Wdesk | Document
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wft:unit


 
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
(Mark One)
Form
10-K
 
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended
December 31, 2019
 
 
or
 
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________________________________to __________________________________
 
Commission file number
001-36504
 
Weatherford International plc
(Exact name of registrant as specified in its charter)
Ireland
 
98-0606750
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
2000 St. James Place,
Houston,
Texas
 
77056
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: 713.836.4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s) (1)
Name of each exchange on which registered
Ordinary Shares, par value $0.001 per share
WFTLF
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.   Yes     No  
The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2019 was approximately $50.2 million based upon the closing price on the New York Stock Exchange as of such date.
The registrant had 69,999,966 ordinary shares outstanding as of March 12, 2020.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required to be furnished pursuant to Part III of this Form 10-K will be set forth in, and will be incorporated by reference from, Weatherford’s definitive proxy statement for the 2020 Annual General Meeting of Shareholders to be held on June 12, 2020 to be filed by Weatherford with the Securities and Exchange Commission (“SEC”) pursuant to Regulation 14A within 120 days after the registrant’s fiscal year ended December 31, 2019.
______________




1 Since our emergence from bankruptcy, our ordinary shares have been quoted on the OTC Pink Marketplace. While our ordinary shares remain registered on the NYSE, the NYSE suspended trading in our ordinary shares in May 2019 and our appeal of that suspension is pending.

Weatherford International plc
Form 10-K for the Year Ended December 31, 2019
Table of Contents

 
PAGE
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
 
 
 
 
 
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
 
 
 
 
 
Item 10
Item 11
Item 12
Item 13
Item 14
 
 
 
 
 
Item 15
Item 16
 




Table of ContentsItem 1 | Business


PART I

Item 1. Business
 
Weatherford International plc, an Irish public limited company, together with its subsidiaries (“Weatherford,” the “Company,” “we,” “us” and “our”), is a multinational oilfield service company. Weatherford is the leading wellbore and production solution company providing equipment and services used in the drilling, evaluation, completion, production and intervention of oil and natural gas wells. Many of our businesses, including those of our predecessor companies, have been operating for more than 50 years.
 
We conduct operations in over 80 countries and have service and sales locations in virtually all of the major oil and natural gas producing regions in the world. Our operational performance is reviewed on a geographic basis and we report our Western Hemisphere and Eastern Hemisphere as separate and distinct reporting segments.
    
 Our principal executive offices are located at 2000 St. James Place, Houston, Texas 77056 and our telephone number at that location is +1.713.836.4000. Our internet address is www.weatherford.com. General information about us, including our corporate governance policies, code of business conduct and charters for the committees of our Board of Directors, can be found on our website under the “Investor Relations” section. On our website we make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file or furnish them to the SEC. The SEC maintains a website that contains our reports, proxy and information statements, and our other SEC filings. The address of that site is www.sec.gov. While our ordinary shares remain registered on the New York Stock Exchange (the “NYSE”), the NYSE suspended trading in our ordinary shares in May 2019 and our appeal of that suspension is pending. Since our emergence from bankruptcy, our ordinary shares have been quoted on the OTC Pink Marketplace under the symbol “WFTLF”.

Recent Developments – Reorganization and Emergence from Bankruptcy Proceedings

On July 1, 2019 (the “Petition Date”), Weatherford International plc, Weatherford International Ltd., and Weatherford International, LLC (collectively, the “Weatherford Parties” or the “Company”) commenced voluntary cases (the “Cases”), seeking relief under Chapter 11 of Title 11 (“Chapter 11”) of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). On September 9, 2019, the Company filed with the Bankruptcy Court the proposed Second Amended Joint Prepackaged Plan of Reorganization of Weatherford International plc and its Affiliate Weatherford Parties (as amended, the “Plan”).

On September 11, 2019, the Bankruptcy Court entered an order, Docket No. 343 (the “Confirmation Order”), confirming and approving the Plan. On December 13, 2019 (the “Effective Date”), the conditions to effectiveness of the Plan were satisfied and the Weatherford Parties emerged from Chapter 11, including, but not limited to, the effectiveness of the schemes of arrangement in Ireland and Bermuda.

Upon emergence from bankruptcy on December 13, 2019, the Company’s then-existing unsecured senior and exchangeable senior notes (including unpaid interest) totaling $7.6 billion were cancelled pursuant to the terms of the Plan, resulting in a gain on settlement of liabilities subject to compromise included in “Reorganization Items” on the Consolidated Statements of Operations. See “Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings” and “Note 3 – Fresh Start Accounting” for additional details on bankruptcy emergence.

On the Effective Date, we adopted and applied the relevant guidance with respect to the accounting and financial reporting for entities that have emerged from bankruptcy proceedings, or “Fresh Start Accounting.”  Under Fresh Start Accounting, our balance sheet on the Effective Date reflects all our assets and liabilities at fair value. Our emergence from bankruptcy and the adoption of Fresh Start Accounting resulted in a new reporting entity, referred to herein as the “Successor,” for financial reporting purposes.  To facilitate discussion and analysis of our financial condition and results of operations herein, we refer to the reorganized Weatherford Parties as the Successor for periods subsequent to December 13, 2019 and as the “Predecessor” for periods on or prior to December 13, 2019.  As a result of the adoption of Fresh Start Accounting and the effects of the implementation of the Plan, our consolidated financial statements subsequent to December 13, 2019 may not be comparable to our consolidated financial statements on or prior to December 13, 2019, and as such, “black-line” financial statements are presented to distinguish between the Predecessor and Successor companies.


Weatherford International plc – 2019 Form 10-K | 3



References to the year ended December 31, 2019 relate to the combined Successor and Predecessor Periods for the year ended December 31, 2019 as the 18 days of the Successor Period is not a significant period of time impacting the combined results.

Strategy
 
Our primary objective is to build stakeholder value through profitable growth in our core product lines with disciplined use of capital and a strong customer focus.

Our customers’ objectives are continually evolving and are currently focused on lowering capital and operational expenditures, generating positive cash flow, reducing emissions, and enhancing safety. Weatherford is aligning its technology development and operations around these trends and expanding its role as a leading “Tier 1 solutions provider” that assists our customers in addressing their key operational challenges related to four domains:

Mature Fields: rejuvenating aging assets from the reservoir to the point of sale through optimizing lift efficiency, restoring wellbore efficiency and integrity, accelerating reservoir recovery, and permanently abandoning wells when they are no longer economic to produce;

Unconventionals: enabling customers to monetize wells by drilling faster, deeper, and cheaper and combating production declines through accurate reservoir evaluation, efficient well construction, effective stimulation, and optimizing production;

Offshore: supporting customers sustain high-margin, long-term production with a focus on reducing rig time, enhancing safety and reliability, and increasing well integrity through the optimization of well placement and construction;

Digitalization and Automation: leveraging our core competencies and applying Industry 4.0, including internet of things (IoT), data analytics, and cloud computing across our many solutions.

We are enabling this solution-based focus across our organization through a commitment to improving safety and service quality, embedding a returns-focused mindset in our organization, and developing and commercializing new technologies.
 
Markets
 
We are the leading wellbore and production solutions company providing equipment and services to the oil and natural gas exploration and production industry. Demand for our industry’s services and products depends upon commodity prices for oil and gas, the number of oil and natural gas wells drilled, the depth and drilling conditions of wells, the number of well completions, the depletion and age of existing wells and the level of workover activity worldwide.

Technology is critical to the oil and natural gas marketplace as a result of the maturity of the world’s oil and natural gas reservoirs, the acceleration of production decline rates and the focus on complex well designs, including deepwater prospects. Customers continue to seek, test and use production-enabling technologies at an increasing rate. We have invested substantial resources into building our technology offerings, which helps us to provide our customers with more efficient tools to find and produce oil and natural gas. Our products and services enable our customers to reduce their costs of drilling and production, increase production rates, or both. Furthermore, these offerings afford us additional opportunities to sell our core products and services to our clients.
 
Divestitures

On April 30, 2019, we completed the sale of our Reservoir Solutions business, also known as our laboratory services business, to Oil & Gas Labs, LLC, an affiliate of CSL Capital Management, L.P., for an aggregate purchase price of $206 million in cash, subject to escrow release and customary post-closing working capital adjustments. The business disposition included our laboratory and geological analysis business, including the transfer of substantially all personnel and associated contracts related to the business.

Also on April 30, 2019, we completed the sale of our surface data logging business to Excellence Logging for $50 million in total consideration, subject to customary post-closing working capital adjustments. The business disposition included our surface data logging equipment, technology and associated contracts related to the business.


Weatherford International plc – 2019 Form 10-K | 4



We divested a majority of our land drilling rig operations during the year ended 2019 as well as in the fourth quarter of 2018. In the fourth quarter of 2018, we completed the sale of a portion of the land drilling rigs operations we previously committed to divesting in the fourth quarter of 2017 and received gross cash proceeds of $216 million. The sale represented two of a series of four closings pursuant to the purchase and sale agreements entered into with ADES International Holding Ltd. (“ADES”) in July of 2018, to sell our land drilling rig operations in Algeria, Kuwait and Saudi Arabia, as well as, two idle land rigs in Iraq. In the first quarter of 2019, we completed the final closings in the series of closings pursuant to the purchase and sale agreements entered into with ADES and received gross proceeds of $72 million. The transactions with ADES included our land rigs and related drilling contracts, as well as the transfer of employees and contract personnel, for aggregate proceeds of $288 million, subject to customary post-closing adjustments based on working capital and net cash.

In the first quarter of 2018, we completed the sale of our continuous sucker rod service business in Canada for a purchase price of $25 million and recognized a gain of $2 million. The carrying amounts of the major classes of assets divested total $23 million and included PP&E, allocated goodwill and inventory. In the third quarter of 2018, we completed the sale of an equity investment in a joint venture for an insignificant gain.

In December of 2017, we completed the sale of our U.S. pressure pumping and pump-down perforating assets for $430 million in cash. We sold our related facilities, field assets, and supplier and customer contracts related to these businesses.

Our divestitures were subject to deferred closings, escrow releases and customary post-closing working capital adjustments and may result in subsequent adjustments that are recorded through the Consolidated Statements of Operations.

Reporting Segments

The Company's chief operating decision maker (the Chief Executive Officer) regularly reviews the information of our two reportable segments which are our Western Hemisphere and Eastern Hemisphere. These reportable segments are based on management’s organization and view of Weatherford’s business when making operating decisions, allocating resources and assessing performance. Research and development expenses are included in the results of both our Western and Eastern Hemisphere segments. Our corporate and other expenses that do not individually meet the criteria for segment reporting are reported separately under the caption Corporate General and Administrative.
 
Products and Services

Our principal business is to provide equipment and services to the oil and natural gas exploration and production industry, both onshore and offshore. Product and services include: (1) Production, (2) Completions, (3) Drilling and Evaluation and (4) Well Construction.

Production offers production optimization services and a complete production ecosystem, featuring our artificial-lift portfolio, testing and flow-measurement solutions and optimization software, to boost productivity and profitability.

Artificial Lift Systems provides a mechanical method to produce oil or gas from a well lacking sufficient reservoir pressure for natural flow. We provide most forms of lift, including reciprocating rod lift systems, progressing cavity pumping, gas-lift systems, hydraulic-lift systems, plunger-lift systems and hybrid lift systems for special applications. We also offer related automation and control systems.

Pressure Pumping offers customers advanced chemical technology and services for safe and effective production enhancements. We provide pressure pumping and reservoir stimulation services, including acidizing, fracturing and fluid systems, cementing and coiled-tubing intervention, however, our U.S. pressure pumping assets were sold in December of 2017.

Testing and Production Services provides well test data and slickline and intervention services. The service line includes drillstem test tools, surface well testing services, and multiphase flow measurement.

Completions is a suite of modern completion products, reservoir stimulation designs and engineering capabilities that isolate zones and unlock reserves in deepwater, unconventional and aging reservoirs.

Completion Systems offers customers a comprehensive line of completion tools-such as safety systems, production packers, downhole reservoir monitoring, flow control, isolation packers, multistage fracturing systems and sand-control technologies that set the stage for maximum production with minimal cost per barrel.

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Liner Systems includes liner hangers to suspend a casing string within a previous casing string rather than from the top of the wellbore. The service line offers a comprehensive liner-hanger portfolio, along with engineering and executional experience, for a wide range of applications that include high-temperature and high-pressure wells.

Cementing Products enables operators to centralize the casing throughout the wellbore and control the displacement of cement and other fluids for proper zonal isolation. Specialized equipment includes plugs, float and stage equipment and torque-and-drag reduction technology. Our cementing engineers analyze complex wells and provide all job requirements from pre-job planning to installation.

Drilling and Evaluation comprises a suite of services ranging from early well planning to reservoir management. The drilling services offer innovative tools and expert engineering to increase efficiency and maximize reservoir exposure. The evaluation services merge wellsite capabilities including wireline, logging while drilling and surface logging with laboratory-fluid and core analyses to reduce reservoir uncertainty.

Drilling Services includes directional drilling, logging while drilling, measurement while drilling and rotary-steerable systems. This service line also includes our full range of downhole equipment, including high-temperature and high-pressure sensors, drilling reamers and circulation subs.

