28 Percent Increase Over Prior Year, Despite Severe Canadian Market Declines
HOUSTON, July 23 /PRNewswire-FirstCall/ -- Weatherford International Ltd. (NYSE: WFT) today reported second quarter 2007 net income of $235.0 million from continuing operations, or $0.68 per diluted share, before non-recurring items. Second quarter diluted earnings per share from continuing operations reflect an improvement of 28 percent over the second quarter of 2006 diluted earnings per share from continuing operations of $0.53, before non-recurring items. The non-recurring items in the second quarter of 2007 results include severance associated with the company's second quarter restructuring activities of $8.6 million, after tax, and $50.0 million of expense for withholding taxes on a distribution made by the company to one of its foreign subsidiaries.
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Second quarter revenues were $1,815.9 million, or 18 percent higher than the same period last year, against a backdrop of a two percent increase in rig activity.
Sequentially, the company's second quarter diluted earnings per share from continuing operations were lower than the record first quarter 2007 diluted earnings per share from continuing operations of $0.83, before non-recurring items, primarily due to an unusually severe seasonal downturn in the Canadian market.
In the first six months of 2007, revenues were $3.7 billion and income from continuing operations before charges was $521.5 million, or $1.50 per diluted share. In 2006, the company reported revenues for the first six months of $3.1 billion and income from continuing operations before charges of $396.8 million, or $1.11 per diluted share.
North America
Revenues for the quarter were $883.4 million. This is a five percent increase over the same quarter in the prior year, as compared to a one percent rig count decline. Growth in the U.S. rig count was more than offset by a 51% drop in the Canadian rig count. Sequentially, revenues decreased 12 percent, as compared to a 16 percent decline in rig count, driven by a 72% sequential decline in the Canadian rig count. In Canada, all product lines declined. In the U.S., artificial lift, completion, wireline, drilling services and chemicals & stimulation performed exceptionally well.
Operating income of $192.3 million was 14 percent lower than the same quarter in the prior year and 36 percent lower than the preceding quarter. The sharp drop in Canadian activity negatively impacted operating margins.
Latin America
Second quarter revenues of $206.6 million were 16 percent higher than the second quarter of 2006 and essentially flat with the prior quarter. This region's performance reflected the strongest sequential growth in its artificial lift, drilling services and well construction product lines.
The current quarter's operating income of $45.7 million improved 36 percent as compared to the same quarter in the prior year and decreased six percent as compared to the first quarter of 2007. Sequentially, the decrease in operating income was primarily driven by decreased activity in Venezuela's Orinoco basin, where the company has a substantial share of the heavy oil market.
Europe/West Africa/CIS
Second quarter revenues of $290.6 million were 42 percent higher than the second quarter of 2006 and 19 percent higher than the prior quarter. This region improved across all product lines with the strongest growth in the completion, drilling services, wireline and drilling tools product lines.
The current quarter's operating income of $68.8 million improved 52 percent as compared to the same quarter in the prior year and 26 percent as compared to the first quarter of 2007.
Middle East/North Africa/Asia
Second quarter revenues of $435.3 million were 38 percent higher than the second quarter of 2006 and 10 percent higher than the prior quarter. This region's performance reflected sequential improvements in its drilling services, artificial lift, completion and drilling tools service lines.
The current quarter's operating income of $97.0 million improved 68 percent as compared to the same quarter in the prior year and 16 percent as compared to the prior quarter.
Discontinued Operations
The company is disposing of an R&D driven investment in producing oilfield assets. The results of operations of this business for the current and prior periods are reflected as discontinued operations, net of taxes. For the three months ended June 30, 2007, the loss per diluted share from discontinued operations was $0.03.
Reclassifications and Non-GAAP
Non-GAAP performance measures and corresponding reconciliations to GAAP financial measures have been provided for meaningful comparisons between current results and results in prior operating periods.
Conference Call
The company will host a conference call with financial analysts to discuss the 2007 second quarter results on July 23, 2007 at 7:30 a.m. (CDT). The company invites investors to listen to a play back of the conference call at the company's website, http://www.weatherford.com in the "investor relations" section.
Weatherford is one of the largest global providers of innovative mechanical solutions, technology and services for the drilling and production sectors of the oil and gas industry. Weatherford operates in over 100 countries and employs approximately 33,500 people worldwide.
