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Weatherford: (In Millions, Except Percentages And Bps) Three Months Ended Change

The following excerpt is from the company's SEC filing.







Operating Income

Operating Income Margin


North America



Land Drilling Rigs

(All Operating Income numbers are non-GAAP and numbers in the table above reflect actual results and may not compute from the table due to rounding)

Bernard J. Duroc-Danner, Chairman of the Board, President and Chief Executive Officer, stated, “We continue to make rapid and deep cost progress and drive structural change, while effectively redirecting our culture and strengthening our talent bench. Our actions remain centered around perennially improving our cost structure through cycles and intensifying capital allocation and cash generation as a company-wide discipline. Our direction is steadfast.

Our free cash flow from operations in the third quarter increased to

$123 million

. We are confident in our ability to generate positive free cash flow every quarter going forward and on a full year basis this year and beyond. Our path further takes us towards operating excellence and a strict focus on our industrial core.”



Revenue for the

quarter of

$2.24 billion

compared with

$2.39 billion


$3.88 billion

quarter revenues declined

sequentially and

from the prior year. Sequentially, North America and Land Drilling Rigs improved, and were offset by the decline in International revenues.

Net loss on a non-GAAP basis for the

$42 million

(net loss of

per share), compared to a net loss of

$77 million

per share), and a net income of

$248 million

quarter of the prior year (net income of

per share).

GAAP net loss for the

$170 million

, or a net loss of

per share.

After-tax charges of

$128 million

quarter include:

$47 million


$40 million

), net of legacy contract charges;

$51 million

), of costs mostly related to severance and facility closures from our 2015 cost reduction plan;

$26 million

), due to foreign currency devaluation and related charges primarily in Angola; and

$15 million

), working capital true-ups related to our 2014 divestiture activity and other professional fees.

Operating income margin of

quarter increased by

basis points sequentially, reflecting the benefits from our aggressive cost cutting measures in response to decreased pricing and activity and decreased by

basis points compared to the third quarter of 2014. Despite the

reduction in revenue, operating income improved sequentially with 2% incrementals and low decrementals of 29% compared to the third quarter of 2014. For the first nine months of this year, our decrementals were a best-in-class 28% compared with 140% in 2009, clearly reflecting our ability to match activity declines with structural cost reductions, while balancing our market share position.

Segment Highlights

Beginning in the first quarter of 2015, the regional results reflect the core Weatherford businesses, while the Land Drilling Rigs business results are disclosed as a separate operating segment. Prior period numbers have been reclassified to conform to the current presentation.

quarter revenues of

$824 million

$16 million

sequentially, and

$990 million

, over the same quarter in the prior year.

quarter operating losses reduced by

$38 million

sequentially to

$54 million

$348 million

from the operating income in the same quarter in the prior year. The sequential revenue growth reflected a very modest recovery from the spring break up in Canada that more than offset a slight U.S. decline. The revenue performance in the U.S. easily outperformed the reduction in U.S. Land horizontal rig count of 7% with market share gains across several product lines. Operating income improved sequentially due to higher revenues and the increasing impact of the cost reduction and efficiency measures taken

through this year. Sequential incrementals were 246% while year-on-year decrementals were 35%. On a year-to-date basis, decrementals versus 2014 were 40% compared with 54% during the previous downturn in 2009.

International Operations

$1.2 billion

$552 million

quarter operating income of

$158 million

margin) was

sequentially and by

$137 million

from the same quarter in the prior year.

Latin America

$421 million

, compared to the same quarter in the prior year.

$73 million

(17.7% margin) was

13% sequentially, and

24%, compared to the same quarter in the prior year. The sequential revenue decline was primarily due to reduced activity in Mexico, Venezuela, Brazil, and Colombia, reflecting deep customer spending cuts. Operating income declines were driven by the lower revenue during the quarter, partly offset by vigorous and proactive cost reductions. Sequential decrementals were 25% while year-on-year decrementals were 13%. On a year-to-date basis, decrementals versus 2014 were a mere 4%.

Europe/Sub-Sahara Africa/Russia

$361 million

$57 million

, or 14% sequentially, and

$194 million

$43 million

(11.7% margin) was

$22 million

or 36% sequentially, and

65% when compared to the same quarter in the prior year.

Revenue declined due to the drop in activity levels in the North Sea as well as in Angola and Gabon in Sub-Sahara Africa, while Russia activity was strong, but suffered from a foreign exchange impact sequentially. Net of foreign exchange currency rate changes, Russia revenue was sequentially higher with strong margins. Overall operating income in the quarter was negatively affected by project delays across the Europe/Caspian region and cancellations across Sub-Sahara Africa, coupled with pricing concessions.

Middle East/North Africa/Asia Pacific

$445 million

$71 million

$188 million

(9.3% margin) was

from the same quarter in the prior year. As the Early Production Facilities legacy contract in Iraq draws to a close, revenue recognition on the contract declines naturally. Excluding the decline in this contract, overall revenue was down 10% sequentially, mainly due to project delays in the Middle East, coupled with weakness in the AsiaPacific region, particularly in Australia. Low operating income decrementals of 19% were helped by the continued cost reduction measures responsive to the activity declines.

$186 million

$1 million

$98 million

$12 million

sequentially with a

basis point increase and

$7 million

from the same quarter in the prior year. Sequential revenues in international drilling remain flat in the third quarter. Operating income increased primarily due to improved efficiency in overall operations and early termination fees from contract cancellations.

Free Cash Flow and Net Debt

Free cash flow from operations was

. Given that the third quarter is an...