What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-24 compared with 2024-04-24 · 143 added, 87 removed, 167 unchanged (58% of the section changed)

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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

Three Months Ended Six Months Ended

June 30, June 30,

2024 2023 2024 2023

Oil price - WTI (1)

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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

Three Months Ended Six Months Ended

June 30, June 30,

2024 2023 2024 2023

North America 738 836 785 909

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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 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.

Revenues in Russia were approximately 5% of our total revenues for the three months ended March 31, 2024, compared to 6% of our total revenues for the three months ended March 31, 2023.

As of March 31, 2024, our Russia operations included $50 million in cash, $104 million in other current assets, $73 million in property, plant and equipment and other non-current assets, and $51 million in liabilities.

Revenues in Russia were approximately 5% of our total revenues for the three and six months ended June 30, 2024, compared to 6% of our total revenues for the three and six months ended June 30, 2023.

As of June 30, 2024, our Russia operations included $84 million in cash, $100 million in other current assets, $78 million in property, plant and equipment and other non-current assets, and $54 million in liabilities.

As of December 31, 2023, our Russia operations included $62 million in cash, $94 million in other current assets, $76 million in property, plant and equipment and other non-current assets, and $62 million in liabilities.

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• curtailing or winding down our activities over time;

• potentially divesting some or all of our assets or businesses in Russia, which could include the option of re-entering the country if and when sanctions or applicable laws would allow for the same and;

• potential nationalization of the business.

Consolidated Statements of Operations - Operating Summary

Revenues of $1.4 billion in the three months ended March 31, 2024, increased 15% compared to $1.2 billion in the three months ended March 31, 2023.

Year-over-year in the first quarter, product revenues increased 11% and service revenues increased 17%.

DRE and WCC contributed 29% and 22% of the increase in revenues, respectively, offset by a 1% decline of revenue in PRI.

Revenues of $1.4 billion and $2.8 billion in the three and six months ended June 30, 2024, increased 10% and 12% compared to $1.3 billion and $2.5 billion in the three and six months ended June 30, 2023, respectively.

Year-over-year in the second quarter, product revenues increased 13% and service revenues increased 9%.

WCC, DRE, and PRI contributed 49%, 25%, and 2% of the increase in revenues, respectively.

The remaining revenue increase was due to higher activity in integrated services and projects.

Geographically, revenue growth was led by improvements in the Middle East/North Africa/Asia, Latin America and Europe/Sub-Sahara Africa/Russia, which contributed to 70%, 31% and 10% of the increase, respectively, partly offset by a revenue decline in North America.

Average oil prices in the three months ended March 31, 2024 increased 2% for both West Texas Intermediate crude oil and Brent North Sea crude oil compared to the same period in 2023.

Henry Hub natural gas prices decreased 20% compared to the same period in 2023.

Global rig counts decreased 5% compared to three months ended March 31, 2023.

The decrease in Henry Hub natural gas prices and rig count in North America and the increase in international rig count was observable in the revenue changes in the respective regions year-over year.

Cost of products and services of $884 million in the three months ended March 31, 2024, increased 12% compared to $790 million in the three months ended March 31, 2023, respectively.

Our cost of products and services as a percentage of revenues was 65% in the three months ended March 31, 2024 compared to 67% in the three months ended March 31, 2023 reflecting improved utilization on a more efficient operating cost structure.

Additionally, lower inventory charges contributed to the lower cost as a percentage of revenues.

Selling, general, administrative and research and development costs of $236 million in the three months ended March 31, 2024, increased 9% compared to $216 million in the three months ended March 31, 2023.

Year-over-year in the six months ended June 30, 2024, product revenues increased 12% and service revenues 13%.

WCC, DRE, and PRI contributed 33%, 27%, and 1% of the increase in revenues, respectively.

The remaining revenue increase was due to higher activity in integrated services and projects.

Geographically, the year-over-year second quarter revenue growth was led by improvements in the Middle East/North Africa/Asia and Europe/Sub-Sahara Africa/Russia regions, which contributed to 92% and 31% of the increase, respectively, partly offset by a revenue decline in Latin America and North America.

Year-over-year in the six months ended June 30, 2024, revenue growth was led by improvements in the Middle East/North Africa/Asia, Europe/Sub-Sahara Africa/Russia, and Latin America regions, which contributed to 80%, 19% and 12% of the increase, respectively, partly offset by a revenue decline in North America.

Operating income of $264 million and $497 million in the three and six months ended June 30, 2024, increased 31% and 29% compared to $201 million and $386 million in the three and six months ended June 30, 2023, respectively, primarily driven by improved operational efficiencies from increased resource utilization in addition to gains on sales of used rental equipment.

Cost of products and services of $891 million and $1.8 billion in the three and six months ended June 30, 2024, increased 5% and 8% compared to $847 million and $1.6 billion in the three and six months ended June 30, 2023, respectively.

Our cost of products and services as a percentage of revenues was 63% and 64% in the three and six months ended June 30, 2024 compared to 66% and 67% in the three and six months ended June 30, 2023, respectively, reflecting improved utilization on a more efficient operating cost structure.

Average oil prices in the three months ended June 30, 2024 increased by 11% for West Texas Intermediate crude oil and 8% for Brent North Sea crude oil and in the six months ended June 30, 2024 increased by 6% for West Texas Intermediate crude oil and 5% for Brent North Sea crude oil compared to the same periods in 2023, respectively.

Average Henry Hub natural gas prices in the three months ended June 30, 2024 decreased 4% and in the six months ended June 30, 2024, decreased by 12%, compared to the same periods in 2023, respectively.

Global rig counts for the three and six months ended June 30, 2024 decreased by 5% compared to both the same periods in 2023, respectively, driven by a decrease in North America.

The year-over-year decrease in both the Henry Hub natural gas prices and North America rig count reflects the lower market demand and oversupply of natural gas in the region.

Selling, general, administrative and research and development costs of $247 million and $483 million in the three and six months ended June 30, 2024, increased 10% in both periods compared to $225 million and $441 million in the three and six months ended June 30, 2023, respectively.

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

Selling, general, administrative and research and development costs as a percentage of revenues was 17% in the three months ended March 31, 2024, an improvement compared to 18% in the three months ended March 31, 2023.

Selling, general, administrative and research and development costs as a percentage of revenues was 18% in both the three and six months ended June 30, 2024, and in both the three and six months ended June 30, 2023.

Consolidated Statements of Operations - Non-Operating Summary

Interest Expense, Net

Interest expense, net was $29 million and $31 million in the three months ended March 31, 2024 and 2023, respectively.

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.

Interest expense was $43 million in the three months ended March 31, 2024, and $47 million in the three months ended March 31, 2023.

Interest income was $14 million in the three months ended March 31, 2024 and $16 million in the three months ended March 31, 2023.

Interest expense, net was $24 million and $53 million in the three and six months ended June 30, 2024, respectively, and $31 million and $62 million in the three and six months ended June 30, 2023, respectively.

Interest expense, net is interest expense net of interest income.

Interest expense of $41 million and $84 million in the three and six months ended June 30, 2024, respectively, and $47 million and $94 million in the three and six months ended June 30, 2023, respectively, decreased primarily due to the reduction in our outstanding long-term debt.

As of June 30, 2024, we have fully repaid our outstanding 2028 Senior Secured Notes.

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

Interest income was $17 million and $31 million in the three and six months ended June 30, 2024, respectively, and $16 million and $32 million in the three and six months ended June 30, 2023.

Loss on Blue Chip Swap Securities

An indirect foreign exchange mechanism known as the Blue Chip Swap (“BCS”) allows entities to remit U.S.

dollars from Argentina through the purchase and sale of securities.

We entered into a series of BCS securities transactions that resulted in a “Loss on Blue Chip Swap Securities” of $10 million in the three and six months ended June 30, 2024 and $57 million in the three and six months ended June 30, 2023.

See “Note 12 – Blue Chip Swap Securities - Argentina” to our Condensed Consolidated Financial Statements for additional details.

Other Expense, Net

Other expense, net was $22 million in the three months ended March 31, 2024 and $35 million in the three months ended March 31, 2023.

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.

Other expense, net was $20 million and $42 million in the three and six months ended June 30, 2024, respectively, and $39 million and $74 million in the three and six months ended June 30, 2023, respectively.

Other expense, net primarily represents foreign exchange 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.

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Three Months Ended (Unfavorable)

March 31, $ % or bps

June 30, $ % or bps

(Dollars in millions) 2024 2023 Change

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PRI Segment Adjusted EBITDA Margin 23.0 % 22.1 % n/m 90 bps

DRE revenues of $422 million in the three months ended March 31, 2024, increased $50 million or 13% compared to $372 million in the three months ended March 31, 2023.

Of the year-over-year revenue increase in the first quarter of 2024 , approximately all of the increase was equally contributed by wireline and drilling- related services.

Geographically, approximately 50% of the overall revenue growth came from Middle East/North Africa/Asia and approximately 35% from the

Europe/Sub-Sahara Africa/Russia region.

DRE segment adjusted EBITDA of $130 million in the three months ended March 31, 2024, increased $22 million or 20%, compared to $108 million in the three months ended March 31, 2023.

DRE segment adjusted EBITDA margin was 30.8% in the three months ended March 31, 2024 compared to 29.0% in the three months ended March 31, 2023.

WCC revenues of $458 million in the three months ended March 31, 2024, increased $37 million or 9% compared to $421 million in the three months ended March 31, 2023.

Of the year-over-year revenue increase in the first quarter 2024 , approximately 70% was from completions and tubular running services.

Geographically, Middle East/North Africa/Asia contributed approximately 65% and Latin America approximately 35%, to the regions with revenue growth, offset by a revenue decline in the North America and Europe/Sub-Sahara Africa/Russia regions.

WCC segment adjusted EBITDA of $120 million in the three months ended March 31, 2024, increased $24 million or 25% compared to $96 million in the three months ended March 31, 2023.

WCC segment adjusted EBITDA margin was 26.2% in the three months ended March 31, 2024, compared to 22.8% in the three months ended March 31, 2023.

PRI revenues of $348 million in the three months ended March 31, 2024, decreased $1 million compared to $349 million in the three months ended March 31, 2023.

Of the year-over-year revenue decrease in the first quarter of 2024 , a modest decline from pressure pumping was partially offset by an increase primarily in artificial lift.

Geographically, approximately all of the revenue decrease came from North America, offset by a revenue increase in the Latin America region.

PRI segment adjusted EBITDA of $73 million in the three months ended March 31, 2024, increased $5 million or 7%, compared to $68 million in the three months ended March 31, 2023.

PRI segment adjusted EBITDA margin was 21.0% in the three months ended March 31, 2024, an improvement compared to 19.5% in the three months ended March 31, 2023.

Six Months Ended (Unfavorable)

June 30, $ % or bps

(Dollars in millions) 2024 2023 Change

DRE Revenues $ 849 $ 766 $ 83 11 %

WCC Revenues 962 861 101 12 %

PRI Revenues 717 715 2 — %

All Other 235 118 117 99 %

Total Revenues $ 2,763 $ 2,460 $ 303 12 %

Operating Income:

DRE Segment Adjusted EBITDA $ 260 $ 214 $ 46 21 %

WCC Segment Adjusted EBITDA 265 205 60 29 %

PRI Segment Adjusted EBITDA 158 149 9 6 %

All Other 50 18 32 178 %

Corporate (32) (26) (6) (23) %

Depreciation and Amortization (171) (161) (10) (6) %

Share-based Compensation

(25) (17) (8) (47) %

Other Credits (Charges) (8) 4 (12) (300) %

Operating Income $ 497 $ 386 $ 111 29 %

DRE Segment Adjusted EBITDA Margin 30.6 % 27.9 % n/m 269 bps

WCC Segment Adjusted EBITDA Margin 27.5 % 23.8 % n/m 374 bps

PRI Segment Adjusted EBITDA Margin 22.0 % 20.8 % n/m 120 bps

DRE revenues of $427 million and $849 million in the three and six months ended June 30, 2024, increased $33 million or 8%, and increased $83 million or 11%, compared to $394 million and $766 million in the three and six months ended June 30, 2023, respectively.

Of the second quarter year-over-year revenue increase, approximately 85% was from wireline activity after business acquisitions in the first quarter of 2024.

Geographically, the Middle East/North Africa/Asia and Europe/Sub-Sahara Africa/Russia regions contributed approximately 65% and 35%, respectively, to the regions with revenue growth, offset by a revenue decline in the Latin America region, primarily from project delays.

Of the year-to-date year-over-year increase, approximately 65% was from wireline activity, and geographically, the Middle East/North Africa/Asia and Europe/Sub-Sahara Africa/Russia regions contributed approximately 60% and 40%, respectively, to the regions with revenue growth, offset by a revenue decline in the Latin America region.

DRE segment adjusted EBITDA of $130 million and $260 million in the three and six months ended June 30, 2024, increased $24 million or 23%, and increased $46 million or 21%, compared to $106 million and $214 million in the three and six months ended June 30, 2023.

DRE segment adjusted EBITDA margin was 30.4% and 30.6% in the three and six months ended June 30, 2024 compared to 26.9% and 27.9% in the three and six months ended June 30, 2023.

The improvement in segment adjusted EBITDA was primarily due to timing of certain higher margin international managed pressure drilling activity, including certain sales of used rental equipment, which more than offset the decrease in Latin America project delays.

WCC revenues of $504 million and $962 million in the three and six months ended June 30, 2024, increased $64 million or 15%, and increased $101 million or 12%, compared to $440 million and $861 million in the three and six months ended June 30, 2023, respectively.

Of the second quarter year-over-year revenue increase, approximately 70% was from completions and liner hanger activity, primarily from the timing of deliveries.

Geographically, the Middle East/North Africa/Asia region contributed approximately 90% to the overall revenue growth.

Of the year-to-date year-over-year revenue increase, approximately 45% was from liner hangers and tubular running services activity and approximately 40% was from completions activity.

Geographically, international regions drove the revenue growth and the Middle East/North Africa/Asia region contributed approximately 80% of the international growth.

This was partly offset by a revenue decline in North America, primarily on account of lower demand in that region.

WCC segment adjusted EBITDA of $145 million and $265 million in the three and six months ended June 30, 2024, increased $36 million or 33%, and increased $60 million or 29%, compared to $109 million and $205 million in the three and six months ended June 30, 2023, respectively.

WCC segment adjusted EBITDA margin was 28.8% and 27.5% in the three and six months ended June 30, 2024, compared to 24.8% and 23.8% in the three and six months ended June 30, 2023.

The increase in revenue and segment adjusted EBITDA was primarily from higher completions activity.

PRI revenues of $369 million and $717 million in the three and six months ended June 30, 2024, increased $3 million and $2 million, compared to $366 million and $715 million in the three and six months ended June 30, 2023, respectively.

Of the second quarter year-over-year revenue increase, the modest increase in intervention services and drilling tools was partly offset by a decline in artificial lift activity .

Geographically, revenue growth in the Europe/Sub-Sahara Africa/Russia and Middle East/North Africa/Asia regions was offset by a decline in the North America and Latin America regions.

Of the year-to-date year-over-year revenue increase, the modest increase in intervention services and drilling tools was partly offset by a decline in artificial lift and pressure pumping activity .

Geographically, revenue growth in the Europe/Sub-Sahara Africa/Russia and Middle East/North Africa/Asia regions was offset by a decline in North America.

PRI segment adjusted EBITDA of $85 million and $158 million in the three and six months ended June 30, 2024, increased $4 million or 5% and increased $9 million or 6% compared to $81 million and $149 million in the three and six months ended June 30, 2023, respectively.

PRI segment adjusted EBITDA margin was 23.0% and 22.0% in the three and six months ended June 30, 2024, compared to 22.1% and 20.8% in the three and six months ended June 30, 2023.

The increase in revenue and segment adjusted EBITDA was primarily from higher artificial lift activity.

All Other Results

All other includes results from non-core business activities that do not individually meet the criteria for segment reporting, including integrated services and projects, which includes pass through and project management services.

All Other revenues of $130 million in the three months ended March 31, 2024, increased $86 million or 195%, compared to $44 million in the three months ended March 31, 2023.

All other results were from non-core business activities that do not individually meet the criteria for segment reporting, including integrated services and projects, which includes pass through and project management services.

All Other revenues of $105 million and $235 million in the three and six months ended June 30, 2024, compared to $74 million and $118 million in the three and six months ended June 30, 2023.

The year-over-year increase was primarily from our integrated services and projects in the Middle East/North Africa/Asia and Latin America regions.

Corporate was a net expense of $14 million in the three months ended March 31, 2024 compared to $12 million in the three months ended March 31, 2023.

Corporate was a net expense of $18 million and $32 million in the three and six months ended June 30, 2024 compared to $14 million and $26 million in the three and six months ended June 30, 2023.

The year-over-year increase in expense was primarily due to an increase in certain professional fees.

Depreciation and Amortization

Depreciation and amortization was $85 million in the three months ended March 31, 2024 compared to $80 million in the three months ended March 31, 2023.

Depreciation and amortization were $86 million and $171 million in the three and six months ended June 30, 2024 compared to $81 million and $161 million in the three and six months ended June 30, 2023.

The year-over-year increase was primarily due to a larger asset base.

Share-based Compensation

We recognized $13 million of share-based compensation in the three months ended March 31, 2024 compared to $9 million in the three months ended March 31, 2023.

The increase was primarily attributable to annual equity awards granted in the first quarter.

We recognized $12 million and $25 million of share-based compensation in the three and six months ended June 30, 2024 compared to $8 million and $17 million in the three and six months ended June 30, 2023.

The year-over-year increase was primarily due to an increase in equity awards granted.

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

These include but are

not limited to;

These include but are not limited to;

geopolitical uncertainty;

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and the price of oil and natural gas.

We continue to expect overall 2024 growth to outpace 2023, led by international and production-focused activity.

We expect continued improvements in our customer activity levels and generally positive macroeconomic conditions, all of which are expected to continue to provide a pathway to a multi-year energy demand expansion.

We continue to expect overall 2024 growth to outpace 2023, led by international activity and global offshore activity.

We expect continued improvements in our customer activity levels and generally constructive macroeconomic conditions, all of which are expected to continue to provide a pathway to a multi-year energy demand expansion.

We continue to closely monitor macroeconomic and geopolitical conditions, potential supply chain disruptions, inflationary factors, and other labor and logistical constraints that could impact our operations and results.

Liquidity and Capital Resources

At March 31, 2024, we had cash and cash equivalents of $824 million and $113 million in restricted cash, compared to $958 million of cash and cash equivalents and $105 million in restricted cash at December 31, 2023.

At June 30, 2024, we had cash and cash equivalents of $862 million and $58 million in restricted cash, compared to $958 million of cash and cash equivalents and $105 million in restricted cash at December 31, 2023.

