Weatherford International plc 10-Q

Item 1. Financial Statements. WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, (Dollars and shares in millions, except per share amounts) 2022 2021 2022 2021 Revenues: Services $ 698 $ 623 $ 1,947 $ 1,734 Products 422 322 1,175 946 Total Revenues 1,120 945 3,122 2,680 Costs and Expenses: Cost of Services 440 407 1,243 1,155 Cost of Products 335 279 970 844 Research and Development 23 21 66 63 Selling, General and Administrative 201 175 575 551 Restructuring Charges 2 — 22 — Other Charges (Credits) ( 2 ) ( 8 ) 3 ( 16 ) Total Costs and Expenses 999 874 2,879 2,597 Operating Income 121 71 243 83 Interest Expense, Net ( 44 ) ( 69 ) ( 140 ) ( 211 ) Loss on Extinguishment of Debt and Bond Redemption Premium ( 2 ) ( 59 ) ( 2 ) ( 59 ) Other Expense, Net ( 12 ) ( 4 ) ( 60 ) ( 19 ) Income (Loss) Before Income Taxes 63 ( 61 ) 41 ( 206 ) Income Tax Provision ( 26 ) ( 28 ) ( 66 ) ( 66 ) Net Income (Loss) 37 ( 89 ) ( 25 ) ( 272 ) Net Income Attributable to Noncontrolling Interests 9 6 21 17 Net Income (Loss) Attributable to Weatherford $ 28 $ ( 95 ) $ ( 46 ) $ ( 289 ) Basic Income (Loss) per Share $ 0.39 $ ( 1.36 ) $ ( 0.65 ) $ ( 4.13 ) Basic Weighted Average Shares Outstanding 71 70 71 70 Diluted Income (Loss) per Share $ 0.39 $ ( 1.36 ) $ ( 0.65 ) $ ( 4.13 ) Diluted Weighted Average Shares Outstanding 72 70 71 70 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 2 Table of Contents WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, (Dollars in millions) 2022 2021 2022 2021 Net Income (Loss) $ 37 $ ( 89 ) $ ( 25 ) $ ( 272 ) Foreign Currency Translation Adjustments ( 51 ) ( 11 ) 8 — Comprehensive Loss ( 14 ) ( 100 ) ( 17 ) ( 272 ) Comprehensive Income Attributable to Noncontrolling Interests 9 6 21 17 Comprehensive Loss Attributable to Weatherford $ ( 23 ) $ ( 106 ) $ ( 38 ) $ ( 289 ) The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 3 Table of Contents WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars and shares in millions, except par value) September 30, 2022 December 31, 2021 (Unaudited) Assets: Cash and Cash Equivalents $ 933 $ 951 Restricted Cash 210 162 Accounts Receivable, Net of Allowance for Credit Losses of $ 29 at September 30, 2022 and $ 31 at December 31, 2021 927 825 Inventories, Net 723 670 Other Current Assets 270 303 Total Current Assets 3,063 2,911 Property, Plant and Equipment, Net of Accumulated Depreciation of $ 753 at September 30, 2022 and $ 623 at December 31, 2021 908 996 Intangible Assets, Net of Accumulated Amortization of $ 439 at September 30, 2022 and $ 328 at December 31, 2021 540 657 Operating Lease Right-of-Use Assets 111 113 Other Non-Current Assets 85 97 Total Assets $ 4,707 $ 4,774 Liabilities: Current Portion of Long-term Debt $ 14 $ 12 Accounts Payable 425 380 Accrued Salaries and Benefits 337 343 Income Taxes Payable 138 140 Current Portion of Operating Lease Liabilities 46 59 Other Current Liabilities 424 398 Total Current Liabilities 1,384 1,332 Long-term Debt 2,366 2,416 Operating Lease Liabilities 114 128 Non-current Taxes Payable 228 264 Other Non-Current Liabilities 143 138 Total Liabilities $ 4,235 $ 4,278 Shareholders’ Equity: Ordinary Shares - Par Value $ 0.001 ; Authorized 1,356 shares, Issued and Outstanding 71 shares at September 30, 2022 and 70 at December 31, 2021 $ — $ — Capital in Excess of Par Value 2,923 2,904 Retained Deficit ( 2,443 ) ( 2,397 ) Accumulated Other Comprehensive Loss ( 27 ) ( 35 ) Weatherford Shareholders’ Equity 453 472 Noncontrolling Interests 19 24 Total Shareholders’ Equity 472 496 Total Liabilities and Shareholders’ Equity $ 4,707 $ 4,774 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 4 Table of Contents WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, (Dollars in millions) 2022 2021 Cash Flows From Operating Activities: Net Loss $ ( 25 ) $ ( 272 ) Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities: Depreciation and Amortization 265 337 Loss on Extinguishment of Debt and Bond Redemption Premium 2 59 Asset