Weatherford International plc 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. As used in this item, “Weatherford”, “the Company,” “we,” “us” and “our” refer to Weatherford International plc, a public limited company organized under the laws of Ireland, and its subsidiaries on a consolidated basis. The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included in “Item 1. Financial Statements.” Our discussion includes various forward-looking statements about our markets, the demand for our products and services and our future results. These statements include assumptions, certain risks and uncertainties. For information about these assumptions, risks and uncertainties, refer to the section “Forward-Looking Statements” and the section “PART II - Other Information - Item 1A. Risk Factors.” Business Weatherford delivers innovative energy services that integrate proven technologies with advanced digitalization to create sustainable offerings for maximized value and return on investment. We provide equipment and services used in the drilling, evaluation, construction, completion, production, intervention and responsible abandonment of wells across the broad spectrum of energy sources. We conduct operations in approximately 75 countries, answering the challenges of the energy industry with 350 operating locations including manufacturing, research and development, service, and training facilities. Our principal business is to provide equipment and services to the oil and natural gas exploration and production industry as well as new energy platforms across our three product line segments: (1) Drilling and Evaluation (2) Well Construction and Completions, and (3) Production and Intervention. 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. Drilling and Evaluation (“DRE”) offers a suite of services including managed pressure drilling, drilling services, wireline and drilling fluids. DRE offers services ranging from early well planning to reservoir management through innovative tools and expert engineering to optimize reservoir access and productivity. Well Construction and Completions (“WCC”) offers products and services for well integrity assurance across the full life cycle of the well. The primary offerings are tubular running services, cementation products, completions, liner hangers and well services. WCC deploys conventional to advanced technologies, providing safe and efficient services in any environment during the well construction phase. Production and Intervention (“PRI”) offers production optimization technologies through the Company’s ability to design and deliver a complete production ecosystem to boost productivity and responsible abandonment for our customers. The primary offerings are intervention services & drilling tools, artificial lift, production automation & software, sub-sea intervention and pressure pumping services. PRI utilizes a suite of reservoir stimulation designs, and engineering capabilities that isolate zones and unlock reserves in conventional and unconventional wells, deep water, and aging reservoirs. 16 Table of Contents Industry Trends The level of spending in the energy industry is heavily influenced by the current and expected future prices of oil and natural gas, but is also impacted by environmental, social and governance (“ESG”) initiatives, and ongoing supply chain shortages as well as geopolitical events like the ongoing military conflict between Russia and Ukraine (“Russia Ukraine Conflict”). These events, in addition to the reopening of the global economy around the relaxing of public restrictions related to the COVID-19 pandemic, have caused commodity prices to increase year-over-year. The industry is also impacted by sanctions related to the Russia Ukraine Conflict. Most notably, several countries including the United States, the European Union and the United Kingdom, have imposed broad sanctions against Russia, certain Russian individuals and certain activities involving Russia or Russian individuals. These factors may result in an increase or decrease in demand for our products and services. The table below shows the average oil and natural gas prices for West Texas Intermediate (“WTI”) and Brent North Sea (“Brent”) crude oil and Henry Hub natural gas. Three Months Ended Six Months Ended 6/30/2022 6/30/2021 6/30/2022 6/30/2021 Oil price - WTI (1) $108.72 $66.09 $101.59 $61.94 Oil price - Brent (1) $113.54 $68.83 $106.92 $64.83 Natural gas price - Henry Hub (2) $7.48 $2.94 $6.07 $3.25 (1) Oil price measured in dollars per barrel (rounded to the nearest $0.01) (2) Natural gas price measured in dollars per million British thermal units (Btu), or MMBtu (rounded to the nearest $0.01) Rig count is an indicator of the level of spending for the exploration and production of oil and natural gas reserves and the increase year-over-year is due to similar reasons described above. The table below shows historical average rig counts based on the weekly Baker Hughes Company rig count information. Three Months Ended Six Months Ended 6/30/2022 6/30/2021 6/30/2022 6/30/2021 North America 827 522 829 529 International 