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 is a leading global energy services company providing equipment and services used in the drilling, evaluation, well construction, completion, production, intervention and responsible abandonment of wells in the oil and natural gas exploration and production industry as well as new energy platforms. We conduct operations in approximately 75 countries, answering the challenges of the energy industry with 345 operating locations including manufacturing, research and development, service, and training facilities. Our operational performance is reviewed and managed across the life cycle of the wellbore and we report in three segments (1) Drilling and Evaluation, (2) Well Construction and Completions, and (3) Production and Intervention. Drilling and Evaluation (“DRE”) offers a suite of services including managed pressure drilling, drilling services, wireline and drilling fluids. DRE offerings range 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 ranging from boosting productivity to responsible end of life well abandonment for our customers. The primary offerings are intervention services & drilling tools, artificial lift, digital solutions (previously production automation & software), sub-sea intervention and pressure pumping services in select markets. PRI utilizes a suite of reservoir stimulation designs, and engineering capabilities that help isolate zones and unlock reserves in conventional and unconventional wells, deep water, and aging reservoirs. Industry Trends Demand for our industry’s products and services is driven by many factors, including commodity prices, the number of oil and gas rigs and wells drilled, depth and drilling conditions of wells, number of well completions, age of existing wells, reservoir depletion, regulatory environment and the level of workover activity worldwide. Lower oil and natural gas prices and lower rig count generally correlate to lower exploration and production spending and higher oil and natural gas prices and higher rig count generally correlate to higher exploration and production spending. Therefore, our financial results are significantly affected by oil and natural gas prices as well as rig counts. 16 Table of Contents 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 March 31, 2023 2022 Oil price - WTI (1) $76.08 $94.45 Oil price - Brent (1) $81.17 $100.30 Natural gas price - Henry Hub (2) $2.65 $4.66 (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 (rounded to the nearest $0.01) The table below shows historical average rig counts based on the weekly Baker Hughes Company rig count information. Three Months Ended March 31, 2023 2022 North America 981 831 International 915 823 Worldwide 1,896 1,654 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 immediate priority being centered on the safety and well-being of our employees in the impacted regions, as well as operating in full compliance with applicable international laws and sanctions. In response to the Russia Ukraine Conflict, the United States, the European Union, the United Kingdom, Switzerland and other countries have imposed certain restrictions and broad sanctions against Russia, certain Russian individuals and entities and certain activities involving Russia or such persons or entities. 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 laws and sanctions. Revenues in Russia were approximately 6% of our total revenues for the three months ended March 31, 2023 and 2022. As of March 31, 2023, our Russia operations include $42 million in cash, $96 million in other current assets, $58 million in property, plant and equipment and other non-current assets, and $45 million in liabilities. 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. 17 Table of Contents Consolidated Statements of Operations - Operating Income Summary Revenues of $1.2 billion in the three months ended March 31, 2023, increased 26% compared to $938 million in the three months ended March 31, 2022. Year-over-year product revenues increased 29% and service revenues increased 25%. DRE, WCC, and PRI contributed to 32%, 31% and 25% of the increase in revenues, respectively. Geographically, revenue growth was led by improvements in Latin America, Middle East/North Africa/Asia, North America and Europe/Sub-Sahara Africa/Russia which contributed to 36%, 27%, 19% and 18%, of the increase, respectively. Approximately 80% of our revenue increase is due to increased customer demand, which management believes is attributable to greater investment in oil and gas production capacity on a global basis, caused by a desire to drive energy security and to meet global consumption needs. The production capacity increase is consistent with the increase in global rig counts, which increased by 15% year-over-year. Covid-19 and related impacts like travel restrictions were still impacting demand in the three months ended March 31, 2022. Cost of products and services of $790 million in the three months ended March 31, 2023, increased $108 million, or 16% compared to the three months ended March 31, 2022. Approximately 80% of the increase in cost of products and services was attributable to cost increases necessary to meet increased demand, with the remainder of the increase equally attributable to a shift in service and product mix and inflation in the cost of labor and materials. Our cost of products and services as a percentage of revenues was 67% in the three months ended March 31, 2023, compared to 73% in the three months ended March 31, 2022. The improvement was primarily driven by improved utilization of service-related resources. Selling, general, administrative and research and development costs of $216 million in the three months ended March 31, 2023, increased $17 million, or 9% compared to $199 million in the three months ended March 31, 2022, primarily reflecting an increase in research and development investment in newer technologies. These costs as a percentage of revenues were 18% in the three months ended March 31, 2023, a decrease compared to 21% in the three months ended March 31, 2022, reflecting our focus on cost control and efficiency. No restructuring charges were incurred in the three months ended March 31, 2023 and $20 million was incurred in the three months ended March 31, 2022. See “Note 4 – Restructuring Charges” for additional information. Other charges (credits) in the three months ended March 31, 2023 were a net credit of $5 million and a net charge of $19 million in the three months ended March 31, 2022 related to miscellaneous charges and credits. Consolidated Statements of Operations - Non-Operating Summary Interest Expense, Net Interest expense, net was $31 million and $48 million in the three months ended March 31, 2023 and 2022, respectively. Interest expense, net primarily represents interest on our outstanding long-term debt offset by interest income. The year-over-year decrease was due in part to lower interest expense after partial repayments of principal since March 31, 2022 and partly due to the increase in interest income, as we reinvest our cash in certain short-term demand deposits. See “Note 7 – Borrowings and Other Debt Obligations” to our Condensed Consolidated Financial Statements for additional details on the long-term debt. Other Expense, Net Other expense, net was $35 million and $16 million in the three months ended March 31, 2023 and 2022, respectively. Other expense, net primarily represents foreign exchange losses attributed to currency losses in countries with no or limited markets to hedge, letter of credit fees and other financing charges. When economically advantageous, we enter into foreign currency forward contracts to mitigate the risk of future cash flows denominated in a foreign currency. Additionally, we enter into certain short-term investments to offset our foreign exchange losses, the gains of which are recorded in “Other Expense, Net”. Other expense, net in the three months ended March 31, 2023 was primarily attributable to foreign exchange losses in the Argentinian Peso. Other expense, net in the three months ended March 31, 2022 was primarily attributed to changes in fair value and settlements of certain foreign currency forward contracts. 18 Table of Contents 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, certain charges do not result in significant tax benefit as a result of being attributed to a non-income tax jurisdiction or our inability to forecast realization of the tax benefit of such losses. This is partially offset by the utilization of previously unbenefited deferred tax assets, such as net operating loss carryforwards. Please see “Note 11 – Income Taxes” to our Condensed Consolidated Financial Statements for additional details. Results of Operations by Segment Financial information by segment is summarized below. Favorable Three Months Ended (Unfavorable) March 31, $ % or bps (Dollars in millions) 2023 2022 Change Revenues: DRE Revenues $ 372 $ 292 $ 80 27 % WCC Revenues 421 344 77 22 % PRI Revenues 349 286 63 22 % All Other 44 16 28 175 % Total Revenues $ 1,186 $ 938 $ 248 26 % Operating Income: DRE Segment Adjusted EBITDA $ 108 $ 59 $ 49 83 % WCC Segment Adjusted EBITDA 96 67 29 43 % PRI Segment Adjusted EBITDA 68 39 29 74 % Corporate and Other (3) (14) 11 79 % Depreciation and Amortization (80) (87) 7 8 % Share-Based Compensation (9) (7) (2) (29) % Restructuring Charges — (20) 20 100 % Other (Charges) Credits 5 (19) 24 126 % Operating Income $ 185 $ 18 $ 167 928 % Margins: DRE Segment Adjusted EBITDA Margin 29.0 % 20.2 % n/m 880 bps WCC Segment Adjusted EBITDA Margin 22.8 % 19.5 % n/m 330 bps PRI Segment Adjusted EBITDA Margin 19.5 % 13.6 % n/m 590 bps 19 Table of Contents DRE Results DRE revenues of $372 million in the three months ended March 31, 2023, increased $80 million, or 27% compared to $292 million in the three months ended March 31, 2022. DRE segment adjusted EBITDA of $108 million in the three months ended March 31, 2023, increased $49 million, or 83% compared to $59 million in the three months ended March 31, 2022. DRE segment adjusted EBITDA margin was 29.0% in the three months ended March 31, 2023, compared to 20.2% in the three months ended March 31, 2022. Approximately 70% of the revenue increase was from drilling-related services. Geographically, Latin America contributed approximately 50% to the overall revenue growth, with each remaining geography contributing equally. The increase in revenue was approximately 70% attributable to higher activity with the remainder primarily attributable to pricing. The improvement in segment adjusted EBITDA was equally attributable to higher activity and pricing including timing of cost inflation related recoveries. WCC Results WCC revenues of $421 million in the three months ended March 31, 2023, increased $77 million, or 22% compared to $344 million in the three months ended March 31, 2022. WCC segment adjusted EBITDA of $96 million in the three months ended March 31, 2023, increased $29 million, or 43% compared to $67 million in the three months ended March 31, 2022. WCC segment adjusted EBITDA margin was 22.8% in the three months ended March 31, 2023, compared to 19.5% in the three months ended March 31, 2022. Approximately 80% of the revenue increase was from cementation products, completions and tubular running services. Geographically, international regions contributed approximately 85% to the overall revenue growth, with each international region contributing equally. The increase in revenue