Weatherford International plc, a company incorporated in Ireland, filed its Form 10-Q for the third quarter ended September 30, 2024. The company reported a net loss of $143.4 million, or $1.97 per share, compared to a net loss of $134.4 million, or $1.83 per share, in the same period last year. Revenue decreased by 14.1% to $1.23 billion, primarily due to lower demand for drilling services and equipment sales. The company’s operating loss was $144.1 million, compared to an operating loss of $133.4 million in the same period last year. Weatherford’s cash and cash equivalents decreased by $143.4 million to $1.23 billion, and the company had a debt balance of $2.45 billion as of September 30, 2024. The company’s management discussed the challenges it faces in the current market environment, including lower demand for its services and the impact of inflation on its costs.
Overview of Weatherford’s Financial Performance
Weatherford International, a leading global energy services company, has reported strong financial results for the three and nine months ended September 30, 2024. The company’s revenues increased by 7% and 11% respectively compared to the same periods in 2023, driven by growth across its three business segments - Drilling and Evaluation (DRE), Well Construction and Completions (WCC), and Production and Intervention (PRI).
Operating income also improved, rising 11% and 23% in the third quarter and first nine months of 2024 respectively, primarily due to improved operational efficiencies and gains on sales of used rental equipment. Cost of products and services as a percentage of revenues remained flat year-over-year at 65%.
Revenue and Profit Trends
Weatherford’s revenue growth was led by improvements in the Middle East/North Africa/Asia, Europe/Sub-Sahara Africa/Russia and Latin America regions, which offset a decline in North America. Geographically, the Middle East/North Africa/Asia region contributed the most to the year-over-year increase, accounting for 74% and 78% of the revenue growth in the third quarter and first nine months respectively.
By business segment, WCC and DRE were the primary drivers of the revenue increase, contributing 52% and 49% respectively in the third quarter, and 38%, 33% and 1% in the first nine months for WCC, DRE and PRI respectively. The remaining revenue increase was due to higher activity in integrated services and projects.
Segment adjusted EBITDA margins improved across the board, with WCC seeing the largest increase from 25.9% to 29.7% in the third quarter, and from 24.5% to 28.3% in the first nine months. DRE’s margin remained flat in the third quarter but increased from 28.2% to 28.9% year-to-date. PRI’s margin declined slightly from 23.2% to 22.4% in the third quarter but improved from 21.6% to 22.2% in the first nine months.
Strengths and Weaknesses
One of Weatherford’s key strengths is its diversified global footprint, with operations in approximately 75 countries. This has allowed the company to capitalize on growth opportunities in international markets, particularly in the Middle East/North Africa/Asia region, which has been a major driver of its revenue and profitability improvements.
Another strength is Weatherford’s broad portfolio of products and services across the well lifecycle, from early well planning to reservoir management. This has enabled the company to meet the evolving needs of its customers and participate in the industry’s transition towards more sustainable energy solutions.
However, Weatherford’s reliance on the North American market, which has seen a decline in activity, remains a weakness. The company has been able to offset this to some extent through growth in other regions, but it will need to continue to diversify its geographic exposure to mitigate the impact of regional downturns.
Additionally, the company’s operations in Russia have been impacted by the ongoing Russia-Ukraine conflict, with revenues from Russia accounting for 6% and 5% of total revenues in the third quarter and first nine months of 2024 respectively, compared to 6% in the same periods of 2023. Weatherford is closely monitoring the situation and evaluating various options, strategies and contingencies with respect to its business in Russia.
Outlook and Future Prospects
Weatherford’s outlook for the remainder of 2024 and beyond remains cautiously optimistic. The company expects overall 2024 revenue to outpace 2023, led by continued growth in international activity and global offshore activity. However, the company also acknowledges the significant risk of activity reduction in certain areas if commodity prices drop significantly or if security infrastructure in certain regions is compromised due to ongoing conflicts.
The company remains constructive on the mid-to-long-term outlook, which it believes provides a pathway to a multi-year energy demand expansion. Weatherford is closely monitoring macroeconomic and geopolitical conditions, potential supply chain disruptions, inflationary factors, and other labor and logistical constraints that could impact its operations and results.
In terms of liquidity and capital resources, Weatherford had $920 million in cash and cash equivalents and $58 million in restricted cash as of September 30, 2024. The company’s cash flow from operating activities increased year-over-year, driven by revenue growth and improved collections from its largest customer in Mexico.
Weatherford’s credit ratings have been maintained and upgraded, with S&P and Fitch upgrading the company’s issuer credit ratings from ‘B+’ to ‘BB-’. The company’s access to capital markets and ability to service its debt obligations remain strong.
Conclusion
Weatherford’s financial performance in the third quarter and first nine months of 2024 demonstrates the company’s ability to navigate the challenges of the current market environment and capitalize on growth opportunities in key international markets. The company’s diversified business model, strong liquidity position, and positive outlook for the future suggest that it is well-positioned to continue delivering value to its shareholders.
However, Weatherford will need to closely monitor and address the risks posed by the ongoing Russia-Ukraine conflict, potential supply chain disruptions, and other macroeconomic and geopolitical factors that could impact its operations and financial results. Maintaining a strong focus on operational efficiency, cost management, and strategic investments in technology and sustainable energy solutions will be crucial for the company’s long-term success.