Write-downs and Other Charges 6 — Inventory Charges 30 50 Gain on Disposition of Assets ( 22 ) ( 22 ) Deferred Income Tax Provision 24 15 Share-Based Compensation 18 13 Changes in Operating Assets and Liabilities, Net: Accounts Receivable ( 103 ) 5 Inventories ( 99 ) ( 14 ) Accounts Payable 49 27 Other Assets and Liabilities, Net 11 36 Net Cash Provided by Operating Activities 156 234 Cash Flows From Investing Activities: Capital Expenditures for Property, Plant and Equipment ( 83 ) ( 44 ) Proceeds from Disposition of Assets 55 39 Other Investing Activities 6 3 Net Cash Used in Investing Activities ( 22 ) ( 2 ) Cash Flows From Financing Activities: Borrowings of Long-term Debt, Net — 491 Repayments of Long-term Debt ( 62 ) ( 510 ) Repayments of Short-term Debt, Net — ( 4 ) Bond Redemption Premium ( 2 ) ( 22 ) Other Financing Activities ( 25 ) ( 20 ) Net Cash Used in Financing Activities ( 89 ) ( 65 ) Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash ( 15 ) ( 6 ) Net Increase in Cash, Cash Equivalents and Restricted Cash 30 161 Cash, Cash Equivalents and Restricted Cash at Beginning of Period 1,113 1,285 Cash, Cash Equivalents and Restricted Cash at End of Period $ 1,143 $ 1,446 Supplemental Cash Flow Information: Interest Paid $ 136 $ 171 Income Taxes Paid, Net of Refunds $ 58 $ 44 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 5 Table of Contents WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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. Accordingly, certain information and disclosures normally included in our annual consolidated financial statements have been condensed or omitted. Therefore, these unaudited Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Annual Report”). The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. Ultimate results could differ from our estimates. In the opinion of management, the Condensed Consolidated Financial Statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary by management to fairly state the results of operations, financial position and cash flows of Weatherford and its subsidiaries for the periods presented and are not necessarily indicative of the results that may be expected for a full year. Our financial statements have been prepared on a consolidated basis. Under this basis, our financial statements consolidate all wholly owned subsidiaries and controlled joint ventures. All intercompany accounts and transactions have been eliminated. Summary of Significant Accounting Policies 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 have been made to these Condensed Consolidated Financial Statements and accompanying footnotes for the three and nine months ended September 30, 2021 to conform to the presentation for the three and nine months ended September 30, 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. We 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 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. 6 Table of Contents Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2022 2021 2022 2021 Revenues: Drilling and Evaluation $ 348 $ 278 $ 957 $ 779 Well Construction and Completions 391 345 1,118 1,005 Production and Intervention 357 292 988 829 Segment Revenues 1,096 915 3,063 2,613 All Other 24 30 59 67 Total Revenues $ 1,120 $ 945 $ 3,122 $ 2,680 Segment Adjusted EBITDA: Drilling and Evaluation $ 85 $ 56 $ 213 $ 131 Well Construction and Completions 78 79 212 184 Production and Intervention 66 57 173 144 Segment Adjusted EBITDA $ 229 $ 192 $ 598 $ 459 Corporate and Other ( 15 ) ( 13 ) ( 47 ) ( 42 ) Depreciation and Amortization ( 88 ) ( 112 ) ( 265 ) ( 337 ) Share-based Compensation Expense ( 5 ) ( 4 ) ( 18 ) ( 13 ) Other Adjustments (a) — 8 ( 25 ) 16 Operating Income $ 121 $ 71 $ 243 $ 83 (a) Other adjustments in nine months ended September 30, 2022 primarily include a $ 22 million restructuring charge. See “Note 4 – Restructuring Charges” for additional information on restructuring around our fulfillment initiatives. Other adjustments were a net credit for the three and nine months ended September 30, 2021, primarily driven by gains on asset sales. 