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

Three Months Ended March 31,

Six Months Ended June 30,

(Dollars in millions) 2024

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Operating Activities

Cash provided by operating activities was $131 million for the three months ended March 31, 2024, an increase from the $84 million for the three months ended March 31, 2023.

The increase from the prior year was mostly driven by an increase in operating income as well as heightened collections activity which more than offset seasonal working capital requirements.

During the fourth quarter of 2023, we entered into a credit default swap with a third-party financial institution related to a secured loan between that third-party financial institution and our largest customer in Mexico.

The secured loan was utilized by this customer to pay us $142 million in the three months ended March 31, 2024 of certain of our outstanding receivables, increasing our net cash provided by operating activities.

See further discussion in “Note 11 – Credit Default Swap”.

Cash provided by operating activities was $281 million for the six months ended June 30, 2024 compared to cash provided by operating activities of $285 million for the six months ended June 30, 2023.

The primary operating sources of cash were from the timing of cash generated by our operations, offset by our operating spend, including payments to suppliers and employees.

Net cash provided by operating activities was also benefited by accounts receivable factoring, as further described in the Accounts Receivable Factoring section below.

Investing Activities

Cash used in investing activities was $54 million for the three months ended March 31, 2024.

The primary investing activities were from cash used for capital expenditures of $59 million and cash used for acquisitions, net of cash acquired, of $36 million.

The uses of cash were primarily offset by proceeds from sale of investments of $41 million from our marketable securities in Argentina and other outflows of $10 million.

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.

Cash used in investing activities was $115 million for the six months ended June 30, 2024 compared to cash used in investing activities of $122 million for the six months ended June 30, 2023.

The primary investing uses of cash were for capital expenditures of $121 million and $100 million for the six months ended June 30, 2024 and six months ended June 30, 2023, respectively.

Cash used in investing activities also includes the use of the Blue Chip Swap mechanism in Argentina, of which the purchases more than offset the proceeds, resulting in a loss of $10 million and $57 million during the six months ended June 30, 2024 and June 30, 2023 (see “Note 12 – Blue Chip Swap Securities - Argentina”).

The increase in business acquisitions, net of cash acquired in the current period was primarily from our acquisitions completed in the first quarter of 2024 (see “Note 13 – Acquisitions”).

Other investing activities include proceeds from the disposition of assets and proceeds from the sale of investments from our marketable securities in Argentina, offset by investing spend around other intangibles.

Financing Activities

Cash used in financing activities was $187 million for the three months ended March 31, 2024.

The primary uses of cash were $172 million for repayments and repurchases of long-term debt (see “Note 6 – Borrowings and Other Debt Obligations”).

The tax remittances on equity awards vested were lower relative to the three months ended March 31, 2023 due to a decrease in the quantity of shares vesting.

Cash used in financing activities was $127 million for the three months ended March 31, 2023.

The primary uses of cash were for repayments of long-term debt of $66 million and $52 million in tax remittances on equity awards vested.

Cash used in financing activities was $289 million for the six months ended June 30, 2024 compared to cash used in financing activities of $297 million for the six months ended June 30, 2023.

The primary financing uses of cash were for repayments and repurchases of long-term debt of $259 million and $230 million for the six months ended June 30, 2024 and six months ended June 30, 2023, respectively (see “Note 6 – Borrowings and Other Debt Obligations”).

Cash used in financing activities also includes tax remittances on equity awards vested, which were lower this period compared to the same period in the prior year due to a decrease in the quantity of shares vested.

In addition, the tax remittance of $54 million on equity rewards vested in the prior year reflected the impact on the timing of both the quantity of shares vested and the increase in share price of those awards upon vesting.

Other financing uses of cash include distributions to noncontrolling interests and bond redemption premiums paid.

Sources of Liquidity

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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, operating costs and restructuring payments.

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

As business activity continues to rise, we expect 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.

In addition, we have derivative financial instruments where we have notional amounts that do not generally represent cash amounts exchanged by the parties and are calculated based on the terms of the derivative instrument, however, in the event of a related default, we could potentially be required to pay.

See further discussion in our Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”) and “Note 11 – Credit Default Swap”.

As of March 31, 2024, the aggregate principal amount of our primary debt outstanding was $82 million of our 2028 Senior Secured Notes and $1.6 billion of our 2030 Senior Notes.

We expect to pay less than $147 million in interest payments in 2024 specific to these notes, of which we have paid $6 million during the three months ended March 31, 2024.

See further discussion in our Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”).

The CDS agreement at “Note 11 – Credit Default Swap” was terminated on July 17, 2024 and the remaining notional balance was eliminated (see “Note 14 – Subsequent Events”).

Our cash requirements will also include payments for our shareholder returns program described in “Note 14 – Subsequent Events.”

As of June 30, 2024, the aggregate principal amount of our primary debt outstanding was $1.6 billion of our 2030 Senior Notes.

We expect to pay $138 million in interest payments in 2024 specific to this note, of which we have paid $69 million during the six months ended June 30, 2024.

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

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

At March 31, 2024 and December 31, 2023, we had approximately $141 million and $92 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 June 30, 2024 and December 31, 2023, we had approximately $123 million and $92 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.

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

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Ratings Services’ Credit Ratings

Our credit ratings at December 31, 2023 have been maintained through March 31, 2024.

Our credit ratings at December 31, 2023 have been maintained through June 30, 2024.

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.

We may experience delays or defaults in customer payments due to, among other reasons, a weaker economic environment, reductions in our customers’ cash flow from operations, our customers’ inability to access credit markets or reach acceptable financing terms, as well as unsettled political and/or social 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.

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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.

In addition to the exposure in Mexico as noted in the above “Cash Requirements” section and in “Note 11 – Credit Default Swap, as of March 31, 2024 and December 31, 2023, our net accounts receivables in Mexico were 28% and 27% of our total net accounts receivables, respectively, of which our largest customer in the country accounted for 24% and 22% of our total net outstanding accounts receivables, respectively.

From time to time, we experience delays in payments from our largest customer in Mexico 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 March 31, 2024 and December 31, 2023, our net accounts receivables in the U.S.

was 10% and 11% of total net accounts receivables, respectively.

In addition to the exposure in Mexico as noted in the above “Cash Requirements” section and in “Note 11 – Credit Default Swap”, our net accounts receivables in Mexico were 35% and 27% of our total net accounts receivables, as of June 30, 2024 and December 31, 2023, respectively, of which our largest customer in the country accounted for 31% and 22% of our total net outstanding accounts receivables, respectively.

From time to time, we experience delays in payments from our largest customer in Mexico.

The balances due are not in dispute and we do not expect to have any material write-offs of receivables, however, delays or defaults in customer payments in the future could differ from management’s expectations and negatively impact the future results of the Company.

As of June 30, 2024 and December 31, 2023, our net accounts receivables in the U.S.

was under 10% and was 11% 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-back.

During the three months ended March 31, 2024 and March 31, 2023, we sold accounts receivable balances of $8 million and $46 million, and received cash proceeds of $8 million and $42 million, respectively, at the time of factoring.

During the three and six months ended June 30, 2024, we sold accounts receivable balances of $43 million and $51 million, and received cash proceeds of $42 million and $50 million, respectively, at the time of factoring.

Of the $43 million in accounts receivable sold during the second quarter of 2024, $39 million was from a new factoring arrangement we entered into during the quarter.

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, at the time of factoring.

Our 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.

The remaining principal of our 2028 Senior Secured Notes was redeemed and paid in full on May 23, 2024.

Our 2030 Senior Notes were issued by Weatherford Bermuda and guaranteed by the Company and other subsidiary guarantors party thereto.

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Credit Agreement, Letters of Credit and Surety Bonds

Weatherford Bermuda, Weatherford Delaware, and Weatherford Canada Ltd.

Weatherford Bermuda, Weatherford Delaware, Weatherford Canada Ltd.

(“Weatherford Canada”) and WOFS International Finance GmbH (“Weatherford Switzerland”), together as borrowers, and the Company as parent, have an amended and restated credit agreement (the “Credit Agreement”).

The amended Credit Agreement as of December 31, 2023 allowed for a total commitment amount of $550 million, maturing on the earlier of October 24, 2028 and 91 days prior to the maturity of the 2028 Senior Secured Notes.

The Credit Agreement is guaranteed by the Company and certain of our subsidiaries and secured by substantially all of the personal property of the Company and those subsidiaries.

At December 31, 2023, the Credit Agreement allowed for a total commitment amount of $550 million, maturing on the earlier of October 24, 2028 and 91 days prior to the maturity of the 2028 Senior Secured Notes.

Financial covenants in the Credit Agreement include a $250 million minimum liquidity covenant (which may increase up to $400 million dependent on the nature of transactions we may decide to enter into), a minimum interest coverage ratio of 2.50 to 1.00, a maximum total net leverage ratio of 3.50 to 1.00, and a maximum secured net leverage ratio of 1.50 to 1.00.

As of March 31, 2024, we had zero borrowings outstanding under the Credit Agreement, and $374 million of letters of credit outstanding, consisting of the $273 million ($223 million for performance letters of credit and $50 million for financial letters of credit) under the Credit Agreement and another $101 million under various uncommitted bi-lateral facilities (of which there was $100 million in cash collateral held and recorded in “Restricted Cash” on the Condensed Consolidated Balance Sheets).

As of December 31, 2023, we had $376 million of letters of credit outstanding, consisting of the $270 million ($218 million for performance letters of credit and $52 million for financial letters of credit) under the Credit Agreement and another $106 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).

In Latin America we utilize surety bonds as part of our customary business practice.

As of March 31, 2024 and December 31, 2023, we had surety bonds outstanding of $511 million and $594 million, respectively.

On April 22, 2024, additional lenders joined the Credit Agreement, providing an increase in total commitments from $550 million to $680 million (performance letters of credit increased from $250 million to $309 million and borrowings or

additional performance or financial letters of credit increased from $300 million to $371 million).

On June 6, 2024, an additional lender joined the Credit Agreement, providing an increase in total commitments from $680 million to $720 million (performance letters of credit increased to $327 million and revolving loan borrowings or additional performance or financial letters of credit increased to $393 million).

In addition, we amended the Credit Agreement to allow for future increases in total commitments of up to $1 billion.

As of June 30, 2024, we had zero borrowings outstanding under the Credit Agreement and $389 million of letters of credit outstanding.

The letters of credit consisted of 289 million for performance letters of credit and $48 million for financial letters of credit under the Credit Agreement and $52 million letters of credit under various uncommitted bi-lateral facilities ($44 million of which was cash collateral held and recorded in “Restricted Cash” on the Condensed Consolidated Balance Sheets).

As of December 31, 2023, we had zero borrowings outstanding under the Credit Agreement and $376 million of letters of credit.

The letters of credit consisted of $218 million for performance letters of credit and $52 million for financial letters of credit under the Credit Agreement and $106 million of letters of credit under various uncommitted bi-lateral facilities ($101 million of which was cash collateral held and recorded in “Restricted Cash” on the Condensed Consolidated Balance Sheets).

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

As of June 30, 2024 and December 31, 2023, we had surety bonds outstanding of $526 million and $594 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.

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.

This report contains various statements relating to future financial performance and results, business strategy, plans, goals and objectives, including certain projections, business trends, a shareholder returns program, and other statements that are not historical facts.

These statements constitute forward-looking statements.

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• 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 return capital to shareholders, including those related to the timing and amounts (including any plans or commitments in respect thereof) of any dividends and share repurchases;

• our ability to service our debt obligations;

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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