816 734 819 716 Worldwide 1,643 1,256 1,648 1,245 Consolidated Statements of Operations - Operating Income Summary Revenues of $1.1 billion and $2.0 billion in the three and six months ended June 30, 2022, increased 18% and 15%, compared to the three and six months ended June 30, 2021, respectively. The year-over-year improvement was from an increased demand across all segments. Cost of products and services of $756 million and $1.4 billion in the three and six months ended June 30, 2022, increased $79 million, or 12%, and $125 million, or 10%, compared to the three and six months ended June 30, 2021, respectively, primarily reflecting increased overall demand, impacts from supply chain disruptions and inflation. Our cost of products and services as a percentage of revenues was 71% and 72% in the three and six months ended June 30, 2022, an improvement compared to 75% and 76% in the three and six months ended June 30, 2021, reflecting increasing demand on a more efficient cost structure. 17 Table of Contents Selling, general, administrative and research and development costs of $218 million and $417 million in the three and six months ended June 30, 2022, increased $9 million, or 4%, and decreased $1 million, compared to the three and six months ended June 30, 2021, primarily reflecting cost initiative efforts in managing the rate of growth on a percentage of revenue growth. These costs as a percentage of revenues were 21% in both the three and six months ended June 30, 2022, an improvement compared to 23% and 24% in the three and six months ended June 30, 2021, also reflecting our focus on simplification. Restructuring charges include nil and $20 million in the three and six months ended June 30, 2022, see “Note 4 – Restructuring Charges” for additional information. Other charges (credits) in the three and six months ended June 30, 2022 was a credit of $14 million and a charge of $5 million, respectively. The net credit in the three months ended June 30, 2022 was primarily from the gain on asset sales related to our fulfillment initiatives and collections of previously impaired receivables offset by a net charge in the three months ended March 31, 2022 that includes a $17 million charge related to Ukraine, resulting in a net charge in the six months ended June 30, 2022. Operating income of $104 million and $122 million in the three and six months ended June 30, 2022 improved $79 million and $110 million, compared to the three and six months ended June 30, 2021, respectively, due to the above-mentioned improvements. Consolidated Statements of Operations - Non-Operating Expenses Summary Interest Expense, Net Interest expense, net was $48 million and $96 million in the three and six months ended June 30, 2022, respectively, and primarily represented interest on our outstanding long-term debt (see “Note 7 – Borrowings and Other Debt Obligations” to our Condensed Consolidated Financial Statements for additional details). Interest expense, net was $72 million and $142 million in the three and six months ended June 30, 2021, respectively. The year-over-year decrease was due to partial repayments of principal and refinancing initiatives in the second half of 2021 which reduced our interest rates. Other Expense, Net Other expense, net was $32 million and $48 million in the three and six months ended June 30, 2022, compared to $11 million and $15 million in the three and six months ended June 30, 2021, respectively. Other expense, net is comprised of letter of credit fees, other financing charges, and foreign exchange losses. The year-over-year increase was primarily due to foreign exchange losses, changes in fair value and settlements of certain foreign currency forward contracts. We enter into foreign currency forward contracts to mitigate the risk of future cash flows denominated in a foreign currency. The amounts will fluctuate, depending on exchange rate volatility, the volume of our foreign currency transactions, and our hedge decisions. At June 30, 2022 and December 31, 2021, we had outstanding foreign currency forward contracts with notional amounts aggregating to $43 million and $349 million, respectively. Income Taxes 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 residents for income tax purposes. The relationship between our pre-tax income or loss from continuing operations and our income tax benefit or provision varies from period to period as a result of 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, the impacts of tax planning activities and the resolution of tax audits. Our effective rate differs from the Irish statutory tax rate as the majority of our operations are taxed in jurisdictions with different tax rates. In addition, we are generally unable to recognize tax benefit on our losses. Please see “Note 11 – Income Taxes” to our Condensed Consolidated Financial Statements for additional details. 