Managed Pressure Drilling helps to manage wellbore pressures to optimize drilling performance. The services incorporate various technologies, including rotating control devices and advanced automated control systems, as well as, several drilling techniques, such as closed-loop drilling, air drilling, managed-pressure drilling and underbalanced drilling.

Wireline Services includes open-hole and cased-hole logging services that measure the physical properties of underground formations to determine production potential, locate resources and detect cement and casing integrity issues. The service line also executes well intervention and remediation operations by conveying equipment via cable into oil and natural gas wells.

Surface Data Logging Systems provides real-time formation evaluation data by analyzing cuttings, gases and fluids while drilling. Our offerings include conventional mud-logging services, drilling instrumentation, advanced gas analysis and wellsite consultants. On April 30, 2019, we completed the sale of our surface data logging business to Excellence Logging for $50 million in total consideration, subject to customary post-closing working capital adjustments. The business disposition included our surface data logging equipment, technology and associated contracts related to the business.

Reservoir Solutions provides rock and fluid analysis to evaluate hydrocarbon resources, advisory solutions with engineering strategy and technologies to support assets at various development stages, and software products to optimize production and automate drilling. On April 30, 2019, we completed the sale of our laboratory services for an aggregate consideration of $206 million.

Well Construction builds or rebuilds well integrity for the full life cycle of the well. Using conventional to advanced equipment, we offer safe and efficient tubular running services in any environment. Our skilled fishing and re-entry teams execute under any contingency from drilling to abandonment and our drilling tools provide reliable pressure control even in extreme wellbores. We also include our land drilling rig business as part of Well Construction.

Tubular Running Services provides equipment, tubular handling, tubular management and tubular connection services for the drilling, completions and workover of oil or natural gas wells. The services include conventional rig services, automated rig systems, real-time torque-monitoring and remote viewing of the makeup and breakout verification process. In addition, they include drilling-with-casing services.

Intervention Services provides re-entry, fishing, wellbore cleaning and well abandonment services, as well as, advanced multilateral well systems.

Drilling Tools and Rental Equipment delivers our patented tools and equipment, including drillpipe and collars, bottom hole assembly tools, tubular-handling equipment, pressure-control equipment, and machine-shop services, for drilling oil and natural gas wells.

Land Drilling Rigs provides onshore contract drilling services and related operations on a fleet of land drilling and workover rigs primarily operated in the Eastern Hemisphere. With our technologically diverse fleet, we have the ability to perform a

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broad range of advanced drilling projects that include multi-well pad drilling, high-pressure high-temperature drilling, deep gas drilling, special well design and other unconventional drilling methods in various climates. We divested substantially all of our land drilling rig operations during the year ended 2019, as well as, in the fourth quarter of 2018.

Other Business Data
 
Competition

We provide our products and services worldwide and compete in a variety of distinct segments with a number of competitors. Our principal competitors include Schlumberger, Halliburton, Baker Hughes, National Oilwell Varco, Nabors Industries, Apergy Corp. and Frank’s International. We also compete with various other regional suppliers that provide a limited range of equipment and services tailored for local markets. Competition is based on a number of factors, including performance, safety, quality, reliability, service, price, response time and, in some cases, depth and breadth of products. The oilfield services business is highly competitive, which may adversely affect our ability to succeed. Additionally, the impact of consolidation and acquisitions of our competitors is difficult to predict and may harm our business as a result.

Raw Materials
 
We purchase a wide variety of raw materials, as well as, parts and components made by other manufacturers and suppliers for use in our manufacturing facilities. Many of the products or components of products sold by us are manufactured by other parties. We are not dependent in any material respect on any single supplier for our raw materials or purchased components.

Customers
 
Substantially all of our customers are engaged in the energy industry. Most of our international sales are to large international or national oil companies. As of December 31, 2019, the Eastern Hemisphere and Western Hemisphere accounted for 53% and 47% of our net outstanding accounts receivables. As of December 31, 2019, our net outstanding accounts receivable in the U.S. accounted for 14% of our balance and Mexico accounted for approximately 17% of our net balance. No other country accounted for more than 10% of our net outstanding accounts receivables balance. During the years ended December 31, 2019, 2018 and 2017 no individual customer accounted for more than 10% of our consolidated revenues.

Backlog

Our services are usually short-term, day-rate based and cancellable should our customers wish to alter the scope of work. Consequently, our backlog of firm orders is not material to our business.

Research, Development and Patents
 
We maintain world-class technology and training centers throughout the world. Additionally, we have research, development and engineering facilities that are focused on improving existing products and services and developing new technologies to meet customer demands for improved drilling performance and enhanced reservoir productivity. Weatherford has also developed significant expertise, trade secrets, and know-how with respect to manufacturing equipment and providing services. As many areas of our business rely on patents and proprietary technology, we seek and ensure patent protection both inside and outside the U.S. for products and methods that appear to have commercial significance.

With respect to the Successor, we amortize developed technology over 5 years.

With respect to the Predecessor, we amortized patents over the years that we expect to benefit from their existence, which typically extends from the grant of the patent through and until 20 years after the filing date of the patent application.
 
Although in the aggregate our patents are important to the manufacturing and marketing of many of our products and services, we do not believe that the expiration of any one of our patents would have a materially adverse effect on our business.
 

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Seasonality
 
Weather and natural phenomena can temporarily affect the level of demand for our products and services. Spring months in Canada and winter months in the North Sea and Russia can affect our operations negatively. Additionally, heavy rains or an exceedingly cold winter in a given region or climate changes may impact our results. The unpredictable or unusually harsh weather conditions could lengthen the periods of reduced activity and have a detrimental impact to our results of operations. The widespread geographical locations of our operations serve to mitigate the overall impact of the seasonal nature of our business.

Federal Regulation and Environmental Matters
 
Our operations are subject to federal, state and local laws and regulations relating to the energy industry in general and the environment in particular. Our 2019 expenditures to comply with environmental laws and regulations were not material, and we currently do not expect the cost of compliance with environmental laws and regulations for 2020 to be material.
 
Employees
 
As of December 31, 2019, we employed approximately 24,000 employees, which is 9% and 18% lower than our workforce as of December 31, 2018 and 2017, respectively. In response to the price of crude oil and a lower level of exploration and production spending and have reduced our overall costs and workforce to better align with activity levels. See “Item 8. – Financial Statements and Supplementary DataNote 11 – Restructuring, Facility Consolidation and Severance Charges” for details on our workforce reductions. In addition, our workforce has been reduced, as a result of the dispositions of certain businesses. Certain of our operations are subject to union contracts and these contracts cover approximately 17% of our employees. We believe we have a dedicated and capable workforce despite the significant headcount reductions over the past three years which were necessary to adapt our Company to the market conditions.


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Information about our Executive Officers

The following table sets forth, as of March 16, 2020, the names and ages of the executive officers of Weatherford, including all offices and positions held by each for at least the past five years.
Name
Age
Current Position and Five-Year Business Experience
Mark A. McCollum (a)
61
President, Chief Executive Officer and Director of Weatherford International plc,
since April 2017
 
 
Executive Vice President and Chief Financial Officer of Halliburton Company, July 2016 to March 2017
 
 
Executive Vice President and Chief Integration Officer of Halliburton Company, January 2015 to June 2016
 
 
Executive Vice President and Chief Financial Officer of Halliburton Company, January 2008 to December 2014
 
 
 
Karl Blanchard (a) (b)
60
Executive Vice President and Chief Operating Officer of Weatherford International plc, since August 2017
 
 
Chief Operating Officer of Seventy Seven Energy, June 2014 to April 2017
 
 
Vice President of Production Enhancement of Halliburton Company,
2012 to June 2014
 
 
 
Christian Garcia
56
Executive Vice President and Chief Financial Officer of Weatherford International plc, since January 2020
 
 
Executive Vice President and Chief Financial Officer of Visteon Corporation, October 2016 to October 2019
 
 
Senior Vice President, Finance and Acting Chief Financial Officer of Halliburton Company, from January 2015 to August 2016
 
 
Chief Accounting Officer of Halliburton Company, January 2014 to December 2015
 
 
 
Christina M. Ibrahim (a)
52
Executive Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary of Weatherford International plc, since October 2017
 
 
Executive Vice President, General Counsel and Corporate Secretary of Weatherford International plc, May 2015 to September 2017
 
 
Vice President, Chief Commercial Counsel and Corporate Secretary of Halliburton Company, January 2015 to April 2015
 
 
Vice President, Corporate Secretary & Chief Commercial Counsel – Western Hemisphere of Halliburton Company, January 2014 to December 2014
 
 
 
 
 
 
 
 
 
(a)
On July 1, 2019, the Weatherford Parties, filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas. Weatherford continued to operate their business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. On September 11, 2019 the Plan, as amended, was confirmed by the Bankruptcy Court and on December 13, 2019 we emerged from bankruptcy after successfully completing the reorganization pursuant to the Plan.

(b)
Prior to joining the Weatherford, Karl Blanchard served as the Chief Operating Officer of Seventy Seven Energy, Inc. (“SSE”), a position he started in June of 2014. SSE and its subsidiaries voluntarily filed for relief under Chapter 11 in the United States Bankruptcy Court for the District of Delaware on June 7, 2016. SSE continued to operate their business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. On July 14, 2016, the Bankruptcy Court issued an order confirming the Joint Pre-packaged Plan of Reorganization (the “SSE Reorganization Plan”). The SSE Reorganization Plan became effective on August 1, 2016, pursuant to its terms and SSE emerged from its Chapter 11 case.

There are no family relationships between the executive officers of the registrant or between any director and any executive officer of the registrant.


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Table of ContentsItem 1A | Risk Factors

Item 1A. Risk Factors

An investment in our securities involves various risks. You should consider carefully all the risk factors described below, the matters discussed herein under “Forward-Looking Statements” and other information included and incorporated by reference in this Form 10-K, as well as in other reports and materials that we file with the SEC. If any of the risks described below, or elsewhere in this Form 10-K, were to materialize, our business, financial condition, results of operations, cash flows and or prospects could be materially adversely affected. In such case, the trading price of our ordinary shares could decline and investors could lose part or all of their investment. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also materially adversely affect our financial condition, results of operations and cash flows.

Fluctuations in oil and natural gas prices, especially a substantial or extended decline, affect the level of exploration, development and production activity of our customers and the demand for our products and services, which could have a material adverse effect on our business, financial condition and results of operations.

Demand for our services and products is tied to the level of exploration, development and production activity and the corresponding capital expenditures by oil and natural gas companies, including national oil companies. The level of exploration, development and production activity is directly affected by fluctuations in oil and natural gas prices, which historically have been volatile and are likely to continue to be volatile in the future, especially given current geopolitical and economic conditions. Therefore, declines in oil and natural gas prices or sustained low oil and natural gas prices or customer perceptions that oil and natural gas prices will remain depressed or will further decrease in the future could result in a continued reduction in the demand and pricing for our equipment and will likely continue at lower rates for our services.

Prices for oil and natural gas are highly volatile and fluctuate in response to relatively minor changes in the supply of and demand for oil and natural gas. Factors that can or could cause these price fluctuations include: excess supply of crude oil relative to demand; domestic and international drilling activity; global market uncertainty; the risk of slowing economic growth or recession in the United States, China, Europe or emerging markets in Asia and the Middle East; the ability or willingness of OPEC and other non-member nations, including Russia, to set and maintain production levels for oil; the decision of OPEC or other non-member nations to abandon production quotas and/or member-country quota compliance within OPEC agreements; oil and gas production levels by non-OPEC countries; the nature and extent of governmental regulation, including environmental regulation; technological advances affecting energy consumption; adverse weather conditions and a variety of other economic factors that are beyond our control. For example, in March 2020, members of OPEC and Russia considered extending their previously agreed oil production cuts and potentially making additional oil production cuts. However, these negotiations were unsuccessful. Saudi Arabia has announced a significant reduction in its export prices effective immediately and Russia has announced that all agreed oil production cuts between members of OPEC and Russia will expire on April 1, 2020. Following these announcements, global oil and natural gas prices declined sharply and may continue to decline. Any perceived or actual further reduction in oil and natural gas prices will depress the immediate levels of exploration, development and production activity and decrease spending by our customers, which could have a material adverse effect on our business, financial condition and results of operations.

Sustained lower oil and natural gas prices have led to a significant decrease in spending by our customers over the past several years, which have led to significantly decreased revenues. Further decreases in oil and natural gas prices could lead to further cuts in spending and potential lower revenues for the company. Several large oil and gas exploration and production companies have recently announced reductions in their previously announced planned capital expenditures during 2020 in light of declining global oil and natural gas prices. Our customers also take into account the volatility of energy prices and other risk factors when determining whether to pursue capital projects and higher perceived risks generally mandate higher required returns. Any of these factors have and could further affect the demand for oil and natural gas and has and could further have a material adverse effect on our business, financial condition, results of operations and cash flow.

Our business is dependent on capital spending by our customers and reductions in capital spending by our customers has had, and could continue to have, an adverse effect on our business, financial condition and results of operations.

