Weatherford International plc (WFRD) Earnings

Management highlights

### Core Q2 2026 Financial Performance - Delivered total revenue of $1.105 billion, adjusted EBITDA of $223 million (20.2% margin), and adjusted free cash flow of $139 million, representing 62.3% conversion of adjusted EBITDA to free cash flow - Adjusted EBITDA margins held essentially flat sequentially compared to Q1 2026 despite multiple headwinds - Adjusted net working capital as a percentage of revenue improved 90 bps sequentially to 27%, marking the second consecutive quarter of improvement, driven by stronger receivables and payables management - Capital expenditures totaled $42 million (3.8% of revenue), remaining within the company's targeted 3%-5% long-term range - Returned $36 million to shareholders in Q2, bringing cumulative shareholder returns since program inception to over $370 million - Ended the quarter with $1.14 billion in cash/restricted cash, total liquidity of $1.7 billion, and a net leverage ratio of 0.34x, consistent with investment-grade ratings ### Regional Operational Highlights - **Middle East**: Geopolitical conflict caused activity suspensions, project deferrals, and elevated logistics costs through most of Q2, with the financial impact in H1 2026 falling within the previously guided $30 million-$50 million range. The company concluded its LSTK contract in Saudi Arabia (finished on scope after three years of execution) and will not pursue a new LSTK contract at current low market pricing, but maintains a strong local presence focused on technology-led growth. The company completed its 5-year integrated contract with PDO in Oman 14 months ahead of schedule and won the 3-year Marmul extension contract starting Q3 2026. Activity began recovering late in the quarter, but recent regional flare-ups have created continued short-term uncertainty. - **Latin America**: Revenue declined sequentially driven by lower-than-expected activity and well deferrals in Mexico, but collections from the company's largest Mexican customer were strong, supporting working capital performance. Cost structure has been aligned to current activity levels, positioning the company for rapid scaling when activity increases. Growth opportunity in Venezuela is progressing faster than expected, with a growing opportunity pipeline that is expected to deliver tangible revenue and margin contributions in 2027. - **Europe, Sub-Saharan Africa, Russia**: Revenue grew sequentially on higher overall activity, though a union labor strike in Norway created late-quarter disruptions that will continue to pressure results into Q3. Russia's share of total company revenue increased due to broader declines in other regions, rather than underlying organic growth. ### Key Strategic Updates - The proposed redomestication from Ireland to the U.S. (originally Texas) failed to meet the 75% approval threshold for the first vote. An updated proposal to redomesticate to Delaware has been filed, with a special shareholder vote scheduled for September 3, 2026. The company expects $20 million-$30 million in annual cash savings starting 2027 if approved, with no changes to global operations or customer commitments. - Entered into a definitive agreement to acquire NCS Multistage, expected to close in H2 2026 pending regulatory and customary approvals. The transaction is predominantly structured as equity, preserving balance sheet strength. It completes Weatherford's full-lifecycle well coverage, expands exposure to high-growth unconventional resource markets globally, and adds a capital-light business model that aligns with the company's return-focused strategy. The deal is expected to deliver at least $15 million in annual cost synergies within 18 months of closing. - Secured multiple high-quality deepwater contract wins across Brazil, West Africa, and Australia during the quarter, with deliveries of these awards expected to begin ramping in Q4 2026. Additional contract wins were secured in Kuwait, Thailand, and Oman, demonstrating broad momentum across the portfolio.

Guidance

- **Q3 2026 Guidance**: Revenue is expected in the range of $1.105 billion to $1.155 billion, with adjusted EBITDA between $235 million and $265 million. Adjusted EBITDA margins are expected to increase by at least 100 bps sequentially despite ongoing Middle East disruptions and the loss of the Saudi LSTK contract revenue. Adjusted free cash flow is expected to exceed $100 million. - **Full Year 2026 Guidance**: Total revenue is now expected in the range of $4.54 billion to $4.80 billion. Adjusted EBITDA is guided between $951 million and $1.046 billion, representing approximately a 1% reduction at the midpoint compared to prior April guidance, reflecting the ongoing impact of Middle East geopolitical disruptions. Adjusted free cash flow conversion guidance was raised to the mid to high 40% range (up from the prior mid 40% outlook) driven by stronger-than-expected H1 2026 cash performance. The effective tax rate is expected to be in the low to mid 20% range for the full year. The long-term through-cycle target for free cash flow conversion remains 50%, with management aiming to raise the target only after sustaining 50% conversion consistently. Management expects H2 2026 margins to be significantly higher than H1, though the magnitude of improvement is slightly reduced from prior expectations due to ongoing regional conflict.

