt at September 30, 2011


$     (7,342,252)






























September 30,


June 30,


December 31,


Components of Net Debt


2011


2011


2010




Cash


$         273,562


$     329,555


$        415,772




Short-term Borrowings and Current Portion of Long-Term Debt


(1,349,624)


(1,113,724)


(235,392)




Long-term Debt


(6,266,190)


(6,256,711)


(6,529,998)




Net Debt


$     (7,342,252)


$ (7,040,880)


$    (6,349,618)









































"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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