What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-25 compared with 2023-07-26 · 122 added, 110 removed, 201 unchanged (54% of the section changed)

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Therefore, our financial results are significantly affected by oil and natural gas prices as well as rig counts.

The table below shows the average oil and natural gas prices for West Texas Intermediate (“WTI”) and Brent North Sea (“Brent”) crude oil and Henry Hub natural gas.

Three Months Ended Six Months Ended

June 30, June 30,

Table of Con t e n t s

The table below shows the average oil and natural gas prices for West Texas Intermediate (“WTI”), Brent North Sea (“Brent”) crude oil and Henry Hub natural gas.

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

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With respect to our continued operations in Russia, we continuously monitor developments in the conflict, changes in sanctions against Russia and restrictions imposed on western companies operating in Russia along with other associated risks including potential nationalization of our assets in Russia.

Revenues in Russia were approximately 6% of our total revenues for both the three and six months ended June 30, 2023 and June 30, 2022, respectively.

As of June 30, 2023, our Russia operations include $57 million in cash, $85 million in other current assets, $58 million in property, plant and equipment and other non-current assets, and $44 million in liabilities.

Revenues in Russia were approximately 6% of our total revenues for both the three and nine months ended September 30, 2023, compared to 7% and 6% of our total revenues for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2023, our Russia operations include $35 million in cash, $94 million in other current assets, $69 million in property, plant and equipment and other non-current assets, and $57 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.

Table of Con t e n t s

Consolidated Statements of Operations - Operating Summary

Revenues of $1.3 billion and $2.5 billion in the three and six months ended June 30, 2023, increased 20% and 23% compared to $1.1 billion and $2.0 billion in the three and six months ended June 30, 2022, respectively.

Year-over-year in the second quarter, product revenues increased 18% and service revenues increased 21%.

DRE, WCC, and PRI contributed to 37%, 27% and 10% of the increase in revenues, respectively, with the remainder coming from higher activity in integrated services and projects.

Year-over-year in the six months ended June 30, product revenues increased 23% and service revenues increased 23%.

DRE, WCC, and PRI contributed to 34%, 29% and 18% of the increase in revenues, respectively, with the remaining 18% from higher activity in integrated services and projects.

Approximately 80% of our revenue increase in each of the three and six months June 30, was 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 9% and 12% year-over-year in the three and six months ended June 30, respectively.

Geographically, the year-over-year second quarter revenue growth was led by improvements in Latin America, Middle East/North Africa/Asia, and Europe/Sub-Sahara Africa/Russia, which contributed to 50%, 34%, and 17% of the increase, respectively, partially offset by decline of 1% in North America.

The year-over-year six months ended June 30 revenue growth was led by improvements in Latin America, Middle East/North Africa/Asia, Europe/Sub-Sahara Africa/Russia and North America, which contributed to 43%, 30%, 17% and 10% of the increase, respectively.

In the three and six months ended June 30, 2023, the U.S.

accounted for 17% and 18% of revenue, respectively, and Mexico accounted for 13% in each period, respectively.

In the three and six months ended June 30, 2022, the U.S.

accounted for 19% of revenue in each period.

Revenues of $1.3 billion and $3.8 billion in the three and nine months ended September 30, 2023, increased 17% and 21% compared to $1.1 billion and $3.1 billion in the three and nine months ended September 30, 2022, respectively.

Year-over-year in the third quarter, product revenues increased 20% and service revenues increased 15%.

WCC, DRE, and PRI contributed to 35%, 21%, and 7% of the increase in revenues, respectively, with the remainder from higher activity in integrated services and projects.

Year-over-year in the nine months ended September 30, 2023 product revenues increased 22% and service revenues increased 20%.

WCC, DRE, and PRI contributed to 31%, 30%, and 15% of the increase in revenues, respectively, with the remainder from higher activity in integrated services and projects.

Approximately 90% and 80% of our revenue increase in the three and nine months ended September 30, 2023, respectively, was 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 observable in the increase of global rig counts, which increased 7% year-over-year in the nine months ended September 30, 2023.

During the three months ended September 30, 2023, international revenues led the increase year-over-year, observable in the 11% increase of international rig counts for the same period.