Segment performance

Weatherford reports three operating product segments for Q2 2026, all measured year-over-year: 1) WCC: Revenue declined 5% YoY, driven primarily by lower activity in the MENA (Middle East and North Africa) region. This decline was partially offset by higher completions activity in Latin America. 2) DRE: Revenue declined 13% YoY, primarily due to lower wireline and drilling-related services activity in MENA. This drop was partially offset by higher managed pressure drilling activity in the ESSR region. 3) PRI: Revenue declined 3% YoY, primarily from lower artificial lift activity in North America and Latin America. All three segments benefited from differentiated technology, a strong installed base, and established operational and manufacturing capabilities. No revenue contribution percentage breakdown by segment was provided in the call.

Risks & headwinds

- Ongoing geopolitical conflict in the Middle East has created persistent operational disruption, elevated logistics costs, project deferrals, and activity declines, with the total annual financial impact expected to increase from the original H1 estimate due to recent flare-ups. Short-term activity recovery remains uncertain, and a lasting return to pre-conflict activity levels will not occur until a permanent regional resolution is reached. - Pricing headwinds exist in pockets of the market, which have driven volume declines for some business lines. The company maintains a disciplined approach of walking away from low-margin work rather than chasing unprofitable revenue growth, which may result in lower near-term top-line growth than competitors. - The labor strike in Norway created Q2 2026 disruptions that will continue to pressure regional results in Q3 2026. - The proposed U.S. redomestication requires shareholder and Irish High Court approval, and there is risk that the updated Delaware proposal could again fail to meet the required approval threshold, preventing the company from realizing expected annual cost savings. - The NCS Multistage acquisition is subject to regulatory and customary closing conditions, and there is risk that it will not close on the expected timeline or at all. - Multi-year structural demand growth for energy services driven by energy security initiatives is expected to play out gradually over multiple quarters and years, with near-term activity growth slower than broader market headlines may suggest, creating risk of near-term performance miss relative to market expectations.

Analyst Q&A

• Q: How does management balance top-line revenue growth versus margin expansion in the coming upcycle, particularly after walking away from the low-margin Saudi LSTK contract? /

  A: Management acknowledges that long-term growth requires top-line expansion, so it is not opposed to revenue growth. However, the company will walk away from any contract that does not meet required return thresholds. The Saudi LSTK contract was strategically valuable to build capability over the past three years, but no longer provides the required margins, so the company was comfortable stepping away. Management notes it has a strong enough pipeline of higher-margin opportunities to deliver resilient margin growth, which is already evident in Q2 results and Q3 guidance.

• Q: What is the current monthly cadence of Middle East conflict impacts, and is impact moderating following the recent flare-up? /

  A: Management reports that financial impact is not currently increasing, which is positive, and overall impact is moderating, though this remains subject to future geopolitical developments. Impact will not fall to zero until a permanent resolution is reached, and this persistent moderate impact is already baked into current guidance. Regional activity is mixed: Saudi Arabia and UAE were recovering prior to the latest flare-up, Oman has remained largely stable, while Bahrain, Qatar, Iraq, and Kuwait have seen the most significant recent disruption and uncertainty.

• Q: How should the 2027 opportunity in Venezuela be framed in terms of size, timing, and relevant product lines? /

  A: Opportunity development in Venezuela has progressed much faster than management initially expected. Weatherford works with multiple customers including Chevron, and the opportunity covers the full range of its product portfolio, with artificial lift, intervention, and well services as the core initial focus. At its peak, Venezuela represented ~$500 million in annual revenue for Weatherford, and management does not expect a return to that peak level in the next few years. Contribution will grow non-linearly from single-digit millions to tens of millions of dollars, with more specific guidance to come when 2027 outlooks are released.

• Q: Is the recent increase in offshore contract awards a sign of a broader market inflection, market share gains, or both? What changes have been made to offshore operations? /

  A: Management confirms that both a strengthening offshore cycle and selective market share gains are contributing to recent wins. MPD and tubular running services are growing in line with the strengthening cycle, while the integrated completions business is gaining share after years of targeted investment. Offshore operations have been restructured to deliver consistent execution and commercial terms across all geographies for multi-regional customers, paired with centralized centers of excellence (such as the new Managed Pressure Wells Center of Excellence) that unify engineering, manufacturing, and remote operations to deliver a differentiated customer value proposition.

• Q: What is the long-term free cash flow conversion target after the recent upward guidance revision? /

  A: Management maintained the 50% through-cycle long-term target, after raising full-year 2026 guidance to mid-to-high 40% based on strong H1 performance (H1 conversion hit ~49%). Numerous working capital, tax efficiency, and capital expenditure optimization initiatives are underway to hit the 50% target. Management will only consider raising the target after it sustainably delivers 50% conversion consistently, aligning with its track record of meeting stated targets.