What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-10-26 compared with 2022-07-28 · 123 added, 120 removed, 175 unchanged (58% of the section changed)

20 unchanged sentences

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.

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.

Growth and spending in the energy services industry is highly dependent on many external factors.

These include, but are not limited to, the impact from geopolitical conflicts, global response to any ongoing pandemics, our customers’ capital expenditures, environmental, social and governance (“ESG”) initiatives, 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.

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 growing recessionary concerns in the global market, ongoing supply chain disruptions, escalating costs, logistical constraints and travel restrictions.

Our consolidated full year revenues for 2022 are anticipated to grow over prior year.

We believe that industry activity will continue to improve into 2023.

Russia Ukraine Conflict

On February 24, 2022, the military conflict between Russia and Ukraine (“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 certain restrictions and broad sanctions against Russia, certain Russian individuals and certain activities involving Russia or Russian individuals.

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%-7% of our total revenues for both the three and nine months ended September 30, 2022 and 2021.

As 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 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.

Oil and Natural Gas Prices

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

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

9 unchanged sentences

The table below shows historical average rig counts based on the weekly Baker Hughes Company rig count information.

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

3 unchanged sentences

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.

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

Revenues of $1.1 billion and $3.1 billion in the three and nine months ended September 30, 2022, increased 19% and 16%, compared to the three and nine months ended September 30, 2021, respectively.

The year-over-year improvement was driven by increased demand across all segments.

Cost of products and services of $775 million and $2.2 billion in the three and nine months ended September 30, 2022, increased $89 million, or 13%, and $214 million, or 11%, compared to the three and nine months ended September 30, 2021, respectively, primarily reflecting increased overall demand.

Our cost of products and services as a percentage of revenues was 69% and 71% in the three and nine months ended September 30, 2022, an improvement compared to 73% and 75% in the three and nine months ended September 30, 2021, reflecting improving utilization on a more efficient operating cost structure, offset by impacts from supply chain disruptions and inflation.

Selling, general, administrative and research and development costs of $224 million and $641 million in the three and nine months ended September 30, 2022, increased $28 million, or 14%, and $27 million, or 4%, compared to the three and nine months ended September 30, 2021, primarily reflecting higher overhead and support costs in response to managing increased activity.

These costs as a percentage of revenues were 20% and 21% in the three and nine months ended September 30, 2022, respectively, an improvement compared to 21% and 23% in the three and nine months ended September 30, 2021, reflecting our focus on cost control initiatives.

Restructuring charges include $2 million and $22 million in the three and nine months ended September 30, 2022, see “Note 4 – Restructuring Charges” for additional information.

Other charges (credits) in the three and nine months ended September 30, 2022 was a credit of $2 million and a charge of

$3 million, respectively.

The credit in the three months ended September 30, 2022 was immaterial and the net charge of $3 million, although immaterial, was primarily related to charges related to Ukraine, partially offset by the gain on asset sales related to our fulfillment initiatives and collections of previously impaired receivables.

Other charges (credits) were a net credit of $8 million and $16 million in both the three and nine months ended September 30, 2021, respectively, primarily driven by gains on asset sales in both periods.

Consolidated Statements of Operations - Non-Operating 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.

Interest expense, net was $44 million and $140 million in the three and nine months ended September 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 $69 million and $211 million in the three and nine months ended September 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 was $12 million and $60 million in the three and nine months ended September 30, 2022, compared to $4 million and $19 million in the three and nine months ended September 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.

The year-over-year increase was primarily due to foreign exchange losses 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.

The amounts will fluctuate, depending on exchange rate volatility, the volume of our foreign currency transactions, and our decisions to hedge.

At September 30, 2022 and December 31, 2021, we had outstanding foreign currency forward contracts with notional amounts aggregating to $113 million and $349 million, 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 residents for income tax purposes.

5 unchanged sentences

Financial information by segment is summarized below.

(Unfavorable)

Three Months Ended $ % or bps

Three Months Ended (Unfavorable)

September 30, $ % or bps

(Dollars in millions) 2022 2021 Change

20 unchanged sentences

Segment Adjusted EBITDA 20.9 % 21.0 % n/m (10) bps

(Unfavorable)

Six Months Ended $ % or bps

Nine Months Ended (Unfavorable)

September 30, $ % or bps

(Dollars in millions) 2022 2021 Change

21 unchanged sentences

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

the three and six months was largely due to increased demand for artificial lift, primarily in North America.

Segment revenues of $1.1 billion and $3.1 billion in the three and nine months ended September 30, 2022, increased $181 million, or 20%, and increased $450 million, or 17%, compared to the same periods in 2021, respectively.

The year-over-year improvement was primarily from an increased demand in all segments.

DRE revenues of $348 million and $957 million in the three and nine months ended September 30, 2022, increased $70 million, or 25%, and increased $178 million, or 23%, compared to the same periods in 2021, respectively.

The year-over-year increases were largely due to increased demand for managed pressure drilling and drilling services in three and the nine months ended September 30, 2022, compared to the same periods in 2021, respectively, and primarily in Latin America and Middle East North Africa/Asia regions.

WCC revenues of $391 million and $1,118 million in the three and nine months ended September 30, 2022, increased $46 million, or 13%, and increased $113 million, or 11%, compared to the same periods in 2021, respectively.

The year-over-year increases in the three and nine months were largely due to increased demand for cementation products, primarily in North America and the Middle East North Africa/Asia regions.

PRI revenues of $357 million and $988 million in the three and nine months ended September 30, 2022, increased $65 million, or 22%, and increased $159 million, or 19%, compared to the same periods in 2021, respectively.

The year-over-year

increases in the three and nine months were 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.

Segment adjusted EBITDA of $229 million and $598 million in the three and nine months ended September 30, 2022, increased $37 million, or 19%, and increased $139 million, or 30%, compared to the same periods in 2021, respectively.

Segment adjusted EBITDA margins were 21% in both the three months ended September 30, 2022 and September 30, 2021 and 20% in the nine months ended September 30, 2022 compared to the 18% in the nine months ended September 30, 2021.

Segment adjusted EBITDA margins were flat year-over-year for the three months ended with lower fall-through on margins for WCC and PRI offset by higher fall-through margins in DRE.

The year-over-year improvement for the nine months ended exceeded the rate of improvement for revenues primarily from 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.

DRE segment adjusted EBITDA of $85 million and $213 million in the three and nine months ended September 30, 2022, increased $29 million, or 52%, and increased $82 million or 63%, compared to the same period in 2021, respectively.

DRE segment adjusted EBITDA margins were 24% and 22% in the three and nine months ended September 30, 2022, an improvement compared to 20% and 17% in the three and nine months ended September 30, 2021, respectively.

The year-over-year improvements were largely due to higher fall-through on margins across product lines, with increases in drilling services in Latin America, Europe/Sub-Sahara Africa and North America along with increases in managed pressure drilling in the Middle East North Africa/Asia regions.

WCC segment adjusted EBITDA of $78 million and $212 million in the three and nine months ended September 30, 2022, decreased $1 million, or 1%, and increased $28 million, or 15%, compared to the same period in 2021, respectively.

WCC segment adjusted EBITDA margins were 20% and 19% in the three and nine months ended September 30, 2022, compared to 23% and 18% in the three and nine months ended September 30, 2021, respectively.

The year-over-year decrease for the three months ended was largely due to lower fall-through on margins for completions and tubular running services in Middle East North Africa/Asia region.

The year-over-year improvements for the nine months was largely due to higher fall-through on margins for cementation, primarily in North America and the Middle East North Africa/Asia regions.

PRI segment adjusted EBITDA of $66 million and $173 million in the three and nine months ended September 30, 2022, increased $9 million, or 16%, and increased $29 million, or 20%, compared to the same period in 2021, respectively.

PRI segment adjusted EBITDA margins were 19% and 18% in the three and nine months ended September 30, 2022, compared to 20% and 17% in the three and nine months ended September 30, 2021, respectively.

The year-over-year decrease for the three months ended was largely due to product mix with lower fall-through margins in North America and Europe, Sub-Sahara Africa/Russia.

The year-over-year improvements for the nine months ended was largely due to higher fall-through on margins for intervention services and drilling tools along with artificial lift, primarily in the North America region.

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.

Depreciation and amortization was $88 million and $265 million in the three and nine months ended September 30, 2022, compared to $112 million and $337 million in the three and nine months ended September 30, 2021, respectively.

The year-over-year decrease was primarily from a lower asset base.

1 unchanged sentence

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.

We recognized $5 million and $18 million in the three and nine months ended September 30, 2022, compared to $4 million and $13 million in the three and nine months ended September 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.

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 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.

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.

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.

Other adjustments was a net charge of zero and $25 million in the three and nine months ended September 30, 2022, respectively and is primarily driven by restructuring charges, see “Note 4 – Restructuring Charges” for details.

Other adjustments were a net credit of $8 million and $16 million in both the three and nine months ended September 30, 2021, respectively, primarily driven by gains on asset sales in both periods.

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,

At September 30, 2022, we had cash and cash equivalents of $933 million and $210 million in restricted cash, compared to $951 million of cash and cash equivalents and $162 million in restricted cash at December 31, 2021.

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.

The following table summarizes cash flows provided by (used in) each type of business activity in the periods presented:

Nine Months Ended September 30,

(Dollars in millions) 2022

Net Cash (Used in) Provided by Operating Activities $ (4) $ 120

Net Cash Provided by (Used in) Investing Activities $ 7 $ (2)

Net Cash Provided by Operating Activities $ 156 $ 234

Net Cash Used in Investing Activities $ (22) $ (2)

Net Cash Used in Financing Activities $ (89) $ (65)

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.