Contact: Andrew P. Becnel (713) 693-4136
Chief Financial Officer
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning, among other things, Weatherford's prospects for its operations which are subject to certain risks, uncertainties and assumptions. These risks and uncertainties, which are more fully described in Weatherford International Ltd.'s reports and registration statements filed with the SEC, include the impact of oil and natural gas prices and worldwide economic conditions on drilling activity, the demand for and pricing of Weatherford's products and services, domestic and international economic and regulatory conditions and changes in tax and other laws affecting our business. Should one or more of these risks or uncertainties materialize, or should the assumptions prove incorrect, actual results may vary materially from those currently anticipated.
Weatherford International Ltd.
Consolidated Condensed Statements of Income
(Unaudited)
(In 000's, Except Per Share Amounts)
Three Months Six Months
Ended June 30, Ended June 30,
2007 2006 2007 2006
Net Revenues:
North America $883,364 $839,753 $1,889,997 $1,762,187
Latin America 206,604 178,637 412,546 340,732
Europe/West Africa/CIS 290,639 205,092 535,597 382,316
Middle East/North
Africa/Asia 435,338 315,094 830,090 589,352
1,815,945 1,538,576 3,668,230 3,074,587
Operating Income (Expense):
North America 192,268 222,276 492,166 484,689
Latin America 45,742 33,575 94,331 58,737
Europe/West Africa/CIS 68,801 45,178 123,558 79,353
Middle East/North
Africa/Asia 96,998 57,806 180,471 104,120
Research and Development (40,700) (37,361) (81,214) (73,804)
Equity in Earnings 989 3,293 1,779 5,927
Corporate Expenses (23,525) (21,507) (50,620) (43,763)
Exit Costs and
Restructuring Charges (13,132) (2,770) (17,316) (2,770)
327,441 300,490 743,155 612,489
Other Income (Expense):
Other, Net (5,934) (9,926) (8,306) (10,749)
Interest Expense, Net (35,293) (23,637) (69,064) (42,579)
Income from Continuing
Operations
Before Income Taxes and
Minority Interest 286,214 266,927 665,785 559,161
Provision for Income Taxes:
Provision for Operations (59,845) (78,503) (152,743) (163,376)
Tax Charges and Benefit
From Exit and
Restructuring Charges (45,426) 970 (43,906) 970
(105,271) (77,533) (196,649) (162,406)
Income from Continuing
Operations Before Minority
Interest 180,943 189,394 469,136 396,755
Minority Interest, Net of
Taxes (4,463) (899) (8,837) (1,736)
Income from Continuing
Operations $176,480 $188,495 $460,299 $395,019
Loss from Discontinued
Operation, Net of Taxes (11,170) (1,648) (13,417) (4,855)
Net Income $165,310 $186,847 $446,882 $390,164
Basic Earnings Per Share:
Income from Continuing
Operations $0.52 $0.54 $1.36 $1.13
Loss from Discontinued
Operation (0.03) (0.00) (0.04) (0.01)
Net Income $0.49 $0.54 $1.32 $1.12
Diluted Earnings Per Share:
Income from Continuing
Operations $0.51 $0.53 $1.33 $1.10
Loss from Discontinued
Operation (0.03) (0.01) (0.04) (0.01)
Net Income $0.48 $0.52 $1.29 $1.09
Weighted Average Shares
Outstanding:
Basic 338,331 348,853 338,670 349,006
Diluted 347,817 358,433 347,062 358,164
Weatherford International Ltd.
Selected Income Statement Information
(Unaudited)
(In 000's)
Three Months
Ended
6/30/2007 3/31/2007 12/31/2006 9/30/2006 6/30/2006
Net Revenues:
North America $883,364 $1,006,633 $956,436 $954,007 $839,753
Latin America 206,604 205,942 211,512 173,953 178,637
Europe/West
Africa/CIS 290,639 244,958 229,757 215,270 205,092
Middle East/
North Africa/
Asia 435,338 394,752 409,883 353,523 315,094
$1,815,945 $1,852,285 $1,807,588 $1,696,753 $1,538,576
Operating Income
(Expense):
North America $192,268 $299,898 $274,007 $281,484 $222,276
Latin America 45,742 48,589 46,413 27,877 33,575
Europe/West
Africa/CIS 68,801 54,757 47,646 46,049 45,178
Middle East/North
Africa/Asia 96,998 83,473 98,086 71,134 57,806
Research and
Development (40,700) (40,514) (37,384) (38,241) (37,361)
Equity in
Earnings (Losses) 989 790 93 (190) 3,293
Corporate
Expenses (23,525) (27,095) (26,625) (24,718) (21,507)
Exit Costs and
Restructuring
Charges (13,132) (4,184) (23,433) -- (2,770)
$327,441 $415,714 $378,803 $363,395 $300,490
Supplemental Information
(Unaudited)
(In 000's)
Three Months
Ended
6/30/2007 3/31/2007 12/31/2006 9/30/2006 6/30/2006
Depreciation and
Amortization:
North America $66,959 $61,764 $58,475 $58,102 $53,829
Latin America 17,118 16,739 17,307 16,856 15,251
Europe/West
Africa/CIS 20,936 18,235 17,259 16,460 16,084
Middle East/North
Africa/Asia 36,951 36,167 32,549 29,653 27,263
Research and
Development 1,669 1,620 1,819 1,813 1,867
Corporate 909 990 1,576 596 700
$144,542 $135,515 $128,985 $123,480 $114,994
We report our financial results in accordance with generally accepted accounting principles (GAAP). However, Weatherford's management believes that certain non-GAAP performance measures and ratios may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. One such non-GAAP financial measure we may present from time to time is operating income or income from continuing operations excluding certain charges or amounts. This adjusted income amount is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for operating income, net income or other income data prepared in accordance with GAAP. See the table below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three months ended June 30, 2007 and 2006, the three months ended March 31, 2007 and the six months ended June 30, 2007 and 2006. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP.
