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Item 1. Financial Statements

2022-04-28 compared with 2021-11-02 · 170 added, 244 removed, 174 unchanged (70% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(Dollars and shares in millions, except per share amounts) 2022 2021

7 unchanged sentences

Selling, General and Administrative 178 188

Goodwill and Long-Lived Asset Impairments — — — 1,057

Restructuring Charges 20 —

Other Charges (Credits), Net ( 8 ) 4 ( 16 ) 170

Other Charges, Net 19 —

Total Costs and Expenses 920 845

1 unchanged sentence

Interest Expense, Net ( 48 ) ( 70 )

Loss on Extinguishment of Debt and Bond Redemption Premium ( 59 ) — ( 59 ) —

Loss on Termination of ABL Credit Agreement — ( 15 ) — ( 15 )

Other Expense, Net ( 16 ) ( 4 )

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(Dollars in millions) 2022 2021

7 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars and shares in millions, except par value) 9/30/2021 12/31/2020

(Dollars and shares in millions, except par value) March 31, 2022 December 31, 2021

Cash and Cash Equivalents $ 841 $ 951

Restricted Cash 215 162

Accounts Receivable, Net of Allowance for Credit Losses of $ 32 at September 30, 2021 and $ 32 at December 31, 2020

Accounts Receivable, Net of Allowance for Credit Losses of $ 35 at March 31, 2022 and $ 31 at December 31, 2021

Inventories, Net 684 670

1 unchanged sentence

Total Current Assets 2,889 2,911

Property, Plant and Equipment, Net of Accumulated Depreciation of $ 570 at September 30, 2021 and $ 367 at December 31, 2020

Intangible Assets, Net of Accumulated Amortization of $ 289 at September 30, 2021 and $ 173 at December 31, 2020

Property, Plant and Equipment, Net of Accumulated Depreciation of $ 661 at March 31, 2022 and $ 623 at December 31, 2021

Intangible Assets, Net of Accumulated Amortization of $ 367 at March 31, 2022 and $ 328 at December 31, 2021

Operating Lease Right-of-Use Assets 119 113

10 unchanged sentences

Operating Lease Liabilities 130 128

Non-current Taxes Payable 272 264

Other Non-Current Liabilities 140 138

2 unchanged sentences

Ordinary Shares - Par Value $ 0.001 ;

Authorized 1,356 shares, Issued and Outstanding 70 shares at September 30, 2021 and December 31, 2020

Authorized 1,356 shares, Issued and Outstanding 70 shares at March 31, 2022 and December 31, 2021

Capital in Excess of Par Value 2,908 2,904

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in millions) 2022 2021

3 unchanged sentences

Depreciation and Amortization 87 111

Loss on Extinguishment of Debt 37 —

Bond Redemption Premium 22 —

Loss on Termination of ABL Credit Agreement — 15

Goodwill and Long-lived Asset Impairments — 1,057

Asset Write-downs and Other Charges 12 —

Inventory Charges 15 17

Loss (Gain) on Disposition of Assets ( 22 ) 8

Gain on Disposition of Assets ( 5 ) —

Deferred Income Tax Provision 3 2

4 unchanged sentences

Other Assets and Liabilities, Net ( 34 ) ( 10 )

Net Cash Provided by Operating Activities 234 188

Net Cash Provided by (Used in) Operating Activities ( 64 ) 74

Cash Flows From Investing Activities:

2 unchanged sentences

Other Investing Activities 9 1

Net Cash Used in Investing Activities ( 2 ) ( 65 )

Net Cash Provided by (Used in) Investing Activities 9 ( 3 )

Cash Flows From Financing Activities:

Borrowings of Long-term Debt, Net 491 457

Repayments of Long-term Debt ( 4 ) ( 3 )

Repayments of Short-term Debt, Net — ( 4 )

Bond Redemption Premium ( 22 ) —

Deferred Consideration Payment — ( 24 )

Other Financing Activities ( 1 ) ( 2 )

Net Cash Provided by (Used in) Financing Activities ( 65 ) 376

Net Cash Used in Financing Activities ( 5 ) ( 9 )

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash 3 ( 4 )

Net Increase in Cash, Cash Equivalents and Restricted Cash 161 493

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash ( 57 ) 58

Cash, Cash Equivalents and Restricted Cash at Beginning of Period 1,113 1,285

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited Condensed Consolidated Financial Statements of Weatherford International plc (the “Company,” or “Weatherford”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.

1 – Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Weatherford International plc (the “Company,” “Weatherford”, “we”, “us”, or “our”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.

GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information.

10 unchanged sentences

Please refer to “Note 1 – Summary of Significant Accounting Policies” of our Consolidated Financial Statements from our 2021 Annual Report for the discussion on our significant accounting policies.

Certain reclassifications of the financial statements and accompanying footnotes for the three and nine months ended September 30, 2020 have been made to conform to the presentation for the three and nine months ended September 30, 2021.

Impairments and Other Charges (Credits)

We recorded the following in “Goodwill and Long-Lived Asset Impairments” and “Other Charges (Credits), Net” on the accompanying Condensed Consolidated Statements of Operations:

Three Months Ended Nine Months Ended

September 30, September 30,

Certain reclassifications have been made to the financial statements and accompanying footnotes for the three months ended March 31, 2021 to conform to the presentation for the three months ended March 31, 2022, including the change in reportable segments made during the fourth quarter of 2021.

New Accounting Standards

All new accounting pronouncements that have been issued but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations.

2 – Segment Information

Financial information by segment is summarized below.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies as presented in our 2021 Annual Report.

During the fourth quarter of 2021, our chief operating decision maker changed the information regularly reviewed to be aligned with how we offer our services and technologies in relation to the life cycle of a well and we have realigned our reportable segments to reflect the change.

All of our segments are enabled by a full suite of digital, monitoring, optimization and artificial intelligence solutions providing services throughout the well life cycle, including responsible abandonment.

We now have three reportable segments:

(1) Drilling and Evaluation (2) Well Construction and Completions, and (3) Production and Intervention.

Previously we had two geographic based reportable segments, Western Hemisphere and Eastern Hemisphere.

Our primary measure of segment profitability is now segment adjusted EBITDA, which is based on segment earnings before interest, taxes, depreciation, amortization, share-based compensation expense and other adjustments.

Research and development expenses are included in segment adjusted EBITDA.

Corporate and other includes business activities related to all other segments (profit and loss), corporate and other expenses (overhead support and centrally managed or shared facilities costs) that do not individually meet the criteria for segment reporting.

Three Months Ended March 31,

(Dollars in millions) 2022 2021

Long-lived Asset Impairments $ — $ — $ — $ 818

Goodwill Impairment — — — 239

Total Goodwill and Long-lived Asset Impairments $ — $ — $ — $ 1,057

Inventory Charges $ — $ 4 $ 7 $ 138

Other Charges (Credits) ( 8 ) — ( 23 ) 32

Total Other Charges (Credits) $ ( 8 ) $ 4 $ ( 16 ) $ 170

Inventories, Net

Inventories, net of reserves of $ 157 million and $ 119 million as of September 30, 2021 and December 31, 2020, respectively, are presented by category in the table below:

Drilling and Evaluation $ 292 $ 236

Well Construction and Completions 344 323

Production and Intervention 286 259

Segment Revenues 922 818

All Other 16 14

Total Revenues $ 938 $ 832

Segment Adjusted EBITDA:

Drilling and Evaluation $ 59 $ 29

Well Construction and Completions 67 50

Production and Intervention 39 41

Segment Adjusted EBITDA $ 165 $ 120

Corporate and Other ( 14 ) ( 18 )

Depreciation and Amortization ( 87 ) ( 111 )

Share-based Compensation Expense

Other Adjustments (a)

Operating Income (Loss) $ 18 $ ( 13 )

(a) Other adjustments include $ 20 million of restructuring charges in the three months ended March 31, 2022 (see “Note 4 - Restructuring Charges” for additional information) and $ 19 million of other charges, net, of which $17 million were related to Ukraine ($16 million in the write-down of receivables, inventory and property, plant and equipment, and $1 million in operating support costs).

There were no other adjustments in the three months ended March 31, 2021.

Disaggregated Revenue

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

The majority of our revenue is derived from short term contracts.

Our products and services are generally sold based upon purchase orders, contracts or other legally enforceable arrangements with our customers that include fixed or determinable prices but do not generally include right of return provisions or other significant post-delivery obligations.

Our Production and Intervention segment leases drilling tools, artificial lift pumping equipment and other unmanned equipment to customers as operating leases.

These equipment rental revenues are generally provided based on call-out work orders that include fixed per unit prices and are derived from short-term contracts.

Equipment revenues recognized under ASU No.

2016-02, Leases (Topic 842) were $ 31 million for the three months ended March 31, 2022 and $ 28 million for the three months ended March 31, 2021.

The following tables disaggregate our revenues from contracts with customers by geographic region and includes equipment rental revenues.

North America in the table below consists of the U.S.

Three Months Ended March 31,

(Dollars in millions) 2022 2021

Revenues by Geographic Areas:

Middle East/North Africa/Asia $ 310 $ 267

North America 238 214

Latin America 227 176

Europe/Sub-Sahara Africa/Russia 163 175

Total Revenues $ 938 $ 832

Contract Balances

The timing of our revenue recognition, billings and cash collections results in the recording of billed and unbilled accounts receivable, contract assets, customer advances and deposits (contract liabilities classified as deferred revenues).

Receivables with customers are included in “Accounts Receivable, Net,” contract assets are included in “Other Current Assets” and contract liabilities are included in “Other Current Liabilities” on our Condensed Consolidated Balance Sheets.

Contract assets are immaterial as of March 31, 2022 and December 31, 2021.

Revenues recognized during the three months ended March 31, 2022 and 2021 that were included in the contract liabilities balance at the beginning of each year were $ 10 million and $ 18 million, respectively.

The following table summarizes these balances as of March 31, 2022 and December 31, 2021:

(Dollars in millions) March 31, 2022 December 31, 2021

Total Accounts Receivables $ 868 $ 825

Receivables for Product and Services in Accounts Receivable, Net $ 835 $ 795

Receivables for Equipment Rentals in Account Receivable, Net $ 33 $ 30

Contract Liabilities in Other Current Liabilities $ 35 $ 26

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASU 2014-09, Revenues from Contracts with Customers (Topic 606).

