Revenues for the fourth quarter were $1,461 million, an increase of $385 million over the prior quarter. The Precision acquisition, which was completed on September 1, 2005, contributed $247 million to the increase. Excluding the acquisition, fourth quarter revenues improved 14 percent sequentially and 26 percent over the comparable period of the prior year. Activity levels in both North America and in the Eastern Hemisphere outperformed each region's increase in rig count. The Eastern Hemisphere's growth was led by an 18 percent sequential increase in the Middle East/North Africa region.
Operating income, excluding the charges noted above, was $250 million for the quarter, 46 percent higher than the third quarter and twice the level of the fourth quarter 2004. Operating income margins improved 120 basis points sequentially and 290 basis points over the fourth quarter of 2004.
Annual revenues were $4,333 million and represent the highest revenue levels in the history of the company. Excluding the Precision acquisition, annual revenues improved $753 million or 24 percent over the prior year. Operating income before charges was $690 million for the current year, 66 percent higher than the prior year. Diluted earnings per share of $1.46, before gains and charges, was 60 percent higher than 2004 diluted earnings per share of $0.91, before charges.
Evaluation, Drilling & Intervention Services
Revenues for the quarter reached record levels of $838 million, including $265 million attributable to the Precision acquisition. Excluding the acquisition, this division posted revenue gains of 9 percent sequentially and 20 percent over the comparable period of the prior year. Sequential improvements were led by an 11 percent increase in North America and an 8 percent increase in the Middle East/North Africa region.
Operating income of $209 million topped the preceding quarter by 49 percent and exceeded the same quarter in the prior year by 88 percent. Both the legacy Weatherford and the acquired Precision product lines posted strong results. Incremental operating margins were 54 percent excluding the acquired businesses or 30 percent with the impact of the acquisition.
Completion & Production Systems
Fourth quarter revenues of $518 million were led by a strong performance in the Eastern Hemisphere. Revenue increases in Europe/CIS/West Africa and the Middle East/North Africa drove the Eastern Hemisphere's 39 percent sequential improvement. Revenue growth in North America was 17 percent sequentially and 37 percent over the same period in 2004.
This division continues to post record levels of operating income. The fourth quarter results of $87 million represent a sequential improvement of 33 percent and an increase of 70 percent over the fourth quarter of 2004. Incremental operating margins were 24 percent sequentially and 27 percent over the same quarter in the prior year.
Other Operations includes the company's pipeline services and contract drilling businesses. Revenues in the fourth quarter increased $68 million as compared to the third quarter. Operating income remained essentially flat on the higher revenue. The contract drilling business' transition to United States accounting requirements accelerated the recognition of $7.1 million of expenses that would have otherwise been deferred.
Research and Development
The company's Research and Development expenditures increased $8 million sequentially and $11 million as compared to the same quarter in the prior year due to the Precision acquisition and increased baseline activity in both divisions.
Other Income (Expense)
The company sold its remaining 6.75 million shares of Universal Compression Holdings, Inc.'s common stock during the fourth quarter of 2005 for a gain of $115 million. There were no tax effects associated with the disposition.
Interest Expense, net increased $6 million sequentially and $9 million from the fourth quarter 2004 due to the reduction in cash and incremental borrowings related to the Precision acquisition.
In the fourth quarter the company's board of directors declared a two-for-one share split of Weatherford's common shares. Earnings per share information for prior periods have been restated to reflect the two-for-one share split.
Non-GAAP performance measures and corresponding reconciliations to GAAP financial measures for the three months ended December 31, 2005 and 2004, the three months ended September 30, 2005 and the years ended December 31, 2005 and 2004 have been provided for additional meaningful comparisons between current results and results in prior operating periods.
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