Sustained low oil and natural gas prices have led to lower spending by our customers. Most of our contracts can be cancelled by our customers at any time. Low commodity prices, the short-term tenor of most of our contracts and the potential extreme financial stress experienced by our customers (some of whom may have to seek bankruptcy protection), have combined to generate demands by many of our customers for reductions in the prices of our products and services. Further reductions in capital spending or requests for further cost reductions by our customers could, directly impact our business by reducing demand for our services and products and have a material adverse effect on our business, financial condition, results of operations and prospects. Spending by exploration and production companies can also be impacted by conditions in the capital markets, which have been volatile in recent years. Limitations on the availability of capital or higher costs of capital may cause exploration and production companies

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Table of ContentsItem 1A | Risk Factors

to make additional reductions to capital budgets even if oil and natural gas prices increase from current levels. Any such cuts in spending would curtail drilling programs, as well as, discretionary spending on well services, which may result in a reduction in the demand for our services, the rates we can charge and the utilization of our assets. Moreover, reduced discovery rates of new oil and natural gas reserves or a decrease in the development rate of reserves in our market areas, whether due to increased governmental regulation, limitations on exploration and drilling activity or other factors, could also have a material adverse impact on our business, even in a stronger oil and natural gas price environment. With respect to national oil company customers, we are also subject to risk of policy, regime, currency and budgetary changes all of which may affect their capital expenditures.

Weakened global macro-economic conditions may adversely affect our industry, business and results of operations.

Our overall performance depends in part on worldwide macro-economic and geopolitical conditions. The United States and other key international economies have experienced cyclical downturns from time to time in which economic activity was impacted by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies and overall uncertainty with respect to the economy. These global macro-economic conditions can suddenly arise and the full impact of such conditions can remain uncertain. In addition, geopolitical developments, such as existing and potential trade wars and other events beyond our control, such as the COVID-19 pandemic, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets.

Public health threats could have a material adverse effect on our business and results of operations.

Public health threats, such as severe influenza, COVID-19 and other highly communicable viruses or diseases, outbreaks of which have already occurred in various parts of the world in which we operate, could adversely impact our operations, the operations of our customers and the global economy, including the worldwide demand for oil and natural gas and the level of demand for our services. The quarantine of personnel or inability to access our offices or customer facilities could adversely affect our operations. Travel operational, or logistical restrictions in any part of the world in which we operate, or any reduction in the demand for our products and services caused by public health threats in the future, may materially impact our operations and have an adverse effect on our results of operations.

Our long-term liquidity requirements and the adequacy of our capital resources are difficult to predict at this time.

We face uncertainty regarding the adequacy of our liquidity and capital resources and have extremely limited, if any, access to additional financing beyond the ABL Credit Agreement and LC Credit Agreement. In addition to the cash requirements necessary to fund ongoing operations, we have incurred, and will continue to incur, significant professional fees and other costs following the Cases and our emergence from bankruptcy. We cannot assure you that cash on hand, cash flow from operations and any financing we are able to obtain through the ABL Credit Agreement and LC Credit Agreement will be sufficient to continue to fund our operations and allow us to satisfy our obligations.

Our liquidity, including our ability to meet our ongoing operational obligations, is dependent upon, among other things: (i) our ability to maintain adequate cash on hand; (ii) our ability to generate cash flow from operations; (iii) changes in market conditions that negatively impact our revenue, and (iv) the professional fees and cost related to the Cases and our emergence from bankruptcy.

The credit risks of our concentrated customer base in the energy industry could result in operating losses and negatively impact liquidity.

The concentration of our customer base in the energy industry may impact our overall exposure to credit risk as our customers may be similarly affected by prolonged changes in economic and industry conditions. Some of our customers are experiencing financial distress as a result of continued low commodity prices and may be forced to seek protection under applicable bankruptcy laws. Furthermore, countries that rely heavily upon income from hydrocarbon exports have been negatively and significantly affected by low oil prices, which could affect our ability to collect from our customers in these countries, particularly national oil companies. Laws in some jurisdictions in which we operate could make collection difficult or time consuming. We perform on-going credit evaluations of our customers and do not generally require collateral in support of our trade receivables. While we maintain reserves for potential credit losses, we cannot assure such reserves will be sufficient to meet write-offs of uncollectible receivables or that our losses from such receivables will be consistent with our expectations. Additionally, in the event of a bankruptcy of any of our customers, we may be treated as an unsecured creditor and may collect substantially less, or none, of the amounts owed to us by such customer.
     

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Table of ContentsItem 1A | Risk Factors

We utilize letters of credit and performance and bid bonds to provide credit support to our customers. If the beneficiaries were to call the letters of credit under our committed facilities, our available liquidity would be reduced by the amount called and it could have an adverse impact on our business, operations, and financial condition.

As of December 31, 2019, we had $399 million of letters of credit and performance and bid bonds outstanding, consisting of $141 million of letters of credit under the ABL Credit Agreement, $105 million of letters of credit under the LC Credit Agreement and $153 million of letters of credit under various uncommitted facilities. At December 31, 2019, we had cash collateral of $152 million supporting letters of credit under our various uncommitted facilities. The cash is included in “Restricted Cash” in the accompanying Consolidated Balance Sheets. In Latin America we utilize surety bonds as part of our customary business practice. These obligations could be called by the beneficiaries should we breach certain contractual or performance obligations. If the beneficiaries were to call the letters of credit under our committed facilities or the surety bonds, our available liquidity would be reduced by the amount called and it could have an adverse impact on our business, operations and financial condition.

Severe or unseasonable weather could adversely affect our business and results of operations.

Variation from normal weather patterns, such as cooler or warmer summers and winters, can have a significant impact on demand. Many experts believe global climate change could increase the frequency and severity of extreme weather conditions. Adverse weather conditions, such as hurricanes in the Gulf of Mexico or extreme winter conditions in Canada, Russia and the North Sea, may interrupt or curtail our operations, or our customers’ operations, cause supply disruptions or loss of productivity or result in a loss of revenue or damage to our equipment and facilities, which may or may not be insured. Any of these outcomes could have a material adverse effect on our business, financial condition and results of operations.

Not responding timely to changes in the market and customer requirements in the highly competitive oilfield services business may adversely affect our ability to succeed. Additionally, the impact of consolidation and acquisitions of our competitors is difficult to predict.

Our business is highly competitive, particularly with respect to marketing our products and services to our customers and securing equipment and trained personnel. Currently the oilfield service industry has excess capacity relative to customer demand, and, in most cases, multiple sources of comparable oilfield services are available from a number of different competitors. This competitive environment could impact our ability to maintain market share, defend, maintain or increase pricing for our products and services and negotiate acceptable contract terms with our customers and suppliers. In order to remain competitive, we must continue to add value for our customers by providing, relative to our peers, new technologies, reliable products and services and competent personnel. The anticipated timing and cost of the development of competitive technology and new product introductions, could impact our financial results, particularly if one of our competitors were to develop competing technology that accelerates the obsolescence of any of our products or services. Additionally, we may be disadvantaged competitively and financially by a significant movement of exploration and production operations to areas of the world in which we are not currently active, particularly if one or more of our competitors is already operating in that area of the world.

Mergers, combinations and consolidations in our industry could result in existing competitors increasing their market share and may result in stronger competitors, which in turn, could have a material adverse effect on our business, financial condition and results of operations. We may not be able to compete successfully in an increasingly consolidated industry and cannot predict with certainty how industry consolidation will affect our other competitors or us.

Liability claims resulting from catastrophic incidents could have a material adverse effect on our business, financial condition and results of operations

Drilling for and producing hydrocarbons, and the associated products and services that we provide, include inherent dangers that may lead to property damage, personal injury, death or the discharge of hazardous materials into the environment. Many of these events are outside our control. Typically, we provide products and services at a well site where our personnel and equipment are located together with personnel and equipment of our customer and third parties, such as other service providers. At many sites, we depend on other companies and personnel to conduct drilling operations in accordance with appropriate safety standards. From time to time, personnel are injured or equipment or property is damaged or destroyed as a result of accidents, failed equipment, faulty products or services, failure of safety measures, uncontained formation pressures or other dangers inherent in drilling for oil and natural gas. Any of these events can be the result of human error. With increasing frequency, our products and services are deployed on more challenging prospects both onshore and offshore, where the occurrence of the types of events mentioned above can have an even more catastrophic impact on people, equipment and the environment. Such events may expose us to significant potential losses.


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Table of ContentsItem 1A | Risk Factors

We may not be fully indemnified against financial losses in all circumstances where damage to or loss of property, personal injury, death or environmental harm occur.

As is customary in our industry, our contracts typically require that our customers indemnify us for claims arising from the injury or death of their employees (and those of their other contractors), the loss or damage of their equipment (and that of their other contractors), damage to the well or reservoir and pollution originating from the customer’s equipment or from the reservoir (including uncontained oil flow from a reservoir) and claims arising from catastrophic events, such as a well blowout, fire, explosion and from pollution below the surface. Conversely, we typically indemnify our customers for claims arising from the injury or death of our employees, the loss or damage of our equipment (other than equipment lost in the hole) or pollution originating from our equipment above the surface of the earth or water.

Our indemnification arrangements may not protect us in every case. For example, our indemnity arrangements may be held to be overly broad in some courts and/or contrary to public policy in some jurisdictions, and to that extent may be unenforceable. Additionally, some jurisdictions which permit indemnification nonetheless limit its scope by statute. We may be subject to claims brought by third parties or government agencies with respect to which we are not indemnified. Furthermore, the parties from which we seek indemnity may not be solvent, may become bankrupt, may lack resources or insurance to honor their indemnities or may not otherwise be able to satisfy their indemnity obligations to us. The lack of enforceable indemnification could expose us to significant potential losses.

Further, our assets generally are not insured against loss from political violence such as war, terrorism or civil commotion. If any of our assets are damaged or destroyed as a result of an uninsured cause, we could recognize a loss of those assets.

We may not be able to generate sufficient cash flows to service our indebtedness and may be forced to take actions in order to satisfy our obligations under our indebtedness. If we are required to take such actions, and such actions are not successful, our indebtedness and liabilities could expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our financial obligations.

As of December 31, 2019, we had approximately $2.2 billion of long-term debt with $2.1 billion in aggregate principal amount of our senior notes maturing on December 1, 2024. Pursuant to the terms of our senior notes, we expect to have interest payments of approximately $231 million annually until the maturity of our senior notes. We also have a senior secured asset-based revolving credit agreement in an aggregate amount of $450 million (the “ABL Credit Agreement”), which was entered into pursuant to the Plan. As of December 31, 2019, we had no borrowings under the ABL Credit Agreement. Our level of indebtedness could have significant negative consequences for our business, financial condition and results of operations, including:

increasing our vulnerability to adverse economic and industry conditions;
limiting our ability to obtain additional financing;
requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing the amount of our cash flow available for other purposes;
limiting our flexibility in planning for, or reacting to, changes in our business;
limiting our access to the inventory and services needed to operate our business;
requiring us to secure additional sources of liquidity, which may or may not be available to us; and
placing us at a possible competitive disadvantage with less leveraged competitors or competitors that may have better access to capital resources.

Our ability to make scheduled payments on, or to refinance, our debt obligations will depend on our financial and operating performance, which is subject to prevailing economic and competitive conditions and certain financial, business and other factors beyond our control. Lower commodity prices and in turn lower demand for our products and services have negatively impacted our revenues, earnings and cash flows, and sustained low oil and natural gas prices could have an adverse effect on our liquidity position. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business and operations. If we continue to experience operating losses and we are not able to generate additional liquidity through the mechanisms described above or through some combination of other actions, including our potential strategic divestitures and other business operations, then our liquidity needs may exceed availability under our Exit Credit Agreements (as defined herein) and other facilities that we may enter into in the future, and we might need to secure additional sources of funds, which may or may not be available to us. If we are unable to secure such additional funds, we may not be able to meet our future obligations as they become due.


Weatherford International plc – 2019 Form 10-K | 13


Table of ContentsItem 1A | Risk Factors

Our business may be exposed to uninsured claims and, as a result, litigation might result in significant potential losses. The cost of our insured risk management program may increase.

In the ordinary course of business, we become the subject of various claims and litigation. We maintain liability insurance, which includes insurance against damage to people, property and the environment, up to maximum limits of $435 million, subject to self-insured retentions and deductibles.

Our insurance policies are subject to exclusions, limitations and other conditions and may not apply in all cases, for example where willful wrongdoing on our part is alleged. It is possible an unexpected judgment could be rendered against us in cases in which we could be uninsured and beyond the amounts we currently have reserved or anticipate incurring, and in some cases those potential losses could be material.

Our insurance may not be sufficient to cover any particular loss or our insurance may not cover all losses. For example, although we maintain product liability insurance, this type of insurance is limited in coverage and it is possible an adverse claim could arise in excess of our coverage. Additionally, insurance rates have in the past been subject to wide fluctuation and may be unavailable on terms that we or our customers believe are economically acceptable. Reductions in coverage, changes in the insurance markets and accidents affecting our industry may result in further increases in our cost and higher deductibles and retentions in future years and may also result in reduced activity levels in certain markets. As a result, we may not be able to continue to obtain insurance on commercially reasonable terms. Any of these events would have an adverse impact on our financial performance.