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

In the following table, estimated revenue for contracts with original performance obligations greater than twelve months are expected to be recognized in the future related to performance obligations that are either unsatisfied or partially unsatisfied as of March 31, 2022.

(Dollars in millions) 2022 2023 2024 2025 Thereafter Total

Service Revenue $ 52 $ 58 $ 59 $ 46 $ 20 $ 235

4 – Restructuring Charges

We had $ 20 million restructuring charges for the three months ended March 31, 2022, presented as “Restructuring Charges” on the accompanying Condensed Consolidated Statements of Operations.

These charges were primarily related to the launch of a multi-year footprint consolidation and workforce efficiency initiative aimed at improving fulfillment operations and included $ 14 million in severance and $ 6 million in asset retirement obligations.

No restructuring charges were recognized in the three months ended March 31, 2021.

The following table presents total restructuring charges by segment and All Other in the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(Dollars in millions) 2022 2021

Drilling and Evaluation $ 5 $ —

Well Construction and Completions 7 —

Production and Intervention 5 —

All Other 3 —

Total Restructuring Charges $ 20 $ —

The following table presents total restructuring reserve activity in the three months ended March 31, 2022:

(Dollars in millions) Reserve at December 31, 2021 Charges Cash Payments (Credits)/Other

Reserve at March 31, 2022

Restructuring Reserve $ 17 $ 20 $ ( 5 ) $ — $ 32

5 – Inventories, Net

Inventories, net of reserves of $ 165 million and $ 159 million as of March 31, 2022 and December 31, 2021, respectively, are presented by category in the table below:

(Dollars in millions) March 31, 2022 December 31, 2021

Finished Goods $ 595 $ 595

1 unchanged sentence

Inventories, Net $ 684 $ 670

In the three and nine months ended September 30, 2021 and 2020, we recognized inventory charges, including excess and obsolete inventory charges, in the following captions on our Condensed Consolidated Statements of Operations:

Three Months Ended Nine Months Ended

September 30, September 30,

In the three months ended March 31, 2022 and 2021, we recognized inventory charges, including excess and obsolete inventory charges, in the following captions on our Condensed Consolidated Statements of Operations:

Three Months Ended March 31,

(Dollars in millions) 2022 2021

Inventory Charges in “Other Charges (Credits), Net” $ — $ 4 $ 7 $ 138

Inventory Charges in “Cost of Products” $ 11 $ 17

Inventory Charges in “Other Charges, Net” 4 —

Total Inventory Charges $ 15 $ 17

Long-lived Asset Impairments

We did not recognize any long-lived asset impairments in the three and nine months ended September 30, 2021.

During the first half of 2020, the global economic and industry conditions resulting from the decline in demand and impact from the COVID-19 pandemic were identified as impairment indicators.

As a result, we performed interim impairment assessments of our property, plant and equipment, definite-lived intangible assets, and right of use assets with the assistance of third-party valuation advisors.

The fair values of our long-lived assets were determined using discounted cash flows under the income approach, a Level 3 fair value analysis.

The income approach required significant assumptions to determine the fair value of an asset or asset group including the estimated discounted future cash flows, specifically the forecasted revenue, forecasted operating margins and the discount rate.

Based on our impairment tests, we determined the carrying amount of certain long-lived assets exceeded their respective fair values and recognized long-lived asset impairments as summarized in “Note 2 – Impairments and Other Charges (Credits), Net.” and further presented by asset class and segment in the table below.

We did not recognize any long-lived asset impairments in the third quarter of 2020.

Nine Months Ended September 30, 2020

(Dollars in millions) Western Hemisphere Eastern Hemisphere Total

Property, Plant and Equipment $ 316 $ 255 $ 571

Intangible Assets 44 115 159

Right of Use Assets 56 32 88

Total Long-Lived Asset Impairments $ 416 $ 402 $ 818

Goodwill and Intangible Assets

As of September 30, 2021 and December 31, 2020, we had no goodwill.

The cumulative impairment loss for goodwill was $ 239 million, all of which was fully impaired in the first half of 2020.

During 2020, based on our interim goodwill impairment assessments that determined the fair value of our reporting units were less than their carrying values, we recognized goodwill impairment charges presented in “Note 2 – Impairments and Other Charges (Credits), Net.” We identified impairment indicators as discussed in “Note 4 – Long-lived Asset Impairments” that triggered these interim quantitative goodwill assessments.

The fair values of our reporting units were determined using a combination of the income approach and the market approach for comparable companies in our industry, a Level 3 fair value analysis.

Determining the fair value of the reporting units requires management to develop significant judgments, including estimating and discounting future cash flows by reporting unit, specifically forecasted revenue, forecasted operating margins and discount rates.

Intangible Assets

The components of definite-lived intangible assets, net of accumulated amortization, were as follows:

(Dollars in millions) 9/30/2021

Developed and Acquired Technology, Net of Accumulated Amortization of $ 218 at September 30, 2021 and $ 132 at December 31, 2020

Trade Names, Net of Accumulated Amortization of $ 71 at September 30, 2021 and $ 41 at December 31, 2020

Intangible Assets, Net of Accumulated Amortization of $ 289 at September 30, 2021 and $ 173 at December 31, 2020

Amortization expense was $ 39 million and $ 117 million in the three and nine months ended September 30, 2021, respectively, and $ 38 million and $ 124 million in the three and nine months ended September 30, 2020, respectively, and is reported in “Selling, General and Administrative” on our Condensed Consolidated Statements of Operations.

Restructuring Charges

We had no restructuring charges in the three and nine months ended September 30, 2021, compared to $ 31 million and $ 114 million in the three and nine months ended September 30, 2020, respectively, which are presented in “Restructuring Charges” on the accompanying Condensed Consolidated Statements of Operations.

The following table presents total restructuring charges by reporting segment and Corporate in the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

September 30, Nine Months Ended September 30,

(Dollars in millions) 2021 2020 2021 2020

Western Hemisphere $ — $ 17 $ — $ 58

Eastern Hemisphere — 12 — 29

Corporate — 2 — 27

Total Restructuring Charges $ — $ 31 $ — $ 114

The following table presents total restructuring accrual activity in the nine months ended September 30, 2021:

(Dollars in millions) Accrued Balance at December 31, 2020 Charges Cash Payments (Credits)/Other

Accrued Balance at September 30, 2021

Restructuring Reserve $ 53 $ — $ ( 26 ) $ ( 5 ) $ 22

Borrowings and Other Obligations

(Dollars in millions) 9/30/2021 12/31/2020

Current Portion of Exit Notes and Finance Lease $ 211 $ 9

Other Short-term Financing Arrangements — 4

Short-term Borrowings $ 211 $ 13

$ 1,898 $ 2,098

2028 Senior Secured Notes 488 —

2024 Senior Secured Notes

Finance Lease Long-term Portion 45 48

6 – Intangibles, Net

The components of intangible assets, net were as follows:

(Dollars in millions) March 31, 2022 December 31, 2021

Developed and Acquired Technology, Net of Accumulated Amortization of $ 276 at March 31, 2022 and $ 247 at December 31, 2021

Trade Names, Net of Accumulated Amortization of $ 91 at March 31, 2022 and $ 81 at December 31, 2021

Intangible Assets, Net of Accumulated Amortization of $ 367 at March 31, 2022 and $ 328 at December 31, 2021

Amortization expense was $ 39 million for both the three months ended March 31, 2022 and 2021, and is reported in “Selling, General and Administrative” on our Condensed Consolidated Statements of Operations.

7 – Borrowings and Other Debt Obligations

(Dollars in millions) March 31, 2022 December 31, 2021

Finance Leases Current Portion $ 13 $ 12

Short-term Borrowings and Current Portion of Finance Leases $ 13 $ 12

11.00 % Exit Notes due 2024

6.50 % Senior Secured Notes due 2028

8.625 % Senior Notes due 2030

Finance Leases Long-term Portion 43 44

Long-term Debt $ 2,416 $ 2,416

Upon our emergence from bankruptcy on December 13, 2019, we entered into an indenture and issued unsecured 11.00 % Exit Notes in an aggregate principal amount of $ 2.1 billion maturing on December 1, 2024 (the “Exit Notes”).

Interest on the Exit Notes accrues at the rate of 11.00 % per annum and is payable semiannually in arrears on June 1 and December 1, which commenced on June 1, 2020.

As of September 30, 2021, $ 200 million of the Exit Notes were classified as a current obligation.

On October 20, 2021 we redeemed $ 200 million of our Exit Notes and paid related accrued interest of $ 8 million along with a bond redemption premium of $ 6 million.

See “Note 14 – Subsequent Events” for additional details.

2024 Senior Secured Notes

On August 28, 2020, we entered into an indenture and issued the 8.75 % Senior Secured Notes in an aggregate principal amount of $ 500 million maturing September 1, 2024 (the “2024 Senior Secured Notes”).

Interest accrued at the rate of 8.75 % per annum and was payable semiannually in arrears on March 1 and September 1, which commenced on March 1, 2021.

On September 30, 2021, we repaid our 2024 Senior Secured Notes and accrued interest with proceeds from the issuance of the 2028 Senior Secured Notes described below and cash on hand.

In addition, we paid and recognized a $ 22 million bond redemption premium and recognized a $ 37 million noncash loss on extinguishment of debt related to the unamortized debt issuance costs and discount, which is presented as “Loss on Extinguishment of Debt and Bond Redemption Premium” on the Condensed Consolidated Statements of Operations.

Our Exit Notes, 2028 Senior Secured Notes and 2030 Senior Notes (described below) were issued by Weatherford Bermuda and guaranteed by Weatherford International plc and Weatherford Delaware and other subsidiary guarantors party thereto.

On December 13, 2019, we issued 11.00 % senior unsecured notes (“Exit Notes”) due in 2024 for an aggregate principal amount of $ 2.1 billion.

Interest on the Exit Notes accrues at the rate of 11.00 % per annum and is payable semiannually on June 1 and December 1 and commenced June 1, 2020.

On October 20, 2021, we redeemed $ 200 million of our Exit Notes.

On October 27, 2021, we issued $ 1.6 billion of 2030 Senior Notes (defined below) and used the net proceeds and cash on hand to redeem $ 1.6 billion in principal amount of our Exit Notes at applicable prices.