18 Table of Contents Segment Results of Operations Financial information by segment is summarized below. Favorable (Unfavorable) Three Months Ended $ % or bps (Dollars in millions) 6/30/2022 6/30/2021 Change Revenues: Drilling and Evaluation $ 317 $ 265 $ 52 20 % Well Construction and Completions 383 337 46 14 % Production and Intervention 345 278 67 24 % Segment Revenues 1,045 880 165 19 % All Other 19 23 (4) (17) % Total Revenues $ 1,064 $ 903 $ 161 18 % Segment Adjusted EBITDA: Drilling and Evaluation $ 69 $ 46 $ 23 50 % Well Construction and Completions 67 55 12 22 % Production and Intervention 68 46 22 48 % Segment Adjusted EBITDA $ 204 $ 147 $ 57 39 % Corporate and Other (18) (11) (7) (64) % Depreciation and Amortization (90) (114) 24 21 % Share-based Compensation Expense (6) (5) (1) (20) % Other Adjustments 14 8 6 75 % Operating Income $ 104 $ 25 $ 79 316 % Segment Adjusted EBITDA Margins: Drilling and Evaluation 21.8 % 17.4 % n/m 440 bps Well Construction and Completions 17.5 % 16.3 % n/m 120 bps Production and Intervention 19.7 % 16.5 % n/m 320 bps Segment Adjusted EBITDA 19.5 % 16.7 % n/m 280 bps 19 Table of Contents Favorable (Unfavorable) Six Months Ended $ % or bps (Dollars in millions) 6/30/2022 6/30/2021 Change Revenues: Drilling and Evaluation $ 609 $ 501 $ 108 22 % Well Construction and Completions 727 660 67 10 % Production and Intervention 631 537 94 18 % Segment Revenues 1,967 1,698 269 16 % All Other 35 37 (2) (5) % Total Revenues $ 2,002 $ 1,735 $ 267 15 % Segment Adjusted EBITDA: Drilling and Evaluation $ 128 $ 75 $ 53 71 % Well Construction and Completions 134 105 29 28 % Production and Intervention 107 87 20 23 % Segment Adjusted EBITDA $ 369 $ 267 $ 102 38 % Corporate and Other (32) (29) (3) (10) % Depreciation and Amortization (177) (225) 48 21 % Share-based Compensation Expense (13) (9) (4) (44) % Other Adjustments (25) 8 (33) (413) % Operating Income $ 122 $ 12 $ 110 917 % Segment Adjusted EBITDA Margins: Drilling and Evaluation 21.0 % 15.0 % n/m 600 bps Well Construction and Completions 18.4 % 15.9 % n/m 250 bps Production and Intervention 17.0 % 16.2 % n/m 80 bps Segment Adjusted EBITDA 18.8 % 15.7 % n/m 310 bps Segment Revenues Segment revenues of $1.0 billion and $2.0 billion in the three and six months ended June 30, 2022, increased $165 million, or 19%, and increased $269 million, or 16%, compared to the same periods in 2021, respectively. The year-over-year improvement was from an increased demand in all segments. DRE revenues of $317 million and $609 million in the three and six months ended June 30, 2022, increased $52 million, or 20%, and increased $108 million, or 22%, compared to the same periods in 2021, respectively. The year-over-year increase was largely due to increased demand for wireline in the three months ended and managed pressure drilling in the six months ended June 30, 2022, compared to the same periods in 2021, respectively, and primarily in Latin America. WCC revenues of $383 million and $727 million in the three and six months ended June 30, 2022, increased $46 million, or 14%, and increased $67 million, or 10%, compared to the same periods in 2021, respectively. The year-over-year increase in the three and six months was largely due to increased demand for cementation products, primarily in North America and the Middle East North Africa/Asia regions. PRI revenues of $345 million and $631 million in the three and six months ended June 30, 2022, increased $67 million, or 24%, and increased $94 million, or 18%, compared to the same periods in 2021, respectively. The year-over-year increase in 20 Table of Contents the three and six months was largely due to increased demand for artificial lift, primarily in North America. Segment Adjusted EBITDA and Margins Our primary measure of segment profitability is segment adjusted EBITDA. Segment adjusted EBITDA of $204 million and $369 million in the three and six months ended June 30, 2022, increased $57 million, or 39%, and increased $102 million, or 38%, compared to the same periods in 2021, respectively. The year-over-year improvement exceeded the rate of improvement for revenues primarily from an increased demand in all segments with a more profitable mix of service and product sales on a more efficient cost structure, resulting in higher fall-through on margins. Segment adjusted EBITDA margins were 20% and 19% in the three and six months ended June 30, 2022, an improvement compared to 17% and 16% in the three and six months ended June 30, 2021, respectively. DRE segment adjusted EBITDA of $69 million and $128 million in the three and six months ended June 30, 2022, increased $23 million, or 50%, and increased $53 million or 71%, compared to the same period in 2021, respectively. DRE segment adjusted EBITDA margins were 22% and 21% in the three and six months ended June 30, 2022, an improvement compared to 17% and 15% in the three and six months ended June 30, 2021, respectively. The year-over-year improvements were largely due to higher fall-through on margins for managed pressure drilling and wireline, primarily in Latin America in all periods, and North America in the three months ended and the Middle East North Africa/Asia regions in the six months ended June 30, 2022, compared to the same periods in 2021, respectively. WCC segment adjusted EBITDA of $67 million and $134 million