Geographically, the year-over-year third quarter revenue growth was led by improvements in the Middle East/North Africa/Asia, Latin America and Europe/Sub-Sahara Africa/Russia, which contributed to 61%, 40%, and 14% of the increase, respectively, partly offset by a revenue decline in North America.

The year-over-year nine months ended September 30, 2023 revenue growth was led by improvements in Latin America, Middle East/North Africa/Asia, Europe/Sub-Sahara Africa/Russia and North America, which contributed to 42%, 39%, 16% and 3% of the increase, respectively.

In the three and nine months ended September 30, 2023, the U.S.

accounted for 16% and 17% of revenue, respectively, and Mexico accounted for 14% and 13%, respectively.

In the three and nine months ended September 30, 2022, the U.S.

accounted for 21% and 20%, respectively.

No other country accounted for more than 10% of our revenue in the periods presented in these financials.

Cost of products and services of $847 million and $1.6 billion in the three and six months ended June 30, 2023, increased 12% and 14% compared to $756 million and $1.4 billion in the three and six months ended June 30, 2022, respectively.

Approximately 80% of our increase in each of the three and six months ended June 30, 2023 was attributable to cost increases necessary to meet increased demand, with a larger portion of the remainder from a shift in service and product mix and the rest due to inflation in the cost of labor and materials.

Our cost of products and services as a percentage of revenues was 66% and 67% in the three and six months ended June 30, 2023, compared to 71% and 72% in the three and six months ended June 30, 2022.

Cost of products and services of $859 million and $2.5 billion in the three and nine months ended September 30, 2023, increased 11% and 13% compared to $775 million and $2.2 billion in the three and nine months ended September 30, 2022, respectively.

Approximately 90% and 80% of our increase in the three and nine months ended September 30, 2023, respectively, was attributable to cost increases necessary to meet increased demand, with a larger portion of the remainder from a shift in service and product mix and the rest due to inflation in the cost of labor and materials.

Our cost of products and services as a percentage of revenues was 65% and 66% in the three and nine months ended September 30, 2023, respectively, compared to 69% and 71% in the three and nine months ended September 30, 2022, respectively.

The improvement was primarily driven by improved utilization of service-related resources.

Selling, general, administrative and research and development costs of $225 million and $441 million in the three and six months ended June 30, 2023, increased 3% and 6% compared to $218 million and $417 million in the three and six months ended June 30, 2022, respectively.

Selling, general, administrative and research and development costs of $241 million and $682 million in the three and nine months ended September 30, 2023, increased 8% and 6% compared to $224 million and $641 million in the three and nine months ended September 30, 2022, respectively.

The increase primarily reflects an increase in research and development investment in newer technologies and an increase in overhead to support the organization growth.

Selling, general, administrative and research and development costs as a percentage of revenues was 18% in both in the three and six months ended June 30, 2023, respectively, a decrease compared to 21% in both the three and six months ended June 30, 2022.

Selling, general, administrative and research and development costs as a percentage of revenues was 18% in both in the three and nine months ended September 30, 2023, a decrease compared to 20% and 21% in the three and nine months ended September 30, 2022, respectively.

Consolidated Statements of Operations - Non-Operating Summary

Interest Expense, Net

Interest expense, net was $31 million and $62 million in the three and six months ended June 30, 2023, respectively, and $48 million and $96 million in the three and six months ended June 30, 2022.

Interest expense, net is interest expense net of interest income, and overall has decreased in the periods presented primarily due to a decrease in interest expense on our outstanding long-term debt and an increase of interest income.

Interest expense was $47 million and $94 million in the three and six months ended June 30, 2023, respectively, and $54 million and $107 million in the three and six months ended June 30, 2022, respectively.

Interest expense has decreased in the periods presented primarily due to the reduction in our outstanding long-term debt.

As of June 30, 2023, we have fully repaid our outstanding Exit Notes and have made partial repurchases of principal on our 2028 Senior Secured Notes since June 30, 2022.

Interest expense, net was $30 million and $92 million in the three and nine months ended September 30, 2023, respectively, and $44 million and $140 million in the three and nine months ended September 30, 2022.

