Weatherford Reports 4th-Quarter 2K17 Results: Weatherford International plc
Weatherford International plc (NYSE: WFT) reported a net loss of $1.940 billion, or a loss of $1.950 for each share for the 4th-quarter of 2K17. The non-GAAP net loss for the 4th-quarter of 2K17, excluding charges and credits, was $329.00 million, or $0.330 diluted loss for each share.
This compares to a $221.00 million non-GAAP net loss for the 3rd-quarter of 2K17, or $0.220 diluted loss for each share, and a $303.00 million non-GAAP net loss for the 4th-quarter of the prior year, or $0.320 diluted loss for each share. Revenue in the 4th-quarter of 2K17 was $1.490 billion, which increased 2.00 percent from revenue of $1.460 billion for the 3rd-quarter of 2K17 and was 6.00 percent higher than the $1.410 billion of revenue reported for the 4th-quarter of 2K16.
The sequential and year-over-year increase was primarily led by the Eastern Hemisphere, with increased activity from contract deliveries and sales. Net cash provided by operating activities was $96.00 million for the 4th-quarter of 2K17, as compared to net cash used of $243.00 million during the 3rd-quarter of 2K17.
Operating loss for the 4th-quarter of 2K17 was $1.740 billion. Excluding charges and credits, segment operating loss for the 4th-quarter of 2K17 was $84.00 million, compared to a loss of $8.00 million for the 3rd-quarter of 2K17.
The sequential decline was almost equally attributed to both hemispheres and included a number of exceptional items negatively impacting operating income by $49.0 million, or $0.050 diluted loss for each share.
A change in accounting for revenue to a cash basis, as well as lower activity in Venezuela, negatively impacted operating income by $17.00 million, or $0.020 diluted loss for each share and lower margins on year-end product sales out of existing inventory negatively impacted operating results by $17.00 million, or $0.020 diluted loss for each share.
Full-year 2K17 revenue was $5.70 billion, a slight decrease of $50.00 million, or 1.00 percent, from 2K16. Full year operating loss for 2K17 was $2.130 billion, compared to a loss of $2.250 billion for 2K16. Excluding charges and credits, full-year adjusted segment operating loss for 2K17 was $258.00 million compared to a loss of $567.00 million for 2K16.
This significant year-over-year improvement in segment operating performance was led by North America, as a result of improvements in the underlying business, cost reductions and efficiency improvements as well as the shutdown of U.S. pressure pumping during the 4th-quarter of 2K16.
McCollum continued, “In 2K17, we set the stage for the future of Weatherford. We have made significant progress, taking decisive and strategic actions throughout 2K17. In addition to realigning and flattening our structure, we initiated an organizational transformation plan that will create an estimated $1 billion in profit improvements over the next 18 to 24 months. Since announcing this plan last quarter, we have taken further steps as an organization to develop rigorous, detailed plans and validate our ability to meet this target.”
In the quarter, we recorded pre-tax charges of $1.590 billion, the majority of which are non-cash. These charges primarily include $1.680 billion in impairments and asset write-downs, a $96.00 million gain on the disposition of our U.S. pressure pumping and pump-down perforating assets, $43.00 million in severance and restructuring charges and $28.00 million in credits related to the fair value adjustment of the outstanding warrant.
Cash Flow and Financial Covenants
Net cash provided by operating activities was $96.00 million for the 4th-quarter of 2K17, driven by improved accounts receivable collections and a reduction in inventory levels from year-end product sales, partially offset by cash payments of $104.00 million for debt interest, $38.00 million for cash severance and restructuring costs and $30.00 million for legal settlements.
4th-quarter capital expenditures of $78 million increased by $13.00 million or 20.00 percent sequentially and increased $10.00 million or 15.00 percent from the same quarter in the prior year. Full-year 2K17 capital expenditures were $225 million, primarily representing investments in our Well Construction and Drilling and Evaluation business units. Excluding Land Drilling Rigs, we expect capital expenditures in 2018 to remain broadly in line with 2K17.
On December 29, 2K17, we completed the sale of our U.S. hydraulic fracturing and pump-down perforating assets for $430.00 million in cash. The proceeds from the sale were used to reduce outstanding debt.
The Company remains in compliance with its financial covenants as defined in our revolving and secured term loan credit facilities as of December 31, 2K17, and expects to continue to remain in compliance with all covenants based on current financial projections.
The 4th-quarter non-GAAP tax provision was $47.00 million and includes a higher tax expense of $10.00 million associated with entities that are no longer being benefited due to the establishment of a valuation allowance in the 4th-quarter and an increase in uncertain tax positions of $10.00 million.
The sum of these exceptional tax charges during the 4th-quarter totaled $0.020 diluted loss for each share. Excluding these exceptional items, tax expense from recurring operations was due to profits in certain jurisdictions, deemed profit countries and withholding taxes on intercompany charges.