Our operations are subject to numerous laws and regulations, including environmental laws and regulations, treaties and international agreements related to greenhouse gases, climate change and alternate energy sources that may expose us to significant liabilities, result in additional compliance costs and could reduce our business opportunities and revenues.

We are subject to various laws and regulations relating to the energy industry in general and the environment in particular. These laws are often complex and may not always be applied consistently in emerging markets. These laws and regulations often change and can cover broad subject matters, including tax, trade, customs (import/export), the environment, greenhouse gases, climate change and alternate energy sources. In the case of environmental regulations, an environmental claim could arise with respect to one or more of our current businesses, products or services, or a business or property that one of our predecessors owned or used, and such claims could involve material expenditures. Generally, environmental laws have in recent years become more stringent and have sought to impose greater liability on a larger number of potentially responsible parties and have increased the costs associated with complying with the more stringent laws and regulations. The scope of regulation of our industry and our products and services may increase further, including possible increases in liabilities or funding requirements imposed by governmental agencies. For example, state, national and international governments and agencies in areas in which we conduct business continue to evaluate, and in some instances adopt, climate-related legislation and other regulatory initiatives that would restrict emissions of greenhouse gases. We also cannot ensure that our future business in the deepwater Gulf of Mexico, if any, will be profitable in light of regulations that have been, and may continue to be, promulgated and in light of the current risk environment and insurance markets. Additional regulations on deepwater drilling elsewhere in the world could be imposed, and those regulations could limit our business where they are imposed.

In addition, members of the U.S. Congress, the U.S. Environmental Protection Agency and various agencies of several states within the U.S. frequently review, consider and propose more stringent regulation of hydraulic fracturing, a stimulation treatment routinely performed on oil and gas wells in low-permeability reservoirs. We previously provided (and may, in the future, resume providing) fracturing services to customers and regulators are investigating whether any chemicals used in the fracturing process might adversely affect groundwater or whether the fracturing processes could lead to other unintended effects or damages. For example, in December 2016, the EPA released its final report regarding the potential impacts of hydraulic fracturing on drinking water resources, concluding that water cycle activities associated with hydraulic fracturing may impact drinking water resources under certain circumstances. In recent years, several cities and states within the U.S. passed new laws and regulations concerning or banning hydraulic fracturing. A significant portion of North American service activity today is directed at prospects that require hydraulic fracturing in order to produce hydrocarbons. Therefore, additional regulation could increase the costs of conducting our business by subjecting fracturing to more stringent regulation. Such regulation, among other things, may change construction standards for wells intended for hydraulic fracturing, require additional certifications concerning the conduct of hydraulic fracturing operations, change requirements pertaining to the management of water used in hydraulic fracturing operations, require other measures intended to prevent operational hazards or ban hydraulic fracturing completely. Any such federal, state, local or foreign legislation could increase our costs of providing services or could materially reduce our business opportunities and revenues if our customers decrease their levels of activity in response to such regulation or if we are not able to pass along any cost increases to our customers. We are unable to predict whether changes in laws or regulations or any other governmental proposals or responses

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will ultimately occur, and accordingly, we are unable to assess the potential financial or operational impact they may have on our business.

Finally, in December 2015, the U.S. joined the international community at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France (the “Paris Agreement”) that requires member countries to review and “represent a progression” in their intended nationally determined contributions, which set greenhouse gas (“GHG”) emission reduction goals every five years beginning in 2020. The agreement entered into was in full force in November 2016. On June 1, 2017, the President of the U.S. announced that the U.S. planned to withdraw from the Paris Agreement and to seek negotiations either to reenter the Paris Agreement on different terms or establish a new framework agreement. The Paris Agreement provides for a four-year exit process beginning when it took effect in November 2016, which would result in an effective exit date of November 2020. The United States’ adherence to the exit process is uncertain and/or the terms on which the United States may reenter the Paris Agreement or a separately negotiated agreement are unclear at this time. The implementation of this treaty and other efforts to reduce GHG emissions in the U.S. and other countries could materially affect our customers by reducing demand for oil and natural gas, thereby potentially materially affecting demand for our services.

If our long-lived assets, goodwill, intangible assets and other assets are impaired, we may be required to record significant non-cash charges to our earnings.

We recognize impairments of goodwill when the fair value of any of our reporting units becomes less than its carrying value. Our estimates of fair value are based on assumptions about future cash flows of each reporting unit, discount rates applied to these cash flows and current market estimates of value. Based on the uncertainty of future revenue growth rates, gross profit performance, and other assumptions used to estimate our reporting units’ fair value, future reductions in our expected cash flows could cause a material non-cash impairment charge of goodwill, which could have a material adverse effect on our results of operations and financial condition.

A significant portion of our revenue is derived from our non-United States operations, which exposes us to risks inherent in doing business in each of the over 80 countries in which we operate.
Our non-United States operations accounted for $3.9 billion of our combined consolidated revenue in 2019, $4.1 billion in 2018 and $4.1 billion in 2017. Operations in countries other than the United States are subject to various risks, including:

volatility in political, social and economic conditions;
exposure to expropriation of our assets or other governmental actions;
social unrest, acts of terrorism, war or other armed conflict;
confiscatory taxation or other adverse tax policies;
deprivation of contract rights;
trade and economic sanctions or other restrictions imposed by the European Union, the United States or other countries;
exposure under the United States Foreign Corrupt Practices Act (“FCPA”) or similar legislation;
restrictions on the repatriation of income or capital;
currency exchange controls;
inflation; and
currency exchange rate fluctuations and devaluations.

Our ability to retain or attract skilled employees, including executive officers and other key personnel, could have a material adverse effect on our business.

Our business is dependent on our ability to attract, develop, and retain qualified employees, including executive officers and other key personnel. Our operations require highly skilled personnel to operate and provide technical support and services. Our ability to meet such employment needs is subject to external and internal factors such as the current and future prices of oil and natural gas, the demand for employees by companies in our industry, our reputation within the labor market (particularly in our highly competitive industry), as well as our employees’ perception of opportunities with us as compared to our peers (including as to our financial performance and incentives related thereto). Furthermore, these internal and external factors may also be impacted by our recent emergence from bankruptcy, the uncertainties currently facing us and the business environment and changes we may make to the organizational structure to adjust to changing circumstances.

If we are unable to attract and retain adequate numbers and an appropriate mix of qualified employees, the quality of products and services we provide to our customers may decrease and our financial performance may be adversely affected. Further, we depend on the contributions of key personnel for our future success. Departures of key employees can cause disruptions to, and

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Table of ContentsItem 1A | Risk Factors

uncertainty in, our business and operations. Future departures of key employees, including changes in our senior management, could disrupt our business and have a material and adverse effect on our financial condition and results of operations.

If we are unable to comply with the restrictions and covenants in the agreements governing our indebtedness, including the Exit Credit Agreements and the indenture governing our Exit Notes, there could be a default under the terms of these agreements, which could result in an acceleration of payment of funds that we have borrowed and would affect our ability to make principal and interest payments on our indebtedness.

Any default under the agreements governing our indebtedness that is not cured or waived by the required lenders or holders, and the remedies sought by the holders of any such indebtedness, could make us unable to pay principal and interest our indebtedness and, in the case of our Exit Notes, substantially decrease the market value of such indebtedness. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the agreements governing our indebtedness (including covenants in the Exit Credit Agreements and the indenture governing our Exit Notes), we could be in default under the terms of such agreements. In the event of such default:

the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest;
the lenders under such agreements could elect to terminate their commitment thereunder and cease making further loans; and;
we could be forced into bankruptcy or liquidation.

If our operating performance declines, we may in the future need to obtain waivers under the Exit Credit Agreements, the indenture governing our Exit Notes or agreements governing any other outstanding indebtedness. If we breach our covenants under the Exit Credit Agreements, the indenture governing our Exit Notes or the agreements governing any other outstanding indebtedness, and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders, as applicable. If this occurs, we would be in default under such agreements, the lenders, holders or trustee, as applicable, could exercise their rights or remedies, as described above, and we could be forced into bankruptcy or liquidation.

Our actual financial results after emergence from bankruptcy are not comparable to our historical financial information as a result of the implementation of the Plan and the transactions contemplated thereby and the implementation of fresh start accounting.

In connection with the disclosure statement we filed with the Bankruptcy Court, and the hearing to consider confirmation of the Plan, we prepared projected financial information to demonstrate to the Bankruptcy Court the feasibility of the Plan and our ability to continue operations upon our emergence from bankruptcy. Those projections were prepared solely for the purpose of the bankruptcy proceedings and have not been, and will not be, updated on an ongoing basis and should not be relied upon by investors. At the time they were prepared, the projections reflected numerous assumptions concerning our anticipated future performance with respect to prevailing and anticipated market and economic conditions that were and remain beyond our control and that may not materialize. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks and the assumptions underlying the projections and/or valuation estimates may prove to be wrong in material respects. Actual results will likely vary significantly from those contemplated by the projections. The failure of any such results, or any other developments contemplated by the Plan, to materialize, or of any such results or developments to have the anticipated effect on us and our subsidiaries or our business or operations, could materially adversely our business and prospects as a post-emergence company.

In addition, upon our emergence from bankruptcy, we adopted fresh start accounting and adjusted our assets and liabilities to fair values and our accumulated deficit was restated to zero. Fresh start accounting results in the Company becoming a new entity for financial reporting purposes on December 13, 2019, the effective date of the Plan. Accordingly, our financial condition and results of operations following our emergence from bankruptcy will not be comparable to the financial condition and results of operations reflected in our historical financial statements. Implementation of the Plan and the transactions contemplated thereby may materially change the amounts and classifications reported in our consolidated historical financial statements. The lack of comparable historical financial information may discourage investors from purchasing our ordinary shares.


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Table of ContentsItem 1A | Risk Factors

There may be circumstances in which the interests of our significant shareholders could be in conflict with the interests of our other shareholders.

In the aggregate, certain funds associated with our largest eight shareholders currently own in excess of 80% of our outstanding ordinary shares. Circumstances may arise in which this shareholder may have an interest in pursuing or preventing acquisitions, divestitures or other transactions, including the issuance of additional equity or debt, that, in their judgment, could enhance their investment in us or another company in which they invest. Such transactions might adversely affect us or other holders of our ordinary shares. In addition, our significant concentration of share ownership post-emergence may adversely affect the trading price of our ordinary shares because investors may perceive disadvantages in owning shares in companies with significant shareholders.

An active trading market for our ordinary shares may not develop.

During bankruptcy, our old ordinary shares were traded on the OTC Pink Marketplace. Immediately following emergence from bankruptcy, our New Ordinary Shares (as defined herein) were not initially listed on any national or regional securities exchange or quoted on any over-the-counter market. Subsequent to emergence our ordinary shares began quotation on the OTC Pink Marketplace.

However, we cannot predict the extent to which investor interest in us will lead to the development of an active trading market or how liquid that market might become. In addition, no assurances can be given regarding when, and if, we will resume our listing on a national exchange, including whether or not we will be able to meet applicable listing standards for any such exchange. If an active trading market does not develop, holders of our shares may have difficulty selling any of our ordinary shares that may now be owned or may purchase later. In addition, until we are able resume our listing on a national exchange, the number of investors willing to hold or acquire our ordinary shares may be reduced, we may receive decreased news and analyst coverage and we may be limited in our ability issue additional securities or obtain additional financing in the future.

The price and trading volume of our ordinary shares may fluctuate significantly.

Even if an active trading market develops for our ordinary shares, the market price of our ordinary shares may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume of our ordinary shares may fluctuate and cause significant price variations to occur. Volatility in the market price of our ordinary shares may prevent one from being able to sell shares at or above the ordinary share issuance price or above the price one paid to acquire the ordinary shares. The market price for our ordinary shares could fluctuate significantly for various reasons, including:

our new capital structure as a result of the Plan transactions;
our limited trading history subsequent to our emergence from bankruptcy;
our limited trading volume;
the concentration of holdings of our ordinary shares;
the lack of comparable historical financial information due to our adoption of fresh start accounting;
actual or anticipated variations in our operating results and cash flow;
the nature and content of our earnings releases, announcements or events that impact our products, customers, competitors or markets; and
business conditions in our markets and the general state of the securities markets and the market for energy-related stocks, as well as general economic and market conditions.

If credit rating agencies lower our credit ratings in the future, capital financing may not be available to us at attractive economic rates.

On December 16, 2019, after emergence from Chapter 11, S&P Global Ratings assigned us an issuer credit rating of B-, with a negative outlook. S&P assigned a B- for our newly issued Exit Notes and a B+ for our Exit Credit Agreements. Moody’s Investors Service withdrew our credit ratings following the filing of the Plan in Bankruptcy Court in the third quarter of 2019 and resumed rating services after emergence. Upon emergence, Moody’s assigned us an issuer credit rating of B1, with a stable outlook. Moody’s assigned a B2 for our newly issued Exit Notes and a Ba2 for our Exit Credit Agreements. Our credit ratings were subject to multiple downgrades by the credit rating agencies prior to our bankruptcy and could be subject to downgrade again in the future.

Moreover, our non-investment grade status may limit our ability to refinance our existing debt, could cause us to refinance or issue debt with less favorable and more restrictive terms and conditions, and could increase certain fees and interest rates of

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Table of ContentsItem 1A | Risk Factors

our borrowings. Suppliers and financial institutions may lower or eliminate the level of credit provided through payment terms or intraday funding when dealing with us thereby increasing the need for higher levels of cash on hand, which would decrease our ability to repay debt balances, negatively affect our cash flow and impact our access to the inventory and services needed to operate our business.

Credit and equity markets have been highly volatile recently, the cost to obtain capital financing has increased, and some markets may not be available at certain times. Credit and equity market conditions and the potential impact on liquidity of major financial institutions may have an adverse effect on our ability to fund operational needs or other activities through borrowings under either existing or newly created instruments in the public or private markets on terms we believe to be reasonable. In addition, our ability to raise capital through equity financing may be limited by the number of ordinary shares authorized but unissued or reserved for issuance. If we are unable to enhance our borrowings via debt offerings or our credit facilities, or to obtain additional equity financing, we could experience a reduction of liquidity and may result in difficulty funding our operations, repayment of short-term borrowings, payments of interest and other obligations. This could be detrimental to our business and have a material adverse effect on our liquidity, consolidated results of operations and financial condition.

The terms of our indebtedness restrict our current and future operations, particularly our ability to respond to changes or to pursue our business strategies.

The Exit Credit Agreements and indenture governing our senior notes contain, and agreements governing our future indebtedness may contain, restrictive covenants that could impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to:

incur additional indebtedness;
pay dividends and make other distributions;
prepay, redeem or repurchase certain debt;
make loans and investments;
sell assets and incur liens;
enter into transactions with affiliates;
enter into agreements restricting our subsidiaries’ ability to pay dividends; and
consolidate, merge or sell all or substantially all of our assets.

As a result of these restrictions, we may be:

limited in how we conduct our business;
unable to raise additional debt or equity financing to operate during general economic or business downturns; or
unable to compete effectively, execute our growth strategy or take advantage of new business opportunities.

In addition, the restrictive covenants in our Exit Credit Agreements require us to maintain specified financial ratios and/or liquidity thresholds under certain circumstances. Our ability to meet those financial ratios or maintain such liquidity thresholds can be affected by events beyond our control.

A breach of the covenants under the Exit Credit Agreements, the indenture governing our senior notes or our other indebtedness could result in an event of default thereunder. Such a default may allow the lenders, holders or the trustee, as applicable, to accelerate the related indebtedness and may result in the acceleration of any other indebtedness to which a cross-acceleration or cross-default provision applies. In addition, an event of default under Exit Credit Agreements would permit the lenders thereunder to terminate all commitments. In the event our lenders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. If we do not repay our debt out of cash on hand, we could attempt to (i) restructure or refinance such debt, (ii) sell assets or (iii) repay such debt with the proceeds from an equity offering. We cannot assure you that we will be able to generate sufficient cash flows from operating activities to pay the interest on our debt or that future borrowings, equity financings or proceeds from the sale of assets will be available to pay or refinance such debt. The terms of our debt, including our bank credit facility, may also prohibit us from taking such actions. Factors that will affect our ability to raise cash through offerings of our capital stock, a refinancing of our debt or a sale of assets include financial market conditions and our market value and operating performance at the time of such offerings, refinancing or sale of assets. We cannot assure you that any such offerings, restructuring, refinancing or sale of assets will be successfully completed.


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Table of ContentsItem 1A | Risk Factors

If another party claims that we have infringed its intellectual property rights, we may be subject to litigation or we may need to take remedial steps to eliminate or mitigate liability.

A third-party may claim that we sell equipment or perform services that infringes upon the third-party’s patent rights or unlawfully uses the third-party’s trade secrets. Addressing such claims of patent infringement or trade secret misappropriation could result in significant legal and other costs and may adversely impact our business. To resolve such claims, we may be required to enter into license agreements that require us to make royalty payments to continue selling equipment or providing of services. Alternatively, the development of non-infringing technologies would increase our costs. If an allegation of patent infringement or trade secret misappropriation cannot be resolved through a license agreement, we might not be able to continue selling particular equipment or providing particular services, which could adversely affect our financial condition, results of operations, and cash flow.

Our business could be negatively affected by cybersecurity incidents and other technology disruptions.

We rely heavily on information systems to conduct and protect our business. These information systems are increasingly subject to sophisticated cybersecurity incidents such as unauthorized access to data and systems, loss or destruction of data (including confidential customer, supplier and employee information), computer viruses, or other malicious code, phishing and cyber-attacks, and other similar events. These incidents arise from numerous sources, not all of which are within our control, including fraud or malice on the part of third parties, accidental technological failure, electrical or telecommunication outages, failures of computer servers or other damage to our property or assets, human error, complications encountered as existing systems are maintained, repaired, replaced, or upgraded or outbreaks of hostilities or terrorist acts.

Given the rapidly evolving nature of cyber incidents, there can be no assurance that the systems we have designed and implemented to prevent or limit the effects of cyber incidents or attacks will be sufficient in preventing all such incidents or attacks, or be able to avoid a material impact to our systems should such incidents or attacks occur. A cybersecurity incident or attack, could result in the disclosure of confidential or proprietary customer, supplier or employee information, theft or loss of intellectual property, damage to our reputation with our customers, suppliers and the market, failure to meet customer requirements or customer dissatisfaction, theft or exposure to litigation, damage to equipment (which could cause environmental or safety issues) and other financial costs and losses. Moreover, we have no control over the information technology systems of our customers, suppliers and others with which our systems may connect and communicate. As a result, the occurrence of a cyber-incident could go unnoticed for a period time. As cybersecurity incidents continue to evolve, we may also be required to devote additional resources to continue to enhance our protective measures or to investigate or remediate any cybersecurity vulnerabilities. We do not presently maintain insurance coverage to protect against cybersecurity risks. If we procure such coverage in the future, we cannot ensure that it will be sufficient to cover any particular losses we may experience as a result of such cyber-attack or other incident. Any cybersecurity incident could have a material adverse effect on our business, financial condition and results of operations.

Adverse changes in tax laws both in the United States and abroad, changes in tax rates or exposure to additional income tax liabilities could have a material adverse effect on our results of operations.

Changes in tax laws could significantly increase our tax expense and require us to take actions, at potential significant expense, to seek to preserve our current level of tax expense.

In 2002, we reorganized from the United States to a foreign jurisdiction. There are frequent legislative proposals in the United States that attempt to treat companies that have undertaken similar transactions as U.S. corporations subject to U.S. taxes or to limit the tax deductions or tax credits available to United States subsidiaries of these corporations. Our tax expense could be impacted by changes in tax laws, tax treaties or tax regulations or the interpretation or enforcement thereof or differing interpretation or enforcement of applicable law by the U.S. Internal Revenue Service and other taxing jurisdictions, acting in unison or separately. The inability to reduce our tax expense could have a material impact on our financial statements.

The Organization of Economic Cooperation and Development (“OECD”), which represents a coalition of member countries, has issued various white papers addressing Tax Base Erosion and Jurisdictional Profit Shifting. The recommendations in these white papers are generally aimed at combating what they believe is tax avoidance. Numerous jurisdictions in which we operate have been influenced by these white papers as well as other factors and are increasingly active in evaluating changes to their tax laws.

Our effective tax rate has fluctuated in the past and may fluctuate in the future. Future effective tax rates could be affected by changes in the composition of earnings in countries in which we operate with differing tax rates, changes in tax laws, or changes in deferred tax assets and liabilities. We assess our deferred tax assets on a quarterly basis to determine whether a valuation

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Table of ContentsItem 1A | Risk Factors

allowance may be required. We have recorded a valuation allowance on substantially all of our current and future deferred tax assets. A prolonged downturn could result in us not being able to benefit future losses, which would negatively impact our financial results.

If a United States person is treated as owning at least 10% of our shares, such holder may be subject to adverse U.S. federal income tax consequences.

As a result of the TCJA, many of our non-U.S. subsidiaries are now classified as “controlled foreign corporations” for U.S. federal income tax purposes due to the expanded application of certain ownership attribution rules within a multinational corporate group. If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our shares, such person may be treated as a “United States shareholder” with respect to one or more of our controlled foreign corporation subsidiaries.  In addition, if our shares are treated as owned more than 50% by United States shareholders, we would be treated as a controlled foreign corporation. A United States shareholder of a controlled foreign corporation may be required to annually report and include in its U.S. taxable income, as ordinary income, its pro rata share of “Subpart F income,” “global intangible low-taxed income” and investments in U.S. property by controlled foreign corporations, whether or not we make any distributions to such United States shareholder. An individual United States shareholder generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a corporate United States shareholder with respect to a controlled foreign corporation.  A failure by a United States shareholder to comply with its reporting obligations may subject the United States shareholder to significant monetary penalties and may extend the statute of limitations with respect to the United States shareholder’s U.S. federal income tax return for the year for which such reporting was due.  We cannot provide any assurances that we will assist investors in determining whether we or any of our non-U.S. subsidiaries are controlled foreign corporations or whether any investor is a United States shareholder with respect to any such controlled foreign corporations. We also cannot guarantee that we will furnish to United States shareholders information that may be necessary for them to comply with the aforementioned obligations.  United States investors should consult their own advisors regarding the potential application of these rules to their investments in us. The risk of being subject to increased taxation may deter our current shareholders from increasing their investment in us and others from investing in us, which could impact the demand for, and value of, our shares.

The United States could treat Weatherford International PLC (parent corporation) as a US taxpayer under IRC Section 7874.

Following the emergence from bankruptcy, Weatherford continues to operate under Weatherford International PLC (PLC), an Irish tax resident. The IRS may, however, assert that PLC should be treated as a U.S. corporation for U.S. federal income tax purposes pursuant to IRC Section 7874. For U.S. federal income tax purposes, a corporation generally is classified as either a U.S. corporation or a foreign corporation by reference to the jurisdiction of its organization or incorporation. Because PLC is an Irish incorporated entity, it would generally be classified as a foreign corporation under these rules. IRC Section 7874 provides an exception to this general rule under which a foreign incorporated entity may, in certain circumstances, be treated as a U.S. corporation for U.S. federal income tax purposes. Under IRC Section 7874, a corporation created or organized outside the United States (i.e., a foreign corporation) will nevertheless be treated as a U.S. corporation for U.S. federal income tax purposes when (i) the foreign corporation directly or indirectly acquires substantially all of the assets held directly or indirectly by a U.S. corporation (including the indirect acquisition of assets of the U.S. corporation by acquiring the outstanding shares of the U.S. corporation), (ii) the shareholders of the acquired U.S. corporation hold, by vote or value, at least 80% (or 60% in certain circumstances if the Third Country Rule applies) of the shares of the foreign acquiring corporation after the acquisition by reason of holding shares in the U.S. acquired corporation (the “Section 7874 Percentage”), and (iii) the foreign corporation’s “expanded affiliated group” does not have substantial business activities in the foreign corporation’s country of organization or incorporation relative to such expanded affiliated group’s worldwide activities. Although it is not free from doubt, we believe that as a result of the implementation of the plan of reorganization, PLC should not be treated as acquiring directly or indirectly substantially all of the properties of a U.S. corporation and, as a result, PLC is not expected to be treated as a U.S. corporation or otherwise subject to the adverse tax consequences of IRC Section 7874. The law and the Treasury Regulations promulgated under IRC Section 7874 are, however, unclear and there can be no assurance that the IRS will agree with this conclusion. If it is determined that IRC Section 7874 is applicable, PLC would be a U.S. corporation for U.S. federal income tax purposes, the taxable year of Weatherford US consolidated group could end on or prior to the emergence from bankruptcy, which could result in additional adverse tax consequences. In addition, although PLC would be treated as a U.S. corporation for U.S. federal income tax purposes, it would generally also be considered an Irish tax resident for Irish tax and other non-U.S. tax purposes.


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Table of ContentsItem 1A | Risk Factors

The rights of our shareholders are governed by Irish law; Irish law differs from the laws in effect in the United States and may afford less protection to holders of our securities.

As an Irish company, we are governed by the Irish Companies Act, which differs in some material respects from laws generally applicable to U.S. corporations and shareholders, including, among others, provisions relating to interested directors, mergers and acquisitions, takeovers, shareholder lawsuits and indemnification of directors. Likewise, the duties of directors and officers of an Irish company generally are owed to the company only. Shareholders of Irish companies generally do not have a personal right of action against directors or officers of the company and may exercise such rights of action on behalf of the company only in limited circumstances. Accordingly, holders of our securities may have more difficulty protecting their interests than would holders of securities of a corporation incorporated in a jurisdiction of the United States.

We are incorporated in Ireland and a significant portion of our assets are located outside the United States. As a result, it might not be possible for shareholders to enforce civil liability provisions of the federal or state securities laws of the United States.

We are organized under the laws of Ireland, and a significant portion of our assets are located outside the United States. The United States currently does not have a treaty with Ireland providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. As such, a shareholder who obtains a court judgment based on the civil liability provisions of U.S. federal or state securities laws may be unable to enforce the judgment against us in Ireland. In addition, there is some doubt as to whether the courts of Ireland and other countries would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liabilities provisions of the federal or state securities laws of the United States or would hear actions against us or those persons based on those laws. The laws of Ireland do, however, as a general rule, provide that the judgments of the courts of the United States have the same validity in Ireland as if rendered by Irish Courts. Certain important requirements must be satisfied before the Irish Courts will recognize the U.S. judgment. The originating court must have been a court of competent jurisdiction, the judgment must be final and conclusive, and the judgment may not be recognized if it was obtained by fraud or its recognition would be contrary to Irish public policy. Any judgment obtained in contravention of the rules of natural justice or that is irreconcilable with an earlier foreign judgment would not be enforced in Ireland.