Interest expense, net is interest expense net of interest income, which has decreased over prior year primarily due to a decrease in interest expense on our outstanding long-term debt and an increase of interest income.

Table of Con t e n t s

Interest expense was $45 million and $139 million in the three and nine months ended September 30, 2023, respectively, and $52 million and $159 million in the three and nine months ended September 30, 2022, respectively.

Interest expense has decreased over prior year primarily due to the reduction in our outstanding long-term debt.

As of September 30, 2023, we have fully repaid our outstanding Exit Notes and have made partial repurchases of principal on our 2028 Senior Secured Notes since September 30, 2022.

See “Note 6 – Borrowings and Other Debt Obligations” to our Condensed Consolidated Financial Statements for additional details.

Interest income was $16 million and $32 million in the three and six months ended June 30, 2023, respectively, and $6 million and $11 million in the three and six months ended June 30, 2022.

Interest income was $15 million and $47 million in the three and nine months ended September 30, 2023, respectively, and $8 million and $19 million in the three and nine months ended September 30, 2022.

Interest income has increased primarily due to higher interest rates on short-term demand deposits.

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dollars from operations in Argentina.

We entered into a series of BCS securities transactions that resulted in a “Loss on Blue Chip Swap Securities” of $57 million in both the three and six months ended June 30, 2023.

No BCS transactions were executed during the third quarter of 2023.

During the second quarter of 2023, we entered into a series of BCS securities transactions that resulted in a “Loss on Blue Chip Swap Securities” of $57 million.

We may enter into additional BCS transactions in the future which may drive additional losses to the extent that the implied exchange rates are higher than the official exchange rates.

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Other Expense, Net

Other expense, net was $39 million and $74 million in the three and six months ended June 30, 2023, respectively, and $32 million and $48 million in the three and six ended June 30, 2022, respectively.

Other expense, net was $24 million and $98 million in the three and nine months ended September 30, 2023, respectively, and $14 million and $62 million in the three and nine months ended September 30, 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, including when applicable, bond redemption premiums partially offset by certain investment gains and losses.

When economically advantageous, we enter into foreign currency forward contracts to mitigate the risk of future cash flows denominated in a foreign currency.

Foreign exchange losses in the three and six months ended June 30, 2023 were primarily attributable to currency losses on the Argentinian Peso.

Foreign exchanges losses in the three and six months ended June 30, 2022 were primarily attributed to changes in fair value and settlements of certain foreign currency forward contracts.

Foreign exchange losses in the three and nine months ended September 30, 2023 were primarily attributable to currency losses on the Argentinian Peso.

Foreign exchange losses in the three and nine months ended September 30, 2022 were primarily attributed to changes in fair value and settlements of certain foreign currency forward contracts.

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.

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Please see “Note 10 – Income Taxes” to our Condensed Consolidated Financial Statements for additional details.

Table of Con t e n t s

Results of Operations by Segment

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Three Months Ended (Unfavorable)

June 30, $ % or bps

September 30, $ % or bps

(Dollars in millions) 2023 2022 Change

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PRI Segment Adjusted EBITDA 86 66 20 30 %

All Other 9 — 9 n/m

All Other 7 3 4 133 %

Corporate (18) (18) — — %

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Share-Based Compensation (9) (5) (4) (80) %

Other (Charges) Credits (1) 14 (15) (107) %

Other Credits (Charges)

Operating Income $ 218 $ 121 $ 97 80 %

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PRI Segment Adjusted EBITDA Margin 23.2 % 18.5 % n/m 469 bps

Six Months Ended (Unfavorable)

June 30, $ % or bps

Table of Con t e n t s

Nine Months Ended (Unfavorable)

September 30, $ % or bps

(Dollars in millions) 2023 2022 Change

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Share-Based Compensation (26) (18) (8) (44) %

Other (Charges) Credits 4 (25) 29 116 %

Other Credits (Charges) 9 (25) 34 136 %

Operating Income $ 604 $ 243 $ 361 149 %

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PRI Segment Adjusted EBITDA Margin 21.6 % 17.5 % n/m 413 bps

DRE revenues of $394 million and $766 million in the three and six months ended June 30, 2023, increased $77 million or 24%, and $157 million or 26%, compared to $317 million and $609 million in the three and six months ended June 30, 2022, respectively.