At March 31, 2022, the carrying value of $ 300 million represents the remaining unpaid principal.

2028 Senior Secured Notes

On September 30, 2021, we entered into an indenture and issued the 6.5 % Senior Secured Notes in aggregate principal amount of $ 500 million maturing September 15, 2028 (the “2028 Senior Secured Notes”).

On September 30, 2021, we issued 6.50 % Senior Secured Notes in aggregate principal amount of $ 500 million maturing September 15, 2028 (the “2028 Senior Secured Notes”).

Interest accrues at the rate of 6.50 % per annum and is payable semiannually on September 15 and March 15 of each year, commencing on March 15, 2022.

The 2028 Senior Secured Notes are guaranteed by the Company and the same subsidiaries of the Company that guaranteed the 2024 Senior Secured Notes.

On September 30, 2021 we received $ 491 million of proceeds net of debt issuance costs paid and the net book value after including accrued debt issuance costs was $ 488 million.

Debt issuance costs will be amortized to “Interest Expense, Net” on the Condensed Consolidated Financial Statements using the effective interest rate method over the term of the debt.

Proceeds from this debt issuance were used to fully repay a senior secured note with an aggregate principal amount of $500 million with a stated interest rate of 8.75% per annum due 2024.

2030 Senior Notes

On October 27, 2021, we issued 8.625 % Senior Notes in aggregate principal amount of $ 1.6 billion maturing April 30, 2030 (the “2030 Senior Notes”).

Interest accrues at the rate of 8.625 % per annum and is payable semiannually on June 1 and December 1 of each year, commencing on June 1, 2022.

As described above under Exit Notes, proceeds from this debt issuance were used to redeem $ 1.6 billion of its principal.

LC Credit Agreement

We have a senior secured letter of credit agreement in an aggregate amount of $ 215 million maturing on May 29, 2024 (the “LC Credit Agreement”), which is used by the Company and certain of its subsidiaries for the issuance of bid and performance letters of credit.

On September 20, 2021, certain provisions and covenants of the LC Credit Agreement were amended as follows:

• Permit the borrowing of up to an additional $ 400 million of secured indebtedness under an asset-based lending facility or a revolving credit facility upon compliance with certain conditions;

• Removed the minimum secured liquidity requirement;

• Increased the minimum aggregate liquidity requirement from $ 175 million to $ 300 million;

• Decreased the minimum aggregate book value of certain pledged assets requirement from $ 1.25 billion to $ 1 billion;

• Increased the ability to repay or redeem debt to $ 500 million subject to minimum aggregate liquidity of $ 400 million at the time of repayment or redemption.

At September 30, 2021, we had approximately $ 173 million in outstanding letters of credit under the LC Credit Agreement and availability of $ 42 million.

As of September 30, 2021, we had $ 329 million of letters of credit outstanding, consisting of the $ 173 million mentioned above under the LC Credit Agreement and another $ 156 million under various uncommitted bi-lateral facilities (for which there was $ 152 million in cash collateral held and recorded in “Restricted Cash” on our Condensed Consolidated Balance Sheets).

We have a senior secured letter of credit agreement (the “LC Credit Agreement”) in an aggregate amount of $ 215 million maturing on May 29, 2024, which is used by the Company and certain of its subsidiaries for the issuance of bid and performance letters of credit.

At March 31, 2022, we had approximately $ 169 million in outstanding letters of credit under the LC Credit Agreement (“LC Credit Agreement letters of credit”) and availability of $ 46 million.

As of March 31, 2022, we had $ 382 million of letters of credit outstanding, consisting of the $ 169 million under the LC Credit Agreement and another $ 213 million under various uncommitted bi-lateral facilities (of which there was $ 212 million in cash collateral held and recorded in “Restricted Cash” on the Condensed Consolidated Balance Sheets).

Our letters of credit under various uncommitted bi-lateral facilities increased “Restricted Cash” since December 31, 2021 due to a requirement from a new multi-year contract.

Accrued Interest

As of September 30, 2021 and December 31, 2020, we had accrued interest of $ 77 million and $ 34 million, respectively, in “Other Current Liabilities” on our Condensed Consolidated Balance Sheets.

As of March 31, 2022 and December 31, 2021, we had accrued interest of approximately $ 71 million and $ 35 million, respectively in “Other Current Liabilities” primarily related to the Exit Notes, 2028 Senior Secured Notes and 2030 Senior Notes.

Fair Value of Short and Long-term Borrowings

4 unchanged sentences

The fair value of our long-term debt is classified as Level 2 in the fair value hierarchy and is established based on observable inputs in less active markets.

The table below presents the fair value and carrying value of the Exit Notes and Senior Secured Notes.

9/30/2021 12/31/2020

The table below presents the fair value and carrying value of our long-term debt (excluding finance leases).

March 31, 2022 December 31, 2021

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

11.00 % Exit Notes due 2024

$ 300 $ 311 $ 300 $ 311

2028 Senior Secured Notes $ 488 $ 516 $ — $ —

2024 Senior Secured Notes

6.50 % Senior Secured Notes due 2028

489 516 488 528

8.625 % Senior Notes due 2030

1,584 1,628 1,584 1,660

Long-Term Debt (excluding Finance Leases) $ 2,373 $ 2,455 $ 2,372 $ 2,499

8 – Disputes, Litigation and Legal Contingencies

3 unchanged sentences

If one or more negative outcomes were to occur relative to these cases, the aggregate impact to our financial condition could be material.