Similarly, judgments might not be enforceable in countries other than the United States where we have assets.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our operations are conducted in over 80 countries and we have manufacturing facilities, research and technology centers, fluids and processing centers and sales, service and distribution locations throughout the world. The following sets forth the locations of our principal owned or leased facilities for our commercial operations by geographic segment as of December 31, 2019:
Region
Specific Location
Western Hemisphere:
Greenville, Houston, Huntsville, Katy, Odessa, San Antonio, Texas; Broussard, Louisiana; Williston, North Dakota; Bakersfield, California; Edmonton, and Nisku, Canada; Comodoro Rivadavia, Neuquén, and Rio Tercero, Argentina; Caxias Do Sul and Macae, Brazil; Venustiano Carranza and Villahermosa, Mexico; Lagunillas, Venezuela; and Villavicencio, Colombia.
 
 
Eastern Hemisphere:
Aberdeen, UK; Stavanger, Norway; Baku, Azerbaijan; Ploiesti, Romania; Luanda, Angola; Port Harcourt, Nigeria; Langenhagen, Germany; Aktau, Kazakhstan; Nizhnevartovsk and Noyabrsk, Russia; Hassi Messaoud, Algeria; Cairo, Egypt; North Rumaila and Erbil, Iraq; Mina Abdulla, Kuwait; Nimr, Oman; Karachi, Pakistan; Hassi Dhahran, Saudi Arabia; Abu Dhabi and Dubai, United Arab Emirates; Malaga, Australia; Dongying and Jiangsu, China; Barmer, India; and Bekasi, Indonesia.

Our principal executive offices are in Houston, Texas. We own or lease numerous other facilities such as service centers, shops and sales and administrative offices throughout the geographic regions in which we operate. Certain of our material U.S. properties

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Table of ContentsItem 2 | Properties

are all mortgaged to the lenders under our Asset Based Loan Credit Agreement and LC Credit Agreement. All of our remaining owned properties are unencumbered, however the lenders could require we mortgage them as well. We believe the facilities that we currently occupy are suitable for their intended use.

Item 3. Legal Proceedings

In the ordinary course of business, we are the subject of various claims and litigation. We maintain insurance to cover many of our potential losses, and we are subject to various self-retention limits and deductibles with respect to our insurance. Please see the following:

For information on the Company’s Chapter 11 Cases, see “Item 8. – Financial Statements and Supplementary DataNotes to Consolidated Financial StatementsNote 2 – Emergence from Chapter 11 Bankruptcy Proceedings,” “Note 3 – Fresh Start Accounting” and “Item 1. Business – Recent Developments – Reorganization and Emergence from Bankruptcy Proceedings” which is incorporated by reference into this item.
Item 1A.Risk Factors – We have been the subject of governmental and internal investigations related to alleged corrupt conduct and violations of U.S. sanctioned country laws, which were costly to conduct, resulted in a loss of revenue and substantial financial penalties and created other disruptions for the business. If we are the subject of such investigations in the future, it could have a material adverse effect on our business, financial condition and results of operations, which is incorporated by reference into this item.”
Item 8. – Financial Statements and Supplementary DataNotes to Consolidated Financial StatementsNote 19 – Disputes, Litigation and Legal Contingencies.”
 
Although we are subject to various on-going items of litigation, we do not believe it is probable that any of the items of litigation to which we are currently subject will result in any material uninsured losses to us. It is possible, however, that an unexpected judgment could be rendered against us, or we could decide to resolve a case or cases that would result in a liability that could be uninsured and beyond the amounts we currently have reserved and in some cases those losses could be material.

Item 4. Mine Safety Disclosures
 
Not applicable.


Weatherford International plc – 2019 Form 10-K | 22


Table of ContentsItem 5 | Market for Registrants Ordinary Shares


PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our old ordinary shares were traded on the New York Stock Exchange under the symbol “WFT” until trading was suspended in May 2019 (which suspension remains in place). During bankruptcy, our old ordinary shares were traded on the OTC Pink Marketplace under the symbol “WFTIQ”. Subsequent to emergence, our New Ordinary Shares began quotation on the OTC Pink Marketplace under the symbol “WFTLF”. As of March 12, 2020, there were 74 shareholders of record. The actual number of stockholders is considerably greater than the number of shareholders of record and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.


 Item 6. Selected Financial Data

The following table sets forth certain selected historical consolidated financial data for our Successor and Predecessor Periods and should be read in conjunction with “Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. – Financial Statements and Supplementary Data,” which contain information on the comparability of the selected financial data and are both contained in this report. Discussion of material uncertainties is included in “Item 8. – Financial Statements and Supplementary DataNotes to Consolidated Financial StatementsNote 19 – Disputes, Litigation and Legal Contingencies.” The following information may not be indicative of our future operating results. We have not declared dividends to shareholders’ in the periods listed below.
 
Successor
 
 
Predecessor
 
Period From
 
 
Period From
 
 
 
 
 
 
(Dollars in millions, except
12/14/19
 
 
01/01/19
 
Years Ended
per share amounts)
through
 
 
through
 
December 31,
Statements of Operations Data:
12/31/19
 
 
12/13/19
 
2018
 
2017
 
2016
 
2015
Revenues
$
261

 
 
$
4,954

 
$
5,744

 
$
5,699

 
$
5,749

 
$
9,433

Operating Income (Loss)
1

 
 
(1,182
)
 
(2,084
)
 
(2,170
)
 
(2,245
)
 
(1,546
)
Net Income (Loss) Attributable to Weatherford
(26
)
 
 
3,661

 
(2,811
)
 
(2,813
)
 
(3,392
)
 
(1,985
)
Basic and Diluted Income (Loss) Per Share Attributable To Weatherford
(0.37
)
 
 
3.65

 
(2.82
)
 
(2.84
)
 
(3.82
)
 
(2.55
)
 
Successor
 
 
Predecessor
(Dollars in millions, except
Year Ended
 
 
Years Ended
per share amounts)
December 31,
 
 
December 31,
Balance Sheet Data:
2019
 
 
2018
 
2017
 
2016
 
2015
Total Assets
$
7,293

 
 
$
6,601

 
$
9,747

 
$
12,664

 
$
14,760

Short-term Borrowings and Current Portion of Long-term Debt
13

 
 
383

 
148

 
179

 
1,582

Long-term Debt
2,151

 
 
7,605

 
7,541

 
7,403

 
5,852

Total Shareholders’ Equity (Deficiency)
2,916

 
 
(3,666
)
 
(571
)
 
2,068

 
4,365



Weatherford International plc – 2019 Form 10-K | 23


Table of ContentsItem 7 | MD&A    

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

As used in this item, the “Company,” “we,” “us” and “our” refer to Weatherford International plc, a public limited company organized under the laws of Ireland, and its subsidiaries on a consolidated basis.
 
The following discussion should be read in conjunction with our Consolidated Financial Statements and Notes thereto included in “Item 8. – Financial Statements and Supplementary Data.” Our discussion includes various forward-looking statements about our markets, the demand for our products and services and our future results. These statements include certain risks and uncertainties. For information about these risks and uncertainties, refer to the section entitled “Forward-Looking Statements” and the section entitled “Item 1A. – Risk Factors.”
 
Overview
 
General

We conduct operations in over 80 countries and have service and sales locations in virtually all of the major oil and natural gas producing regions in the world. Our operational performance is reviewed on a geographic basis, and we report the following as separate, distinct reporting segments: Western Hemisphere and Eastern Hemisphere.
 
Our principal business is to provide equipment and services to the oil and natural gas exploration and production industry, both onshore and offshore. Products and services include: (1) Production, (2) Completions, (3) Drilling and Evaluation and (4) Well Construction.

Production offers production optimization services and a complete production ecosystem, featuring our artificial-lift portfolio, testing and flow-measurement solutions, and optimization software, to boost productivity and profitability.

Completions is a suite of modern completion products, reservoir stimulation designs, and engineering capabilities that isolate zones and unlock reserves in deepwater, unconventional, and aging reservoirs.

Drilling and Evaluation comprises a suite of services ranging from early well planning to reservoir management. The drilling services offer innovative tools and expert engineering to increase efficiency and maximize reservoir exposure. The evaluation services merge wellsite capabilities including wireline, logging while drilling, and surface logging with laboratory-fluid and core analyses to reduce reservoir uncertainty. On April 30, 2019, we completed the sale of our laboratory services and surface data logging businesses for an aggregate consideration of $256 million.

Well Construction builds or rebuilds well integrity for the full life cycle of the well. Using conventional to advanced equipment, we offer safe and efficient tubular running services in any environment. Our skilled fishing and re-entry teams execute under any contingency from drilling to abandonment, and our drilling tools provide reliable pressure control even in extreme wellbores. We also included our land drilling rig business as part of Well Construction. We divested a majority of our land drilling rig operations during 2019 and in the fourth quarter of 2018.

We may sell our products and services separately or may bundle them together to provide integrated solutions up to, and including, integrated well construction where we are responsible for the entire process of drilling, constructing and completing a well. Our customers include both exploration and production companies and other oilfield service companies. Depending on the service line, customer and location, our contracts vary in their terms, provisions and indemnities. We earn revenues under our contracts when products are delivered and services are performed. Typically, we provide products and services at a well site where our personnel and equipment may be located together with personnel and equipment of our customer and third parties, such as other service providers. Our services are usually short-term in nature, day-rate based and cancellable should our customer wish to alter the scope of work. Consequently, our backlog of firm orders is not material to the Company.


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Table of ContentsItem 7 | MD&A    

Emergence from Bankruptcy Proceedings

On July 1, 2019, the Weatherford Parties commenced the Cases under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas. On September 9, 2019, the Company filed with the Bankruptcy Court the proposed Second Amended Joint Prepackaged Plan of Reorganization of Weatherford International plc and its Affiliate Weatherford Parties.

On September 11, 2019, the Bankruptcy Court entered a Confirmation Order confirming and approving the Plan. On December 13, 2019, the conditions to effectiveness of the Plan were satisfied and the Company emerged from Chapter 11, including, but not limited to, the effectiveness of the schemes of arrangement in Ireland and Bermuda. The Company filed a notice of the Effective Date of the Plan with the Bankruptcy Court on December 13, 2019 (the “Notice of Effective Date”). See “Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings” and “Note 3 – Fresh Start Accounting” for additional details on bankruptcy emergence.

On the Effective Date, we adopted and applied the relevant guidance with respect to the accounting and financial reporting for entities that have emerged from bankruptcy proceedings, or “Fresh Start Accounting.” Under Fresh Start Accounting, our balance sheet on the Effective Date reflects all of our assets and liabilities at fair value. Our emergence from bankruptcy and the adoption of Fresh Start Accounting resulted in a new reporting entity, referred to herein as the “Successor,” for financial reporting purposes.  To facilitate discussion and analysis of our financial condition and results of operations herein, we refer to the reorganized Weatherford Parties as the Successor for periods subsequent to December 13, 2019 and as the “Predecessor” for periods on or prior to December 13, 2019.  As a result of the adoption of Fresh Start Accounting and the effects of the implementation of the Plan, our consolidated financial statements subsequent to December 13, 2019 may not be comparable to our consolidated financial statements on or prior to December 13, 2019, and as such, “black-line” financial statements are presented to distinguish between the Predecessor and Successor companies.

References to the year ended December 31, 2019 relate to the combined Successor Predecessor Periods for the year ended December 31, 2019.

Industry Trends

The level of spending in the energy industry is heavily influenced by the current and expected future prices of oil and natural gas. Changes in expenditures result in an increased or decreased demand for our products and services. The Rig Count is an indicator of the level of spending for the exploration for and production of oil and natural gas reserves. The following chart sets forth certain statistics that reflect historical market conditions: 
 
WTI Oil (a)
 
Henry Hub Gas (b)
 
North
American
Rig Count (c)
 
International Rig
Count (c)
2019
$
61.06

 
$
2.19

 
1,077

 
1,098

2018
$
45.41

 
$
2.94

 
1,223

 
988

2017
$
60.42

 
$
2.95

 
1,082

 
948

(a)
Price per barrel of West Texas Intermediate (“WTI”) crude oil as of the last business day of the year indicated at Cushing Oklahoma – Source: Thomson Reuters
(b)
Price per MM/BTU as of the last business day of the year indicated at Henry Hub Louisiana – Source: Thomson Reuters
(c)
Average Rig Count – Source: Baker Hughes Rig Count
 
During 2019 oil prices ranged from a low of $46.54 per barrel during early-January, to a high of $66.30 per barrel in late April and averaged $56.82 per barrel in the fourth quarter of 2019. Natural gas ranged from a high of $3.59 MM/BTU during mid-January to a low of $2.07 MM/BTU in early-August and averaged $2.41 MM/BTU in the fourth quarter of 2019. Factors influencing oil and natural gas prices during the period include hydrocarbon inventory levels, realized and expected global economic growth, realized and expected levels of hydrocarbon demand, level of production capacity and weather and geopolitical uncertainty.

