Weatherford International plc

Revenues totaled $5.14 billion in 2023, an increase of $804 million, or 19% compared to 2022. The year-over-year improvement was due to increased activity across all reporting segments. Customer demand is primarily driven by changes in oil and natural gas prices and rig counts. Revenues in 2023 reflect a 18% increase in service revenues and a 20% increase in product revenues. WCC, DRE, and PRI contributed to 35%, 26%, and 10% of the increase in revenues, respectively, with the remainder from higher activity in integrated services and projects. Geographically, growth in 2023 was led by improvements in the Middle East/North Africa/Asia, Latin America and Europe/Sub-Sahara Africa/Russia, which contributed to 51%, 40%, and 13% of the increase, respectively, partly offset by a revenue decline in North America. Approximately 80% of our revenue increase in 2023 was due to increased customer demand, with the remainder from pricing and market share improvements, and operational focus. Average oil prices in 2023 decreased 18% for both West Texas Intermediate crude oil and Brent North Sea crude oil compared to

2022. Henry Hub natural gas prices decreased 60% compared to 2022. Global rig counts increased 4% compared to 2022. International revenues (outside of North America, see “Note 3 – Revenue” to our Consolidated Financial Statements) led the increase in 2023, observable in the 11% increase of international rig counts for the same periods.

Cost of products and services of $3.40 billion increased $375 million, or 12%, in 2023 compared to 2022, to support the increased overall activity across our segments. Approximately 80% of our increase in 2023 was attributable to cost increases necessary to meet increased demand, with a large portion of the remainder from a shift in service and product mix and the rest due to inflation in the cost of labor and materials. Our cost of products and services as a percentage of revenues was 66% in 2023, an improvement compared to 70% in 2022, reflecting improved utilization on a more efficient operating cost structure, and pricing improvements to customers to offset impacts from supply chain disruptions and inflation. Additionally, lower inventory charges contributed to the lower cost structure as a percentage of revenues.

Selling, general, administrative and research and development costs of $916 million increased $48 million, or 6%. The increase primarily reflects an increase in research and development investment in newer technologies and an increase in overhead to support organization growth. These costs as a percentage of revenues were 18% in 2023, an improvement compared to 20% in 2022, reflecting our focus on cost control initiatives.

Revenues totaled $4.33 billion in 2022, an increase of $686 million, or 19% compared to 2021. The year-over-year improvement was due to increased activity across all reporting segments. Revenues in 2022 reflect a 15% increase in service revenues and a 26% increase in product revenues. The year-over-year improvement was due to increased activity across all reporting segments with PRI, DRE and WCC contributing 39%, 38%, and 24% of the increase in revenues, respectively. Geographically, growth in 2022 was led by improvements in Latin America, the Middle East/North Africa/Asia, and North America, which contributed to 36%, 30%, and 30% of the increase, respectively. Approximately 70% of our revenue increase in 2022 was due to increased customer demand with remainder from pricing and market share improvements, and operational focus. Customer demand is primarily driven by changes in oil and natural gas prices and rig counts. Average oil prices in 2022 increased 39% for West Texas Intermediate crude oil and 43% for Brent North Sea crude oil compared to 2021. Henry Hub natural gas prices increased 64% compared to 2021. Global rig counts increased 28% compared to 2021. Service and product quality excellence allowed us to benefit from a robust market with customers focusing on delivering energy supply with minimal disruption, globally. Imbalance across geographies driven by geopolitical conflicts, investment variances and supply disruptions caused a greater focus on energy security, globally. Our operational initiatives, put in place over the past couple of years, enabled us to regain share in a few product lines and geographies, as well as improve pricing through differentiation.

Cost of products and services of $3.02 billion increased $304 million, or 11% compared to 2021, to support the increased overall activity across our segments. Approximately 70% of this increase is attributable to cost increases necessary to meet increased demand for our products and services. The remainder of the increase was primarily due to inflation of wages and to a lesser extent higher cost of materials. Our cost of products and services as a percentage of revenues was 70% in 2022, an improvement compared to 75% in 2021, reflecting improved utilization on a more efficient operating cost structure, and pricing improvements to customers to offset impacts from supply chain disruptions and inflation. Additionally, higher gains on asset sales and lower inventory charges contributed to the lower cost structure as a percentage of revenues.

Selling, general, administrative and research and development costs in 2022 of $868 million increased $45 million, or 5%, when compared to 2021 to keep up with increased activity and demand across our segments. These costs as a percentage of revenues were 20% in 2022, an improvement compared to 23% in 2021, reflecting our focus on cost control initiatives.