in the three and six months ended June 30, 2022, increased $12 million, or 22%, and increased $29 million, or 28%, compared to the same period in 2021, respectively. WCC segment adjusted EBITDA margins were 18% in both the three and six months ended June 30, 2022, an improvement compared to 16% in both the three and six months ended June 30, 2021, respectively. The year-over-year improvements were largely due to higher fall-through on margins for cementation and liner hangers, primarily in North America and the Middle East North Africa/Asia regions in all periods. PRI segment adjusted EBITDA of $68 million and $107 million in the three and six months ended June 30, 2022, increased $22 million, or 48%, and increased $20 million, or 23%, compared to the same period in 2021, respectively. PRI segment adjusted EBITDA margins were 20% and 17% in the three and six months ended June 30, 2022, an improvement compared to 17% and 16% in the three and six months ended June 30, 2021, respectively. The year-over-year improvements were largely due to higher fall-through on margins for intervention services and drilling tools, primarily in North America and the Middle East North Africa/Asia regions in all periods. Depreciation and Amortization Depreciation and amortization was $90 million and $177 million in the three and six months ended June 30, 2022, compared to $114 million and $225 million in the three and six months ended June 30, 2021, respectively. The year-over-year decrease was primarily from a lower asset base. Share-based Compensation Expense We record share-based compensation expense in “Selling, General and Administrative” on the accompanying Condensed Consolidated Statements of Operations. We recognized $6 million and $13 million in the three and six months ended June 30, 2022, compared to $5 million and $9 million in the three and six months ended June 30, 2021, respectively. The year-over-year increase was due to additional awards granted. Other Adjustments Other adjustments in the six months ended June 30, 2022 primarily include a net credit from the gain on asset sales related to our fulfillment initiatives and collections of previously impaired receivables in the three months ended June 30, 2022 offset by net charges in the three months ended March 31, 2022 that include a $20 million restructuring charge and a $17 million charge related to Ukraine. See “Note 4 – Restructuring Charges” and earlier description of other charges (credits) for additional information. 21 Table of Contents Business Outlook Growth in the energy services industry is highly dependent on many external factors. These include, but are not limited to, the impact from geopolitical conflicts, the global response to the COVID-19 pandemic, our customers’ capital expenditures, ESG driven changes, world economic, political and weather conditions, the price of oil and natural gas, and member-country quota compliance within the Organization of Petroleum Exporting Countries and the expanded alliance (“OPEC+”). We expect continued improvements in our customer activity levels and generally positive macroeconomic conditions that may offset inflationary pressures and potential recessionary concerns, all of which are expected to provide a pathway to a multi-year energy demand expansion. We continue to closely monitor the ongoing supply chain disruptions, escalating costs, logistical constraints and travel restrictions. We believe that industry activity will continue to improve in 2022 and our consolidated revenues are anticipated to grow by mid-teens above 2021 levels. Russia Ukraine Conflict On February 24, 2022, the broad Russia Ukraine Conflict began and in response, we evaluated, and continue to evaluate, our operations, with the first action being centered on the safety and well-being of our employees in the impacted regions. In response to the Russia Ukraine Conflict, the United States, the European Union, the United Kingdom and other countries have imposed broad sanctions against Russia, certain Russian individuals and certain activities involving Russia or Russian individuals. Certain restrictions have been placed, that have impacted the movement of assets, primarily activity into Russia. We continue to monitor and intend to remain in full compliance with the evolving sanctions landscape and will continue to fulfill existing contractual obligations within applicable international laws and sanctions. Revenues in Russia were 6% of our total revenues for both the three and six months ended June 30, 2022. Excluding cash, net assets in Russia were $168 million as of June 30, 2022, and are comprised of $127 million in current assets, $93 million in property, plant and equipment, $5 million in other non-current assets, and $57 million in liabilities. If the Russia Ukraine Conflict and related sanctions persist or are escalated, our business may be negatively impacted, potentially lowering revenues or triggering asset impairments in Russia. Opportunities and Challenges Our customers continue to face challenges in balancing the cost of extraction activities with securing desired rates of