Weatherford International(WFRD) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements Presents Weatherford International plc's unaudited Condensed Consolidated Financial Statements for Q2 and H1 2021, detailing operations, balance sheets, cash flows, and notes Condensed Consolidated Statements of Operations Q2 & H1 2021 Statement of Operations Highlights (Unaudited) | Indicator (in millions) | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $903 | $821 | $1,735 | $2,036 | | Operating Income (Loss) | $25 | $(497) | $12 | $(1,319) | | Net Loss | $(73) | $(579) | $(183) | $(1,537) | | Net Loss Attributable to Weatherford | $(78) | $(581) | $(194) | $(1,547) | | Basic & Diluted Loss per Share | $(1.11) | $(8.30) | $(2.77) | $(22.10) | - Revenues for Q2 2021 increased to $903 million from $821 million in Q2 2020, while for the six months ended June 30, revenues decreased to $1,735 million in 2021 from $2,036 million in 2020[6] - The company reported a significant reduction in net loss for both the three and six-month periods in 2021 compared to 2020, primarily due to the absence of large impairment and restructuring charges seen in the prior year[6] Condensed Consolidated Balance Sheets Balance Sheet Summary (Unaudited) | Indicator (in millions) | June 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $3,126 | $3,178 | | Total Assets | $5,160 | $5,430 | | Total Current Liabilities | $1,243 | $1,368 | | Long-term Debt | $2,605 | $2,601 | | Total Liabilities | $4,401 | $4,498 | | Total Shareholders' Equity | $759 | $932 | - Cash and Cash Equivalents increased to $1,217 million as of June 30, 2021, from $1,118 million at the end of 2020[10] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (Unaudited) | Indicator (in millions) | 2021 | 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $120 | $61 | | Net Cash Used in Investing Activities | $(2) | $(62) | | Net Cash Used in Financing Activities | $(15) | $(36) | | Net Increase (Decrease) in Cash | $102 | $(44) | - The company generated significantly more cash from operations in the first six months of 2021 ($120 million) compared to the same period in 2020 ($61 million)[12] - Capital expenditures were substantially lower in H1 2021 ($24 million) compared to H1 2020 ($73 million), contributing to a much lower cash usage in investing activities[12] Notes to Condensed Consolidated Financial Statements - In Q2 2021, the company recorded a net credit of $8 million for 'Impairments and Other Charges', a significant reversal from the $406 million charge in Q2 2020 which included substantial long-lived asset and goodwill impairments[18] - As of June 30, 2021, the company had no goodwill on its balance sheet, as the entire balance of $239 million was fully impaired in the first half of 2020[25] - The company's long-term debt as of June 30, 2021, primarily consists of $2.1 billion of 11.00% Exit Notes and $460 million of 8.75% Senior Secured Notes, both due in 2024[31][32][33] Revenue by Geographic Segment (in millions) | Segment | Q2 2021 | Q2 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Western Hemisphere | $425 | $310 | $815 | $898 | | Eastern Hemisphere | $478 | $511 | $920 | $1,138 | | Total Revenues | $903 | $821 | $1,735 | $2,036 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q2 and H1 2021 financial results, highlighting Q2 revenue growth, industry trends, business outlook, and margin expansion strategies Overview and Financial Results - Q2 2021 revenues increased by 10% YoY to $903 million, while H1 2021 revenues declined 15% YoY to $1.7 billion compared to a pre-pandemic Q1 2020[63] - The Q2 2021 revenue improvement was driven by a 37% growth in the Western Hemisphere, particularly in the United States and Mexico, while the Eastern Hemisphere saw a 6% decline[64] - Operating income improved significantly in Q2 and H1 2021 compared to 2020, primarily due to lower impairment and restructuring charges and benefits from cost improvement initiatives[66] - On June 1, 2021, the company's ordinary shares were approved for listing and began trading on The Nasdaq Global Select Market under the ticker symbol 'WFRD' on June 2, 2021[70] Industry Trends and Business Outlook Average Commodity Prices and Rig Counts | Indicator | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Oil price - WTI ($/barrel) | $66.09 | $27.81 | | Natural gas price - Henry Hub ($/MMBtu) | $2.94 | $1.71 | | Worldwide Average Rig Count | 1,256 | 1,251 | - The company expects consolidated revenues to increase by mid- to high-single digits in the second half of 2021 compared to the first half, which should lead to further margin expansion[75] - Management remains cautious about a broad-based industry recovery due to the resurgence of COVID-19 infection rates, despite improving oil prices and economic activity[74] Results of Operations - Western Hemisphere revenues increased 37% in Q2 2021 YoY, driven by higher demand in the U.S. and increased ISP sales in Mexico, with segment operating income improving by $51 million[84][87] - Eastern Hemisphere revenues decreased 6% in Q2 2021 YoY due to lower activity since the COVID-19 pandemic began, with segment operating income decreasing by $9 million[86][88] - Net interest expense increased to $72 million in Q2 2021 from $59 million in Q2 2020, primarily due to interest on the 8.75% Senior Secured Notes issued in August 2020[89] Liquidity and Capital Resources - Total cash, cash equivalents, and restricted cash was $1.4 billion at June 30, 2021, an increase of $102 million from year-end 2020[93] Free Cash Flow Reconciliation (in millions) | Indicator | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $120 | $61 | | Capital Expenditures | $(24) | $(73) | | Proceeds from Disposition of Assets | $22 | $8 | | Non-GAAP Free Cash Flow | $118 | $(4) | - Annual cash interest payments are expected to be approximately $275 million, with capital spending for 2021 projected between $100 - $110 million[103] - As of June 30, 2021, the company had $331 million of letters of credit outstanding and $307 million in outstanding surety bonds[108][109] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposure has not materially changed since December 31, 2020, except for debt fair value changes - Other than changes in the fair value of its debt, the company's market risk exposure has not materially changed from the end of the previous fiscal year[116] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal controls - Based on an evaluation as of June 30, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[118] - No changes in internal control over financial reporting occurred during Q2 2021 that have materially affected, or are reasonably likely to materially affect, these controls[119] PART II – OTHER INFORMATION Item 1. Legal Proceedings Refers to Note 9 for ongoing disputes, highlighting the GAMCO Shareholder Litigation dismissal in May 2021 and subsequent appeal - The GAMCO shareholder lawsuit, which alleged violations of federal securities laws, was dismissed with prejudice by the District Court on May 14, 2021[41] - On June 11, 2021, the plaintiffs in the GAMCO case filed a Notice of Appeal with the District Court, with the company unable to reliably predict the outcome[41] Item 1A. Risk Factors No material changes to risk factors have occurred since those disclosed in the 2020 Annual Report and Registration Statement - As of June 30, 2021, there have been no material changes to the risk factors previously disclosed in the 2020 Annual Report and Registration Statement[122] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In May 2021, the company issued 53 ordinary shares from warrant exercises, generating approximately $5,000 in cash proceeds, exempt from registration - During May 2021, the company issued 53 ordinary shares from the exercise of warrants, receiving cash proceeds of about $5,000[123] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[124] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[125] Item 5. Other Information The company reported no other information for this item - None[126] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including an executive offer letter and Sarbanes-Oxley Act certifications - The report includes a list of exhibits filed, such as management contracts and CEO/CFO certifications[128]