and segment adjusted EBITDA was primarily attributable to higher activity, resulting in margin fall through. PRI Results PRI revenues of $349 million in the three months ended March 31, 2023, increased $63 million, or 22% compared to $286 million in the three months ended March 31, 2022. PRI segment adjusted EBITDA of $68 million in the three months ended March 31, 2023, increased $29 million, or 74% compared to $39 million in the three months ended March 31, 2022. PRI segment adjusted EBITDA margin was 19.5% in the three months ended March 31, 2023, an improvement compared to 13.6% in the three months ended March 31, 2022. Approximately 90% of the revenue increase was from intervention services and drilling tools, pressure pumping and artificial lift. Geographically, international regions contributed approximately 65% to the overall revenue growth, with each international region contributing equally. The increase in revenue and segment adjusted EBITDA was primarily attributable to higher activity, resulting in margin fall through. Corporate and Other Corporate and other was a net expense of $3 million in the three months ended March 31, 2023 compared to $ 14 million in the three months ended March 31, 2022. The year-over-year decrease was primarily due to improved results in other non-core businesses that did not individually meet the criteria for segment reporting and from our focus on cost control and efficiency. Depreciation and Amortization Depreciation and amortization was $80 million in the three months ended March 31, 2023 compared to $87 million in the three months ended March 31, 2022, respectively. The year-over-year decrease was primarily from a lower asset base. 20 Table of Contents Share-based Compensation Expense We recognized $9 million of share-based compensation expense in the three months ended March 31, 2023, an increase of $2 million compared to $7 million of share-based compensation expense in the three months ended March 31, 2022. The increase was attributable to a higher number of performance share units expected to vest. Restructuring Charges No restructuring charges were incurred in the three months ended March 31, 2023 and $20 million was incurred in the three months ended March 31, 2022. See “Note 4 – Restructuring Charges” for additional information. Other (Charges) Credits Other (charges) credits in the three months ended March 31, 2023 were a net credit of $5 million and a net charge of $19 million in the three months ended March 31, 2022 related to miscellaneous charges and credits. Outlook Growth and spending in the energy services industry is highly dependent on many external factors. These include but are not limited to: inflation; geopolitical uncertainty; supply chain disruptions; energy policies at local and regional levels; and, the price of oil and natural gas. For 2023, we expect continued growth in our customer activity levels and notwithstanding recessionary concerns, we expect continued improvement in our customer activity, especially in international markets. However, we continue to closely monitor the global market and are well positioned to pivot our strategy as changes in external factors require. 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. While we believe we are well positioned to satisfy our customers’ needs, the level of improvement in our businesses in the future will continue to depend heavily on pricing, volume of work, our ability to offer cost efficient, innovative and effective technology solutions, and our success in gaining market share in new and existing markets. We continue to follow our long-term strategy, aimed at achieving sustainable profitability and cash flow generation in our businesses, servicing our customers and creating value for our shareholders. Our long-term success will be determined by our ability to effectively manage the cyclicality of our industry, including growth during the current up-cycles and potential prolonged industry downturns, our ability to respond to industry changes and demands, while managing through risks we may be exposed to, and ultimately our ability to generate consistent positive cash flow and positive returns on invested capital. 21 Table of Contents Liquidity and Capital Resources At March 31, 2023, we had cash and cash equivalents of $833 million and $150 million in restricted cash, compared to $910 million of cash and cash equivalents and $202 million in restricted cash at December 31, 2022. The following table summarizes cash flows provided by (used in) each type of business activity in the periods presented: Three Months Ended March 31, (Dollars in millions) 2023 2022 Net Cash Provided by (Used in) Operating Activities $ 84 $ (64) Net Cash Provided by (Used in) Investing Activities $ (64) $ 9 Net Cash Used in Financing Activities $ (127) $ (5) Operating Activities Cash provided by operating activities was $84 million for the three months ended March 31, 2023. The primary source of cash provided by operating activities was higher operating income that more than offset higher operating and seasonal working capital requirements. Cash used in operating activities was $64 million for the three months ended March 31, 2022. The primary uses of cash in operating activities were driven by seasonal working capital requirements. Investing Activities Cash used in investing activities was $64 million for the three months ended March 31, 2023. The primary investing activity was cash used for capital expenditures of $64 million. Cash provided by investing activities was $9 million for the three months ended March 31, 2022. The primary investing activities included proceeds from a settlement of escrow related to the sale of business for $9 million, cash used for capital expenditures of $20 million, which was offset by proceeds from the sale of assets of $20 million. Financing Activities Cash used in financing activities was $127 million for the three months ended March 31, 2023. The primary uses of cash were $66 million for repayments and repurchases of long-term debt and $52 million in tax remittances on equity awards vested. The tax remittances were higher relative to the three months ended March 31, 2022 due to an increase in both the share price and the quantity of shares vested. Cash used in financing activities was $5 million for the three months ended March 31, 2022 which includes $4 million of finance lease payments and $1 million in tax remittances on equity awards vested. 