Weatherford International Ltd.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2007 2007 2006 2007 2006
Operating Income:
GAAP Operating
Income $327,441 $415,714 $300,490 $743,155 $612,489
Exit costs and
restructuring
charges 13,132(a) 4,184(b) 2,770(c) 17,316(d) 2,770(e)
Non-GAAP
Operating Income $340,573 $419,898 $303,260 $760,471 $615,259
Provision for Income
Taxes:
GAAP Provision
for Income
Taxes $(105,271) $(91,378) $(77,533) $(196,649) $(162,406)
Tax impact of
charges (4,574)(a)(1,520)(b) (970)(c) (6,094)(d) (970)(e)
Other charge 50,000(a) -- -- 50,000(d) --
Non-GAAP
Provision
for Income Taxes $(59,845) $(92,898) $(78,503) $(152,743) $(163,376)
Income from
Continuing
Operations:
GAAP Income
from Continuing
Operations $176,480 $283,819 $188,495 $460,299 $395,019
Total charges,
net of tax 58,558(a) 2,664(b) 1,800(c) 61,222(d) 1,800(e)
Non-GAAP Income
from Continuing
Operations $235,038 $286,483 $190,295 $521,521 $396,819
Diluted Earnings Per
Share From
Continuing
Operations:
GAAP Diluted
Earnings per
Share From
Continuing
Operations $0.51 $0.82 $0.53 $1.33 $1.10
Total charges, net
of tax 0.17(a) 0.01(b) 0.00(c) 0.17(d) 0.01(e)
Non-GAAP Diluted
Earnings per Share
From Continuing
Operations $0.68 $0.83 $0.53 $1.50 $1.11
Note (a): This amount represents severance charges associated with the
Company's restructuring activities. On an after tax basis, these charges
approximated $8.6 million during the three months ended June 30, 2007. In
addition, the Company incurred a tax charge of $50.0 million for
withholding taxes required to be paid on a distribution made by the
Company to one of its foreign subsidiaries. On an after tax basis, these
items resulted in an effect of seventeen cents per diluted share for the
three months ended June 30, 2007.
Note (b): This amount represents severance charges associated with the
Company's restructuring activities. On an after tax basis, these charges
approximated $2.7 million, or one cent per diluted share, during the three
months ended March 31, 2007.
Note (c): This amount represents severance charges associated with the
integration of the Precision acquisition. On an after tax basis, these
charges approximated $1.8 million during the three months ended June 30,
2006.
Note (d): This amount represents severance charges associated with the
Company's restructuring activities. On an after tax basis, these charges
approximated $11.2 million during the six months ended June 30, 2007. In
addition, the Company incurred a tax charge of $50.0 million for
withholding taxes required to be paid on a distribution made by the
Company to one of its foreign subsidiaries. On an after tax basis, these
items resulted in an effect of seventeen cents per diluted share for the
six months ended June 30, 2007.
Note (e): This amount represents severance charges associated with the
integration of the Precision acquisition. On an after tax basis, these
charges approximated $1.8 million, or one cent per diluted share, during
the six months ended June 30, 2006.
SOURCE Weatherford International Ltd.
CONTACT: Andrew P. Becnel, Chief Financial Officer of Weatherford
International Ltd., +1-713-693-4136
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Web site: http://www.weatherford.com