7 Table of Contents 3 – Revenues 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 receive, 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. We lease 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 $ 43 million and $ 109 million in the three and nine months ended September 30, 2022, respectively, and $ 34 million and $ 97 million for the three and nine months ended September 30, 2021, respectively. The following table disaggregates 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. and Canada. Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2022 2021 2022 2021 Revenues by Geographic Areas: Middle East/North Africa/Asia $ 354 $ 312 $ 1,014 $ 868 North America 297 224 803 658 Latin America 280 217 772 598 Europe/Sub-Sahara Africa/Russia 189 192 533 556 Total Revenues $ 1,120 $ 945 $ 3,122 $ 2,680 Contract Balances The timing of our revenue recognition, billings and cash collections result in the recording of accounts receivable, contract assets, and contract liabilities. The following table summarizes these balances as of September 30, 2022 and December 31, 2021: (Dollars in millions) September 30, 2022 December 31, 2021 Receivables for Product and Services in Accounts Receivable, Net $ 893 $ 795 Receivables for Equipment Rentals in Account Receivable, Net $ 34 $ 30 Accounts Receivable, Net $ 927 $ 825 Contract Assets in Other Current Assets $ 31 $ 47 Contract Assets in Other Non-Current Assets $ 19 $ 14 Contract Liabilities in Other Current Liabilities (a) $ 43 $ 45 (a) Revenues recognized during the nine months ended September 30, 2022 and 2021 that were included in the contract liabilities balance at the beginning of each year were approximately $ 35 million and $ 28 million, respectively. 8 Table of Contents 4 – Restructuring Charges We had $ 2 million and $ 22 million in restructuring charges for the three and nine months ended September 30, 2022, respectively, presented as “Restructuring Charges” on the accompanying Condensed Consolidated Statements of Operations. The 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 $ 8 million in asset retirement obligations. No restructuring charges were recognized in the three and nine months ended September 30, 2021. The following table presents total restructuring charges by segment and All Other in the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, Nine Months Ended September 30, (Dollars in millions) 2022 2021 2022 2021 Drilling and Evaluation $ — $ — $ 5 $ — Well Construction and Completions — — 7 — Production and Intervention — — 5 — All Other 2 — 5 — Total Restructuring Charges $ 2 $ — $ 22 $ — The following table presents total restructuring reserve activity in the nine months ended September 30, 2022: (Dollars in millions) December 31, 2021 Charges Cash Payments (Credits)/Other September 30, 2022 Restructuring Reserve $ 17 $ 22 $ ( 13 ) $ — $ 26 9 Table of Contents 5 – Inventories, Net Inventories, net of reserves of $ 129 million and $ 159 million as of September 30, 2022 and December 31, 2021, respectively, are presented by category in the table below: (Dollars in millions) September 30, 2022 December 31, 2021 Finished Goods $ 642 $ 595 Work in Process and Raw Materials, Components and Supplies 81 75 Inventories, Net $ 723 $ 670 In the three and nine months ended September 30, 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 September 30, Nine Months Ended September 30, (Dollars in millions) 2022 2021 2022 2021 Inventory Charges in “Cost of Products” $ 6 $ 11 $ 26 $ 43 Inventory Charges in “Other Charges (Credits)” — — 4 7 Total Inventory Charges $ 6 $ 11 $ 30 $ 50 10 Table of Contents 6 – Intangibles, Net The components of intangible assets, net were as follows: (Dollars in millions) September 30, 2022 December 31, 2021 Developed and Acquired Technology, Net of Accumulated Amortization of $ 328 at September 30, 2022 and $ 247 at December 31, 2021 $ 256 $ 343 Trade Names, Net of Accumulated Amortization of $ 111 at September 30, 2022 and $ 81 at December 31, 2021 284 314 Intangible Assets, Net of Accumulated Amortization of $ 439 at September 30, 2022 and $ 328 at December 31, 2021 $ 540 $ 657 Amortization expense was $ 39 million and $ 117 million for both the three and nine months ended September 30, 2022 and September 30, 2021, respectively, and is reported in “Selling, General and Administrative” on our Condensed Consolidated Statements of Operations. 7 – Borrowings and Other Debt Obligations (Dollars in millions) September 30, 2022 December 31, 2021 Current Portion of Finance Leases $ 14 $ 12 Current Portion of Exit Notes — — Current Portion of Long-term Debt $ 14 $ 12 11.00 % Exit Notes due 2024 $ 250 $ 300 6.50 % Senior Secured Notes due 2028 490 488 8.625 % Senior Notes due 2030 1,585 1,584 Long-term Portion Finance Leases 41 44 Long-term Debt $ 2,366 $ 2,416 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. Exit Notes We have an outstanding aggregate principal amount of $ 250 million maturing December 1, 2024 on our 11.00 % senior unsecured notes (“Exit Notes”) with interest payable semiannually on June 1 and December 1, and commenced on June 1, 2020. On August 10, 2022, we redeemed $ 50 million in principal plus related unpaid interest of our Exit Notes. At September 30, 2022, the carrying value of $ 250 million represents the remaining unpaid principal. 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. 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 is payable semiannually on September 15 and March 15 of each year, and commenced on March 15, 2022. Proceeds from this debt issuance were used to fully repay a previous senior secured note with an aggregate principal amount of $ 500 million with a stated interest rate of 8.75 % per annum due 2024, 11 Table of Contents resulting in $ 59 million in charges from the bond redemption premium and noncash loss on extinguishment of debt related to the unamortized debt issuance costs and discount. 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 is payable semiannually on June 1 and December 1 of each year, and commenced on June 1, 2022. The proceeds from this debt issuance were used to redeem $ 1.6 billion of the above Exit Notes. LC Agreement 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. 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. On October 17, 2022, we amended the LC Agreement, the details of which are found in “Note 12 – Subsequent Events”. Accrued Interest As of September 30, 2022 and December 31, 2021, we had accrued interest of approximately $ 57 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 The carrying value of our short-term borrowings, when applicable, approximates their fair value due to their short maturities. The fair value of our long-term debt fluctuates with changes in applicable interest rates among other factors. Fair value will exceed carrying value when the current market interest rate is lower than the interest rate at which the debt was originally issued and will be less than the carrying value when the market rate is greater than the interest rate at which the debt was originally issued. 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 our long-term debt (excluding finance leases). September 30, 2022 December 31, 2021 (Dollars in millions) Carrying Value Fair Value Carrying Value Fair Value 11.00 % Exit Notes due 2024 $ 250 $ 255 $ 300 $ 311 6.50 % Senior Secured Notes due 2028 490 456 488 528 8.625 % Senior Notes due 2030 1,585 1,403 1,584 1,660 Long-Term Debt (excluding Finance Leases) $ 2,325 $ 2,114 $ 2,372 $ 2,499 12 Table of Contents 8 – Disputes, Litigation and Legal Contingencies We are subject to lawsuits and claims arising out of the nature of our business. We have certain claims, disputes and pending litigation for which we do not believe a negative outcome is probable or for which we can only estimate a range of liability. It is possible, however, that an unexpected judgment could be rendered against us, or we could decide to resolve a case or cases, that would result in a liability that could be uninsured and beyond the amounts we currently have reserved and in some cases those losses could be material. If one or more negative outcomes were to occur relative to these cases, the aggregate impact to our financial condition could be material. Accrued litigation and settlements recorded in “Other Current Liabilities” on the accompanying Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 were $ 39 million and $ 40 million, respectively. GAMCO Shareholder Litigation On September 6, 2019, GAMCO Asset Management, Inc. (“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, 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. GAMCO’s lawsuit was filed in the United States District Court for the Southern District of Texas, Houston Division, and it is captioned GAMCO Asset Management, Inc. v. McCollum, et al., Case No. 4:19-cv-03363. The District Court Judge appointed Utah Retirement Systems (“URS”) as Lead Plaintiff, and on March 16, 2020, URS filed its Amended Complaint. URS added the Company as a defendant but dropped the claims against non-officer board members and all the claims under the Securities Act. 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. 13 Table of Contents 9 – Shareholders’ Equity The following summarizes our shareholders’ equity activity for the three and nine months ended September 30, 2022 and 2021: (Dollars in millions) Capital in Excess of Par Value Retained Deficit Accumulated Other Comprehensive Income (Loss) Non-controlling Interests Total Shareholders’ Equity Balance at December 31, 2021 $ 2,904 $ ( 2,397 ) $ ( 35 ) $ 24 $ 496 Net Income (Loss) — ( 80 ) — 6 ( 74 ) Equity Awards, Granted, Vested and Exercised 4 — — — 4 Balance at March 31, 2022 $ 2,908 $ ( 2,477 ) $ ( 35 ) $ 30 $ 426 Net Income — 6 — 6 12 Other Comprehensive Income — — 59 — 59 Dividends to Noncontrolling Interests — — — ( 11 ) ( 11 ) Equity Awards Granted, Vested and Exercised 5 — — — 5 Balance at June 30, 2022 $ 2,913 $ ( 2,471 ) $ 24 $ 25 $ 491 Net Income — 28 — 9 37 Other Comprehensive Loss — — ( 51 ) — ( 51 ) Dividends to Noncontrolling Interests — — — ( 9 ) ( 9 ) Equity Awards Granted, Vested and Exercised 4 — — — 4 Other 6 — — ( 6 ) — Balance at September 30, 2022 $ 2,923 $ ( 2,443 ) $ ( 27 ) $ 19 $ 472 Balance at December 31, 2020 $ 2,897 $ ( 1,947 ) $ ( 43 ) $ 30 $ 937 Net Income (Loss) — ( 116 ) — 6 ( 110 ) Dividends to Noncontrolling Interests — — — ( 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 Income — — 15 — 15 Dividends to Noncontrolling Interests — — — ( 4 ) ( 4 ) Equity Awards Granted, Vested and Exercised 2 — — — 2 Other — — — ( 2 ) ( 2 ) Balance at June 30, 2021 $ 2,899 $ ( 2,141 ) $ ( 32 ) $ 33 $ 759 Net Income (Loss) — ( 95 ) — 6 ( 89 ) Other Comprehensive Loss — — ( 11 ) — ( 11 ) 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 14 Table of Contents The following table presents the changes in our accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2022 and 2021: (Dollars in millions) Currency Translation Adjustment Defined Benefit Pension Total Balance at December 31, 2021 $ ( 36 ) $ 1 $ ( 35 ) Other Comprehensive Income 8 — 8 Balance at September 30, 2022 $ ( 28 ) $ 1 $ ( 27 ) Balance at December 31, 2020 $ ( 31 ) $ ( 12 ) $ ( 43 ) Other Comprehensive Income — — — Balance at September 30, 2021 $ ( 31 ) $ ( 12 ) $ ( 43 ) 10 – Income (Loss) per Share Basic income (loss) per share for all periods presented equals net income (loss) divided by our weighted average shares outstanding during the period. Diluted income (loss) per share is computed by dividing net income (loss) by our weighted average shares outstanding during the period including potential dilutive ordinary shares. Antidilutive shares represent potentially dilutive securities which are excluded from the computation of diluted income or loss per share as their impact was antidilutive. These include potential ordinary shares for restricted share units, performance share units, phantom restricted share units, and outstanding warrants. Our basic and diluted weighted average shares outstanding for periods presented with net loss are equivalent as the impact of the inclusion of potential dilutive securities are antidilutive. A reconciliation of the number of shares used for the basic and diluted income (loss) per share calculation was as follows: Three Months Ended September 30, Nine Months Ended September 30, (Dollars and shares in millions, except per share amounts) 2022 2021 2022 2021 Net Income (Loss) Attributable to Weatherford $ 28 $ ( 95 ) $ ( 46 ) $ ( 289 ) Basic Weighted Average Shares Outstanding 71 70 71 70 Dilutive Effect of Awards Granted in Stock Incentive Plans 1 — — — Diluted Weighted Average Shares Outstanding 72 70 71 70 Antidilutive Shares 8 10 9 10 Basic and Diluted Income (Loss) Per Share Attributable to Weatherford $ 0.39 $ ( 1.36 ) $ ( 0.65 ) $ ( 4.13 ) 11 – Income Taxes We determine our quarterly tax provision using the year-to-date effective tax rate because the estimated annual approach is not reliable given that 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, 2022, we recognized tax expense of $ 26 million and $ 66 million, respectively, compared to the three and nine months ended September 30, 2021 where we recognized tax expense of $ 28 million and $ 66 million, respectively. 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. We provide for 15 Table of Contents 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. 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 may not result in significant tax benefit due to our inability to forecast realization of the tax benefit of such losses. The Inflation Reduction Act (“IRA”) was signed into law during the third quarter of 2022 which instituted new tax provisions, including a Minimum Business Tax. Given our current tax position, it should not have a significant impact on our financial statements. We will continue to evaluate our position, and potential impact of the IRA. 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. The expense in the nine months ended September 30, 2022 included a $ 27 million recognition of a benefit from previously uncertain tax positions. As of September 30, 2022, we anticipate that it is reasonably possible that our uncertain tax positions of $ 228 million may decrease by up to $ 14 million in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations. 12 – Subsequent Events On October 17, 2022, we amended our LC Agreement (as amended and restated, the “Credit Agreement”) to provide for a $ 370 million revolving credit agreement, comprised of $ 280 million for bid and performance letters of credit, and $ 90 million for revolving loans and bid, performance and financial letters of credit. The revolving loan capacity is $ 45 million. The maturity date under the Credit Agreement is October 17, 2026; provided, that if more than $ 50 million of our Exit Notes are outstanding on such date the maturity date will be August 30, 2024. The Credit Agreement also has (i) a minimum liquidity covenant of $ 250 million, (ii) a minimum interest coverage ratio of 2.00 to 1.00 for the testing period ended September 30, 2022 and 2.50 to 1.00 for each testing period thereafter and (iii) a maximum ratio of funded debt (net of unrestricted cash in excess of $ 400 million) to consolidated adjusted EBITDA of 4.00 to 1.00 for each testing period ending prior to June 30, 2023 and 3.50 to 1.00 for each testing period thereafter. The obligations under the Credit Agreement, as with our prior LC Agreement, are guaranteed by the Company and certain of our subsidiaries and secured by substantially all of the personal property of the Company and these subsidiaries. For additional information on the terms of the Credit Agreement, please refer to the Form 8-K filed with the Securities and Exchange Commission on October 18, 2022. 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. 16 Table of Contents