Outlook

Recent developments have created significant uncertainty on the industry’s trajectory for 2020. The global impacts surrounding the COVID-19 pandemic, including operational and manufacturing disruptions, logistical constraints and travel restrictions, are rapidly evolving and increasingly dynamic. We may experience delays or a lack of availability of key components from our suppliers, customer restrictions that would prevent access to their sites, community measures to contain the spread of the virus,

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Table of ContentsItem 7 | MD&A    

changes to Weatherford’s policies that may restrict our employees, and other actions that may negatively impact our ability to operate.

Further, recent actions by certain members of OPEC and its partners have also disrupted the supply/demand equation, resulting in commodity price weakness and reductions to the capital spending plans of our customers. The COVID-19 pandemic and the recent customer responses to OPEC initiatives have resulted in weaker demand for our products and services. These events have had a significant impact on our outlook and may constrain our ability to generate revenues, profits, cash flows and may affect our liquidity profile. The WTI crude oil on the last business day of the 2019 year closed at $61.06 per barrel and during the second week of trading in March 2020 the price per barrel had fallen to the low $30’s per barrel.

We were already taking a number of actions which were yielding improvements in our cost structure as we entered the year. However, given current developments, we are now implementing more aggressive actions to right-size our business to address current market conditions. Despite this challenging outlook, we are committed to improving our profitability and free cash flow in 2020. We are embedding a returns-focused mindset into our organization and this, alongside continued cost-reduction efforts and the non-recurrence of costs associated with our financial restructuring, will assist in achieving our profit and cash flow objectives.

In the fourth quarter of 2017, we launched a program (“Transformation Program”) focused on increasing our revenue, profitability, and cash flows by improving operations across the company, including flattening our organizational structure, implementing process changes, enhancing our supply chain, and rationalizing our manufacturing footprint. The improvements from the Transformation Program were impacted by the adverse market conditions and our voluntary Chapter 11 bankruptcy filing in 2019, and the original timeline to generate targeted savings is expected to take longer than originally anticipated. Going forward, we will continue to focus on improving our operations and these efforts will include workforce reductions, facility consolidations, and other cost efficiency initiatives across all of our geographic regions.

We continually seek opportunities to maximize efficiency and value through various transactions, including purchases or dispositions of assets, businesses, investments or joint ventures based on the strategic fit within our business and/or our short and long-term objectives. On April 30, 2019, we completed the sale of our laboratory services and surface data logging businesses for an aggregate consideration of $256 million. We divested a majority of our land drilling rig operations in the fourth quarter of 2018 and during 2019 for consideration of $288 million.

The oilfield services industry growth is highly dependent on many external factors, such as our customers’ capital expenditures, world economic and political conditions, the price of oil and natural gas, member-country quota compliance within the Organization of Petroleum Exporting Countries and weather conditions and other factors, including those described in the section entitled “Forward-Looking Statements” and the section entitled “Item 1A. – Risk Factors.”

Opportunities and Challenges

As production decline rates persist and reservoir productivity complexities increase, our customers will continue to face challenges in balancing the cost of extraction activities with securing desired rates of production while achieving acceptable rates of return on investment. These challenges increase our customers’ requirements for technologies that improve productivity and efficiency, which in turn puts pressure on us to deliver our products and services at competitive rates. We believe we are well positioned to satisfy our customers’ needs, but the level of improvement in our businesses in the future will depend heavily on pricing, volume of work, and our ability to offer solutions to more efficiently extract hydrocarbons, control costs, and penetrate new and existing markets with our newly developed technologies.

While our industry offers many opportunities, there were significant challenges that materialized throughout 2019, including but not limited to slower collections from customers, pressure from suppliers to shorten payment terms or lower credit limits and increased inventory balances resulting from a disruption in deliveries as we went through the Chapter 11 bankruptcy process. As we have emerged successfully from the bankruptcy process we anticipate that our new capital structure will help alleviate many of these aforementioned issues.

Our challenges also include adverse market conditions that could make our targeted cost reduction benefits more difficult to obtain and the ability to recruit and retain employees problematic. Continued negative sentiment for the energy industry in the capital markets may impact demand for our products and services, as our customers, particularly those in North America, may face challenges securing appropriate amounts of capital under suitable terms to finance their operations. The cyclicality of the energy industry continues to impact the demand for our products and services, such as our drilling and evaluation services, well construction and well completion services, which strongly depend on the level of exploration and development activity and the completion phase of the well life cycle. Other products and services, such as our production optimization and artificial lift systems,

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Table of ContentsItem 7 | MD&A    

are dependent on the number of wells and the type of production systems used. We are following our long-term strategy aimed at achieving profitability in our businesses, servicing our customers, and creating value for our stakeholders. Our long-term success will be determined by our ability to manage effectively the cyclicality of our industry, including the ongoing and prolonged industry downturn, our ability to respond to industry demands and periods of over-supply or low oil prices, and ultimately to generate consistent positive cash flow and positive returns on the invested capital.

During bankruptcy proceedings our non-debtor affiliates that did not file voluntary petitions continued to operate their businesses and facilities without disruption to customers, vendors, partners or employees. Vendors and other unsecured creditors who continued to work with the non-debtor affiliates on existing terms were paid in full and in the ordinary course of business. All existing customer and vendor contracts remained in place and were serviced in the ordinary course of business. On emergence from bankruptcy our lower leverage ratio and debt levels should enable us to capture additional market share. There is no assurance, however, that we will be able to execute on our strategies or achieve the intended benefits.

Recent Developments

Bankruptcy and Fresh Start Accounting

On July 1, 2019, Weatherford Ireland, Weatherford International Ltd. (“Weatherford Bermuda”), and Weatherford International, LLC (“Weatherford Delaware”) (collectively, “Weatherford Parties”), filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas. On September 11, 2019 the Plan, as amended, was confirmed by the Bankruptcy Court and on December 13, 2019 (“Effective Date or Fresh Start Reporting Date”) we emerged from bankruptcy after successfully completing the reorganization pursuant to the Plan.

The Consolidated Financial Statements included herein have been prepared as if we were a going concern and in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 852 – Reorganizations (“ASC 852”). See “Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings” and “Note 3 – Fresh Start Accounting” for additional details regarding the bankruptcy.

As a result, during bankruptcy we segregated liabilities and obligations whose treatment and satisfaction were dependent on the outcome of the Chapter 11 proceedings and classified these items as “Liabilities Subject to Compromise” on our Consolidated Financial Statements with respect to the Predecessor as shown in “Note 3 – Fresh Start Accounting”. In addition, we have classified all income, expenses, gains or losses that were incurred or realized as a result of the Chapter 11 proceedings as “Reorganization Items” in our Consolidated Statements of Operations.

In accordance with ASC 852, we adopted fresh start accounting (“Fresh Start Accounting”) upon emergence from Chapter 11, at which point we became a new entity for financial reporting because (i) the holders of the then existing ordinary shares of the Predecessor company received less than 50% of the new ordinary shares of the Successor company outstanding upon emergence and (ii) the reorganization value of the Company’s assets immediately prior to confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims. Upon adoption of Fresh Start Accounting, the reorganization value derived from the range of enterprise value as disclosed in the Disclosure Statement associated with the Plan, as adjusted for the revised projections filed with the SEC on a Form 8-K on October 7 and October 16, 2019, was allocated to the Company’s assets and liabilities based on their fair values (except for deferred income taxes) in accordance with ASC 805 – Business Combinations. The amount of deferred income taxes to be recorded was determined in accordance with ASC 740 – Income Taxes. The Effective Date fair values of the Company’s assets and liabilities may differ materially from their recorded values as reflected on the historical balance sheet.

Financial Results and Overview

References to the year ended December 31, 2019 relate to the combined Successor Predecessor Periods for the year ended December 31, 2019.

There was continued weakness within the energy market during 2019, particularly in North America, with price uncertainty in WTI crude, lower rig counts, and reduced spending by customers. This was combined with an uncertain economic and political situation in Argentina, leading to a reduction in activity. These factors were offset by activity growth in the Middle East as well as improvements in Europe and Russia. While an improved product mix, favorable exchange rates and cost savings contributed to improvements in our operations during 2019, we incurred significant reorganization expenses as part of our voluntary reorganization under Chapter 11 and made significant cash investments in working capital.

Combined revenues in 2019 compared to 2018 decreased $529 million, or 9%, which was predominantly driven by lower activity levels in Canada, lower demand for services in the United States, uncertainty related to economic conditions and customer

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Table of ContentsItem 7 | MD&A    

budget reductions in Argentina, as well as decreased revenues associated with the divested land drilling rigs, laboratory services and surface logging businesses. This decline was partially offset by increased activity in the Middle East and higher service activity in Russia and the North Sea. Excluding the impact of revenues from the divested portion of the land drilling rigs, laboratory services and surface logging businesses, consolidated revenues were down $166 million, or 3% in 2019 compared to 2018.

Combined consolidated operating results improved $903 million, or 43% in 2019 compared to 2018 while combined segment operating income declined $133 million, or 41% in 2019 compared to 2018. The 2019 improvement in combined consolidated operating results was primarily due to lower goodwill impairment charges in 2019 compared to 2018. The combined segment operating income declined due to the reduced activity in North America and an unfavorable product mix in Canada and the United States. Lower demand for our products and services coupled with an unfavorable product mix and lack of supply chain savings caused the expected benefits from our cost reduction initiatives to slow and consequently resulted in significantly lower actual results compared to our expectations during 2019. 

These declines were partially offset by higher integrated service project activity in Latin America and operational improvements in the Eastern Hemisphere as a result of a more favorable geographic and product mix. Excluding the impact of operating results from the divested portion of the land drilling rigs, laboratory services and surface logging businesses, segment operating results in 2019 declined $55 million compared to 2018.

Divestitures

On April 30, 2019, we completed the sale of our surface data logging business to Excellence Logging for $50 million in total consideration, subject to customary post-closing working capital adjustments. The business disposition included our surface data logging equipment, technology and associated contracts related to the business.

On April 30, 2019, we completed the sale of our Reservoir Solutions business, also known as our laboratory services business to Oil & Gas Labs, LLC, an affiliate of CSL Capital Management, L.P., for an aggregate purchase price of $206 million in cash, subject to escrow release and customary post-closing working capital adjustments.

We divested a majority of our land drilling rig operations during the year ended 2019 as well as in the fourth quarter of 2018. In the fourth quarter of 2018, we completed the sale of a portion of the land drilling rigs operations we previously committed to divesting in the fourth quarter of 2017 and received gross cash proceeds of $216 million. The sale represented two of a series of four closings pursuant to the purchase and sale agreements entered into with ADES in July of 2018 to sell our land drilling rig operations in Algeria, Kuwait and Saudi Arabia, as well as two idle land rigs in Iraq. The sale was for 31 land rigs and related drilling contracts, as well as the transfer of employees and contract personnel, for an aggregate purchase price of $288 million, subject to customary closing conditions and adjustments based on working capital, net cash, loss or destruction of rigs and drilling contract backlog. In the first quarter of 2019, we completed the final closings in a series of closings pursuant to the purchase and sale agreements entered into with ADES and received gross proceeds of $72 million.

In the first quarter of 2018, we completed the sale of our continuous sucker rod service business in Canada for a purchase price of $25 million and recognized a gain of $2 million. The carrying amounts of the major classes of assets divested total $23 million and included PP&E, allocated goodwill and inventory. In the third quarter of 2018, we completed the sale of an equity investment in a joint venture for an insignificant gain.

In December of 2017, we completed the sale of our U.S. pressure pumping and pump-down perforating assets for $430 million in cash and recognized a $96 million gain on this sale. We sold our related facilities, field assets, and supplier and customer contracts related to these businesses. Proceeds from the sale were used to reduce outstanding indebtedness.

Summary of Significant Charges and Credits

Reorganization items in the 2019 Predecessor Period directly related to bankruptcy include the $4.3 billion gain on settlement of liabilities subject to compromise, $1.4 billion gain on revaluation of the Company’s assets and liabilities, and $346 million of charges for debt issuance write-offs, debt discount write-offs, backstop commitment fees, DIP financing fees and professional fees related to bankruptcy matters. In addition, we incurred $86 million of prepetition charges for professional and other fees related to the Cases incurred before the petition date.

For the Predecessor Period, we recorded $730 million of goodwill impairment charges related to our fair value assessment of our reporting units, $189 million of severance and restructuring charges and $374 million of inventory write-off, long-lived asset impairments, asset write-downs and other charges.

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Table of ContentsItem 7 | MD&A    


For the year ended December 31, 2018, we recorded $1.9 billion of goodwill impairment charges related to our annual fair value assessment of our business and assets, $151 million of long-lived asset impairments, $126 million of severance and restructuring charges and $87 million of other asset write-downs.

For the year ended December 31, 2017, we incurred $928 million of long-lived asset impairments, $540 million inventory write-off and other related charges including excess and obsolete, $230 million in the write-down of Venezuelan receivables and $183 million of severance and restructuring charges.