Due to the COVID-19 pandemic, many of the Company’s litigation matters and other disputes have been delayed due to court closures or other mandated accommodations.

The COVID-19 pandemic temporarily closed courts in many jurisdictions around the world.

Although many courts have reopened, we continue to experience delays in certain jurisdictions.

Accrued litigation and settlements recorded in “Other Current Liabilities” on the accompanying Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 were $ 45 million and $ 40 million, respectively.

GAMCO Shareholder Litigation

1 unchanged sentence

(“GAMCO”), purportedly on behalf of itself and other similarly situated shareholders, filed a lawsuit asserting violations of the federal securities laws against certain then-current and former officers and directors of the Company.

GAMCO alleges violations of Sections 10(b) and 20(b) of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”), and violations of Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”) based on allegations that the Company and certain of its officers made false and/or misleading statements, and alleged non-disclosure of material facts, regarding our business, operations, prospects and performance.

GAMCO alleges violations of Sections 10(b) and 20(b) of the Securities Exchange Act of 1934, and violations of Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”) based on allegations that the Company and certain of its officers made false and/or misleading statements, and alleged non-disclosure of material facts, regarding our business, operations, prospects and performance.

GAMCO seeks damages on behalf of purchasers of the Company’s ordinary shares from October 26, 2016 through May 10, 2019.

4 unchanged sentences

URS added the Company as a defendant but dropped the claims against non-officer board members and all the claims under the Securities Act.

On May 14, 2021, the District Court dismissed the case with prejudice for failure to state a claim.

On August 9, 2021, the plaintiffs filed their Notice of Appeal with the District Court.

The case is still pending appeal and we cannot reliably predict the outcome of the claims, including the amount of any possible loss.

The defendants filed their motion to dismiss on May 18, 2020, and the Court granted the motion on May 14, 2021.

URS appealed the Court’s Opinion on Dismissal to the Court of Appeals for the Fifth Circuit, and the parties are continuing to await a decision.

We cannot reliably predict the outcome of the claims, including the amount of any possible loss.

9 – Shareholders’ Equity

The following summarizes our shareholders’ equity activity in the three and nine months ended September 30, 2021 and 2020:

The following summarizes our shareholders’ equity activity for the three months ended March 31, 2022 and 2021:

(Dollars in millions) Capital in Excess of Par Value Retained

1 unchanged sentence

Comprehensive

Income (Loss) Non-controlling Interests Total Shareholders’ Equity

Loss Non-controlling Interests “NCI” Total Shareholders’ Equity

Balance at December 31, 2021 $ 2,904 $ ( 2,397 ) $ ( 35 ) $ 24 $ 496

Net Income (Loss) — ( 80 ) — 6 ( 74 )

Other — — — ( 2 ) ( 2 )

Other Comprehensive Loss — — ( 4 ) — ( 4 )

Balance at March 31, 2021 $ 2,897 $ ( 2,063 ) $ ( 47 ) $ 34 $ 821

Net Income (Loss) — ( 78 ) — 5 ( 73 )

Other Comprehensive Loss — — 15 — 15

Dividends to Noncontrolling Interests — — — ( 4 ) ( 4 )

Equity Awards, Granted, Vested and Exercised 4 — — — 4

Other — — — ( 2 ) ( 2 )

Balance at June 30, 2021 $ 2,899 $ ( 2,141 ) $ ( 32 ) $ 33 $ 759

Net Income (Loss) — ( 95 ) — $ 6 ( 89 )

Other Comprehensive Loss — — — — —

Dividends to Noncontrolling Interests — — — ( 11 ) ( 11 )

Equity Awards Granted, Vested and Exercised 1 — — — 1

Other — — — ( 2 ) ( 2 )

Balance at September 30, 2021 $ 2,900 $ ( 2,236 ) $ ( 43 ) $ 26 $ 647

Balance at March 31, 2022 $ 2,908 $ ( 2,477 ) $ ( 35 ) $ 30 $ 426

Balance at December 31, 2020 $ 2,897 $ ( 1,947 ) $ ( 43 ) $ 30 $ 937

Net Income (Loss) — ( 116 ) — 6 ( 110 )

Dividends to NCI — — — ( 2 ) ( 2 )

Other Comprehensive Loss — — ( 4 ) — ( 4 )

Balance at March 31, 2021 $ 2,897 $ ( 2,063 ) $ ( 47 ) $ 34 $ 821

Net Income (Loss) — ( 581 ) — 2 ( 579 )

Other Comprehensive Loss — — 29 — 29

Dividends to Noncontrolling Interests — — — ( 8 ) ( 8 )

Balance at June 30, 2020 $ 2,897 $ ( 1,573 ) $ ( 57 ) $ 38 $ 1,305

Net Income (Loss) — ( 174 ) — 7 ( 167 )

Other Comprehensive Loss — — ( 6 ) — ( 6 )

Dividends to Noncontrolling Interests — — — ( 9 ) ( 9 )

