Weatherford International plc

Ladies and gentlemen, thank you for standing by, and welcome to the Weatherford International Third Quarter 2023 Earnings Call. All participants will be in a listen-only mode, and should you need any assistance today, 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 a question, please press star, then two. As a reminder, this event is being recorded today. I would now like to turn the conference over to Mohamed Topiwala, Director, Investor Relations and M&A. Sir, you may begin.

Welcome, everyone, to the Weatherford International Third 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 the 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 third 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. We delivered another quarter of solid results driven by strong operational execution in a mixed market environment. As always, I want to start by thanking the 18,000 plus members of our One Weatherford team for their passion for our customers and business. Everything we have achieved is the result of their spirit, tenacity, and commitment. Third quarter revenue increased 3% sequentially and 17% year-on-year, driven by international growth across most regions. While we continue to be an internationally levered business, I want to highlight what our North American team has achieved. Historically, North America has been a margin challenge region for us, and we have driven a strong focus on improving profitability in the past couple of years through operational improvements, commercial focus, facility consolidation, and exiting certain businesses. Despite the obvious weakness in North America over the past year, our margin performance in this region has actually increased on a year-over-year revenue decline, and that is a very tangible proof point of the two-cycle resilience of our operating strategy. This quarter yet again witnessed solid margin performance with adjusted EBITDA of $305 million, representing 23.2% margin. We have talked about the first on margin and cash several times, And while this is another of those firsts, it is still an intermediate step towards our goal of mid-20s EBITDA margins. We generated adjusted free cash flow of $137 million in the quarter. While lower than the second quarter, it is higher than what we had guided towards, as we had anticipated some significant collections headwinds in specific geographies. But the rest of the company came together to deliver superior performance. We also continue to build inventory for a higher product sales fourth quarter. As you saw in our announcement yesterday, we now have a $550 million credit facility in place, and I want to thank our banking partners for their support and engagement. We have consistently said that ours is a journey of improvements in our capital structure, and getting this facility with dramatically improved terms and a revolver of $300 million is a capstone event. Our net leverage is now at 0.9x, and I think that speaks for itself. Over the past three years, we have spent a fair amount of time on these calls on capital allocation, and our actions and results demonstrate our commitment to actioning our priorities. Moving to some of our commercial highlights during the third quarter. For our drilling and evaluation segment, KCA JoyTAG awarded us a one-year contract to provide MPD systems and services in Norway, and Transocean has commissioned us to provide and install and MPD system on their ultra-deepwater rig, the Deepwater Aquila. For our well construction and completion segment, Qatar Energy awarded us a five-year contract to provide liner hanger systems for its onshore and offshore wells, and Chevron Angola awarded us a two-year contract for conventional TRS for its offshore deepwater operations. For our production and intervention segment, Aramco awarded us a three-year contract for the supply and maintenance of drilling and fishing jars, in addition to a two-year contract extension for comprehensive intervention services. We were awarded a five-year digital solutions contract by Pertamina Hulu Rokan in Indonesia to provide integrated well-monitoring services and our industry-leading Foresight Edge solution. And finally, Ecopetrol awarded us a two-year contract to provide integrated products and services including artificial lift, completions, drilling tools, and intervention services. This quarter also witnessed several noteworthy technology milestones for each of our segments. Starting with DRE, we deployed the Vell Core Stabilizer lost circulation material in oil-based drilling fluid using an engineered approach to reduce downhole losses and enhance drilling efficiencies. We also deployed new high-performance shale and clay inhibitor Vell HibEx designed to improve drilling by mitigating the impact of drilling fluids on formations while increasing well productivity. In WCC, we deployed our new V3 pack off-stage tool, which offers a more reliable and robust sealing system aimed at enhancing wellbore integrity. We also deployed the first combination of 16-inch two-stage cementing tool and annulus casing packer in a geothermal application for the Everloop in Germany, simplifying the well construction process and improving wellbore integrity. In PRI, we further enhanced our foresight suite of offerings by launching Foresight RegenXI, the energy industry's first regenerative variable speed drive for rod lift systems that harnesses untapped energy through recycling otherwise wasted power and reduces emissions. We deployed our Endura dual-string section mill for a major operator in the Middle East and our new AlphaV single-trip cased-hole exit system in the North Sea for Equinor, both aimed at improving operational efficiency by reducing run time. The examples demonstrate how we continue to innovate and expand the breadth of our portfolio to create meaningful value for our customers every step of the well life cycle. Now let's turn to our view on the markets. For North America, it continues to be a challenging period despite strong commodity prices. As continued capital discipline by both public and large private E&Ps, asset sales and consolidation in the U.S. shale, especially in the Permian, were a headwind to incremental rig and well activity. We believe we are close to a bottom, and as we move into 2024, we expect activity to improve slightly with growing energy demand and strong energy prices, supportive for both E&Ps and service companies across the well lifecycle. Further, improving production outlook provides additional opportunities for us to help customers meet their production targets. However, as we have discussed, the situation is significantly different for both international and offshore markets, where we see continued strength leading to double digit activity growth in 2024. In the Middle East, the investment thesis of our major customers remains intact and shows no signs of wavering. While onshore activity remains strong, we see an acceleration in offshore activity across the region, which is forecasted to grow in the mid to high teens next year. Needless to say, the most significant risk is geopolitical, not economic or otherwise. In Latin America, ENP capex and activity growth is expected to grow in the high single digits, led by offshore, particularly deepwater. We also see regional pockets of growth in sub-Saharan Africa, Asia Pacific offshore, and several other areas where we remain well-positioned. As we have said before, our focus will be on revenue quality and pricing versus volume as we continue to prioritize driving margin expansion and cash generation. The digital ecosystem that runs throughout our portfolio has proven to be a differentiator as well as a force multiplier for driving operational efficiencies and performance across the wealth cycle. On November 7th, we will host our 19th annual Forward Digital Conference with customers, technology partners, and technical experts. We look forward to a robust discussion on the increasing role of digitalization and automation in the sector and how Weatherford's digital technologies support safe, efficient and optimized operations for our customers. As we look forward into Q4 and to 2024, we are cognizant of the uncertainty stemming from geopolitical and macroeconomic concerns. However, we continue to be constructive on the near to midterm outlook, both in terms of market fundamentals and operator demand, along with our proven ability to execute and deliver margin growth and cash generation. With that, I'd like to hand it over to Arun.