Goodwill and Long-lived Asset Impairments

During 2019, we determined that goodwill for all our reporting units in the Western Hemisphere and Eastern Hemisphere was fully impaired and as a result we incurred a goodwill impairment charge of $730 million. The impairment indicators during 2019 were a result of lower activity levels and lower exploration and production capital spending that resulted in a decline in drilling activity and growth in all our reporting units. Our lower than expected and forecasted financial results were due to the continued weakness within the energy market which impacted our ability to meet the original timeline of our revenue and profitability improvement efforts under our restructuring over the past two years, defined in “Note 11 – Restructuring, Facility Consolidation and Severance Charges”. These circumstances prompted us to evaluate whether circumstances in the Predecessor Period had changed that would more likely than not reduce the fair value of one or more of our reporting units below their carrying amount.

When conducting this evaluation, we considered macroeconomic and industry conditions, including the outlook for exploration and production spending by our customers and overall financial performance of each of our reporting units. We also considered whether there were any changes in our long-term forecasts, which are impacted by assumptions about the future commodity pricing and supply and demand for our goods and services.

During the Predecessor Period in 2019, we recognized long-lived asset impairments of $20 million to write-down our assets to the lower of carrying amount or fair value less cost to sell for our land drilling rigs. We had asset write-downs of $91 million for assets where there was low or no demand.

During 2018, we recorded a goodwill impairment of $1.9 billion which was based upon our annual fair value assessment of our business and assets. The rapid and steep decline in oil prices and consequentially lower expectations for future exploration and production capital spending, resulted in a sharp reduction in share prices in the oilfield services sector, including our share price, which triggered the goodwill impairment. During 2018, we also recognized long-lived asset impairments of $151 million related to our land drilling rigs assets primarily to write-down our land drilling rigs assets to the lower of carrying amount or fair value less cost to sell. The 2018 impairments were due to the sustained downturn in the oil and gas industry that resulted in a reassessment of our disposal groups for our land drilling rigs. The change in our expectations of the market’s recovery, in addition to successive negative operating cash flows in certain disposal asset groups represented an indicator that those assets will no longer be recoverable over their remaining useful lives.

During 2017, we recognized long-lived asset impairments of $928 million, of which $923 million was related to property, plant and equipment (“PP&E”) impairments and $5 million was related to the impairment of intangible assets. The PP&E impairments include a $740 million write-down to the lower of carrying amount or fair value less cost to sell of our land drilling rigs classified as held for sale, $172 million related to segment product line assets and $11 million of long-lived impairments charges related to Corporate assets. The 2017 impairments were due to the sustained downturn in the oil and gas industry, whose recovery was not as strong as expected and whose recovery in subsequent quarters was slower than had previously been anticipated. The change in the expectations of the market’s recovery, in addition to successive negative operating cash flows in certain asset groups represented an indicator that those assets will no longer be recoverable over their remaining useful lives.

See “Note 9 – Long-Lived Asset Impairments and Asset Write-Downs,” “Note 10 – Goodwill and Intangible Assets” and “Note 15 – Fair Value of Financial Instruments, Assets and Other Assets” for additional information regarding goodwill and long-lived asset impairments.



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Table of ContentsItem 7 | MD&A    

Debt Transactions and Equity Issuances

On July 3, 2019, the Weatherford Parties borrowed approximately $1.4 billion under the DIP Credit Agreement and the proceeds were used to repay certain prepetition indebtedness, cash collateralize certain obligations with respect to letters of credit and similar instruments and finance the working capital needs and general corporate purposes of the Weatherford Parties and certain of their subsidiaries. On July 3, 2019, the Company repaid all outstanding amounts due under the secured Term Loan Agreement and 364-Day Credit Agreement totaling approximately $616 million with borrowings from our DIP Credit Agreement. In addition, we cash collateralized approximately $271 million of letters of credit and similar instruments with borrowings from the DIP Credit Agreement. See “Note 13 – Short-term Borrowings and Other Debt Obligations” for additional details. The DIP Credit Agreement was repaid in full upon emergence from Bankruptcy on December 13, 2019.

As of the Petition Date, the Predecessor’s senior notes and exchangeable senior notes and related unpaid accrued interest totaling $7.6 billion were placed into liabilities subject to compromise during the bankruptcy period with respect to the Predecessor as shown in “Note 3 – Fresh Start Accounting”. Upon emergence from bankruptcy on December 13, 2019, the Predecessor’s senior and exchangeable senior notes were cancelled pursuant to the terms of the Plan, resulting in a gain on extinguishment of debt of $4.3 billion recorded in “Reorganization Items” on the Consolidated Statements of Operations.

On the Effective Date we issued Exit Notes for an aggregate principal amount of $2.1 billion (of which $500 million was in the form of Exit Takeback Notes to existing creditors on the senior notes being cancelled). Interest on the Exit Notes will accrue at the rate of 11.00% per annum and will be payable semiannually in arrears on June 1 and December 1, commencing on June 1, 2020.

For the 2019 Predecessor Period, we had net short-term repayments of $347 million primarily from our borrowings and repayments of the DIP Credit Agreement and our Predecessor Revolving Credit Agreements, including the repayment of our 364-Day Credit Agreement. Our long-term debt repayments of $318 million on our Term Loan Agreement and financed leases.

On December 13, 2019, all previously issued and outstanding equity interests in the Predecessor were cancelled and the Company issued 69,999,954 new ordinary shares (“New Ordinary Shares”) to the holders of the Company’s existing senior notes and holders of old ordinary shares (“Old Ordinary Shares”). The amount in excess of par value of $2.9 billion is reported in Capital in Excess of Par Value on the accompanying Consolidated Balance Sheets.

On the Effective Date, the Company issued warrants (“New Warrants”) to holders of the Company’s Old Ordinary Shares, to purchase up to an aggregate of 7,777,779 New Ordinary Shares in the Company, par value $0.001 (the “New Ordinary Shares”), at an exercise price of $99.96 per ordinary share. The New Warrants are equity classified and, upon issuance, have a value of $31 million, which was recorded in “Capital in Excess of Par Value.”

In February of 2018, we repaid in full our 6.00% senior notes due March 2018. On February 28, 2018, we issued $600 million in aggregate principal amount of our 9.875% senior notes due 2025.

The February 2018 debt offering partially funded a concurrent tender offer to purchase for cash any and all of our 9.625% senior notes due 2019. We settled the tender offer in cash for the amount of $475 million, retiring an aggregate face value of $425 million and accrued interest of $20 million. In April 2018, we repaid the remaining principal outstanding on an early redemption of the bond. We recognized a cumulative loss of $34 million on these transactions in “Bond Tender and Call Premium” on the accompanying Consolidated Statements of Operations.

In June of 2017, we repaid our 6.35% senior notes on the maturity date. On June 26, 2017, we issued an additional $250 million aggregate principal amount of our 9.875% senior notes due 2024. These notes were issued as additional securities under an indenture pursuant to which we previously issued $540 million aggregate principal amount of our 9.875% senior notes due 2024.

See “Note 13 – Short-term Borrowings and Other Debt Obligations” and “Note 14 – Long-term Debt” for additional details of our financing activities.

Results of Operations

The following table sets forth consolidated results of operations and financial information by operating segment and other selected information for the periods indicated. The Successor Period and the Predecessor Period are distinct reporting periods as a result of our emergence from bankruptcy on December 13, 2019. References in these results of operations to the change and the percentage change

Weatherford International plc – 2019 Form 10-K | 30


Table of ContentsItem 7 | MD&A    

combine the Successor Period and Predecessor Period results for the year ended December 31, 2019 in order to provide some comparability of such information to the year ended December 31, 2018. While this combined presentation is not presented according to generally accepted accounting principles in the United States (“GAAP”) and no comparable GAAP measure are presented, management believes that providing this financial information is the most relevant and useful method for making comparisons to the year ended December 31, 2018 as the eighteen days of the Successor Period is not a significant period of time impacting the combined results.
 
Successor
 
 
Predecessor
 
Combined
 
Predecessor
 
Period From
 
 
Period From
 
 
 
 
 
$ Change
% Change
 
% Change
 
12/14/19
 
 
01/01/19
 
Years Ended
 
Favorable
 
through
 
 
through
 
December 31,
 
(Unfavorable)
 (Dollars in millions, except per share data)
12/31/19
 
 
12/13/19
 
2018
 
2017
 
2019 vs 2018
2019 vs 2018
 
2018 vs 2017
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Western Hemisphere
$
121

 
 
$
2,620

 
$
3,063

 
$
2,937

 
$
(322
)
(11
)%
 
4
 %
Eastern Hemisphere
140

 
 
2,334

 
2,681

 
2,762

 
(207
)
(8
)%
 
(3
)%
Total Revenues
$
261

 
 
$
4,954

 
$
5,744

 
$
5,699

 
$
(529
)
(9
)%
 
1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Income (Loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
Western Hemisphere
$
(4
)
 
 
$
54

 
$
208

 
$
(113
)
 
$
(158
)
(76
)%
 
284
 %
Eastern Hemisphere
10

 
 
134

 
119

 
(139
)
 
25

21
 %
 
186
 %
Total Segment Operating Income (Loss)
$
6

 
 
$
188

 
$
327

 
$
(252
)
 
$
(133
)
(41
)%
 
230
 %
Total Other Operating Expenses, Net
(5
)
 
 
(1,370
)
 
(2,411
)
 
(1,918
)
 
1,036

43
 %
 
(26
)%
Total Operating Income (Loss)
$
1

 
 
$
(1,182
)
 
$
(2,084
)
 
$
(2,170
)
 
$
903

43
 %
 
4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Reorganization Items
$
(4
)
 
 
$
5,389

 
$

 
$

 
$
5,385

 %
 
 %
  Interest Expense, Net
(12
)
 
 
(362
)
 
(614
)
 
(579
)
 
240

39
 %
 
(6
)%
  Total Other Income (Expense), Net

 
 
(26
)
 
(59
)
 
93

 
33

56
 %
 
(163
)%
Income (Loss) before Income Taxes
(15
)
 
 
3,819

 
(2,757
)
 
(2,656
)
 
6,561

238
 %
 
(4
)%
  Income Tax Provision
(9
)
 
 
(135
)
 
(34
)
 
(137
)
 
(110
)
(324
)%
 
75
 %
Net Income (Loss)
(24
)
 
 
3,684

 
(2,791
)
 
(2,793
)
 
6,451

231
 %
 
 %
Net Income Attributable to Noncontrolling Interests
2

 
 
23

 
20

 
20

 
5

25
 %
 
 %
Net Income (Loss) Attributable to Weatherford
$
(26
)
 
 
$
3,661

 
$
(2,811
)
 
$
(2,813
)
 
$
6,446

229
 %
 
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss per Share
$
(0.37
)
 
 
$
3.65

 
$
(2.82
)
 
$
(2.84
)
 
NA

NA

 
1
 %
Weighted Average Shares Outstanding
70

 
 
1,004

 
997

 
990

 
NA

NA

 
(1
)%
Depreciation and Amortization
34

 
 
447

 
556

 
801

 
(75
)
13
 %
 
31
 %

Revenues Percentage by Product Lines

We provide equipment and services used in the production, completions, drilling and evaluation, and well construction of oil and natural gas wells. The composition of our consolidated revenues by product line group is as follows:

Weatherford International plc – 2019 Form 10-K | 31


Table of ContentsItem 7 | MD&A    

 
Successor
 
 
Predecessor
 
Period From
 
 
Period From
 
 
 
12/14/19
 
 
01/01/19
 
Years Ended
 
through
 
 
through
 
December 31,
 
12/31/2019
 
 
12/13/2019
 
2018
 
2017
Production
32
%
 
 
29
%
 
27
%
 
26
%
Completions
25

 
 
23

 
21

 
22

Drilling and Evaluation
22

 
 
24

 
25

 
24

Well Construction
21

 
 
24

 
27

 
28

Total
100
%
 
 
100
%
 
100
%
 
100
%

Consolidated and Segment Revenues

2019 vs 2018 Revenues

Combined consolidated revenues decreased $529 million, or 9% in 2019, compared to 2018. Excluding the impact of revenues from the divested portion of the land drilling rigs, laboratory services and surface logging businesses, consolidated revenues were down $166 million, or 3%, in 2019 compared to 2018.

Western Hemisphere combined revenues decreased $322 million, or 11%, in 2019 compared to 2018, due to lower activity levels in the U.S. and Canada as a result of a decline in rig related activity and exploration spending, which has reduced demand for drilling, completion and production products and services. The decline in Canada was partially offset by higher activity in integrated service projects and product sales in Mexico.

Eastern Hemisphere combined revenues decreased $207 million, or 8%, in 2019 compared to 2018. The decline in revenues was primarily due to lower revenues from our divested land drilling rigs businesses in the Middle East and North Africa, as well as our divested laboratories and surface logging businesses. Increased revenues in the completions product line partially offset this decline. Excluding the impact of revenues from the divested portion of the land drilling rigs, laboratory services and surface logging businesses, revenues in 2019 increased $105 million, or 5% in 2019 compared to 2018.

2018 vs 2017 Revenues

Consolidated revenues increased $45 million, or 1%, in 2018 compared to 2017.