Weatherford International plc

Ladies and gentlemen, thank you for standing by. Welcome to the Weatherford International third quarter 2021 earnings call. All participants will be in a listen-only mode. Since you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. As a reminder, today's event is being recorded. I would now like to turn the conference over to Mohamed Papawala, Director, Investor Relations and M&A. Sir, you may begin.

Welcome, everyone, to the Weatherford International Third Quarter 2021 Conference Call. I'm joined today by Girish Saligram, President and CEO, and Keith Jennings, Executive Vice President and CFO. We will start today with our prepared remarks. then open it up for questions. You may download a copy of the presentation slides that correspond with today's call from our website's investor relations section. I want to remind everyone that some of today's comments include forward-looking statements. These statements are subject to many risks and uncertainties that could cause our actual results to materially differ from any expectation expressed herein. Please refer to our latest Securities and Exchange Commission filings risk factors and cautions regarding forward-looking statements. Our comments today also include non-GAAP financial measures. The underlying details and a reconciliation of GAAP to non-GAAP financial measures are included in our third quarter press release, which can be found on our website. With that, I'd like to turn the call over to Girish.

Thanks, Mohamed, and thank you all for joining our call today. We will start on slide three, which highlights very significant accomplishments on our key priorities during an exceptional third quarter. As you're all aware, there have been significant headwinds roiling several industries over the past quarter. In addition to the ongoing effects of the pandemic, the third quarter witnessed pervasive supply chain disruptions, inflationary pressures, and severe weather impacts. Despite these challenges, I am very pleased and proud of our team's commitment to our four strategic imperatives that enabled outperformance against expectations on revenue, adjusted EBITDA, and free cash flow. We ended the third quarter of 2021 with ample liquidity. Our product and service portfolio continued to prove its strength with record-breaking accomplishments. Our market reading product lines, including managed pressure drilling and tubular running services, enabled us to drive synergies across our portfolio and demonstrate the unique value of integrating our offerings. We have laid out our strategy and approach in prior calls, and our results this quarter are another important proof point of the tangible outcome of the daily efforts of the One Weatherford team. Getting into some specifics, I'll start with safety, which is a foundational element of our performance. Having the discipline, rigor, and focus to continually ensure that our team goes home safely every day instills the same mindset across all operating processes. I'd like to recognize our team in Mexico, where we maintain a 100% safety record for 2021. This is an exemplary achievement and a great example of our continued commitment to safety. Turning to our financial results, we delivered outstanding performance with reported adjusted EBITDA margins of 19%, an improvement of more than 380 basis points sequentially. Like prior quarters where we have exceeded expectations, I will temper the enthusiasm with a reminder that we are still laser focused on fundamental operating performance improvement. We have talked in the past about our approach of improving our margin at baseline activity levels while capturing increasing activity at higher fall-throughs. This came through in spades in Q3 with a very favorable services mix on increased activity. We also had some one-time items during the quarter, which Keith will cover, but even without them, our margins ticked up significantly. We have also talked about 15% adjusted EBITDA margins as our intermediate goal over the next couple of years, and I am pleased that we are delivering at that level well ahead of our timeline. However, we do recognize that we still have work to do to ensure balanced and predictable performance consistently and through cycles. Our cash performance was remarkable, with the company generating $111 million in free cash flow. This puts us on track for another full year of positive free cash flow which is a notable achievement. We recently executed multiple financial transactions to address our capital structure inefficiencies. This basket of transactions resulted in achieving much needed flexibility with our banking partners, reducing interest expense and extending of maturities. We appreciate investors for recognizing the underlying and improving capabilities of our company and recognize the current constructive tone towards energy services, which afforded us the window to accomplish these transactions. With these transactions, we are materially reducing interest expenses, improving our operating profile, and enhancing balance sheet flexibility. We give the company a stable foundation to continually drive our focus on customers, technology, and operations, which should deliver increased margins and free cash flow generation. None of the results were feasible without the tireless dedication and hard work of our entire One Weatherford team, and I'm incredibly proud of their commitment and achievements. As I reflect back on my first full year with the company, I am humbled and grateful at having the privilege to represent their efforts to all of you. Moving to slide four, I want to highlight progress on our strategic vectors, which we shared earlier in the year. Our first strategic vector is our product and service portfolio, and we continue to make technology, commercialization, and business model advancements across product lines. We have talked about our market-leading product lines, and the PressurePro expansion and managed pressure drilling is a great example of enhancing our offerings to ensure that we have capability across the application and pricing spectrum. The slide highlights new offerings, expansions, and technology-driven records in each of our market leading product lines. However, where we get an amplification effect is when we are able to integrate our offerings to enhance the synergies among them. The single largest vehicle for this is our integrated services, which delivered outstanding results this quarter in Europe and Mexico. In one project in the North Sea, we were able to leverage MPD, and TRS to pull through our drilling services business. This enabled us to replace a competitor to drill three challenging large-hole weld sections, ultimately saving the customer more than 13 days. In Mexico, our integrated services tripled efficiency from the exploration to the early development phase of a project to deliver early production in a new field development. In fact, we set a field record by drilling one weld to total depth in approximately 22 days, a two-thirds improvement in drilling and weld construction time. The solution spans several drilling and completion technologies, including advanced geosteering and logging while drilling or LWD tools. The strength of our industry-leading brands and technologies, like the Magnus rotary steerable system and the central well construction optimization platform, was evident in delivering these solutions. Our second strategic vector is around our evolution as part of the energy transition. For us to ensure a bright future in the new energy economy in the future as an energy services company, We need to drive the same technology differentiation and solution creation as we have in traditional oil field services. We are actively pursuing opportunities in CCUS while working plug-in abandonment projects for customers in multiple geographies. We also remain excited about geothermal as an important energy source where we have been a leader for over 20 years. During the third quarter, we provided the technology and engineering needed to remove scale and enable installing an electrical submersible pump for the rejuvenation of a geothermal well in Germany. The final strategic vector for us, digitalization and automation, is critical to address our customers' needs, and we continue to gain traction and increase adoption with customers across all our geozones. A large operating company in Colombia awarded Weatherford a three-year contract for the Foresight production optimization platform. With this award, the Foresight platform has the leading production monitoring market share in that part of the world. On top of that, an NOC in the Middle East recognized our production automation and software services for performance excellence and problem solving in the face of extreme challenges. And following up on these accomplishments, Hart Energy declared Foresight Edge a winner of the special Meritorious Award for Engineering Innovation. This honor further solidifies it as a best-in-class technology with game-changing technical and economic potential for our industry. Digital solutions like Foresight Edge were again the focus of our Weatherford Enterprise Software Conference, or WESC, for three days at the end of October 2021. WESC is Weatherford's largest customer event and the industry's preeminent digitalization forum. This year marked the 16th annual conference featuring advancements from well construction to production. The size and scope of the show expands year after year. In 2021, we had virtual participants from Houston to Abu Dhabi and Jakarta, and we held nearly twice the number of breakout sessions for customers. One thing that didn't change is the unique features where customers not only attend, but also share testimonials on Weatherford technologies in action. Our strategic vectors are the central themes in a long-term approach to preserve our ability to differentiate and create value. And with all of these moving in the right direction, we feel confident in their progress ahead. That same spirit of differentiation and value creation is evident in our operational highlights shown on slide five. We leveraged our industry-leading offerings to deliver differentiated services for our customers and pull through others across our portfolio. You'll notice that we helped them deliver better wells, wells with enhanced integrity from the start and improved reservoir productivity in the long run. These kinds of outcomes have not gone unnoticed by our customers, which has enabled us to gain market share, expand our margins, and generate repeat business. Our market-leading product lines enable a beachhead offering with customers that then allows us to gain share of wallets by pulling through other product lines. As an example, an NOC in North Africa awarded us a contract for MPD services in an onshore field. The win comes after multiple years of contracting with our competitors and was based on the strength of our technology. With this award, we not only gained share, but also expanded the scope of our MPD work in the country beyond deep water to land. Additionally, in the same geography, a major customer awarded us a sole source contract to supply completion materials reservoir monitoring systems, and associated services. This award enables us to replace vendors who historically provided the services. In addition, a major IOC in South America awarded us an offshore TRS contract for running completions on its next campaign. This opportunity again comes after years on the outside and let us introduce Vero Technology with all of its benefits. As a premium offering, Vero Technology provides immediate and lasting benefits to the crew, efficiency, safety, and integrity, all of which bring enormous value to our customers. With an operator in Australia, after serving as the incumbent on a ring and deploying our other TRS services, we secured an inaugural contract for Vero. Upgrading the customer's services has delivered significant rig time savings and reduced personnel on board. For a major operator in the Gulf of Mexico, we replaced conventional operations with a Vero trial, which allowed the customer to mitigate potentially detrimental connection issues. We are also driving the same returns-focused differentiation across our other product lines. We have seen significant commercial traction and margin expansion in our drilling services product line, spearheaded by our Magnus rotary steerable system. In South America, we increased the adoption of these services by completing a successful field trial with an NOC. Our Magnus RSS and Riptide drilling reamer both achieved rates of penetration 30% faster than planned. As a result of the performance on the first well, the customer assigned us additional wells with the potential to expand further. For another customer, our services included the Revolution RSS, which drilled a well 13 days faster than planned and saved 27 operational days over the course of the entire campaign. Turning to slide six for our view on the market, we continue to see improvement in the overall macro environment and believe we are in the early stages of a multi-year upcycle. In North America, Market fundamentals continue to improve and we continue to see capital discipline from public ENPs. Our focus, however, continues to be on generating sustainable returns and going after work only where it makes sense for us to do so. Keith will talk more about that in relation to our fourth quarter outlook and on margin improvement, an area where we continue to see improvements. It is also important to note that our business in North America has changed significantly over the past couple of years. We no longer play in high-volume, low-margin services. and are focused on our four market leading product lines, conventional lift and other high margin offerings, including digital solutions. This has been a key driver of our continued margin improvement in North America, but does reduce our growth expectations relative to the rest of the industry. However, we strongly believe that the prioritization of margins and returns is the right call for us now. Internationally, we continue to see activity increases in most geographies, particularly the Middle East and South America. In an environment where we saw increasing signs of economic recovery and very tight oil and gas markets, tendering activity was above pre-pandemic levels and RIC counts continued to trend up. We are very appreciative of our customers' support as we have had wins during the quarter throughout every geozone. Additionally, we have deployed differentiating drilling and evaluation technologies in the North Sea and Middle East with very positive results, and we believe that they will be drivers for continued growth in future quarters. Looking ahead to 2022, we are now more confident in a growth scenario, and despite inflationary headwinds, expect to see continued improvement in profitability reflected in margin expansion on a year-over-year basis. Now I'll hand it over to Keith for our financial update.