production while achieving acceptable rates of return on investment. These challenges increase our customers’ requirements for technologies that improve productivity and efficiency and pressures us to deliver our products and services at competitive rates. In addition, as consolidation of the energy services industry continues due to market conditions, there has been an increased demand for companies to provide specialized products, services and technologies. Weatherford delivers innovative energy services that integrate proven technologies with advanced digitalization to create sustainable offerings for maximized value and return on investment. We believe we are well positioned to satisfy our customers’ needs, but the level of improvement in our businesses in the future will depend heavily on pricing, volume of work, our ability to offer technology solutions to more efficiently extract oil and gas while controlling costs, and our success in penetrating new and existing markets with our newly developed technologies. Over the long-term, we expect the world’s demand for energy to continue to rise and require more advanced technology from the energy service industry. We remain focused on delivering innovative and cost-efficient solutions for customers to assist them in achieving their operational, safety and environmental objectives. Current market conditions could make it more difficult to obtain our targeted cost reduction benefits and to recruit, motivate and retain employees, including key personnel. Escalations of sanctions and other events around the Russia Ukraine Conflict, including increased exposure to cyber attacks, increasing investor and government focus on ESG factors, supply chain challenges and disruptions, and the cyclicality of the energy industry may negatively impact demand for our products and services. We are following our long-term strategy aimed at achieving sustainable profitability in our businesses, servicing our customers and creating value for our shareholders. Our long-term success will be determined by our ability to manage effectively the cyclicality of our industry, including future potential prolonged industry downturns, our ability to respond to industry demands in periods of over-supply or uncertain oil prices, and ultimately to generate consistent positive cash flow and positive returns on the invested capital. 22 Table of Contents Liquidity and Capital Resources At June 30, 2022, we had total cash and cash equivalents plus restricted cash of $1.1 billion, of which $211 million was restricted cash, compared to $1.1 billion at December 31, 2021, of which $162 million was restricted cash. The following table summarizes cash flows (used in) provided by each type of business activity in the periods presented: Six Months Ended June 30, (Dollars in millions) 2022 2021 Net Cash (Used in) Provided by Operating Activities $ (4) $ 120 Net Cash Provided by (Used in) Investing Activities $ 7 $ (2) Net Cash Used in Financing Activities $ (25) $ (15) Operating Activities Cash used in operating activities was $4 million for the six months ended June 30, 2022. The primary uses of cash in operating activities were working capital investments to support increased customer activity and interest payments. The cash used in operating activities was minimized by accounts receivable collections and by a short-term monetization transaction we entered into during the three months ended June 30, 2022 on certain accounts receivable balances. This transaction resulted in net cash proceeds of $59 million in the three months ended June 30, 2022, which decreased our net cash outflows in the six months ended June 30, 2022. Cash provided by operating activities was $120 million for the six months ended June 30, 2021. The primary sources of cash provided by operating activities were driven by collections on our accounts receivables and inventory utilization, partially offset by interest payments. Investing Activities Cash provided by investing activities was $7 million for the six months ended June 30, 2022. The primary investing activities included proceeds from the sale of assets of $43 million and a release of funds in escrow related to the sale of business for $9 million, which was offset by cash used for capital expenditures of $44 million. Cash used in investing activities was $2 million for the six months ended June 30, 2021. The primary uses of cash in investing activities were capital expenditures of $24 million for property, plant and equipment, offset by proceeds of $22 million from other asset dispositions. Financing Activities Cash used in financing activities was $25 million for the six months ended June 30, 2022 and $15 million for the six months ended June 30, 2021. The primary uses of cash in financing activities in all periods presented were for finance lease payments and dividends paid to noncontrolling interests. Sources of Liquidity Our sources of available liquidity include cash generated by our operations, cash and cash equivalent balances, and accounts receivable factoring. From time to time, we may enter into transactions to dispose of businesses or capital assets that no longer fit our long-term strategy. We historically have accessed banks for short-term loans and the capital markets for debt and equity offerings. Based upon current and anticipated levels of operations and our recent refinancing transactions, we expect to have sufficient cash from operations and cash on hand to fund our cash requirements (discussed below) and financial obligations, both in the short-term and long-term. Our cash and cash equivalents of $879 million (which excludes restricted cash) remain our primary source of funds to manage any liquidity event risks. 23 Table of Contents LC Agreement We have a senior secured letter of credit agreement (the “LC 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 June 30, 2022, we had approximately $173 million in outstanding letters of credit under the LC Agreement and availability of $42 million. Ratings Services’ Credit Ratings Our credit ratings at June 30, 2022 were maintained since December 31, 2021. • Moody’s Investors Service corporate family rating is at B2, our senior unsecured notes rating is at B3, and our senior secured notes and LC Agreement ratings are at Ba3. The outlook is stable. • Standard and Poor’s corporate family and senior unsecured notes ratings are at B-, and our senior secured notes and LC Agreement ratings are B+. The outlook is stable. Cash Requirements Our cash requirements will continue to include payments for capital expenditures, payments for short-term working capital needs, interest payments on our long-term debt, repayment on finance leases, operating costs associated with our business and restructuring payments. In 2021, operating cash flow benefited from the monetization of working capital accumulated in 2020. As business activity rises, we expect to continue to utilize cash on capital assets and working capital growth. Our cash requirements may also include awards under our employee incentive programs and other amounts to settle litigation related matters. At June 30, 2022, we had outstanding debt of $300 million in aggregate principal amount for our Exit Notes due 2024, $500 million in aggregate principal amount for our 2028 Senior Secured Notes and $1.6 billion in aggregate principal amount of the 2030 Senior Notes. On July 11, 2022, we issued a notice of election to redeem $50 million of our Exit Notes on August 10, 2022. Please see “Note 7 – Borrowings and Other Debt Obligations” for additional details. Our capital spending for 2022 is currently projected to be between $120 million to $140 million. Capital expenditures are expected to be used primarily to support the ongoing activities and commitments in our core business. We expect to make $213 million in interest payments in 2022 and approximately $198 million in interest payments annually until the maturity of our long-term debt (excluding finance leases). Our payments on operating leases and operating purchase obligations in 2022 are expected to be approximately $74 million and $177 million, respectively. Cash and cash equivalents plus restricted cash are held by subsidiaries outside of Ireland. At June 30, 2022 we had approximately $160 million of our cash and cash equivalents that cannot be immediately repatriated from various countries due to country central bank controls or other regulations. Based on the nature of our structure, other than the restrictions noted above, we foresee we will be able to redeploy cash with minimal to no incremental tax. Customer Receivables We may experience delayed customer payments and payment defaults due to, among other reasons, reductions in our customers’ cash flow from operations, our customers’ inability to access credit markets, as well as unsettled political conditions. Accounts Receivable Factoring and Monetization From time to time, we participate in factoring arrangements to sell accounts receivable to third-party financial institutions for cash proceeds net of discount and hold-back. The programs we factor under are uncommitted and thus we cannot assure they will be available as a source of liquidity. Our factoring transactions were recognized as sales, and the proceeds are included as operating cash flows in our Condensed Consolidated Statements of Cash Flows. 24 Table of Contents During the three and six months ended June 30, 2022, we sold accounts receivable balances of $9 million and $26 million, and received cash proceeds of $8 million and $23 million, respectively. During the three and six months ended June 30, 2021, we sold accounts receivable balances of $34 million and $40 million, and received cash proceeds of $29 million and $34 million, respectively. Additionally, during the three months ended June 30, 2022, we entered into a short-term monetization transaction on accounts receivable balances of $77 million. We received net cash proceeds of $59 million in the three months ended June 30, 2022 and $16 million in early July. The proceeds are included as operating cash flows in our Condensed Consolidated Statements of Cash Flows. Guarantees Weatherford International plc, the ultimate parent of the Weatherford group, guarantees the obligations of its subsidiaries – Weatherford International Ltd., a Bermuda exempted company (“Weatherford Bermuda”), and Weatherford International, LLC, a Delaware limited liability company (“Weatherford Delaware”), including the notes and credit facilities listed below. Our Exit Notes, 2028 Senior Secured Notes and 2030 Senior Notes were issued by Weatherford Bermuda and guaranteed by Weatherford International plc and Weatherford Delaware and other subsidiary guarantors party thereto. Please see “Note 7 – Borrowings and Other Debt Obligations” for additional details. Letters of Credit and Surety Bonds As of June 30, 2022, we had $378 million of letters of credit outstanding, consisting of the $173 million under the LC Agreement and another $205 million under various uncommitted bi-lateral facilities (of which there was $205 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. We utilize surety bonds as part of our customary business practice in Latin America. As of June 30, 2022, we had surety bonds outstanding of $299 million. Any of our outstanding letters of credit or surety bonds could be called by the beneficiaries should we breach certain contractual or performance obligations. If the beneficiaries were to call the letters of credit under our LC Agreement or surety bonds, our available liquidity would be reduced by the amount called. 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. The forward-looking statements included herein are only made as of the date of the filing of this report, and 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 II – Other Information – 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: • global political, economic and market conditions, political disturbances, war, terrorist attacks, changes in global trade policies, weak local economic conditions and international currency fluctuations (including the Russia Ukraine Conflict); • general global economic repercussions related to U.S. and global inflationary pressures and potential recessionary concerns; 25 Table of Contents • failure to ensure on-going compliance with current and future laws and government regulations and sanctions, including but not limited to those related to the Russia Ukraine Conflict, and environmental and tax and accounting laws, rules and regulations; • changes in, and the administration of, treaties, laws, and regulations, including in response to issues related to the Russia Ukraine Conflict and the potential for such issues to exacerbate other risks we face, including those related to the other risks and uncertainties listed or referenced in this Forward-Looking Statements section and in the Risk Factors section below; • cybersecurity issues, as we may experience a higher rate of cybersecurity attacks, intrusions or incidents in the current environment of remote connectivity, as well as increased geopolitical conflicts and tensions; • our ability to comply with, and respond to, climate change, ESG and other “sustainability” initiatives and future legislative and regulatory measures both globally and in the specific geographic regions in which we and our customers operate; • our ability to effectively and timely address the need to conduct our operations and provision of services to our customers more sustainably and with a lower carbon footprint; • risks associated with disease outbreaks and other public health issues, including the COVID-19 pandemic, their impact on the global economy and the business of our company, customers, suppliers and other partners; • further spread and potential for a resurgence of the COVID-19 pandemic in a given geographic region and related disruptions to our business, employees, customers, suppliers and other partners and additional regulatory measures or voluntary actions that may be put in place to limit the spread of the COVID-19 pandemic, 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; • our ability to effectively and timely adapt our technology portfolio, products and services to address and participate in changes to the market demands for the transition to alternate sources of energy such as geothermal, carbon capture and responsible abandonment, including our digitalization efforts; • 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 challenges and disruptions, 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; • our ability to service our debt obligations; • potential non-cash asset impairment charges for long-lived assets, intangible assets or other assets; and • adverse weather conditions in certain regions of our operations. 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 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 current and past filings with the SEC under the Exchange Act and the Securities Act of 1933, as amended. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Other than the change in fair value of our debt as discussed in “Note 7 – Borrowings and Other Debt Obligations” in the Notes to Condensed Consolidated Financial Statements, our exposure to market risk has not changed materially since December 31, 2021. 26 Table of Contents