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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2021-02-19 compared with 2020-03-16 · 14 added, 73 removed, 22 unchanged (80% of the section changed)

Quantitative and Qualitative Disclosures about Market Risk

We are currently exposed to market risk from changes in foreign currency and changes in interest rates.

From time to time, we may enter into derivative financial instrument transactions to manage or reduce our market risk.

A discussion of our market risk exposure in these financial instruments follows.

Foreign Currency Exchange Rates and Inflationary Impacts

We operate in virtually every oil and natural gas exploration and production region in the world.

In some parts of the world, such as Latin America, the Middle East and Southeast Asia, the currency of our primary economic environment is the U.S.

dollar, and thus we use the U.S.

dollar primarily as our functional currency.

In other parts of the world, we conduct our business in currencies other than the U.S.

dollar, and the functional currency is the applicable local currency.

Currency devaluation charges are included in current earnings in “ Currency Devaluation Charges ” on the accompanying Consolidated Statements of Operations .

For the year ended December 31, 2018, the Predecessor recognized currency devaluation charges of $49 million primarily related to the devaluation of the Angolan kwanza.

For additional details see “ Currency Devaluation Charges” sub-heading under “ Item 7.

– Management’s Discussion and Analysis of Financial Condition and Results of Operations .”

Weatherford International plc – 2019 Form 10-K | 49

Table of Contents Item 7A | Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency, Foreign Currency Forward Contracts and Cross-Currency Swaps

Assets and liabilities of entities for which the functional currency other than the U.S.

dollar are translated into U.S.

dollars using the exchange rates in effect at the balance sheet date result in translation adjustments that are reflected in Accumulated Other Comprehensive Loss in the Shareholders’ Deficiency section on our Consolidated Balance Sheets .

Foreign currency translation comprehensive loss improved $52 million in 2019 due to emergence from Chapter 11 bankruptcy proceedings and fresh start accounting and worsened $240 million in 2018 .

As of December 31, 2019 and 2018 , we had outstanding foreign currency forward contracts with total notional amounts aggregating $389 million and $435 million , respectively.

These contracts were entered into in order to hedge our net monetary exposure to currency fluctuations in various foreign currencies.

The total estimated fair value of these contracts and amounts owed associated with closed contracts at December 31, 2019 and 2018 , resulted in an immaterial net liability in both periods.

These derivative instruments were not designated as hedges, and the changes in fair value of the contracts are recorded each period in current earnings.

Interest Rates

We are subject to interest rate risk on our long-term fixed-interest rate debt and variable-interest rate borrowings.

Variable rate debt exposes us to short-term changes in market interest rates.

Fixed rate debt exposes us to changes in market interest rates reflected in the fair value of the debt and to the risk that we may need to refinance any maturing debt with new debt at a higher rate.

All else being equal, the fair value of our fixed rate debt will increase or decrease inversely to changes in interest rates.

Our senior notes outstanding at December 31, 2019 and 2018 , and that were subject to interest rate risk consist of the following:

December 31, 2019

December 31, 2018

(Dollars in millions)

Carrying Amount

11.00% Exit Notes due December 1, 2024

5.125% Senior Notes due 2020

5.875% Exchangeable Senior Notes due 2021 (a)

7.75% Senior Notes due 2021

4.50% Senior Notes due 2022

8.25% Senior Notes due 2023

9.875% Senior Notes due 2024

9.875% Senior Notes due 2025 (b)

6.50% Senior Notes due 2036

6.80% Senior Notes due 2037

7.00% Senior Notes due 2038

9.875% Senior Notes due 2039

6.75% Senior Notes due 2040

5.95% Senior Notes due 2042

The fair value of the Exchangeable Senior Notes due 2021 includes an exchange feature reported in Capital in Excess of Par Value , and a debt component further described in “ Note 14 – Long-term Debt .”

On February 28, 2018, the Predecessor issued $600 million in aggregate principal amount of our 9.875% senior notes due 2025.

We had various finance leases $64 million at December 31, 2019 but believe the impact of changes in interest rates in the near term will not be material to these instruments.

The carrying value of our short-term borrowings of $3 million at December 31, 2019 approximates their fair value.

Not Applicable.