Interest Expense, Net

Interest expense, net primarily represented for each year, the interest on our outstanding long-term debt (see “Note 8 – Borrowings and Other Debt Obligations” to our Consolidated Financial Statements for additional details) offset by interest income. Interest expense, net, of $123 million in 2023, decreased $56 million, or 31%, compared to 2022 primarily due to the early repayments of principal on our 11.00% Exit Notes maturing on December 1, 2024, fully repaid in 2023, early repayments and repurchases of principal on our 6.5% Senior Secured Notes maturing September 15, 2028, and an increase in interest income. Interest expense, net, of $179 million in 2022, decreased $81 million, or 31%, compared to $260 million in 2021 primarily due to the early repayments of principal amounts on our 11.00% Exit Notes maturing on December 1, 2024, having fully repaid in 2021 on our 8.75% Senior Secured Notes maturing on September 1, 2024, and an increase in interest income.

Loss on Blue Chip Swap Securities

An indirect foreign exchange mechanism known as the Blue Chip Swap (“BCS”) allows entities to remit U.S. dollars from operations in Argentina. During the second quarter of 2023, we entered into a series of BCS securities transactions that resulted in a “Loss on Blue Chip Swap Securities” of $57 million. See “Note 17 – Blue Chip Swap Securities - Argentina” to our Consolidated Financial Statements for additional details.

Loss on Extinguishment of Debt and Bond Redemption Premium

During 2023, we repaid the remaining $125 million in principal on our Exit Notes and made $243 million in repayments and repurchases of our 6.5% Senior Secured Notes, and incurred a $5 million bond redemption premium. During 2022, we repaid $175 million in principal on our Exit Notes and incurred a $5 million bond redemption premium. During 2021, we repaid in full our 2024 Senior Secured Notes, repaid $200 million of Exit Notes, and refinanced $1.6 billion of Exit Notes. As such, we recognized a $170 million loss, comprised of a $39 million loss on extinguishment of debt and a $131 million bond redemption premium. See “Note 8 – Borrowings and Other Debt Obligations” for additional details.

Other Expense, Net

Other expense, net, of $129 million in 2023 increased $39 million compared to 2022 expense of $90 million primarily attributable to currency losses on the Argentine Peso. Other expense, net, in 2022 increased by $61 million compared to the 2021 expense of $29 million primarily attributable to currency losses in the Argentine Peso and the Russian Ruble.

When economically advantageous, we enter into foreign currency forward contracts to mitigate the risk of future cash flows denominated in a foreign currency. Additionally, we enter into certain short-term investments which partially offset these foreign exchange losses.

We provide for income taxes based on the laws and rates in effect in the countries in which operations are conducted, or in which we or our subsidiaries are considered resident for income tax purposes. The relationship between our pre-tax income or loss from continuing operations and our income tax benefit or provision varies from period to period as a result of various factors, which include changes in total pre-tax income or loss, the jurisdictions in which our income is earned, the tax laws in those jurisdictions, the impacts of tax planning activities and the resolution of tax audits. Our effective rate differs from the Irish statutory tax rate as the majority of our operations are taxed in jurisdictions with different tax rates. In addition, we are unable to recognize tax benefit on certain losses.

We record deferred tax assets for net operating losses and temporary differences between the book and tax basis of assets and liabilities that are expected to produce tax deductions in future periods. The realizability of the deferred tax assets is dependent upon judgments and assumptions inherent in the determination of future taxable income, including factors such as future operating conditions (particularly as related to prevailing oil prices and market demand for our products and services). The Company concluded it was not able to realize the benefit of certain deferred tax assets and has established a valuation allowance. Continued performance improvement in certain jurisdictions could result in a change in our realization of deferred tax asset assessment in the near future, which would release valuation allowance.

The income tax provision and respective effective tax rate was $57 million and 11%, $87 million and 63%, and $86 million and (25)% for 2023, 2022 and 2021, respectively.

Our income tax provisions in 2023 and 2022 are primarily driven by income in certain jurisdictions, deemed profit countries and withholding taxes on intercompany and third-party transactions that do not directly correlate to ordinary income or loss. Impairments and other charges recognized do not result in significant tax benefit as a result of being attributed to a non-income tax jurisdiction or our inability to forecast realization of the tax benefit of such losses.

For the year ended December 31, 2023, income tax expense was lower by $93 million, due to the release of valuation allowances where deferred tax assets are now considered more likely than not to be realized in the future, and $22 million due to the recognition of a benefit from previously uncertain tax positions throughout the year. Those benefits were offset by the establishment of valuation allowance of approximately $50 million against the sale of Blue Chip Swap securities and currency devaluation in Argentina (see Note 17 – Blue Chip Swap Securities - Argentina). During the year ended December 31, 2022, income tax expense was lower by $35 million, due to the release of valuation allowances and $27 million, due to the recognition of a benefit from previously uncertain tax positions.

We are continuously under tax examination in various jurisdictions. We cannot predict the timing or outcome regarding resolution of these tax examinations or if they will have a material impact on our consolidated financial statements. As of December 31, 2023, we anticipate that it is reasonably possible that the amount of our uncertain tax positions of $203 million may decrease by up to $13 million in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations.

