Weatherford International plc

Thank you for standing by. Welcome to the Weatherford International second quarter 2023 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 Mohamed Tapawala, Vice President, Investor Relations, and M&A. Sir, you may begin.

Welcome, everyone, to the Weatherford International Second Quarter 2023 Conference Call. I'm joined today by Girish Saligram, President and CEO, and Arun Mitra, Executive Vice President and CFO. 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 filing 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 second 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's investor relations 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. Our second quarter results continue to build on the strong momentum of the first, and I'm enormously grateful to the entire One Weatherford team for delivering above expectations despite some headwinds. Our performance in the second quarter is the 12th consecutive quarter of delivering on our enterprise commitments, demonstrating the progress we continue to make in operational execution and result in financial performance. We deliver solid financial performance in revenue, margins, and most importantly, cash flow. While the North America market activity was weaker than anticipated and our business in Canada was impacted from the wildfires, our strength in the international market came through very clearly with 12% sequential growth and was up 27% over last year. This enabled a sequential 7% total revenue growth to $1.27 billion and more than offset the 7% sequential decline in North America. A 20% increase year-over-year for Q2, we are now looking to deliver mid- to high-teens revenue growth for the year. We had several countries generating over 20% growth in the first half of the year compared to the first half of 2022, giving us tangible proof points of broad-based international traction. This quarter once again had strong margin performance with adjusted EBITDA of $291 million with an adjusted EBITDA margin of 22.8%, which is not just a sequential improvement, but it's 536 basis points above the same period a year ago. This performance also represents a significant milestone with the highest level of margin the company has generated in over 12 years. I am particularly pleased with our performance on adjusted free cash flow as we generated $172 million in the second quarter. I believe the strong cash number and EBITDA conversions speak for themselves on our operating focus. Moving to some of our commercial highlights during the second quarter. We had notable wins in our intervention services portfolio with a five-year contract win with Petrobras in offshore Brazil and a three-year contract win with BP Azerbaijan to provide deep water intervention services. Aramco awarded us a three-year drilling services contract, continuing to build on our focus in the region. We were awarded a five-year contract with a major IOC in Iraq to provide upper completions products and services. Kuwait Energy in Iraq has awarded us a two-year well-testing services contract extension. And in North America, Cord Energy awarded us a one-year contract to provide reciprocating rod lift, long-stroke Rotoflex, and conventional pumping unit technology for its Bakken assets. This quarter also witnessed several noteworthy technology milestones. First, I would like to highlight our Vero offering in our tubular running services, or TRS, business. We have talked in prior quarters about this offering, which brings together automation, mechanization, software, and artificial intelligence to provide unmatched connection integrity while enhancing safety. We have now exceeded 650 jobs and 144,000 connections globally. During the quarter, Transocean awarded us TRS Vero automated integrity contracts for the first-ever deployments in Norway on three rigs, and ENI awarded us a two-year contract for Vero for deep water operations in the Mediterranean. Continuing on the theme of technology advancements in TRS, we launched StringGuard, a unique technology that enhances safety and operational efficiency by mitigating the risk of drop strings in TRS operations. I am extremely excited about the value this will bring to our customers, as we can now give them even more confidence in the reliability of our market-leading offerings. In our production and intervention segment, we launched multiple technologies, including MultiCatch Anchor and Ghost Dreamer, to improve borehole conditioning as part of our intervention services business. In the drilling and evaluation segment, we noted in our first quarter call the commercialization of our performance tier MPD offering, which we have now branded as MODIS. During the quarter, MODIS was deployed for a customer in US land, where we successfully demonstrated its ability to increase drilling efficiency. Following our Q1 contract announcement, we have now signed a joint development agreement with Ever, a revolutionary geothermal company, to develop whipstock and sidetrack technology for future projects in Germany and around the world. This agreement is designed to further bolster our geothermal offering to provide liner hanger systems, cementation products, and open-hole and cased-hole wireline services to support the first commercial Ever loop in Germany. Now let's turn to our view on the markets. As we see uneven economic recovery globally, paired with interest rate hikes by central banks impacting near-term demand, we still expect a net favorable environment in the second half of 2023 and continued customer investments going into 2024. Broader themes such as energy security, regionalization, and investment growth, especially in international and offshore markets, further support meaningful, incremental demand for Weatherford products and services across our footprint. Though unforeseen events can certainly disrupt markets, we are constructive on the near- to mid-term outlook and see healthy growth across market segments. In North America, rig count declines are poised to bottom near the levels we see today, and we expect them to hold steady as we move through the remainder of the year. As noted previously, our North America land mix is much more production-oriented, with limited risk tied with reduced rig count activity. As oversupply for both oil and gas is consumed and demand recalibrates, we would expect a slow, steady improvement in both rig and well counts into 2024 as new E&P CapEx plans kick off and operators transition from maintenance-level production. Simultaneously, we continue to consciously transition out of less profitable and cedillary service lines, a recent example being Alaska. While this might cause a relatively more modest comparison on the top line to others, We are seeing the positive impact of these actions on margins and cash generation and will remain focused on maintaining a positive value gap in the North America region. Internationally, the activity outlook is robust in the near to mid-term, led by the Middle East and Latin America, with additional pockets of growth in Asia Pacific, Mediterranean, and other regions. In the Middle East, continued field development investment in Saudi Arabia, UAE, Kuwait, and others, along with regional exploration projects, set the stage for robust rig and well count growth that should enable double-digit growth in 2024. In Latin America, rig and well activity are showing steady growth in the high single digits, led by a significant step up in offshore investment in Mexico, Guyana, Brazil, and in unconventionals in Argentina. Broader indicators support the positive story we see unfolding for offshore. CAPEX growth, a significant step up in project sanctions, tightening rig utilization, and rising activity validate our positive outlook for the next few years, especially for deep water, where we expect market activity to grow around 10% in 2024 and continue into 2025. As offshore activity ramps up and equipment capacity tightens, we expect to see pricing opportunity and a renewed focus on technology to optimize operational performance in these complex environments. This is constructive across our customer profile and product segments, including our offerings of MPD, TRS, completions, and intervention solutions. We also see growing demand for intelligent and AI-driven solutions like Vero and Foresight to support safe, efficient, profitable offshore operations. While we still expect customer project timing adjustments, supply tightness, and FX impacts in certain markets, Our overall outlook for organic growth remains encouraging, and we believe we will continue to see double-digit revenue increases into 2024 with positive margin fall-throughs. Looking ahead, we continue to make progress towards our goal of mid-20s EBITDA margins. We have exceeded expectations in the first half despite seasonality, mixed changes, startup costs on new projects, infrastructure investments, and natural disasters. The strong operating performance has enabled us to continue to de-lever the balance sheet, and our net leverage ratio at 1.1 times is a far cry from the weather for the fold. As we look at our opportunity set in the second half of the year, we believe we are well positioned to take advantage of the strong international and offshore activity while continuing to improve North America profitability. Coupled with the execution capability our team has demonstrated, we are increasing our guidance on revenue, margins, and cash. With that, I'd like to hand it over to Arun to walk us through financial performance and the detailed guidance for the third quarter and full year 2023.