Weatherford International plc – 2020 Form 10-K | 40

Table of Contents Item 7A | Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Swaps and Derivatives

We manage our debt portfolio to limit our exposure to interest rate volatility and may employ interest rate derivatives as a tool to achieve that goal.

The major risks from interest rate derivatives include changes in the interest rates affecting the fair value of such instruments, potential increases in interest expense due to market increases in floating interest rates and the creditworthiness of the counterparties in such transactions.

The counterparties to our interest rate swaps are multinational commercial banks.

We continually re-evaluate counterparty creditworthiness and modify our requirements accordingly.

Amounts paid or received upon termination of the interest rate swaps represent the fair value of the agreements at the time of termination.

Derivative gains and losses are recognized each period in current earnings or other comprehensive income (loss), depending on whether the derivative is designated as part of a hedge relationship, and if so, the type of hedge.

Table of Contents Forward-Looking Statements

Forward-Looking Statements

5 unchanged sentences

Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecasted in the forward-looking statements.

Furthermore, from time to time, we update the various factors we consider in making our forward-looking statements and the assumptions we use in those statements.

However, we undertake no obligation to correct, update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except to the extent required under federal securities laws.

The following sets forth various assumptions we use in our forward-looking statements, as well as risks and uncertainties relating to those statements.

Certain of these risks and uncertainties may cause actual results to be materially different from projected results contained in forward-looking statements in this report and in our other disclosures.

These risks and uncertainties include, but are not limited to, those described below under “Part I – Item 1A.

– Risk Factors ” and the following:

the price and price volatility of oil, natural gas and natural gas liquids;

We undertake no obligation to correct, update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except to the extent required under federal securities laws.

The following, together with disclosures under “Part I – Item 1A.

– Risk Factors”, sets forth certain risks and uncertainties relating to our forward-looking statements that may cause actual results to be materially different from our present expectations or projections:

• risks associated with disease outbreaks and other public health issues, including COVID-19, their impact on the global economy and the business of our company, customers, suppliers and other partners, changes in, and the administration of, treaties, laws, and regulations, including in response to such issues and the potential for such issues to exacerbate other risks we face, including those related to the factors listed or referenced below;

• further spread and potential for a resurgence of COVID-19 in a given geographic region and related disruptions to our business, customers, suppliers and other partners and additional regulatory measures or voluntary actions that may be put in place to limit the spread of COVID-19, including vaccination requirements and the associated availability of vaccines, restrictions on business operations or social distancing requirements, and the duration and efficacy of such restrictions;

• the price and price volatility of, and demand for, oil, natural gas and natural gas liquids;

• member-country quota compliance within the Organization of Petroleum Exporting Countries (“OPEC”);

• our ability to realize expected revenues and profitability levels from current and future contracts;

1 unchanged sentence

• global political, economic and market conditions, political disturbances, war, terrorist attacks, changes in global trade policies, weak local economic conditions and international currency fluctuations;

member-country quota compliance within the Organization of Petroleum Exporting Countries (“OPEC”);

global public health threats and pandemics, such as severe influenza, COVID-19 and other highly communicable viruses or diseases;

• increases in the prices and lack of availability of our procured products and services;

2 unchanged sentences

• our ability to attract, motivate and retain employees, including key personnel;

• our ability to access to capital markets on terms that are commercially acceptable to the Company;

• our ability to manage our workforce, supply chain and business processes, information technology systems and technological innovation and commercialization, including the impact of our organization restructure, business enhancements, improvement efforts and the cost and support reduction plans;

2 unchanged sentences

• failure to ensure on-going compliance with current and future laws and government regulations, including but not limited to environmental and tax and accounting laws, rules and regulations.

Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in our other filings with the U.S.

Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Securities Act of 1933, as amended (the “Securities Act”).

Many of these factors are macro-economic in nature and are, therefore, beyond our control.

Should one or more of these risks or uncertainties materialize, affect us in ways or to an extent that we currently do not expect or consider to be significant, or should underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from those described in this quarterly report as anticipated, believed, estimated, expected, intended, planned or projected.

Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in our other filings with the SEC under the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) and the Securities Act of 1933 (as amended, the “Securities Act”).

For additional information regarding risks and uncertainties, see our other filings with the SEC.

Weatherford International plc – 2020 Form 10-K | 41

Table of Contents Forward-Looking Statements

Table of Contents Item 8 | Financial Statements and Supplementary Data

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk