Weatherford International plc

Ladies and gentlemen, thank you for standing by. Welcome to the Weatherford International fourth quarter and full year 2022 earnings call. All participants will be in listen-only mode. Should 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, this event is being recorded. I would now like to turn the conference over to Muhammad Topalwala, Director, Investor Relations, and M&A. Sir, you may begin.

Welcome, everyone, to the Weatherford International fourth quarter and full year 2022 conference call. I'm joined today by Girish Saligram, President and CEO, Arun Mitra, our Executive Vice President and Chief Financial Officer, and Dezen Mills, our Chief Accounting Officer. We will start today with our prepared remarks and then open it up for questions. You may download a copy of the presentation slides corresponding to 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 differ materially from any expectation expressed herein. Please refer to our latest Securities and Exchange Commission filings for 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 fourth quarter earnings press release, which can be found on our website. As a reminder, today's call is being webcast, and a recorded version will be available on our website section following the conclusion of this call. With that, I'd like to turn the call over to Girish.

Thanks, Mohamed. And thank you all for joining the call today. Weatherford delivered outstanding results in the fourth quarter and all of 2022. And I'm incredibly gratified, proud, and humbled. Gratified that our strategy and actions have come together to deliver strong performance. Proud of what we have achieved and humbled by being given the privilege to represent the 17,700 members of the One Weatherford team and share our results with all of you. The spirit, resilience, and talent of our team is the driving force behind the commercial wins, revenue growth, margin expansion, and free cash flow we delivered. My immense pride and deep gratitude goes out to all of our Weatherford team. Thank you for what you do every day for our customers and the company. There are many significant milestones in our full year 2022 results. It was the first time we generated positive free cash flow for three consecutive years in over three decades. We achieved a leverage ratio of 1.4 times, the lowest in over 15 years. Revenue grew year over year by 19%, the highest growth rate in over 10 years. And perhaps most notably, we generated positive net income of $26 million, another first in over 10 years. These results clearly demonstrate the effectiveness of our refreshed operating paradigm and reaffirm the strength of our strategy to enable margin expansion and generate free cash flow. With this marking the 10th successive quarter of results that demonstrate performance, credibility, transparency, and stability, we can now confidently say the turnaround at Weatherford is complete. We are the new Weatherford, a Weatherford that continues to deliver differentiation in technology and people, but now with a culture, leadership, and operating paradigm around consistency and credibility of performance. As we confidently move into the next phase of our journey, we have a broader horizon and a longer range vision to deliver value. Desmond and Arun will cover more details, but I wanted to share a few of the more significant highlights of our results. Our fourth quarter 2022 revenue of $1.2 billion was up 8% sequentially and 25% year over year. Our focus on directed growth and pricing allowed us to grow the top line and was aided by general market activity increase. I am especially pleased with our performance on margins and free cash flow. we delivered 22% adjusted EBITDA margins, expanding margins by 290 basis points sequentially, driven by solid execution across the board. In fact, the Q4 2022 EBITDA margin is the highest that the company has achieved in any quarter in more than 12 years. The improvements we have made in our net working capital efficiencies alongside higher adjusted EBITDA were reflected in our $171 million of free cash flow performance. This is $38 million higher than the third quarter, despite $65 million in additional interest payments. We delivered $72 million of net income in Q4, leading to a full year profitability as measured by net income of $26 million. Few would have bet on Weatherford being net income positive in 2022, and we are excited to turn the page and add to shareholder equity on our balance sheet. While we clearly acknowledge the benefit of the tailwinds of a strong market, our performance improvements are equally driven by the execution intensity on our 2022 focus areas. In fulfillment, we continued our multi-year initiative and have begun to fundamentally change the company's manufacturing, sourcing, and repair platform. Over the course of the year, we identified our new flagship centers, put in place a new logistics management system, and continued to make progress on facility optimization as we have now exited over 12% of our operating facilities since 2021. I have been emphatic about not chasing revenue growth without margins and directed growth with a focus area for us to ensure that incremental revenues also provide margin lift. We complemented this with a company-wide initiative on driving price consistently and systematically as we offset the inflationary pressures from our suppliers and wage increases. Excellence in execution, our focus area aimed at improving our enterprise effectiveness, continued to progress over the course of the year. We saw improved