Weatherford Touts Record Revenues in 4Q10
Weatherford reported fourth quarter 2010 income of $156 million, or $0.21 per diluted share, excluding an after tax loss of $210 million. The excluded after tax loss is comprised of the following items:
- $158 million book tax expense primarily incurred in connection with a tax reorganization to migrate Latin America operations out of the U.S. holding structure during the quarter to further strengthen global tax planning efforts. Of this amount, $54 million was a cash charge;
- $34 million in bond tender premiums paid for the extinguishment of a portion of senior notes due in 2012 and 2013;
- $21 million after-tax reserve taken against Venezuelan account receivables in light of the country's economic prognosis;
- $12 million in after-tax severance related to restructuring initiatives; and
- $15 million after-tax gain related to the November 2010 settlement of the TNK-BP put option which settled below the fair value liability recorded in the prior quarter.
The company incurred no net costs related to the government investigations.
Fourth quarter diluted earnings per share reflect an increase of $0.18 over the fourth quarter of 2009 diluted earnings per share of $0.03, before charges and fair value adjustment for the put option.
Sequentially, the company's fourth quarter diluted earnings per share, before charges and the fair value adjustment to the put option, were $0.03 higher than the third quarter of 2010.
Fourth quarter revenues of $2.901 billion were the highest in company history and produced the highest quarterly sequential growth rate in the recent past. Revenues were 20 percent higher than the same period last year, and 14 percent higher than the prior quarter. International revenues were up 15 percent versus the prior quarter. Eastern Hemisphere revenues increased ten percent sequentially and 13 percent versus the year ago quarter, while North America revenue increased 14 percent and 70 percent, respectively, over the same period. Integrated Drilling, Completion Systems, Drilling Services, Stimulation and Chemicals, and Artificial Lift product lines posted strong sequential growth for the company.
Segment operating income of $421 million improved 89 percent year-over-year and 13 percent sequentially. Margin performance was held back primarily due to asset write-offs, particularly in the Eastern Hemisphere, as well as unfavorable weather conditions in Australia. Asset write-offs, principally on inventory, totaled $50 million during the quarter and negatively impacted earnings per share by approximately $0.05.
The company expects earnings per share before excluded items of $0.27 in the first quarter of 2011 and $1.30 for the full year 2011. The outlook for the international markets in 2011 is constructive, as supported by this quarter's healthy improvement in international revenues. The pace of recovery is expected to accelerate throughout the year and gain further momentum in 2012.
Revenues for the quarter were $1,253 million, which is a 70 percent increase over the same quarter in the prior year and up 14 percent sequentially.
Operating income was $252 million compared to $42 million for the fourth quarter of 2009 and was up $51 million, or 25 percent, sequentially. The current quarter's margins improved 180 basis points to 20.1%.
Continued gains in the U.S. land market coupled with robust Canadian activity levels led to higher sequential results. Oil directed drilling and liquid rich plays continued to drive activity levels higher, while reduced Gulf of Mexico operations weighted negatively on region results. The Artificial Lift, Drilling Services and Stimulation and Chemicals product lines contributed strong results for the quarter.
Middle East/North Africa/Asia
Fourth quarter revenues of $681 million were 15 percent higher than the fourth quarter of 2009 and 13 percent higher than the prior quarter. On a sequential basis, Algeria and Iraq posted strong performances along with the Completion Systems and Integrated Drilling product lines. Year-over-year, revenue gains were meaningful in Iraq and China.
The current quarter's operating income of $53 million decreased 35 percent as compared to the same quarter in the prior year and decreased 22 percent compared to the prior quarter. Asset write-offs and inclement weather in Australia negatively impacted profitability during the quarter.
Fourth quarter revenues of $524 million were ten percent higher than the fourth quarter of 2009 and six percent higher than the prior quarter. On a sequential basis, the United Kingdom posted strong revenue performance along with the Drilling Services product line.
The current quarter's operating income of $61 million was up 25 percent compared to the same quarter in the prior year and flat sequentially. Write-offs of inventory negatively impacted profitability in the quarter.
Fourth quarter revenues of $442 million were 28 percent lower than the fourth quarter of 2009 and up 31 percent over the prior quarter. Brazil and Colombia throughout the year have delivered exemplary performance and are expected to continue to lead 2011 growth in Latin America as awarded contracts commence.
The current quarter's operating income of $54 million increased ten percent as compared to the same quarter in the prior year and increased 30 percent compared to the prior quarter.
Net Debt and Free Cash Flow
Net debt for the quarter increased $23 million, after payment of $47 million for the settlement of the TNK put, $43 million in bond tender premiums and $38 million in acquisition consideration. Free cash flow (measured by changes in net debt) was $115 million for the full year 2010.
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.
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