Weatherford International plc Q3 FY2024 earnings call

• Performance: Delivered strong margin and cash performance despite challenges in North America, Latin America, and Middle East/North Africa; observed gradual softening in activity, particularly in short cycle oil projects and onshore programs.
• Capital Return Program: Paid first quarterly dividend of $0.25 per share and repurchased approximately $50 million of shares in Q3; net leverage ratio ~0.5 times, committed to retiring debt and maintaining top tier ROIC.
• Segment Highlights: Aramco awarded three-year corporate procurement agreement; deployed MPD solutions in deep geothermal exploration wells; awarded three-year frame contract for drilling services in Middle East unconventional resources; acquisition of Datagration added PetroVisor and EcoVisor platforms to digital solutions portfolio.
• Market Outlook: Broader international market growth decelerated, but tender and award activity still proceeding; margin outlook of 25-75 basis point annual improvement predicated on flat revenues, with confidence in isolating growth opportunities in select pockets.

In the third quarter of 2024, Weatherford's revenue was flat sequentially and up 7% year-over-year. International revenue grew 9% year-over-year, while North America revenue was up 6% sequentially. Adjusted EBITDA margins came in at 25.2%, and adjusted free cash flow was $184 million with an adjusted free cash flow conversion of 52%. Regionally, overall North America revenue was up 6% sequentially, primarily due to increased activity in Canada and the Gulf of Mexico, while international business was down 1% sequentially but up 9% year-over-year, with the Middle East, North Africa, Asia region driving year-on-year growth.

• Fourth Quarter: Expected revenues flat to low-single digits; DRE revenues flat sequentially, WCC flat to low-single digits, PRI revenues up low to mid-single digits; adjusted EBITDA margins ~25% for Q4. Full year: Adjusted EBITDA margins slightly above 25%, full year adjusted free cash flow expected to exceed $500 million. Long-term: Aim for high-20s EBITDA margins in 3 years in flat to modestly up operating environment, with focus on networking capital efficiency and free cash flow conversion around 50%.

• Market moderation leading to delays in activity and scheduling shifts in some regions.
• Potential softening in revenue due to customers taking a more measured, cautious approach.
• Regional uncertainties such as Latin America having delays and Mexico's evolving market dynamics with a new President and national oil company changes.

Q: Dave Anderson of Barclays asked about M&A, how acquisitions have gone and future M&A plans.

A: Girish Saligram said acquisitions fit strategy, like Probe and Ardyne bringing technology and portfolio fill; M&A selective, not for scale alone but to enhance product lines and value creation.

Q: James West at Evercore asked about growing in stable environment and strengths.

A: Girish Saligram said they have specific growth areas, like MPD Modus launch and production optimization in mature fields as key strengths.

Q: Scott Gruber at Citigroup asked about margin enhancement levers in slower growth.

A: Girish Saligram mentioned pricing, new technology introduction, fulfillment network optimization, and internal efficiencies as levers.

Q: Ati Modak with Goldman Sachs asked about MPD adoption in other regions and free cash flow cadence.

A: Girish Saligram said MPD adoption is growing globally; Arun Mitra said working capital efficiency is improving and expects continuous improvement in free cash flow cadence.

Q: Jim Rollyson with Raymond James asked about digital impact and free cash flow execution.

A: Girish Saligram said digital is a growth pocket, accretive to margins and less capital intensive; Arun Mitra said buyback execution is a learning process, focusing on prudent and responsible approach.

Q: Saurabh Pant with Bank of America asked about orders in Middle East and working capital.

A: Girish Saligram said orders show ongoing activity despite growth moderation; Arun Mitra said working capital efficiency is improving with focus on reducing concentration.

Q: Kurt Hallead with Benchmark asked about margin pressure and customer pricing discussions.

A: Girish Saligram said conversations about pricing are constructive, with strong value proposition backing pricing and customers valuing security of supply.

Q: Doug Becker with Capital One asked about Latin America outlook and digital production offerings.

A: Girish Saligram said Latin America is a wildcard with potential; digital production offerings are significant opportunity with artificial lift and digital capability integration.

Q: Joshua Chan with Daniel Energy Partners asked about Datagration acquisition and digital integration.

A: Girish Saligram said Datagration acquisition bridges data gap for customers, enabling unified data models and real-time analysis for optimization.