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. 17 Table of Contents Outlook 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. 18 Table of Contents 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 Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Oil price - WTI (1) $93.18 $70.62 $98.79 $64.83 Oil price - Brent (1) $100.72 $73.47 $104.85 $67.71 Natural gas price - Henry Hub (2) $7.99 $4.36 $6.71 $3.62 (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 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 Nine Months Ended September 30, September 30, 2022 2021 2022 2021 North America 960 647 876 570 International 857 772 832 735 Worldwide 1,817 1,419 1,708 1,305 Consolidated Statements of Operations - Operating Income 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 19 Table of Contents $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 $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 $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 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 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. 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. 20 Table of Contents Segment Results of Operations Financial information by segment is summarized below. Favorable Three Months Ended (Unfavorable) September 30, $ % or bps (Dollars in millions) 2022 2021 Change Revenues: Drilling and Evaluation $ 348 $ 278 $ 70 25 % Well Construction and Completions 391 345 46 13 % Production and Intervention 357 292 65 22 % Segment Revenues 1,096 915 181 20 % All Other 24 30 (6) (20) % Total Revenues $ 1,120 $ 945 $ 175 19 % Segment Adjusted EBITDA: Drilling and Evaluation $ 85 $ 56 $ 29 52 % Well Construction and Completions 78 79 (1) (1) % Production and Intervention 66 57 9 16 % Segment Adjusted EBITDA $ 229 $ 192 $ 37 19 % Corporate and Other (15) (13) (2) (15) % Depreciation and Amortization (88) (112) 24 21 % Share-based Compensation Expense (5) (4) (1) (25) % Other Adjustments — 8 (8) (100) % Operating Income $ 121 $ 71 $ 50 70 % Segment Adjusted EBITDA Margins: Drilling and Evaluation 24.4 % 20.1 % n/m 430 bps Well Construction and Completions 19.9 % 22.9 % n/m (300) bps Production and Intervention 18.5 % 19.5 % n/m (100) bps Segment Adjusted EBITDA 20.9 % 21.0 % n/m (10) bps 21 Table of Contents Favorable Nine Months Ended (Unfavorable) September 30, $ % or bps (Dollars in millions) 2022 2021 Change Revenues: Drilling and Evaluation $ 957 $ 779 $ 178 23 % Well Construction and Completions 1,118 1,005 113 11 % Production and Intervention 988 829 159 19 % Segment Revenues 3,063 2,613 450 17 % All Other 59 67 (8) (12) % Total Revenues $ 3,122 $ 2,680 $ 442 16 % Segment Adjusted EBITDA: Drilling and Evaluation $ 213 $ 131 $ 82 63 % Well Construction and Completions 212 184 28 15 % Production and Intervention 173 144 29 20 % Segment Adjusted EBITDA $ 598 $ 459 $ 139 30 % Corporate and Other (47) (42) (5) (12) % Depreciation and Amortization (265) (337) 72 21 % Share-based Compensation Expense (18) (13) (5) (38) % Other Adjustments (25) 16 (41) (256) % Operating Income $ 243 $ 83 $ 160 193 % Segment Adjusted EBITDA Margins: Drilling and Evaluation 22.3 % 16.8 % n/m 550 bps Well Construction and Completions 19.0 % 18.3 % n/m 70 bps Production and Intervention 17.5 % 17.4 % n/m 10 bps Segment Adjusted EBITDA 19.5 % 17.6 % n/m 190 bps Segment Revenues 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 22 Table of Contents 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 $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 $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. 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 $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 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. 23 Table of Contents Liquidity and Capital Resources 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 2021 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 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 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 $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. 24 Table of Contents 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 in “Note 7 – Borrowings and Other Debt Obligations” and “Note 12 – Subsequent Events”) and financial obligations, both in the short-term and long-term. 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. 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 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. 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. 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. 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 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. 25 Table of Contents 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. 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 the three months ended September 30, 2022. 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”). 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. 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 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 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. 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. 26 Table of Contents 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; • 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 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; • 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, 27 Table of Contents 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.