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Weatherford Reports First Quarter 2016 Results

BAAR, Switzerland, May 4, 2016 /PRNewswire/ -- Weatherford International plc WFT, -6.38% reported a net loss before charges and credits of $239 million ($0.29 net loss per share before charges) on revenues of $1.59 billion for the first quarter of 2016. GAAP net loss for the first quarter of 2016 was $498 million, or a net loss of $0.61 per share.

First Quarter 2016 Highlights

  • The Company completed negotiations to refinance our existing revolving credit facility into a consolidated $1.651 billion package, to be made up of a new 3-year $1.151 billion revolving credit facility and a new 4-year $500 million term loan facility. Including the non-extending banks, the total available facilities will stand at $1.88 billion through July of 2017;
  • Raised net proceeds of $630 million through a successful public equity offering;
  • Ceased operations in four of the nine planned manufacturing facilities closures for the year;
  • Closed 26 operating and other facilities, one more than originally planned; and
  • Completed 78% of the additional 6,000 reduction in force, with annualized savings of $288 million.

(In Millions, Except Percentages and bps)


Three Months Ended


Change




3/31/2016


12/31/2015


3/31/2015


Sequential


Year-on-Year


Total












Revenue


$

1,585



$

2,012



$

2,794



(21)

%


(43)


%

Operating Income (Loss)


$

(105)



$

57



$

238



(285)

%


(144)


%

Operating Margin



(6.6)

%



2.8

%



8.5

%


(943)

bps


(1,516)


bps

North America












Revenue


$

543



$

699



$

1,163



(22)

%


(53)


%

Operating Loss


$

(128)



$

(68)



$

(10)



(90)

%


(1,210)


%

Operating Margin


(23.6)

%



(9.6)

%



(0.8)

%


(1,400)

bps


(2,279)


bps

International












Revenue


$

923



$

1,166



$

1,436



(21)

%


(36)


%

Operating Income


$

49



$

142



$

238



(65)

%


(79)


%

Operating Margin



5.4

%



12.1

%



16.6

%


(673)

bps


(1,125)


bps

Land Drilling Rigs












Revenue


$

119



$

147



$

195



(19)

%


(39)


%

Operating Income (Loss)


$

(26)



$

(17)



$

10



(55)

%


(355)


%

Operating Margin



(21.9)

%



(11.5)

%



5.2

%


(1,043)

bps


(2,712)


bps

(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, "The brutality and length of this down cycle has challenged the entire industry, both our customer base and our peers. During the first quarter, all of our regions and product lines suffered the brunt of this harsh industry decline. North America was very challenged, with the U.S. reaching its lowest rig count level in recorded history, and several international markets experiencing severe seasonal downturns. We managed what we could control, to the fullest.

Historically our free cash flow has a seasonal low in the first quarter and this year is no exception. While we recorded negative free cash flow of $216 million this quarter, this is $50 million better year-over-year, despite experiencing much larger operating losses. Furthermore, the first quarter's cash flow included severance and restructuring cash payments of $71 million which were voluntary and accelerated coupled with net cash outflows of $47 million from the now largely completed Zubair project.

We are pleased to announce we have negotiated the renewal of our revolving credit facility and a new term loan facility and are grateful to our banking group for their continued commitment and support. In addition, in order to safeguard our Company from a protracted down cycle, during the first quarter, we successfully raised $630 million of net proceeds through an equity offering. Given our very aggressive cost actions and our unyielding focus on quality and reliability, we are confident in our ability to successfully navigate the current challenging industry conditions.

Building on our fundamental operating progress and applying a disciplined approach, we are prepared to address continued near-term market strains, as well as to exploit activity turns when the recovery comes. Our direction remains focused on core, cost and cash. As we progress through the year, our performance to come will reflect our transformation in all operating and financial metrics."

First Quarter 2016 Results

Revenue for the first quarter of 2016 was $1.59 billion compared with $2.01 billion in the fourth quarter of 2015 and $2.79 billion in the first quarter of 2015. First quarter revenues declined 21% sequentially and 43% from the prior year. The sequential decline was 22% in North America and 21% for International operations. Product sales declined 30% sequentially, while service and rental revenue decreased by 16%. The product sales decline was as much seasonal as cyclical and most impacted the Eastern Hemisphere.