Balance at September 30, 2020 $ 2,897 $ ( 1,747 ) $ ( 63 ) $ 36 $ 1,123

The following table presents the changes in our accumulated other comprehensive loss by component in the nine months ended September 30, 2021 and 2020:

The following table presents the changes in our accumulated other comprehensive loss by component for the three months ended March 31, 2022 and 2021:

(Dollars in millions) Currency Translation Adjustment Defined Benefit Pension Total

1 unchanged sentence

Other Comprehensive Loss — — —

Balance at September 30, 2021 $ ( 31 ) $ ( 12 ) $ ( 43 )

Balance at March 31, 2022 $ ( 36 ) $ 1 $ ( 35 )

Balance at December 31, 2020 $ ( 31 ) $ ( 12 ) $ ( 43 )

Other Comprehensive Loss ( 4 ) — ( 4 )

Balance at September 30, 2020 $ ( 65 ) $ 2 $ ( 63 )

Balance at March 31, 2021 $ ( 35 ) $ ( 12 ) $ ( 47 )

10 – Loss per Share

1 unchanged sentence

Diluted earnings (loss) per share is computed by dividing net income (loss) by our weighted average shares outstanding during the period including potential dilutive ordinary shares.

The following table presents our basic and diluted weighted average shares outstanding and loss per share in the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, Nine Months Ended September 30,

The following table presents our basic and diluted weighted average shares outstanding and loss per share for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(Dollars and shares in millions, except per share amounts) 2022 2021

3 unchanged sentences

Our basic and diluted weighted average shares outstanding for the periods presented are equivalent due to the net loss attributable to shareholders.

Diluted weighted average shares outstanding in the three and nine months ended September 30, 2021 and 2020 exclude 10 million and 8 million potential ordinary shares, respectively, for restricted share units, performance share units, phantom restricted share units, and outstanding warrants as we had net losses for those periods and their inclusion would be anti-dilutive.

Revenue by Product Line and Geographic Region

Revenues are attributable to countries based on the ultimate destination of the sale of products or performance of services.

Our two product lines are as follows:

(1) Completion and Production and (2) Drilling, Evaluation and Intervention.

The unmanned equipment that we lease to customers under operating leases consists primarily of drilling rental tools (in the Drilling, Evaluation and Intervention product line) and artificial lift pumping equipment (in the Completion and Production product line).

These equipment rental revenues are generally provided based on call-out work orders that include fixed per unit prices and are derived from short-term contracts.

The following tables disaggregate our product and service revenues by major product line and geographic region for the three and nine months ended September 30, 2021 and 2020 and includes equipment revenues recognized under lease accounting standards of $ 34 million and $ 97 million in the three and nine months ended September 30, 2021, respectively, and $ 30 million and $ 119 million for the three and nine months ended September 30, 2020, respectively.

Three Months Ended

September 30, Nine Months Ended

September 30,

(Dollars in millions) 2021 2020 2021 2020

Product Line Revenue for Western Hemisphere

Completion and Production $ 239 $ 170 $ 695 $ 632

Drilling, Evaluation and Intervention 202 146 561 582

Total Western Hemisphere Revenue 441 316 $ 1,256 $ 1,214

Product Line Revenue for Eastern Hemisphere

Completion and Production 221 241 $ 633 $ 783

Drilling, Evaluation and Intervention 283 250 791 846

Total Eastern Hemisphere Revenue 504 491 $ 1,424 $ 1,629

Total Revenues $ 945 $ 807 $ 2,680 $ 2,843

Three Months Ended

September 30, Nine Months Ended

September 30,

(Dollars in millions) 2021 2020 2021 2020

Revenue by Geographic Areas:

North America $ 224 $ 175 $ 658 $ 688

Latin America 217 141 598 526

Western Hemisphere 441 316 $ 1,256 $ 1,214

Middle East & North Africa and Asia 312 319 $ 868 $ 1,063

Europe/Sub-Sahara Africa/Russia 192 172 556 566

Eastern Hemisphere 504 491 $ 1,424 $ 1,629

Total Revenues $ 945 $ 807 $ 2,680 $ 2,843

Contract Balances

The timing of our revenue recognition, billings and cash collections results in the recording of billed accounts receivable, contract assets (including unbilled receivables), customer advances and deposits (contract liabilities classified as deferred revenues).

Our receivables are primarily derived from contract sales of products and services, which are included in “Accounts Receivable, Net” on the Condensed Consolidated Balance Sheets.

Contract assets were immaterial as of September 30, 2021 and December 31, 2020.

Revenue recognized during the nine months ended September 30, 2021 that was included in the contract liabilities balance at the beginning of 2021 was $ 28 million.

The following table summarizes these balances as of September 30, 2021 and December 31, 2020:

(Dollars in millions) 9/30/2021

Receivables for Product and Services in Accounts Receivable, Net $ 782 $ 792

Total Accounts Receivables $ 816 $ 826

Contract Liabilities $ 31 $ 37

Performance Obligations

(Dollars in millions) 2021 2022 2023 2024 Thereafter Total

Service Revenue $ 17 $ 66 $ 55 $ 57 $ 65 $ 260

Segment Information

Financial information by segment is summarized below.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies as presented in our 2020 Annual Report.