Results of Operations by Segment

DRE Results

DRE revenues of $1.5 billion in 2023 increased by $208 million or 16% compared to 2022 due to higher demand and activity with approximately 70% of the increase from drilling-related services. Geographically, approximately 55% of the overall revenue growth came from Latin America and approximately 25% from the Middle East/North Africa/Asia regions.

DRE segment adjusted EBITDA of $422 million in 2023 increased by $98 million or 30% compared to 2022. DRE segment adjusted EBITDA margin was 27.5% in 2023 compared to 24.4% in 2022.

DRE revenues of $1.3 billion in 2022, increased by $262 million or 25% compared to 2021 due to higher demand and activity with approximately 70% of the increase from managed pressure drilling and drilling services. Geographically, approximately half of the overall revenue growth came from Latin America and 35% from the Middle East/North Africa/Asia regions.

DRE segment adjusted EBITDA of $324 million in 2022 increased by $138 million or 74% compared to 2021. DRE segment adjusted EBITDA margin was 24.4% in 2022 compared to 17.4% in 2021.

WCC Results

WCC revenues of $1.8 billion in 2023 increased by $279 million or 18% compared to 2022 due to higher demand and activity with approximately 75% of the increase from completions and cementation products. Geographically, international regions contributed to approximately all of the overall revenue growth with 50% from the Middle East/North Africa/Asia. Latin America along with Europe/Sub-Sahara Africa/Russia equally contributed to the remaining overall revenue growth.

WCC segment adjusted EBITDA of $455 million in 2023 increased by $156 million or 52% compared to 2022. WCC segment adjusted EBITDA margin was 25.3% in 2023 compared to 19.7% in 2022.

WCC revenues of $1.5 billion in 2022 increased by $168 million or 12% compared to 2021 due to higher demand and activity with approximately 55% of the increase from cementation products. Geographically, approximately half of the overall revenue growth came from the Middle East/North Africa/Asia with North America and Latin America contributing equally to remaining overall revenue growth. The increase was offset by a revenue decline in Europe/Sub-Sahara Africa/Russia.

WCC segment adjusted EBITDA of $299 million in 2022 increased by $43 million or 17% compared to 2021. WCC segment adjusted EBITDA margin was 19.7% in 2022 compared to 18.9% in 2021.

PRI Results

PRI revenues of $1.5 billion in 2023 increased by $77 million or 6% compared to 2022 due to higher demand and activity with approximately 75% of the increase from pressure pumping and intervention services and drilling tools. Geographically, international regions contributed approximately all of the overall revenue growth with approximately half from Latin America and half from the Middle East/North Africa/Asia. The increase was offset by a revenue decline in North America.

PRI segment adjusted EBITDA of $323 million in 2023 increased by $62 million or 24% compared to 2022. PRI segment adjusted EBITDA margin was 21.9% in 2023 compared to 18.7% in 2022.

PRI revenues of $1.4 billion in 2022, increased by $268 million or 24% compared to 2021 due to higher demand and activity across all PRI product lines with approximately 75% of the increase from artificial lift and pressure pumping. Geographically, approximately 45% of the revenue growth came from North America and approximately 45% of the growth was contributed equally by Europe/Sub-Sahara Africa/Russia and Latin America.

PRI segment adjusted EBITDA of $261 million in 2022 increased by $70 million or 37% compared to 2021. PRI segment adjusted EBITDA margin was 18.7% in 2022 compared to 16.9% in 2021.

All Other Results

All other includes results from non-core business activities that do not individually meet the criteria for segment reporting, including integrated services and projects, which includes pass through services and project management services.

All other revenues of $327 million, increased $240 million or 276%, in 2023 compared to 2022, primarily due to higher activity related to integrated services and projects in the Middle East/North Africa/Asia and Latin America. All other revenues of $87 million, decreased $12 million or 12% in 2022 compared to 2021, primarily due to product line discontinuations and lower revenues from integrated services and projects.

Corporate

Corporate was a net expense of $52 million in 2023, a decrease of $16 million or 24% compared to 2022, primarily due to lower litigation expense in 2023. Corporate was a net expense of $68 million in 2022 and 2021 and included the impact of litigation expense or other one-time items.

Depreciation and Amortization

Depreciation and amortization expense in 2023 was $327 million, a decrease of $22 million compared to 2022, and in 2022 was $349 million, a decrease of $91 million compared to 2021. The decrease in both periods was primarily attributed to a lower asset base, offset by an increase in our capital expenditures as demand increased. See “Note 2 – Segment Information”, “Note 7 – Property, Plant and Equipment, Net”, and “Note 8 – Intangible Assets, Net” for additional information.

Share-based Compensation

We record share-based compensation expense in “Selling, General and Administrative” on the accompanying Consolidated Statements of Operations. We recognized $35 million in 2023 and $25 million in each of 2022, and 2021. The increase was primarily attributable to the cost of performance share units. See “Note 13 – Share-Based Compensation” for additional information.