WEATHERFORD NET LOSS $549 MLN
Weatherford International plc (NYSE: WFT) reported a net loss of $549 million, or a loss of $0.59 per share, and non-GAAP net loss of $303 million before charges and credits ($0.32 non-GAAP loss per share) on revenues of $1.41 billion for the fourth quarter of 2016.
Fourth Quarter 2016 Highlights
• Free cash flow generated from operations (non-GAAP) was $171 million;
• Operating margins improved by 273 basis points sequentially , with 68% incrementals; and
• Revenue of $1.41 billionwas up 4%sequentially , led by North America and Middle East/North Africa/Asia Pacific regions.
Full Year 2016 Highlights
• Reduced net debt and extended debt maturities through a series of capital market transactions;
• Achieved annualized cost savings of $601 million;
• Achieved best safety record in Company history; and
• Reduced nonproductive time in core product lines by 24 percent year-over-year .
Krishna Shivram, Chief Executive Officer , stated, "During 2016, we took the necessary steps to secure our liquidity and provide a runway from which the Company can become consistently profitable and free cash flow positive. We also removed a significant level of fixed costs, while still achieving the best safety record in the company' s history and measurably improving our service quality and performance.
I am pleased with our fourth quarter results. Revenue grew by 4% sequentially , despite approximately $40 million of lost revenue as we idled our U.S. pressure pumping business during the quarter . Sequential operating income incrementals were 68%, easily exceeding our targeted 50%. Excluding the land drilling rig business, revenue grew 4% with operating income incrementals of 73%, clearly exhibiting the power of increased revenue spread over a low and efficient fixed cost base.
North America revenue grew 8% and would have increased 17%, if we continued our pressure pumping activities for the full quarter.
Both the U.S. and Canada grew strongly on land while offshore Gulf of Mexico weakened. Incrementals in North America were 104% as we removed costs throughout the fourth quarter . Operating losses in North America were $58 million including a loss of $29 million related to the pressure pumping business, which would have been negatively impacted by another $20 million had this business continued through the quarter .
International revenue grew 2% while operating margins improved slightly . In Latin America, activity levels were weak in Mexico, V enezuela and Brazil; restructuring of the industry in Argentina placed downward pressure on pricing, while activity in Colombia surged.
Eastern Hemisphere revenue grew 4% sequentially with 168 basis point margin improvement and 39% incrementals. Product sales were approximately $40 million higher than the normal quarterly level. The North Sea and Russia experienced a seasonal slowdown. SubSahara Africa activity declined in Angola and Nigeria while Asia-Pacific benefited from product sales in Australia and Malaysia. The Middle East/North Africa region was positively impacted by higher product sales as well as the start-up of activities on several of the service contracts won over the last six months. We expect to start-up on the remaining service contracts in early 2017.
Free cash flow from operations was $171 million, driven by working capital improvements, and after successful debt and equity raises totaling $996 million during the quarter, net debt was reduced by $507 million to $6.5 billion."
Shivram continued, "After a protracted period of relentless cost structure transformation, implementation of disciplined financial metrics and the overall realignment of our Company, Weatherford is now well positioned with a streamlined portfolio to make material progress in operating results and to deleverage our balance sheet.
As supply and demand fundamentals continue to steadily improve, we stand at the beginning of a multi-year cycle of increased spending by our customers, almost entirely focused on developing mature reservoirs, principally on land. We are perfectly aligned to benefit from the attributes of this kind of cycle as it plays to our strengths on land in Well Construction, Completions and Artificial Lift.
We are now emerging from the downturn as a much stronger organization. With a transformed cost structure, and a much-improved balance sheet, we are committed to delivering the difference for our clients through innovation, collaboration and fit-for-purpose solutions.
Our focus is centered on service quality , safety , customer engagement, talent management and further strengthening a culture of accountability . As we execute on this 'Back to the Basics' strategy , we expect stronger financial results will naturally follow ."
Fourth Quarter 2016 Results
Revenue for the fourth quarter of 2016 was $1.41 billion compared with $1.36 billion in the third quarter of 2016 and $2.01 billion in the fourth quarter of 2015. Fourth quarter revenue improved 4% sequentially and declined 30% from the prior year . North America revenue increased 8% despite the shutdown of the U.S. pressure pumping business that began in the middle of the quarter while International revenue improved 2% and Land Drilling Rigs revenue declined 4% sequentially .
Net loss for the fourth quarter of 2016 was $549 million (diluted net loss of $0.59 per share), compared to a $1.78 billion loss in the third quarter of 2016 (diluted net loss of $1.98 per share), and a $1.21 billion loss in the fourth quarter of the prior year (diluted net loss of $1.54 per share).
Non-GAAP adjusted net loss for the fourth quarter of 2016 was $303 million (non-GAAP diluted net loss of $0.32 per share), compared to a non-GAAP $349 million loss in the third quarter of 2016 (non-GAAP diluted net loss of $0.39 per share), and a nonGAAP $102 million loss in the fourth quarter of the prior year (non-GAAP diluted net loss of $0.13 per share).
After-tax charges, net of credits, of $246 million for the fourth quarter include:
• $125 million in severance and restructuring charges;
• $69 million in pressure pumping business related shutdown costs and other charges;
• $30 million in litigation charges;
• $28 million in other charges and credits;
• $10 million in Egyptian foreign currency devaluation charges; and
• $16 million of income related to the fair value adjustment of our outstanding warrants.
Negative segment operating margin of 5.4% for the fourth quarter improved 273 basis points sequentially , and improved 801 basis points from the fourth quarter of 2015. Negative adjusted segment operating margin of 5.4% for the fourth quarter improved 273 basis points sequentially , and declined 824 basis points from the fourth quarter of 2015. Sequential adjusted segment operating income incrementals were 68% on a 4% revenue increase and year-on-year adjusted operating income decrementals were 22% on a revenue decline of 30%.