Three Months Ended

September 30, Nine Months Ended

September 30,

(Dollars in millions) 2021 2020 2021 2020

Western Hemisphere $ 441 $ 316 $ 1,256 $ 1,214

Eastern Hemisphere 504 491 1,424 $ 1,629

Total Revenues 945 807 $ 2,680 $ 2,843

Operating Income (Loss):

Western Hemisphere 45 ( 2 ) $ 97 $ 4

Eastern Hemisphere 34 5 21 38

Total Segment Operating Income 79 3 118 42

Corporate (a)

( 16 ) ( 28 ) ( 51 ) ( 80 )

Total Operating Income (Loss) Before Other Operating Expenses 63 ( 25 ) 67 ( 38 )

Goodwill and Long-Lived Asset Impairments — — — ( 1,057 )

Restructuring Charges — ( 31 ) — ( 114 )

Other (Charges) Credits, Net 8 ( 4 ) 16 ( 170 )

Total Operating Income (Loss) 71 ( 60 ) 83 ( 1,379 )

Interest Expense, Net (b)

( 69 ) ( 64 ) ( 211 ) ( 181 )

Loss on Extinguishment of Debt and Bond Redemption Premium ( 59 ) — ( 59 ) —

Loss on Termination of ABL Credit Agreement (b)

— ( 15 ) — ( 15 )

Other Expense, Net ( 4 ) ( 20 ) ( 19 ) ( 65 )

Loss Before Income Taxes $ ( 61 ) $ ( 159 ) $ ( 206 ) $ ( 1,640 )

(a) Corporate also includes eliminations of intercompany margins associated with transfers of assets and inventory that was a benefit of $ 1 million and expense of $ 9 million in the three months ended September 30, 2021 and 2020, respectively.

The nine months ended September 30, 2021 and 2020, included elimination of intercompany margins of zero and an expense $ 27 million, respectively.

(b) Loss on Termination of ABL Credit Agreement was included in “Interest Expense Net” in 2020, which has been reclassified to be presented on a consistent basis with 2021.

Diluted weighted average shares outstanding for the three months ended March 31, 2022 and 2021 exclude 11 million and 9 million potential ordinary shares, respectively, for restricted share units, performance share units, phantom restricted share units, and outstanding warrants as we had net losses for those periods and their inclusion would be anti-dilutive.

11 – Income Taxes

We determined our quarterly tax provision using the year-to-date effective tax rate because small changes in estimated ordinary annual income result in significant changes in our estimated annual effective tax rate.

The year-to-date effective tax rate treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis.

In the three and nine months ended September 30, 2021, we recognized tax expense of $ 28 million and $ 66 million, respectively, on a loss before income taxes of $ 61 million and $ 206 million, respectively, compared to the three and nine months ended September 30, 2020 where we recognized tax expense of $ 8 million and $ 64 million, respectively, on a loss before income taxes of $ 159 million and $ 1.6 billion, respectively.

We provide for income taxes based on the laws and rates in effect in the countries in which operations are conducted, or in which we or our subsidiaries are considered resident for income tax purposes.

The relationship between our pre-tax income or loss and our income tax provision or benefit varies from period to period due to various factors which include changes in total pre-tax income or loss, the jurisdictions in which our income is earned, the tax laws in those jurisdictions and in our operating structure.

For the three months ended March 31, 2022, we recognized tax expense of $ 28 million on a loss before income taxes of $ 46 million compared to the three months ended March 31, 2021 where we recognized tax expense of $ 23 million on a loss before income taxes of $ 87 million.

Our income tax provisions are primarily driven by income in certain jurisdictions, deemed profit countries and withholding taxes on intercompany and third-party transactions that do not directly correlate to ordinary income or loss and other adjustments.

Impairments and other charges recognized do not result in significant tax benefit as a result of our inability to forecast realization of the tax benefit of such losses.

Impairments and other charges recognized do not result in significant tax benefit due to our inability to forecast realization of the tax benefit of such losses.

We routinely undergo tax examination in various jurisdictions.

We cannot predict the timing or outcome regarding resolution of these tax examinations or if they will have a material impact on our financial statements.

As of September 30, 2021, we anticipate that it is reasonably possible that our uncertain tax positions of $ 241 million may decrease by up to $ 13 million in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations.

Subsequent Events

Exit Notes Redemption

On October 20, 2021 we redeemed $ 200 million of our Exit Notes and paid related accrued interest of $ 8 million and an early bond redemption premium of $ 6 million.

2030 Senior Notes and Exit Notes Redemption

On October 27, 2021, we issued $ 1.6 billion of 8.625 % senior notes due April 30, 2030 (the “2030 Senior Notes”).

The net proceeds and cash on hand were used to redeem $ 1.6 billion in principal of our Exit Notes at applicable prices, plus accrued and unpaid interest.

Interest on the 2030 Senior Notes is payable semi-annually on June 1 and December 1 of each year, beginning on June 1, 2022 at a rate of 8.625 % per year and will mature on April 30, 2030.

The 2030 Senior Notes are guaranteed by the Company and the same subsidiaries that guaranteed the 2028 Senior Secured Notes.

As of March 31, 2022, we anticipate that it is reasonably possible that our uncertain tax positions of $ 272 million may decrease by up to $ 11 million in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations.

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-Q

Item 1. Financial Statements