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 2021 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 financial obligations, both in the short-term and long-term. Cash Requirements Our cash requirements will continue to include payments for principal and interest on our long-term debt, capital expenditures, payments on our finance and operating leases, payments for short-term working capital needs and operating costs. 22 Table of Contents To the extent business activity continues to rise, we expect to make more tax payments and to utilize cash on reducing our debt structure and invest in capital assets and our working capital. Our cash requirements also include personnel costs including awards under our employee incentive programs as well as other amounts to settle litigation related matters. As of March 31, 2023, we had outstanding debt of $105 million in aggregate principal amount for our Exit Notes maturing on December 1, 2024 (which we announced on April 20, 2023 that we intend to redeem in total on May 22, 2023), $441 million in aggregate principal amount for our 2028 Senior Secured Notes and $1.6 billion in aggregate principal amount for our 2030 Senior Notes. For these notes, after the May 2023 redemption of the Exit Notes, we expect $173 million in interest payments annually in 2023 and approximately $167 million in interest payments annually, beginning in 2024 until the maturity of these obligations. See “Note 7 – Borrowings and Other Debt Obligations” for additional information. Our capital spending for 2023 is projected to be between $200 million to $230 million. Our payments on our operating and finance leases in 2023 are expected to be approximately $64 million and $19 million, respectively. Cash and cash equivalents and restricted cash are held by subsidiaries outside of Ireland. At March 31, 2023 we had approximately $174 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. Ratings Services’ Credit Ratings Our credit ratings at March 31, 2023 were maintained since December 31, 2022. • Standard and Poor’s corporate family and senior unsecured notes ratings are at B, and our senior secured notes and Credit Agreement ratings are BB-. The outlook is stable. • Moody’s Investors Service corporate family rating is at B2, our senior unsecured notes rating is at B3, and our senior secured notes and Credit Agreement ratings are at Ba3. The outlook is stable. Customer Receivables We may experience delayed customer payments and payment defaults due to, among other reasons, a weaker economic environment, reductions in our customers’ cash flow from operations, our customers’ inability to access credit markets, as well as unsettled political conditions. Allowances have been recorded for receivables believed to be uncollectible, including amounts for the resolution of potential credit and other collection issues such as disputed invoices. Adjustments to the allowance are made depending on how potential issues are resolved and the financial condition of our customers. In addition, our customers are primarily in fossil fuel-related industries and broad declines in demand for or pricing of oil or natural gas might impact the collections of our customer receivables. As of December 31, 2022 and March 31, 2023, our net accounts receivables in Mexico comprised 21% and 27% of our total net account receivables, respectively. From time to time, we experience delays in payments from customers in Mexico, and although the balances due are not in dispute and we do not expect to have any material write-offs of receivables, delays or failure to pay in the future could differ from management’s expectations and negatively impact future results of the company. As of December 31, 2022 and March 31, 2023, net accounts receivables in the U.S. comprised 12% of total net accounts receivables. Except for the above, no other country accounted for more than 10% of our net accounts receivables balance. Accounts Receivable Factoring 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. During the three months ended March 31, 2023 and 2022, we sold accounts receivable balances of $46 million and $17 million, and received cash proceeds of $42 million and $15 million, respectively. 