Cash provided by operating activities was $156 million for the nine months ended September 30, 2022.

The primary sources of cash provided by operating activities were from higher operating income and lower cash interest.

Cash provided by operating activities was $234 million for the nine months ended September 30, 2021.

The primary sources of cash provided by operating activities were driven by higher operating income and lower accounts payable spend, 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.

Cash used in investing activities was $22 million for the nine months ended September 30, 2022.

The primary investing activity was cash used for capital expenditures of $83 million, partially offset by proceeds from the sale of assets of $55 million.

Cash used in investing activities was $2 million for the nine months ended September 30, 2021.

During the nine months ended September 30, 2021, the primary uses of cash were capital expenditures of $44 million for property, plant and equipment, offset by proceeds of $39 million from 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.

Cash used in financing activities was $89 million for the nine months ended September 30, 2022 and $65 million for the nine months ended September 30, 2021.

During the nine months ended September 30, 2022, the primary uses of cash were for repayments of long-term debt of $62 million, which included the $50 million on early redemption of our Exit Notes and finance lease payments, and the remaining financing cash uses were primarily for dividends paid to noncontrolling interests.

During the nine months ended September 30, 2021, the primary uses of cash were repayments of long-term debt of $510 million which consisted primarily of the repayment of our 2024 Senior Secured Notes and finance lease obligations, a $22 million bond redemption premium payment for the early redemption of our 2024 Senior Secured Notes, and $20 million primarily for dividends paid to noncontrolling interests.

The primary sources of cash were net proceeds of $491 million, net of commitments fees and debt issuance costs, from the issuance of the 2028 Senior Secured Notes.

See “Note 7 – Borrowings and Other Obligations” to our Condensed Consolidated Financial Statements for further details on the debt financing.

Sources of Liquidity

2 unchanged sentences

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.

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.

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 in “Note 7 – Borrowings and Other Debt Obligations” and “Note 12 – Subsequent Events”) and financial obligations, both in the short-term and long-term.

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

At September 30, 2022, we had approximately $163 million in outstanding letters of credit under the LC Agreement and availability of $52 million.

On October 17, 2022, we amended the LC Agreement, the details of which are found in “Note 12 – Subsequent Events”.

Ratings Services’ Credit Ratings

Our credit ratings at June 30, 2022 were maintained since December 31, 2021.

Our credit ratings at September 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.

4 unchanged sentences

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.

As business activity continues to rise, we expect to continue to utilize cash on capital assets and working capital growth.

Our cash requirements also include personnel costs including awards under our employee incentive programs and other amounts to settle litigation related matters.

At September 30, 2022, our outstanding debt included $250 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 August 10, 2022, we redeemed $50 million in principal plus related unpaid interest of our Exit Notes.

On October 18, 2022, we issued a notice to redeem $125 million in principal amount of our Exit Notes on November 17, 2022.

The Exit Notes will be redeemed at 103% of the principal amount, plus accrued and unpaid interest.

Please see “Note 7 – Borrowings and Other Debt Obligations” and “Note 12 – Subsequent Events” for additional details.

Our capital spending for 2022 is currently projected to be between $120 million to $130 million.

2 unchanged sentences

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.

Cash and cash equivalents and restricted cash are held by subsidiaries outside of Ireland.

At September 30, 2022 we had approximately $163 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.

5 unchanged sentences

Our factoring transactions were recognized as sales, and the proceeds are included as operating cash flows in our Condensed Consolidated Statements of Cash Flows.

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.

During the three and nine months ended September 30, 2022, we sold accounts receivable balances of $12 million and $38 million, and received cash proceeds of $11 million and $34 million, respectively.

During the three and nine months ended September 30, 2021, we sold accounts receivable balances of $15 million and $55 million, and received cash proceeds of $12 million and $46 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.

We received net cash proceeds of $59 million in the three months ended June 30, 2022 and $16 million in the three months ended September 30, 2022.

The proceeds are included as operating cash flows in our Condensed Consolidated Statements of Cash Flows.

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.

Our LC Agreement and as subsequently amended in “Note 12 – Subsequent Events” was issued by Weatherford Bermuda and Weatherford Delaware and guaranteed by Weatherford International plc and other subsidiary guarantors party thereto.

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).

As of September 30, 2022, we had $357 million of letters of credit outstanding, consisting of the $163 million under the LC Agreement and another $194 million under various uncommitted bi-lateral facilities (of which there was $194 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.

As of September 30, 2022, we had surety bonds outstanding of $287 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.

19 unchanged sentences

• 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;

• further spread and potential for a resurgence of a 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”);

• member-country quota compliance within the Organization of Petroleum Exporting Countries;

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

11 unchanged sentences

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.

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.

2 unchanged sentences

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 2. Management’s Discussion and Analysis