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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-02-17 compared with 2021-02-19 · 38 added, 33 removed, 3 unchanged (96% of the section changed)

Quantitative and Qualitative Disclosures about Market Risk

Not Applicable.

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 conduct operations in approximately 75 countries and have service and sales locations in oil and natural gas producing regions globally.

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.

We recognized foreign currency exchange losses of $9 million and $34 million for the Successor years ended December 31, 2021 and 2020, respectively, and $14 million for Combined 2019 Predecessor Period.

The unfavorable loss in 2021 and 2020 primarily relates to the weakening of foreign currencies resulting from the impacts of the COVID-19 pandemic.

Foreign currency exchange losses and currency devaluation charges are included in current earnings in “art II – Item 8.

– Financial Statements and Supplementary Data – Consolidated Statements of Operations”.

For additional details see “Part II - Item 7.

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

– Other Income (Expense), Net.”

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

Assets and liabilities of entities where 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.

The resulting translation adjustments are reflected in Accumulated Other Comprehensive Loss in the Shareholders’ Deficiency section on our Consolidated Balance Sheets.

As of December 31, 2021 and 2020, we had outstanding foreign currency forward contracts with total notional amounts aggregating $349 million and $337 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 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 borrowings.

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.

Weatherford International plc – 2021 Form 10-K | 40

Table of Contents Forward-Looking Statements

Forward-Looking Statements

This report contains various statements relating to future financial performance and results, business strategy, plans, goals and objectives, including certain projections, business trends and other statements that are not historical facts.

These statements constitute forward-looking statements.

These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “budget,” “strategy,” “plan,” “guidance,” “outlook,” “may,” “should,” “could,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions, although not all forward-looking statements contain these identifying words.

Forward-looking statements reflect our beliefs and expectations based on current estimates and projections.

While we believe these expectations, and the estimates and projections on which they are based, are reasonable and were made in good faith, these statements are subject to numerous risks and uncertainties.

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

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;

• our ability to generate cash flow from operations to fund our operations;

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

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

• our ability to timely collect from customers;

• our ability to realize cost savings and business enhancements from our revenue and cost improvement efforts;

• 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;

• potential non-cash asset impairment charges for long-lived assets, intangible assets or other assets;

• adverse weather conditions in certain regions of our operations;

• 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.

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 Item 8 | Financial Statements and Supplementary Data

Our senior notes outstanding at December 31, 2021 and 2020, and that were subject to interest rate risk consist of the following:

December 31, 2021 December 31, 2020

(Dollars in millions) Carrying Value Fair Value Carrying Value Fair Value

11.00% Exit Notes due 2024 $ 300 $ 311 $ 2,098 $ 1,628

8.75% Senior Secured Notes due 2024 — — 455 507

6.5% Senior Secured Notes due 2028 488 528 — —

8.625% Senior Notes due 2030 1,584 1,660 — —

Total Long-Term Debt $ 2,372 $ 2,499 $ 2,553 $ 2,135

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