Of the year-over-year revenue increase in the second quarter of 2023, approximately 65% was from drilling-related services.

Geographically, international regions contributed approximately 90% to the overall revenue growth and approximately half of the international growth came from Latin America.

DRE revenues of $388 million and $1,154 million in the three and nine months ended September 30, 2023, increased $40 million or 11%, and $197 million or 21%, compared to $348 million and $957 million in the three and nine months ended September 30, 2022, respectively.

Of the year-over-year revenue increase in the third quarter of 2023, approximately all of the increase was from drilling- related services and wireline.

Geographically, international regions contributed approximately all of the overall revenue growth and approximately 70% of the international growth came from Latin America.

The increase in revenue was attributable to higher activity.

Of the year-over-year revenue increase in the six months ended June 30, 2023, approximately 70% was from drilling-related services.

Geographically, Latin America contributed approximately 50% to the overall revenue growth, with each remaining geography contributing equally.

Of the year-over-year revenue increase in the nine months ended September 30, 2023, approximately 70% was from drilling-related services.

Geographically, international regions contributed approximately 90% of the overall revenue growth with approximately 60% of the international growth coming from Latin America.

The increase in revenue was approximately 90% attributable to higher activity with the remainder primarily attributable to pricing.

DRE segment adjusted EBITDA of $106 million and $214 million in the three and six months ended June 30, 2023, increased $37 million or 54%, and $86 million or 67%, compared to $69 million and $128 million in the three and six months ended June 30, 2022.

DRE segment adjusted EBITDA margin was 26.9% and 27.9% in the three and six months ended June 30, 2023, compared to 21.8% and 21.0% in the three and six months ended June 30, 2022.

The improvement in segment adjusted EBITDA was more than half attributable to pricing, including timing of cost inflation related recoveries with the remainder from higher activity.

WCC revenues of $440 million and $861 million in the three and six months ended June 30, 2023, increased $57 million or 15%, and $134 million or 18%, compared to $383 million and $727 million in the three and six months ended June 30, 2022, respectively.

Of the year-over-year revenue increase in the second quarter 2023, approximately 95% was from completions and cementation products.

Geographically, international regions contributed approximately to all of the overall revenue growth, and approximately 55% of the international growth came from Latin America.

Of the year-over-year revenue increase in the six months ended June 30, 2023, approximately 80% was from cementation products and completions.

Geographically, international regions contributed approximately 90% to the overall revenue growth, and approximately 40% of the international growth came from Latin America, with the rest of the international regions contributing equally.

WCC segment adjusted EBITDA of $109 million and $205 million in the three and six months ended June 30, 2023, increased $42 million or 63%, and $71 million or 53%, compared to $67 million and $134 million in the three and six months ended June 30, 2022.

WCC segment adjusted EBITDA margin was 24.8% and 23.8% in the three and six months ended June 30, 2023, compared to 17.5% and 18.4% in the three and six months ended June 30, 2022.

DRE segment adjusted EBITDA of $111 million and $325 million in the three and nine months ended September 30, 2023, increased $26 million or 31%, and $112 million or 53%, compared to $85 million and $213 million in the three and nine months ended September 30, 2022.

DRE segment adjusted EBITDA margin was 28.6% and 28.2% in the three and nine months ended September 30, 2023, compared to 24.4% and 22.3% in the three and nine months ended September 30, 2022.

The nine months ended September 30, 2023 improvement in segment adjusted EBITDA was approximately 65% due to higher activity, with the remainder attributable to pricing, including timing of cost inflation related recoveries.

Table of Con t e n t s

WCC revenues of $459 million and $1,320 million in the three and nine months ended September 30, 2023, increased $68 million or 17%, and $202 million or 18%, compared to $391 million and $1,118 million in the three and nine months ended September 30, 2022, respectively.

Of the year-over-year revenue increase in the third quarter 2023, approximately 90% was from completions, cementation products and liner hangers.

Geographically, international regions contributed approximately to all of the overall revenue growth, and approximately 60% of the international growth came from the Middle East/North Africa/Asia.

