Weatherford: 2nd Quarter Results – Revenues of $3.9bn
Weatherford International Ltd. today reported results for the second quarter ended June 30, 2013.
Second Quarter 2013 Highlights
– $0.15 per diluted share (non-GAAP), or net income of $116 million excluding after-tax losses of $234 million;
– Estimated $153 million potential FCPA and Oil-for-Food settlement with the U.S. government;
– Free cash flow increased by over $200 million sequentially, driven by working capital improvements;
– Capital expenditures, net of lost-in-hole, declined 26% compared to the prior year quarter;
– Revenues of $3,868 million were 3% higher than the same period last year, and up 1% sequentially;
– International revenues of $2,339 million were up 12% over the same period in 2012 and up 9% sequentially;
– Eastern Hemisphere operating income margin expanded 155 basis points sequentially;
– North America revenues of $1,529 million were down 10% sequentially, and down 8% from the same quarter of 2012 primarily due to the Canadian seasonal downturn compounded by severe flooding.
Second Quarter 2013 Results
On a GAAP basis, segment operating income was $385 million with a second quarter net loss of $118 million, or a loss of $0.15 per diluted share. The excluded after-tax losses included:
– $153 million representing management’s best estimate of a potential settlement with the U.S. government related to the FCPA and oil-for-food matters, although no agreement has been reached and uncertainties remain; – $38 million in severance, exit and other charges; – $31 million associated with legacy lump sum contracts in Iraq; and – $12 million related to U.S. government investigations and tax related professional fees.
The non-GAAP effective tax rate for the quarter was 12%.
Outlook
The Company expects the second half of 2013 to show higher revenue and operating income in North America compared to the first half of this year with the U.S. also benefiting from a lower operating cost structure. Latin America will show improvement in both revenue and profitability in the fourth quarter of 2013. The outlook for the Eastern Hemisphere remains positive with continued expansion in Europe, Caspian and Russia along with continued recovery in the Middle East/North Africa and Asia Pacific region. Increased operating performance in the second half of the year, as well as further cost reductions and improvements in capital efficiency measures, all suggest a positive outlook. The Company expects its 2013 annual effective tax rate to be in the range of 27% to 29%.
Regional Highlights
– North America
North America revenues for the quarter were $1,529 million, an 8% decrease over the same quarter in the prior year and down 10% sequentially. The quarter’s operating income was $167 million, down $59 million, or 26% from the same quarter in the prior year and down 25% sequentially. The sequential decline was largely due to the seasonal effect of the “spring breakup” in Canada impacting revenues and margins in all product lines, and was partially offset by increased U.S. Artificial Lift and Well Construction activity. U.S. year-over-year performance declined, driven primarily by lower Stimulation profitability.
– Middle East/North Africa/Asia Pacific
Second quarter revenues of $919 million were up $270 million, or 42% higher than the second quarter of 2012, and $134 million, or 17% higher sequentially. The current quarter’s operating income of $66 million increased $42 million, or 175% from the same quarter in the prior year, and increased 47% sequentially due to an increase in our Drilling Services, Well Construction and Artificial Lift product lines. The Asia Pacific region generated the highest revenue and operating income in our history.
– Europe/Sub-Sahara Africa/Russia
Second quarter revenues of $681 million were 4% higher than the second quarter of 2012 and up 8% from the prior quarter. The current quarter’s operating income of $83 million was down 19% when compared to the same quarter in the prior year, and was up $18 million, or 28% from the prior quarter. The year-over-year operating income decline resulted from reduced margins in Russia driven by lower activity levels and the change in product mix. Sequentially, operating income was up due to increased activity in Well Construction for Europe.
– Latin America
Second quarter revenues of $739 million were down $43 million or 6% compared to the second quarter of 2012, and up $12 million, or 2% sequentially. The decline in revenue in the second quarter compared to the prior year was largely related to lower activity in Mexico. The current quarter’s operating income of $90 million was flat compared to the same quarter in the prior year, and decreased 8% from the prior quarter.
Liquidity and Free Cash Flow
Free cash flow increased by over $200 million compared to the prior quarter. The improvement in cash flow was driven entirely by working capital improvements. Driving the change in working capital, days sales outstanding decreased to 89 days, and days sales in inventory decreased to 85 days.
Non-GAAP Performance Measures
Unless explicitly stated to the contrary, all performance measures used throughout this document are non-GAAP. Corresponding reconciliations to GAAP financial measures have been provided in the following pages to offer meaningful comparisons between current results and results in prior operating periods.
About Weatherford
Weatherford is a Swiss-based, multinational oilfield service company. It is one of the largest global providers of technology and services for the oil and gas industry. Weatherford operates in over 100 countries, and employs over 60,000 people worldwide. For more information, visit www.weatherford.com