23 Table of Contents Guarantees Our Exit Notes and 2028 Senior Secured Notes were issued by Weatherford International Ltd., a Bermuda exempted company (“Weatherford Bermuda”), and guaranteed by the Company and Weatherford International, LLC, a Delaware limited liability company (“Weatherford Delaware”) and other subsidiary guarantors party thereto. Our 2030 Senior Notes were originally co-issued by Weatherford Bermuda and Weatherford Delaware and guaranteed by the Company and other subsidiary guarantors party thereto. Credit Agreement, Letter of Credit and Surety Bonds Weatherford Bermuda, Weatherford Delaware, and Weatherford Canada Ltd. (“Weatherford Canada”), together, as borrowers, and the Company as parent, have an amended and restated credit agreement (the “Credit Agreement”). The Credit Agreement allows for a total commitment amount of $400 million maturing on October 17, 2026 (subject to a $250 million minimum liquidity covenant and a minimum interest coverage ratio and maximum ratio of funded debt), provided that no more than $50 million of our Exit Notes are outstanding on August 30, 2024 (otherwise the maturity date becomes August 30, 2024). On March 24, 2023, we further amended the Credit Agreement to permit unlimited prepayments and other redemptions of indebtedness subject to (i) the ratio of funded debt (net of unrestricted cash in excess of $400 million) to consolidated adjusted EBITDA as defined in the Credit Agreement, not exceeding 2.50 to 1.00, (ii) no default or event of default existing and (iii) aggregate proforma liquidity in the event of a debt reduction equaling or exceeding $300 million (which previously was $350 million). The material terms of the Credit Agreement or exceeding $300 million (which previously was $350 million). The material terms of the Credit Agreement are otherwise unchanged. The obligations under the Credit Agreement are guaranteed by the Company and certain of our subsidiaries and secured by substantially all of the personal property of the Company and those subsidiaries. As of March 31, 2023, we had $405 million of letters of credit outstanding, consisting of the $253 million under the Credit Agreement and another $152 million under various uncommitted bi-lateral facilities (of which there was $146 million in cash collateral held and recorded in “Restricted Cash” on the Condensed Consolidated Balance Sheets). At March 31, 2023, we had $147 million remaining letters of credit available under our Credit Agreement. We utilize surety bonds as part of our customary business practice in Latin America. As of March 31, 2023, we had surety bonds outstanding of $430 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 and could reduce our available liquidity if we are unable to mitigate the issue. Forward-Looking Statements This report contains various statements relating to future financial performance and results, business strategy, plans, goals and objectives, including certain projections, business trends and other statements that are not historical facts. These statements constitute forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “budget,” “strategy,” “plan,” “guidance,” “outlook,” “may,” “should,” “could,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions, although not all forward-looking statements contain these identifying words. Forward-looking statements reflect our beliefs and expectations based on current estimates and projections. While we believe these expectations, and the estimates and projections on which they are based, are reasonable and were made in good faith, these statements are subject to numerous risks and uncertainties. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecasted in the forward-looking statements. The forward-looking statements included herein are only made as of the date of this report, or if earlier, as of the date they were made, 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, banking crises, political disturbances, war, terrorist attacks, changes in global trade policies, weak local economic conditions and international currency fluctuations (including the Russia Ukraine Conflict); 24 Table of Contents • 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, 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; • cybersecurity incidents, as our reliance on digital technologies increases, those digital technologies may become more vulnerable and/or 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, including as a result of the Russia Ukraine Conflict; • our ability to comply with, and respond to, climate change, environmental, social and governance 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, lead times and lack of availability of our procured products and services; • our ability to timely collect from customers; • our ability to realize cost savings and business enhancements from our revenue and cost improvement efforts; • our ability to attract, motivate and retain employees, including key personnel; • our ability to access to capital markets on terms that are commercially acceptable to the Company; • our ability to manage our workforce, supply chain challenges and disruptions, business processes, information technology systems and technological innovation and commercialization, including the impact of our organization restructure, business enhancements, improvement efforts and the cost and support reduction plans; • our ability to service our debt obligations; • potential non-cash asset impairment charges for long-lived assets, intangible assets or other assets; and • adverse weather conditions in certain regions of our operations. Many of these factors are macro-economic in nature and are, therefore, beyond our control. Should one or more of these risks or uncertainties materialize, affect us in ways or to an extent that we currently do not expect or consider to be significant, or should underlying assumptions prove incorrect, our actual results, performance or achievements may vary materially from those described in this report as anticipated, believed, estimated, expected, intended, planned or projected. Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in our current and past filings with the SEC under the Exchange Act and the Securities Act of 1933, as amended. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Other than the change in fair value of our debt as discussed in “Note 7 – Borrowings and Other Debt Obligations” in the Notes to Condensed Consolidated Financial Statements, our exposure to market risk has not changed materially since December 31, 2022. 25 Table of Contents