Of the year-over-year revenue increase in the nine months ended September 30, 2023, approximately 75% was from completions and cementation products.

Geographically, Latin America and the Middle East/North Africa/Asia regions equally contributed to approximately 70% of the overall revenue growth.

WCC segment adjusted EBITDA of $119 million and $324 million in the three and nine months ended September 30, 2023, increased $41 million or 53%, and $112 million or 53%, compared to $78 million and $212 million in the three and nine months ended September 30, 2022.

WCC segment adjusted EBITDA margin was 25.9% and 24.5% in the three and nine months ended September 30, 2023, compared to 19.9% and 19.0% in the three and nine months ended September 30, 2022.

The increase in revenue and segment adjusted EBITDA was primarily attributable to higher activity, resulting in margin fall through.

PRI revenues of $366 million and $715 million in the three and six months ended June 30, 2023, increased $21 million or 6%, and $84 million or 13%, compared to $345 million and $631 million in the three and six months ended June 30, 2022, respectively.

Of the year-over-year revenue increase in the second quarter of 2023, approximately 95% was from intervention services and drilling tools, pressure pumping and artificial lift.

Geographically, Latin America contributed approximately 70% to the regions with overall revenue growth, offset by a revenue decline in North America.

Of the year-over-year revenue increase in the six months ended June 30, 2023, approximately 90% was from intervention services and drilling tools, pressure pumping and artificial lift.

Geographically, international regions contributed approximately 90% to the overall revenue growth and approximately half of the international growth came from Latin America.

PRI segment adjusted EBITDA of $81 million and $149 million in the three and six months ended June 30, 2023, increased $13 million or 19%, and $42 million, or 39%, compared to $68 million and $107 million in the three and six months ended June 30, 2022.

PRI segment adjusted EBITDA margin was 22.1% and 20.8% in the three and six months ended June 30, 2023, an improvement compared to 19.7% and 17.0% in the three and six months ended June 30, 2022.

PRI revenues of $371 million and $1,086 million in the three and nine months ended September 30, 2023, increased $14 million or 4%, and $98 million or 10%, compared to $357 million and $988 million in the three and nine months ended September 30, 2022, respectively.

Of the year-over-year revenue increase in the third quarter of 2023, approximately all of the increase was from pressure pumping partially offset by a decline in artificial lift.

Geographically, Latin America and Middle East/North Africa/Asia contributed approximately 50% each to the regions with overall revenue growth, offset by a revenue decline in North America.

Of the year-over-year revenue increase in the nine months ended September 30, 2023, approximately 80% was from pressure pumping and intervention services and drilling tools.

Geographically, international regions contributed approximately all of the overall revenue growth with approximately 50% of the international growth coming from Latin America and approximately 40% in Middle East/North Africa/Asia.

These increases were offset by revenue decline in North America.

PRI segment adjusted EBITDA of $86 million and $235 million in the three and nine months ended September 30, 2023, increased $20 million or 30%, and $62 million, or 36%, compared to $66 million and $173 million in the three and nine months ended September 30, 2022.

PRI segment adjusted EBITDA margin was 23.2% and 21.6% in the three and nine months ended September 30, 2023, an improvement compared to 18.5% and 17.5% in the three and nine months ended September 30, 2022.

The increase in revenue and segment adjusted EBITDA was primarily attributable to higher activity, resulting in margin fall through.

All Other Results

All Other revenues of $74 million and $118 million in the three and six months ended June 30, 2023, increased $55 million or 289%, and $83 million or 237%, compared to $19 million and $35 million in the three and six months ended June 30, 2022, respectively.

All Other revenues of $95 million and $213 million in the three and nine months ended September 30, 2023, increased $71 million or 296%, and $154 million or 261%, compared to $24 million and $59 million in the three and nine months ended September 30, 2022, respectively.

The year-over-year increase was primarily due to improved results in integrated services and projects in the Middle East/North Africa/Asia and Latin America that did not individually meet the criteria for segment reporting.

Corporate was a net expense of $14 million and $26 million in the three and six months ended June 30, 2023 compared to a net expense of $18 million and $34 million in the three and six months ended June 30, 2022, respectively.

The year-over-year decrease in expense was primarily due to the impact of certain one-time items in 2023 and 2022.

Corporate was a net expense of $18 million and $44 million in the three and nine months ended September 30, 2023 compared to a net expense of $18 million and $52 million in the three and nine months ended September 30, 2022, respectively.

The year-over-year decrease in the nine months ended was primarily due to the impact of certain one-time items in 2022.

Table of Con t e n t s

Depreciation and Amortization

Depreciation and amortization was $81 million and $161 million in the three and six months ended June 30, 2023 compared to $90 million and $177 million in the three and six months ended June 30, 2022, respectively.

Depreciation and amortization was $83 million and $244 million in the three and nine months ended September 30, 2023 compared to $88 million and $265 million in the three and nine months ended September 30, 2022, respectively.

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

Share-based Compensation Expense

We recognized $8 million and $17 million of share-based compensation expense in the three and six months ended June 30, 2023 compared to $6 million and $13 million of share-based compensation expense in the three and six months ended June 30, 2022, respectively.

We recognized $9 million and $26 million of share-based compensation expense in the three and nine months ended September 30, 2023 compared to $5 million and $18 million in the three and nine months ended September 30, 2022, respectively.

The increase was primarily attributable to a higher number of performance share units expected to vest.

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and the price of oil and natural gas.

We continue to expect overall 2023 growth over 2022, led by increased demand in customer activity levels.

We continue to expect overall 2023 growth over 2022, led by increased demand in customer activity levels, driven mostly by international customers looking to increase production capacity.

We continue to closely monitor the global market and are well positioned to pivot our strategy as changes in external factors require.

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Liquidity and Capital Resources

At June 30, 2023, we had cash and cash equivalents of $787 million and $135 million in restricted cash, compared to $910 million of cash and cash equivalents and $202 million in restricted cash at December 31, 2022.

At September 30, 2023, we had cash and cash equivalents of $839 million and $107 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:

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in millions) 2023

Net Cash Provided by (Used in) Operating Activities $ 285 $ (4)

Net Cash Provided by (Used in) Investing Activities $ (122) $ 7

Net Cash Provided by Operating Activities $ 457 $ 156

Net Cash Used in Investing Activities $ (158) $ (22)

Net Cash Used in Financing Activities $ (388) $ (89)

Operating Activities

Cash provided by operating activities was $285 million for the six months ended June 30, 2023.

The primary source of cash provided by operating activities was mostly attributed to more revenues billed from increased demand and more collections that more than offset our operating spend.

Cash used in operating activities was $4 million for the six months ended June 30, 2022.

The primary uses of cash in operating activities were working capital investments to support increased customer activity and interest payments.

used in operating activities was minimized by accounts receivable collections and by a short-term monetization transaction we entered into during the three months ended June 30, 2022 on certain accounts receivable balances.

This transaction resulted in net cash proceeds of $59 million in the three months ended June 30, 2022, which decreased our net cash outflows in the six months ended June 30, 2022.

Cash provided by operating activities for the nine months ended September 30, 2023 and September 30, 2022 was $457 million and $156 million, respectively.

The primary source of cash provided by operating activities was mostly attributed to operating income and collections, which offset operating spend, including cash interest.

Higher operating income offset by lower spend and lower cash interest attributed to the increase year-over-year.

Table of Con t e n t s

Investing Activities

Cash used in investing activities was $122 million for the six months ended June 30, 2023.

Cash used in investing activities was $158 million for the nine months ended September 30, 2023.

The primary investing activities were cash used for capital expenditures of $142 million and the purchase of Blue Chip Swap securities in Argentina for $110 million.

The uses of cash were partially offset by Blue Chip Swap proceeds of $53 million (see Note 11 – Blue Chip Swap Securities - Argentina) and additional cash proceeds of $33 million from the sales of our investments in marketable securities in Argentina, presented as part of “Other Investing Activities”.

Cash provided by investing activities was $7 million for the six months ended June 30, 2022.

The primary investing activities included proceeds from the sale of assets of $43 million and a release of funds in escrow related to the sale of business for $9 million, which was offset by cash used for capital expenditures of $44 million.