inventory efficiency, evidenced by an 11-day reduction in DSI year-over-year, in a year where revenue increased by 19%. Overall net working capital base improved by 13 days to 91 days, an impressive achievement in a growth environment. Simplification. Our focus area to increase operational efficiency was led by several global and localized initiatives aimed at de-layering and driving more accountability across the organization. resulting in overhead costs as a percentage of revenue to decline over 280 basis points on a full year basis. These initiatives are crucial in delivering our year-over-year increases of 320 basis points in EBITDA margins and $21 million of free cash flow. Over the past three years, Weatherford has generated $655 million of free cash flow, which exceeds the past two decades combined. In the fourth quarter of 2022, We also had many commercial wins, demonstrating our position as both a broad spectrum and specialty services provider, providing a solid foundation for 2023 and beyond. Kuwait Oil Company, or KOC, awarded us a five-year contract to provide directional drilling and logging while drilling services, which provide fit-for-purpose solutions to overcome complex challenges. A major IOC in the Middle East awarded us a five-year contract to provide fishing equipment and services, We attribute this win to our consistent service quality and safety performance. We won three awards worth more than $600 million with a Latin American customer to deliver integrated drilling and completion services in onshore and offshore operations, enabled by our technological and operational leadership. In Brazil, we secured a two-year sole provider award with Petrobras for the provision of our newly enhanced chemical injection system, addressing the reliability and conveyance requirements of the pre-salt play. As previously announced, we received a three-year lump sum turnkey or LSTK contract with Aramco to deliver drilling and intervention services, with the possibility of extending it for two years, and a five-year contract exceeding $500 million from Petroleum Development Oman to deliver integrated drilling services in the Marmool and greater soccer fields, which is already underway. Shifting to our technology and partnership highlights for the quarter, our FIRMA plug-in abandonment team in Europe won an OWI award for significant contribution to the industry. This recognition showcases our firmer solutions' rigorous approach to well decommissioning, resulting in reduced carbon emissions and enhanced safety in every operation. We announced a partnership with Ardine, a leader in specialized well decommissioning technology, that will enable Weatherford and Ardine to deliver significant value to customers globally by offering the industry's most comprehensive portfolio of plug-in abandonment and slot recovery solutions. This partnership demonstrates our continuing commitment to innovation and value creation in the well decommissioning space and further enhancing our industry-leading firma offering. We signed a multi-year agreement with DataRobot, a leader in artificial intelligence, to deliver advanced AI solutions in our digital platforms, including foresight production optimization and central well construction platforms. Now turning to our view on the markets. In North America, the last several quarters have seen a high rate of growth for drilling and completions activity, and we expect the trajectory to start flattening. We still expect North America to grow in 2023, but at a lower rate. On the supply side, we are now beginning to see signs of recovery as logistical constraints are slowly correcting and raw materials are becoming available. On the offshore side, we are seeing signs of market activity picking up and are well positioned to capture it across our portfolio especially with our MPD and TRS offerings. The momentum of our international markets continues to gain traction and support the multi-year upcycle view across all segments and markets. Middle East and Latin America activity continue to be robust, and there will be incremental opportunities as activity further ramps up. In summary, the overall macro environment for the sector continues to be supported by solid fundamentals, despite continued inflationary and geopolitical headwinds. Our ability to carry our momentum forward is evident in the commercial wins in 2022, including over $6.5 billion of wins with IOCs and NOCs across our broad customer footprint. In the coming quarters, we will begin to see the impact of our new contracts, technology advancements, and partnerships as we continue to focus on margins, cash flow, and positioning the company for success over the long term. Our confidence in the growing revenue pipeline and intense focus on driving lean business operations enable us to envision low to mid-20% EBITDA margins over the next few years. We also added a new member to our leadership team. In January, Arun Mitra joined Weatherford as Executive Vice President and Chief Financial Officer. Arun's decision to join Weatherford speaks volumes to the caliber of talent we attract as a best-in-class organization. Arun, we are thrilled to have you on our team. Before I hand things over to Arun, I'd like to thank Desmond Mills for his service as our interim chief financial officer and his continued leadership in guiding our finance team. With that, I'd now like to hand it over to Desmond to talk more specifically about our financial performance this quarter, followed by Arun to walk us through the guidance for the first quarter and full year of 2023.