Net loss on a non-GAAP basis for the first quarter of 2016 was $239 million (net loss of $0.29 per share), compared to a net loss of $102 million in the fourth quarter of 2015 (net loss of $0.13 per share), and a net loss of $33 million in the first quarter of the prior year (net loss of $0.04 per share).

GAAP net loss for the first quarter of 2016 was $498 million, or a net loss of $0.61 per share.

After-tax charges of $259 million for the first quarter primarily include:

  • $65 million of litigation charges primarily related to the potential settlement of our previous income tax restatements;
  • $59 million of costs related to severance and facility closures;
  • $54 million of Zubair legacy contract charges;
  • $49 million primarily from supply contract related charges and asset write-downs; and
  • $31 million due to foreign currency devaluation charges in Angola.

Operating margin of -6.6% for the first quarter decreased by 943 basis points sequentially, and declined 1,516 basis points from the first quarter of 2015. Sequentially, there was an overall 21% reduction in revenue resulting in decrementals of 38%. Year-over-year revenue was down 43% with decrementals of 28%.

Segment Highlights

North America

First quarter revenues of $543 million were down $156 million, or 22% sequentially, and down $620 million, or 53%, over the same quarter in the prior year. First quarter operating losses increased by $60 million sequentially to $128 million (-23.6% margin) and increased $118 million from an operating loss of $10 million in the same quarter of the prior year. The sequential decrease in revenue was less than the 27% decrease in average U.S. rig count that resulted in further declines in customer activity and spending and also impacted by the weakening Canadian dollar and the early arrival of the Canadian spring break-up. Operating losses increased sequentially resulting in decrementals of 39% as additional cost reduction measures that began during the quarter were not enough to offset the sharp drop in revenue. Year-over-year decrementals were a respectable 19%.

International Operations

First quarter revenues of $923 million were down $243 million, or 21% sequentially, and lower by $513 million, or 36% compared to the same quarter in the prior year. First quarter operating income of $49 million (5.4% margin) was $93 million lower sequentially and $189 million lower versus the same quarter in the prior year. The international rig count in the first quarter dropped 10% from last quarter. Decrementals were 38% sequentially and 37% year-over-year.

Latin America

First quarter revenues of $305 million were down $71 million, or 19% sequentially, and down $181 million, or 37%, compared to the same quarter in the prior year. First quarter operating income of $44 million (14.5% margin) was down 22% sequentially and down 55% compared to the same quarter in the prior year. Continued commodity price declines have caused further spending reductions and activity declines, primarily in Colombia, Mexico, Brazil and Venezuela. Revenues were also negatively impacted by lower sequential product sales. Operating income declines from lower revenues were offset by continued strong cost reduction measures that resulted in 18% sequential decrementals.

Europe/Sub-Sahara Africa/Russia

First quarter revenues of $257 million were down $80 million, or 24% sequentially, and down $160 million, or 38%, over the same quarter in the prior year. First quarter operating loss of $1 million (-0.4% margin) was down $39 million or 103% sequentially, and down 102% when compared to the same quarter in the prior year. Revenue decreased primarily from weak winter season activity in Russia and the North Sea, coupled with a reduction from the strong year-end product sales in Europe and Sub-Sahara Africa, as well as from project cancellations throughout the Sub-Sahara Africa region. Operating income declines for the first quarter were impacted by the revenue declines, an unfavorable product mix and in part lower product sales. Decrementals were 49% sequentially and 45% year-over-year.

Middle East/North Africa/Asia Pacific

First quarter revenues of $361 million were down $92 million, or 20% sequentially, and down $172 million, or 32%, from the same quarter in the prior year. First quarter operating income of $6 million (1.7% margin) was down 87% sequentially and down 91% from the same quarter in the prior year. The sequential revenue decline was primarily from lower seasonal product sales in completion, artificial lift and well construction that impacted the Gulf States, China, Australia and Indonesia, coupled with seasonal and budget related activity reductions across the Asia Pacific region. The decline in operating income was in line with the reduction in revenue.

Land Drilling Rigs

First quarter revenues of $119 million were down $28 million, or 19% sequentially, and down $76 million, or 39%, compared to the same quarter in the prior year. Lower activity from contracts ending in Bangladesh, activity declines in Colombia and project delays in both Kuwait and Saudi Arabia were the primary drivers of the sequential decline in revenue. First quarter operating loss of $26 million (-21.9% margin) was down $9 million sequentially and down $36...


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