Weatherford International plc Q2 FY2025 earnings call

Key Points

• Second quarter results were in line with expectations despite market headwinds; normalizing for Argentina divestitures, revenue and adjusted EBITDA would have had a sequential improvement.
• North America and Latin America performed as expected, with North America down due to seasonal spring breakup in Canada and Latin America down due to Argentina divestitures; Mexico activity expected down ~60% this year but activity levels stabilized and cost structure rightsized.
• ESSR region grew due to project start-ups in Europe, amplified by FX; Middle East, North Africa broader region had sequential growth in Q2 despite Saudi market softening.
• Margin dilution from tariff cost pass-throughs and pricing pressure mitigated by volume-based cost adjustments and structural cost reductions; adjusted EBITDA margin for Q2 was 21.1%.
• Adjusted free cash flow was $79 million in 2Q; paid 4 quarterly dividends of $0.25 per share and repurchased approximately $186 million over past 4 quarters.
• Operational highlights included awards from bp, Shell, and Equinor; successful field trial of TITAN RS technology in Norway for Equinor.

North America was down sequentially, driven by the seasonal spring breakup in Canada. Latin America performed as expected, with North America and Latin America both down sequentially; Latin America's Mexico activity was expected to be down approximately 60% this year but activity levels had stabilized and the cost structure in Mexico was rightsized. The ESSR region saw growth due to project start-ups in Europe, amplified by FX. The Middle East, North Africa broader region achieved sequential growth in the second quarter despite the Saudi market softening, though service-related segments faced higher decremental impact.

Q3 Guidance

• Q3 revenues expected to be $1.165 billion to $1.195 billion, modestly down with U.S. land and Saudi as primary headwinds, partially offset by seasonal rebound in Canada.

2025 Guidance

• 2025 revenues expected $4.7 billion to $4.9 billion, adjusted EBITDA $1.015 billion to $1.06 billion; EBITDA margins in low 20s; North America revenues down high single digits Y/Y, international down low double to mid-double digits; adjusting for Mexico activity declines and Argentina divestitures, international revenues likely down low to mid-single digits.
• Q3 adjusted EBITDA expected $245 million to $265 million, margins tick up slightly from Q2 levels; free cash flow flat to slightly up from Q2, then increase in Q4.

• Market headwinds continuing well into 2026 due to international market softness and commodity prices leading to customer spending slowdown.
• Trade discussions causing uncertainty and potential demand destruction in short to midterm; tariff impacts expected to be greater in second half.
• OPEC+ adding supply increasing pressure on global oil supply-demand balance; some customers signaling spending cuts.

Q: David Anderson with Barclays asked about the Saudi market transition, growth against the backdrop, and when international might turn positive.

A: Girish discussed Saudi market softness since Q1 last year, underpenetrated businesses, technology introduction, and expected softness continuing into 2026 with potential transition in second half of 2026 for international markets.

Q: Scott Gruber with Citigroup asked about the implied 4Q guide.

A: Girish explained the 4Q guide is driven by seasonality and significant project start-ups, with some uncertainty but based on orders in hand.

Q: James Michael Rollyson with Raymond James asked about U.S. land mix and tariffs.

A: Girish noted U.S. land is product and production oriented, with tariff impacts causing uncertainty and focus on improving cost position and defending margins.

Q: Saurabh Pant with Bank of America asked about Mexico stability and cash.

A: Girish said Mexico activity stabilized, with no significant inflection expected, and hopeful for second half payment ramp but uncertain on timing.

Q: James West with Melius Research asked about M&A pipeline and Anuj's thoughts on Weatherford.

A: Girish discussed M&A pipeline focus on well construction and production segments, Anuj highlighted capital allocation, free cash flow, simplification, and being a strong business partner as key priorities.

Q: Douglas Lee Becker with Capital One asked about pricing pressure and cost out measures.

A: Girish said pricing pressure acute in North America, especially on service businesses; cost out measures offset revenue declines and aim for order of magnitude productivity improvement annually.

Q: Derek Podhaizer with Piper Sandler asked about balance sheet strategy.

A: Anuj discussed robust balance sheet, $1.3 billion liquidity, focus on reducing debt, managing maturity profile, lowering interest expense, and revising covenants.

Q: Ati Modak with Goldman Sachs asked about Argentinian asset sales and portfolio optimization.

A: Girish discussed Argentina divestiture as significant cash-generating move, with other smaller portfolio optimizations ongoing.

Q: Joshua W. Jayne with Daniel Energy Partners asked about MPD in deepwater.

A: Girish discussed strong MPD position, interest and quotation activity, expectation of uptick in activity in second half of 2026 and 2027, and a 3-year MPD contract in Mexico as a revenue base diversifier.