Cash used in investing activities was $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 sale of assets of $55 million.

Financing Activities

Cash used in financing activities was $297 million for the six months ended June 30, 2023.

Cash used in financing activities was $388 million for the nine months ended September 30, 2023.

The primary uses of cash were $306 million for repayments and repurchases of long-term debt (see “Note 6 – Borrowings and Other Debt Obligations”) and $54 million in tax remittances on equity awards vested.

The tax remittances were higher than the same period of the prior year due to an increase in both the share price and the quantity of shares vested.

Cash used in financing activities was $25 million for the six months ended June 30, 2022.

The primary uses of cash were for finance lease payments and dividends paid to noncontrolling interests.

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

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 distributions paid to noncontrolling interests.

Sources of Liquidity

Our sources of available liquidity include cash generated by our operations, cash and cash equivalent balances, the borrowing capacity available to us under our Credit Agreement 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.

From time to time, we may enter into transactions to dispose of businesses or capital assets.

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, we expect to have sufficient cash from operations and cash on hand to fund our cash requirements (discussed below and in “Note 6 – Borrowings and Other Debt Obligations”) and financial obligations, both in the short-term and long-term.

Our available liquidity could be negatively impacted by delayed collections on customer receivables.

Based upon current and anticipated levels of operations and collections, we expect to have sufficient cash from operations and cash on hand to fund our cash requirements (discussed below and in “Note 6 – Borrowings and Other Debt Obligations”) and financial obligations, both in the short-term and long-term.

Cash Requirements

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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.

In addition, we may further invest in research and development investment in newer technologies as well as overhead to support the organization growth.

In addition, we may further invest in research and development in newer technologies as well as in overhead to support the organization’s growth.

Our cash requirements also include improvements made to our technology platforms and personnel costs including awards under our employee incentive programs as well as other amounts to settle litigation related matters.

As of June 30, 2023, our primary debt outstanding was the $396 million in aggregate principal amount of our 2028 Senior Secured Notes and $1.6 billion in aggregate principal amount of our 2030 Senior Notes.

Considering the balances of our outstanding notes as of June 30, 2023, we would expect $172 million in interest payments in 2023 in total, of which we have paid $91 million during the six months ended June 30, 2023.

We may repurchase or retire our debt, or take other steps to reduce our debt or otherwise improve our financial position.

These actions could include open market debt repurchases, negotiated repurchases, other retirements of outstanding debt and opportunistic refinancing of debt.

The amount of debt that may be repurchased or retired, if any, will depend on market conditions, the Company's cash position, compliance with debt covenants and restrictions and other considerations.

See “Note 6 – Borrowings and Other Debt Obligations” and “Note 12 – Subsequent Events” for additional information.

As of September 30, 2023, our primary debt outstanding was the $324 million in aggregate principal amount of our 2028 Senior Secured Notes and $1.6 billion in aggregate principal amount of our 2030 Senior Notes.

Considering the balances of our outstanding notes as of September 30, 2023, we would expect $172 million in interest payments in 2023 in total, of which we have paid $103 million during the nine months ended September 30, 2023.

See “Note 6 – Borrowings and Other Debt Obligations” for additional information.

Our capital spending for 2023 is projected to be between 4-5% of total year revenues.

Our capital spending for 2023 is projected to be within 3-5% of total year revenues.

Our payments on our operating and finance leases in 2023 are expected to be approximately $66 million and $21 million, respectively.

Table of Con t e n t s

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

At June 30, 2023 and December 31, 2022, we had approximately $112 million and $177 million, respectively, of our cash and cash equivalents that cannot be immediately repatriated from various countries due to country central bank controls or other regulations.

At September 30, 2023 and December 31, 2022, we had approximately $157 million and $177 million, respectively, of our cash and cash equivalents that cannot be immediately repatriated from various countries due to country central bank controls or other regulations.

Repatriation of those cash balances might result in incremental taxes or losses similar to the Argentine Blue Chip Swap “BCS” transactions executed in the second quarter of 2023 (see “Note 11 – Blue Chip Swap Securities - Argentina”), which contributed to the decrease in cash and cash equivalents that cannot be immediately repatriated.

As of June 30, 2023 and December 31, 2022, our Argentine operations include $30 million and $115 million in cash denominated in Argentine pesos, respectively.

To safeguard our cash from the effects of Argentine inflation and devaluation, we may consider additional BCS transactions in the future.

Ratings Services’ Credit Ratings

Our credit ratings at June 30, 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.

As we continue to conduct business in Argentina and in other countries with cash that cannot be immediately repatriated, we may consider infrequent transactions like the BCS transaction in the future to safeguard our cash from exposure to the effects of inflation and currency devaluation.

Customer Receivables

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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 June 30, 2023 and December 31, 2022, our net accounts receivables in Mexico were 28% and 21% of our total net account receivables, respectively.

As of September 30, 2023 and December 31, 2022, our net accounts receivables in Mexico were 35% and 21% of our total net accounts receivables, respectively, driven by delayed payments from our primary customer.

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 June 30, 2023 and December 31, 2022, our net accounts receivables in the U.S.

was 12% of total net accounts receivables.

As of September 30, 2023 and December 31, 2022, our net accounts receivables in the U.S.

was 10% and 12% of total net accounts receivables, respectively.

Except for the above, no other country accounted for more than 10% of our net accounts receivables balance.

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From time to time, we participate in factoring arrangements to sell accounts receivable to third-party financial institutions for cash proceeds net of discounts and hold-backs.

During the three and six months ended June 30, 2023, we sold accounts receivable balances of $63 million and $109 million, and received cash proceeds of $61 million and $103 million, respectively.

During the three and six months ended June 30, 2022, we sold accounts receivable balances of $9 million and $26 million, and received cash proceeds of $8 million and $23 million, respectively.

During the three and nine months ended September 30, 2023, we sold accounts receivable balances of $12 million and $121 million, and received cash proceeds of $11 million and $114 million, respectively.

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

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.

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On December 1, 2022, the indenture related to our 2030 Senior Notes was amended and supplemented to add Weatherford Delaware as co-issuer and co-obligor, and concurrently released the guarantee of Weatherford Delaware.

Table of Con t e n t s

Credit Agreement, Letter of Credit and Surety Bonds

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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 June 30, 2023, we had $385 million of letters of credit outstanding, consisting of the $250 million under the Credit Agreement and another $135 million under various uncommitted bi-lateral facilities (of which there was $128 million in cash collateral held and recorded in “Restricted Cash” on the Condensed Consolidated Balance Sheets).

On October 24, 2023, we further amended our Credit Agreement, the details of which are discussed in “Note 12 - Subsequent Events”.

As of September 30, 2023, we had $379 million of letters of credit outstanding, consisting of the $272 million under the Credit Agreement and another $107 million under various uncommitted bi-lateral facilities (of which there was $101 million in cash collateral held and recorded in “Restricted Cash” on the Condensed Consolidated Balance Sheets).

As of December 31, 2022, we had $395 million of letters of credit outstanding, consisting of the $195 million under the Credit Agreement and another $200 million under various uncommitted bi-lateral facilities (of which there was $199 million in cash collateral held and recorded in “Restricted Cash” on the Condensed Consolidated Balance Sheets).

As of June 30, 2023 and December 31, 2022, our revolving loan capacity available was $45 million, respectively.

We utilize surety bonds as part of our customary business practice in Latin America.

As of June 30, 2023 and December 31, 2022, we had surety bonds outstanding of $434 million and $415 million, respectively.

As of September 30, 2023 and December 31, 2022, our revolving loan capacity available was $45 million, respectively.

As mentioned above, on October 24, 2023, we further amended our Credit Agreement, the details of which are discussed in “Note 12 - Subsequent Events”.

We utilize surety bonds as part of our customary business practice primarily in Latin America.

As of September 30, 2023 and December 31, 2022, we had surety bonds outstanding of $564 million and $415 million, respectively.

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.

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• 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;

Table of Con t e n t s

• changes in, and the administration of, treaties, laws, and regulations, including in response to issues related to the Russia Ukraine Conflict such as nationalization of assets, and the potential for such issues to exacerbate other risks and uncertainties listed or referenced;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis