Q1 2021 Weatherford International PLC Earnings Call

[music].

Yeah.

Ladies and gentlemen, thank you for standing by.

Welcome to the Weatherford International first quarter 2021 earnings call.

All participants will be in listen only mode.

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After todays presentation, there will be an opportunity to ask questions.

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As a reminder, this event is being reported.

I would now like to turn the conference over to Mohamad total Waller director Investor Relations and M&A share.

You may begin.

Welcome everyone to the Weatherford International fourth quarter 2021 conference call I'm joined today by Ganesh, Sally Grimes, President and CEO, and Keith Jennings Executive Vice President and CFO. He.

We will start today with our prepared remarks, and then we will open it up for questions you.

You may download a copy of the presentation slide that corresponds with today's call from our website Investor Relations section.

Favorable operating performance, while never losing focus on safety and service quality.

We delivered above the expectations, we outline February call and are keeping pace with larger and more diversified industri players, despite having exited drilling oriented commoditized product lines and several geographies.

Revenue was down very slightly on a sequential basis as we saw 6% growth in North America offset by a 4% decline internationally. However, EBITDA performance was against strong at 12% with this being the fifth consecutive quarter of double digit margins.

Most significantly or cash performance was outstanding.

The company generating $70 million in free cash flow, which led to a cash balance of $1.3 billion up 58 million sequentially.

As you are all aware, we recently announced that we filed the registration of for shares with the SEC and we intend to read a list of company on the NASDAQ under the ticket simple W. F. R D.

While we recognize that we still have work to do to bring the company to an optimal operating efficiency. We are confident in the future and believe this is the right time to make this change I.

I would like to thank our team board partners customers and share holders for their patients efforts and supported reaching this important milestone.

Moving to specific for.

For the first quarter on slight for I'd like to start with safety an area, where we continued to receive recognition for multiple customers.

For example, a kubler running crew entangle Kazakhstan received the outstanding operational Excellence award from an IOC.

We realized that safety continues to be at the quota for values and are now augmenting a historical focus with digital transformation.

These efforts digitalize operations for reduced exposure of personnel of the rig site or exemplified in the Prs product line, which is a high risk profile given the historical manual intensity of operations.

Portfolio displace a global competitor and with a long term contract on two deepwater rigs.

This combination of services helps reduce onboard personnel and enhances safety.

Not only that it addresses unforeseen contingencies by having cross screen fishing technicians on the rig and it reduces the customers' total cost of ownership.

Besides well construction and intervention operations, we enabled effective outcomes in drilling through differentiated technologies in Romania, we saved and operate in nine days of rig time, using an integrated drilling solution that combined the Magnus for 75 rotary <unk> system with turbine on Triple combo logging while drilling technologies.

On an offshore well as a result, we delivered a horizontal six inch reentry in record time by doubling the penetration rate compared to our major competitors previous record.

Employing the full scope of our drilling engineering quality process enabled us to design the bottom hole assembly with appropriate bid and stabilization features.

Using our central well construction optimization platform and real time operating center allowed us to manage critical operational parameters, including downhole vibrations in real time. This successful operation enables us to expand the Magnus portfolio in the Continental Europe market.

Again speaking about drilling in the first quarter, we achieved the first ever use of weakness intelligent managed pressure drilling or MPD for a particular MLC in the middle East as part of our recently awarded five year contract or MPD solution enabled the operator to perform dynamic pore pressure in formation integrity, Chris Tess.

Drilling statically under balanced conditions, while balancing the formation pressure and eliminate losses, while circulating.

This solution yielded a 67% faster rate of penetration in the reservoir section enabled mitigation of differential sticking incidents and resulted in elimination of over 14500 barrels of oil based mud loss per well to the formation in offset wells all translating to significant cost savings for the customer.

In another example, a remote collaboration our NPD teams performed a terrific job of engineering preparations. It has off study and risk management at a distance from India, Mexico and the UAE.

Also in the Middle East, we completed a successful trial of the industry's first fully Retrievable 15000 Psi gas tight bridge plug for a major operator, there the approved well barrier was set to isolate between frac stages growth tracking it was retrieved with wireline, which saved the customer.

Over two days of coiled tubing milling something that would've been required with the use of conventional <unk> barriers.

In the last quarter of 2020, we highlighted the value delivered to a major operator in Argentina, using a combination of our drilling services and managed pressure drilling technologies, recognizing the value of our integrated solutions with leading technologies. Another major operating the same field has awarded Weatherford multiple three year contracts for serves the <unk>.

<unk> provider of many services, including drilling managed pressure drilling tubular running intervention drilling tools cementing products production Packers and liner hanger systems.

This comprehensive solutions package will be delivered on a minimum of for wells with potential for expanding the scope of work.

The highlights from this quarter show, how we are harnessing opportunities for profitable growth.

Our strategy involves increasing commercial traction of new technologies that enable differentiated value leveraging scale to grow into adjacent product lines in targeted geographies ditch.

Digitization to drive remote operations, and creating synergies through cross product line solutions.

These strategies for growth carryover from our core operations for alternative energy last quarter, we hosted a virtual geothermal event in the UK for our global customers.

The digital session highlighted the significant contributions that geothermal energy can make to decarbonization efforts.

This particular power sources clean renewable and generated from the Earth's heat search represents a huge opportunity for the energy transition.

It's worth noting that Weatherford has a 23 year history of delivering results in geothermal projects. These results, including the world's hottest borehole in Iceland.

<unk> the world's first 90 degree geothermal well in Canada.

Hearing the Turkish geothermal market.

And drilling and logging relative <unk> largest geothermal heating plant.

Clearly our portfolio can make a positive impact in this space for synergies among our product lines. In fact, we can integrate our proprietary technologies from grilling managed pressure drilling tubular running in wireline completion services to help customers harnessed this energy source and fulfill its enormous potential.

Now turning to slide five for our view on the market.

As you all know North America activity was up meaningfully during the quarter and we see the U S rig count continue on a path of improvement.

As we've previously discussed after making strategic exits and uncompetitive markets in North America.

We now have greater exposure to the production cycle in businesses like product <unk> and automation software and artificial lift we generally trail rig count increases.

We're encouraged by the increase in rig count like other industry observers expect capital spending discipline by E&ps to continue.

Rationally are focused continues to be true drive operational improvements in the company based on flat activity we.

We will be poised to take advantage of activity increases with higher fault true.

But for Iraq, relying on that on our journey towards sustainable profitability, but that let me turn it over to keep to provide you the financial update.

Thank you Girish, please turn to slide six and I will begin with a summary of for a first quarter results, which reflects the continued momentum for improving financials.

The revenues or $832 million, one per cent below the fourth quarter and 32% below the same period in 2020.

The sequential performance primarily resulted from increased drilling evaluation, an intervention services in the U S and Canada, plus seasonal activity increases in Canada and increased activity across all of our product lines in Latin America.

These gains were offset by seasonally driven decreases incompletion in production product sales in the Middle East Asia, and North Africa, and seasonal drilling activity decreases in Russia.

First quarter adjusted EBITDA was $102 million, which is which is an adjusted EBITDA margin of 12%.

As Girish mentioned, we delivered on our commitments and the first in the past quarter by accomplishing another quarter of double digit adjusted EBITDA margins and generating free cash flow hour EBITDA margin improved by approximately 60 basis points sequentially overcoming the impact of restored pay and benefits for employees and the seasonal.

Decline in product sales.

And the quarter, we experienced a lower than anticipated seasonal decline and product revenues of 13%.

Well not fully offsetting the revenue decline in products. The seven per cent increase in service revenues delivered very accretive earnings fall through.

Operating results in the first quarter also benefited from the continued realisation of cost reductions from our initiatives focused on simplifying the organization and managing are available cost lepers.

Overall, the 12% EBIT margin this quarter, which improved on the EBITDA margin of the prior quarter on lower revenues plus headwinds from material cost inflation, along with treating our employees as they deserve by restoring pay and benefits demonstrates that our cost rationalization initiatives.

Aimed at stabilizing and improving our margin profile are taken hold.

Let me know provide a regional breakdown starting with the western hemisphere on slide seven.

Western Hemisphere revenues of $390 million in the first quarter grew 5% sequentially and declined 34% versus prior year.

In North America revenues grew 6% sequentially driven by the 14 per cent sequential growth in our drilling evaluation and intervention business or dei aligning with the increased rig activity.

Revenue for completions and productions or CMP remained unchanged sequentially largely due to ongoing completion and work over activity, which was partly offset by lower product sales. Additionally, both product lines benefited from seasonal increases activity increases in Canada.

First quarter revenues of $176 million in Latin America grew 3% sequentially and declined 29% versus the prior year.

<unk> revenue growth of 8% sequentially more than offset the CMP revenue decline.

Dei product line growth was driven by increased activity in South America, which was partially offset by lower production related sales throughout Latin America.

Segment adjusted EBITDA.

For the Western Hemisphere in the first quarter was $52 million, which grew by 11 million or 27 per cent sequentially ajar.

Justin segment EBIT margin of 13% improved 200 basis 230 basis points sequentially, and we're 40 basis points above the prior year quarter.

The growth and adjusted segment EBITDA was primarily driven by increased activity and cost rationalization in North America.

Turning to slide eight east.

Eastern Hemisphere revenues of $442 million in the first quarter declines, 6% sequentially and 30% versus the prior year.

Overall across the eastern Hemisphere, CMP revenues declined 17% sequentially, driven primarily by seasonally lower product sales across the middle East Asia and North Africa.

D E I revenues increased by 5% sequentially driven by higher drilling activity in Europe, and the middle east more than offsetting the service and activity declines in Russia from weather impacts.

The revenues in the Middle East North Africa, and Asia of 267 million were down eight per cent sequentially and 34% versus the prior year.

On a sequential basis, our revenue decline here was across CMP, largely driven by seasonally lower product sales and lower activity across the region, particularly in the middle East and Asia.

Revenues in Europe sub Saharan Africa, and Russia declined three percentage sequentially and declined 22% versus the prior year.

Adjusted segment EBITDA for the Eastern Hemisphere was $6 million to $6 million in the first quarter, a decrease of $21 million or 24% sequentially.

Just a segment EBITDA margins of 15% declined 360 basis points sequentially. The sequential decline and adjusted segment EBITDA margins was primarily driven by a decline in high margin product sales in the fourth quarter of 2020, which did not reoccur in the first quarter and seasonally driven lower activity in.

Sales for completions and drilling.

Slide nine.

We continue to demonstrate or performance improvements by generating positive cash flow. Despite a greater than 30 per cent year on year reduction in revenues and a $22 million increase year on year in cash paid for interest Unlevered free cash flow of $94 million in the first quarter of 2021 improved by 94.

A million dollars versus the prior year and free cash flow of $70 million in the first quarter of 2021 improved $72 million.

Sequentially, adjusted EBITDA, and Unlevered free cash flow remain unchanged Ah relatively flat with the decrease in cash paid for interest and capital expenditures being the primarily primary drivers behind the improvement of $93 million in free cash flow.

First quarter 2021 cash flows provided by operations or 74 million compared to $22 million in the fourth quarter of 2020, and 30 million in the first quarter of 2020.

Our continuing improvements in cash flow performance resulted results for more improve operating performance disciplined cost management returns focus capital expenditures and working capital harvesting driven by accounts receivable collection and continued inventory rationalization.

Capital expenditures were 15 million in the first quarter compared to 38 million in the first quarter of 2020 and $54 million in the fourth quarter of 2020, when we accelerated our investments and selective growth projects in Latin America.

Total cash are approximately 1.3 billion as of March 31, 2021 was up $58 million from the prior quarter.

We believe our cash flow from operating activities and cash balance provide the flexibility to operate through this environment and we have no debt maturities until 2024.

And March of the first quarter, we filed a form 10 registration statement with the United States Securities and Exchange Commission to register ordinary shares pursuant to section 12, B of the Securities Exchange Act of 1930 for with no additional shares to be offered for sale.

Our filing off the form 10, a subject SEC review upon its effectiveness, we will be subject to the reporting requirements of the exchange Act in conjunction with the form 10, becoming effective we intend to list or ordinary shares on the NASDAQ stock exchange under the ticker symbol W. F.

<unk> subject to the approval from NASDAQ and in compliance with applicable listing requirements.

We currently expect the registration and lifting process to be completed in the second quarter of 2021.

This is an essential step for the company to fully returned to the public markets. We believe this is the right timing or re emergence to re list on the NASDAQ stock exchange and that doing so will enhance long term shareholder value by improving the companies visibility expanding liquidity ordinary shares and for <unk>.

Riding a broader institutional investor base, the opportunity to invest in the new Weatherford.

Turning to slide 10, I will share a few quantitative thoughts on both the full year and the second quarter of 2021.

Very still significant economic an industry specific uncertainty that precludes us from providing more specific guidance.

These comments do not assume another round of extended pandemic related lockdowns that may further curtailed oil and gas activity or disrupt the expected recovery of hydrocarbon consumption that is underway.

[noise] consolidated revenues in 2021 will align with current activity levels and we we continue to expect them to be in line with our annualized second half of 2020 results.

Our focus areas will drive one margin expansion in 2021 and the benefit of these efforts is expected to improve EBITDA margins by 100 to 200 basis points from the second half 2020 levels.

As activity level of stabilized and eventually grow we expect networking capital to be an outflow, particularly if we experienced a material growth and activity in the second half of 2021.

For 2021, excluding the impact of networking capital our Unlevered free cash flow is expected to improve slightly year on year.

We expect to reinvest in our business true capital expenditures in the range of $100 million to $130 million.

As a result, we expect slightly negative free cash flow in 2021.

Let me turn now to the second quarter of 2021.

We expect second quarter of 2021 consolidated revenue to be in line for the first quarter, we just completed.

I just did EBIT margin is expected to be in line with the first quarter 2021 levels.

Second quarter Unlevered cash flow is expected to decline sequentially from the first quarter largely due to the non repeat of the working capital unwind in the first quarter as well as the seasonal timing of cash outflows.

Thank you for your time today I will now hand, the call over to Girish for is closing comments. Thanks.

Thanks Keith.

As you heard a really strong start to the year and we are focused on bringing the same degree of performance into subsequent quarters.

We are seeing strong signal that our goal of achieving sustainable profitability and free cash flow generation is talk just aspirational, but achievable, we believe that our consistency and execution and growth should concentrate that into reality over the next couple of years.

Turning to slightly 11 in February we laid out of 2021 focus areas of North America performance variable cost optimization organizational simplification, an inventory along with the strategic vectors of digital transformation ESPN energy transition in our portfolio.

Our first spoke stereo for 2021 is not the medic of where we have put in place a new leadership team and Ah realigning our cost structure to be in tune with the realities of today's market.

In the first quarter, we saw the results of that with the 6% revenue growth in them coming through it improved margins. We are driving changes in the BB manage inventory to a robust sales and operations process inventory categorization and Ah redeployment process. These changes along with improved organizational agility enabled a significant increase.

Sequential margin performance in the first quarter.

Continuing on variable cost management is a very important focus area for us we appointed an enterprise wide team to establish new cultural and operational frameworks for cracking costs and driving cost reduction initiatives across the organization the.

The work we've done on a cost savings initiatives enabled us to maintain almost the same level of gross margin with only 100 basis point drop on a 32% year over year decline in revenue.

This is an incredible feat in a very challenging market, but we cannot rest there. The actions. We're taking now are critical enablers for us to manage our business and advanced toward the goal of sustainable profitable.

To further progress efforts for our third focus area organizational simplification, we recently brought on Joe Mon Green as a chief Human Resources Officer.

He had previously been in that role for Anadarko and camera Joanna steam our focus from reducing layers increasing span of control. While also ensuring robust mechanisms for efficient international assignments on a thriving pipeline program for our next generation of engineers. All these efforts coupled with a natural intensity of our teams enabled a straw.

Long first quarter performance I am looking forward to the cumulative impact to fund initiatives showing up in our results from the coming quarters.

In the area of inventory rationalization, we made incredible progress on our 2021 goal of improving day sales of inventory by 10 days. The work done so far to simplify the organization is paying dividends, we were able to enhance collaboration throughout our company's entire supply chain and better and great manufacturing operations in sales.

For improved inventory management and delivery as a result of these efforts we have seen a four day improvement in our DSI sequentially.

Now, let me briefly touch base on what we've been doing the line ourselves for the long term strategic factor shaping our industrious home.

Digital transformation is one that has a high priority for us.

Investments in digital capabilities have continued to help deliver value to our customers from their ongoing digital transformation journeys we have.

Seemed renewed interest from customers in our digital offerings, which feature remote operating capabilities visualization edge automation and artificial intelligence.

During the quarter the head Vv made an expanding into new geographies will further the deployment of our digital platforms in turn we can help our customers to reduce downtime and increase operational efficiencies across drilling well construction completion in production.

Energy transition is an extremely important strategic vector with tremendous attraction from our customers, particularly in Europe will be continued to see increasing levels of engagement on drilling geothermal wells.

We had also having advanced conversations about carbon capture as our firma abandonment instruct recovery solutions make further inroads in the market. This vector is great importance for us and our portfolio is pivotal to making an impact in this area going forward.

And that brings me to our product and service portfolio. The traction of key technologies and commercial operations has a crucial effect on our achievements because it influences winning work and gaining market share a clear indication of this is a success. We have had leveraging adjacent product clients for market expansion as in the case with Vero, which I mentioned earlier, we try and.

All eight of our <unk> zones in the first quarter.

At the same time, we continue to refine the portfolio by exiting diluted businesses and refocusing our efforts in capital on Fox of the portfolio that are generating positive returns.

Weatherford has been through some challenging periods of the past few years, but we continue to remain optimistic about the future and believe that our best days are ahead.

The result of 2020 and now the first quarter of 2021, I'm, leading indicators that should provide confidence and justify our optimism.

A decision to re enter the public markets for some other sign up our belief and we look forward to updating all of you on our progress in the coming quarter. Thank you all for joining us today and with that operating let's open it up for Q&A. Please.

Thank you we will now begin the question and answer session.

Ask a question you moved from starving one on your touchdowns from.

You are using a speakerphone, we ask for you to receive up your handset before pressing the keys.

So it's all your question please for starving too.

And today's first question comes from corner line I'll get worse Morganstanley. Please go ahead.

Yeah. Thanks.

Was wondering if you guys could expand on some of the comments you made on.

Some potential big re tenders from national oil companies in your.

Sensual to gain market share there.

Could you could you may be provided semester color on what what these tenders look like as in our day large projects to our day specific product line tenders.

Where geographically are they in and sort of wondering what are you targeting in terms of of game Sir.

Sure Thanks kind of discoloration in the morning for his fault.

What we're seeing I would say the predominant activity is in the middle East, that's where we're seeing the bulk of this and most of these are really product line specific tenders and I think there's a combination of you've got a natural sort of.

And a cycle in the neck cycled starting up by in some cases and in some cases as we mentioned the disc customers, saying, Hey look let's re tender the the overall peace.

Some of these tenders happened as we were going to our chapter 11 process and we've lost some of the share. That's why we're looking to be able to get back in and gain some.

Sure Secondly, we made a lot of investment in terms of our local infrastructure, which is you know is a critical component in some of these.

Geographies and then last but not least is we've talked about we believe we've got a very strong street for technology that can help so we've put our best for put forward all day tenders, we hope and now we will have to see what for Ya.

Outcome of these now in terms of timing.

Most of these standards typically run between three and sometimes five to seven years in some cases. So there are varying lengths and we expect over the next few months to get the decisions on these as you know in this sector. The way the standards a lot of them at least work as they are typically share it across multiple service providers and so it's.

Not only winning the tender, but then it's also about how you execute which is a really important part so you've got to continue to deliver on that performance every day to make sure that you're capturing the full share of what you were originally awarded.

Yeah understood.

There's been a lot of focus on on an international I think frankly middle Eastern particular pricing.

For service companies would would you agree with the sentiment debt capacity is a bit tighter than it was last cycle that there is maybe some longer term potential for price increases for service companies and I guess the question from your perspective is.

Are you are you trading price for market share how <unk>, how are you sort of approaching the market given given the balance between market share it does.

Desire for higher margin.

Sure Yeah look I think it's a little bit of a mixed mixed bag right now I think where you've got product clients that truly have a higher risk profile and you can deliver incremental value to EBIT differentiated service or product offering I think there is the ability to drive price in terms of capacity and I also club that with a little bit of.

Deal inflation in certain pieces. So there is a bit of an opportunity for sure around that having said that I think part of the rationale that lost customers go through with the standard is exactly back to make sure that they are getting the optimal pricing and too.

To ensure that they're getting the best stock cost structure. So what we're trying to do is is really put together a overall holistic view and it's actually good that many of these are coming together. So we can figure out where we can get synergies across our operations to provide the right cost point and get as much price was possible in terms of share verses price.

We've been very clear in that obviously share. It is important and we are focused on top line growth, but we're not going to chase volume at the expense of margins that that is something that would be a very very clear about we have talked about that at blanked internally. We have had conversations about that with customers now in the event and.

Certain places you know going from a let's say a 5% share it on a particular tender to a 20% share gives you volume efficiencies. It gives you scale if that actually changes the profile back we will certainly look at consider and go after but in a genetic sense, creating off volume for for margin is not <unk>.

Something we are doing.

Got it all helpful contact I'll turn it back.

Okay. Thank you for the next question for our next question today for some in the first one was for me. Please.

Go ahead.

Good morning <unk>.

Thanks for taking the question.

I wanted to ask you first about the M. P. D business now that we're especially since we're beginning to see all golfs for drillers come out of chapter 11.

With more capital and.

Hopefully some some reemergence with offshore activity as well as a leadership position with you a unique niche for Weatherford can you talk about that outlook. Maybe also find it within where you know today's penetration of M. P. D. As in the high value markets, and where where do you think you could go to.

Over the next couple of years.

And a good scenario.

Sure absolutely.

I really appreciate it and not to have you on the call look MPD manage pressure drilling as a business. It's a technology that I'm personally tremendously excited about and something that Weatherford has had a as you said leadership position for a very long time we've.

We've been pioneers in this technology in a number of different ways and it's something that we have continued to investing over multiple cycles, we've got a fantastic global team.

And we've got deep domain expertise in the in the product line and the thing about MPD is look we truly believe it's a better paradigm around grilling, but it is still something that is less than 10% of the wells drilled in the world. So.

If you think about it from that context, regardless of what the share position is I will just say, we've got a leading position on shed in that product line if.

If we can take that sub 10%.

Adoption rate will call it and grow back to say, 15% over the next.

Two to three years, that's a tremendous increase in the overall market itself and so we believe that the portfolio that we have that we're adding to we are continuing to invest in technologies to spend the full spectrum.

We think it's something that is a is a critical part of the growth engine for the company.

And the thing about our MPD businesses, it's both onshore and offshore we've clearly got leading edge technology on the offshore side are rictus product, which has been successfully deployed and is running.

Lots of the road, that's something that we are very proud off and it continues to be a market leader, but I've also got a very very strong basic RCD business, starting with the U S that we do in multiple parts. So we're augmenting that overall product line, making sure that we are covering every part of the spectrum at the same time, there's a big focus from us on really ensure.

Showing that we are spending time with customers.

Making sure that we are going to be understanding of what the technology brings how do we make it part and parcel of dead overall paradigm and drilling. So so so thanks for bringing that I've look it's something we're very very excited about we think it'll be a big part of our future going forward.

Super Thanks, Thanks creation I wanted to ask a follow up about your outlook for the year, we're calling this qualitative outlook of not guidance. So I got that but you got off to a good start with Q1.

I wouldn't say starting on second base, but certainly a good start and.

Your guidance or the the outlook for you too. It's flattering I know you know. This then then what all of your your peers.

Are pointing towards a expecting with.

More of the range of mid to high single digit growth sequentially for for you. One is queue to you mentioned some some important considerations with regard to co.

COVID-19 impacts that are still happening.

Mobility internationally as well as some of the <unk> to the degree counting your north American businesses, but that being said do you see any particular areas where.

You would hope to do a little bit better than flat.

Sure in the second quarter share it look I'll, let let me give you a little bit of a macro view and Keith can jump in with some additional points look first of all I'd say start with.

The philosophy that we have taken and that we are really trying to drive hard within the company is making sure that the company is profitable act flat activity levels and so we're very cognizant of the fact that in this sector and especially with US historically, we've relied on in upcycle to get the company profitable and then inevitably we saw for the consequence.

<unk> on the next Downcycled. So we are absolutely determined to make sure that doesn't happen and so we are laser focused on ensuring that we are making the structural changes from the company to drive to change that is required for us to be sustainably profitable. So that's really why we keep.

Hammering that team secondly, as you point I look.

In certain Geography's, we've exited unprofitable commoditized product lines that didn't really contribute so as activity fixed back up the first part that fixed back up about those product line. As an example, we talked about drilling services.

In North America, we've just recently made a decision on our Wellheads business because we didn't have something that was asked profitable on on that line. It was very commoditized and so those are the things that will pick up fairly quickly and we don't expect that to contribute to us meaningfully having said that look we are excited about the production side of the equation.

Artificial lift as an example in the U S effect six activity come through we our position we are price do capture that and we expect that to come through it and increased fall true secondly, look if the restrictions around logistics and people movement, especially in some parts of the world, but it's still very strongly or the pandemic is still.

Raging if that abates over the second half I think we will have a.

Better opportunity to go capture some of that but we don't Wanna get wait to head off our skis and so we are being a little bit more prudent and we are really focused on what we need to do and what we can control, while always being ready to pounce on the market opportunity.

Good morning, and I'm from.

I think the thing. We also have to think about is Q1 was a strong quarter and it was partially strong.

Because the the products business did not step down as hard seasonally.

And so we are working with our frontline salespeople to understand if that was just some of the queue to pull forward because of U S is picking up.

If it with that then we have to balance the forecast for Q2 with the step up in the services business and then the leveling off the product sales. So that's so we've kind of.

Thought about it if there's more activity, we're seeing and we will be happy to sell into it.

Good. Thanks, Thanks for the day of the clarification Kate appreciate it.

Okay, ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press star than one.

Today's next question comes from Greg Broody, It would be a day for.

Please go ahead.

Good morning, Thank you for all the information.

Good morning, Greg.

Uhm.

Last quarter, you talked a little bit about.

Try and should put in place a regular way credit facility.

Curious.

Where that stands what you're certain thoughts on there.

Sure. So we continue to have dialogue with our banking partners.

The.

Overall credit spectrum, and and feeling towards the sub investment grade oilfield services market where per.

<unk> I think is getting better I think we see more.

Issues, we see more for.

Facilities being put in place. So we are working with our partners, we're having better conversations zone, we had in queue for.

We still have not launched a process yet, but as we get out of the quiet period here will pick both of those dialogue.

So you say you haven't lost.

Do you have a sense of timing how long it'll take for.

To.

To get a tunnel is once you do.

But no sense of timing, we're not rushing this as you know.

Story of Weatherford they.

Prior leadership team I think probably rushed coming out of bankruptcy and.

The.

The facility was not.

Where it needed to be so it was part of the problem that led to the it need to unwind it.

It became.

Something off so this time, we're taking our time, we're being more cautious we're making sure that we put together a facility that better reflects the geographic footprint of the company as best as possible.

And so that's really why it's taking so long it's not an easy thing, particularly when you are coming off of the.

A single be credit spectrum in a world where people have moved away from your industry.

That makes sense and then you you.

Gave some commentary on.

Free cash flow for the sheer expected to be slight negatives.

I'm just.

I just wanted to rehash Coupla guidance numbers, you gave us last for just to make sure they're still the same.

The restructuring charges, how much for you estimate it for this year.

The restructuring spend for this year so.

I think we had.

<unk> and the forecast.

We may not hit all of that but.

We're still thinking that.

Pending on how the second half plays out.

And how will cost and organizational rationalization program continues.

Is that the the corporate out the carpet costs for the corner.

Okay $18 billion is that a good run right now.

I think that's a good run rates I think we could probably use 2000 for 25 and your models, but I think we are in Ah.

A good place with the corporate costs.

The net.

You have to remember, though in that line, we carry intercompany eliminations and that's what will move it up or down we started to footnote that in our queue. So people can get a better look.

Enter that number.

But this quarter intercompany eliminations were minimal so.

It's a better look at that number.

Got it.

So of the 20 to 25, it sounds like trying to interest the 20th makes more sense yeah.

Yeah.

Just.

<unk> actually reduced it I think probably about 20 million.

How should we think about.

Is that something that moved out to next year's touch.

How should we be thinking about our Capex me grow as you mentioned that business opportunity improves.

So.

As a.

That's peg it at three and a half billion dollars revenue business I think steady state Capex should probably average roughly 5% we should be about 175, we are under that at the moment, partly particularly because we were overcapitalized in some ways and the last part of the cycle. So as we rationalize the assets.

Rationalize the assets that can go into service rationalizing, what we need to invest in as growth assets. Then at the moment, we see the 100 to 130 is what we need for 2021 that may pick up as we get a better look at.

For 22, but at the moment, we're spending just what we need and what we believe will.

Will provide a return as you can tell a remember from last quarter queue for we accelerated and spent over 50 million because we had some particularly.

Interesting.

Growth opportunities that we wanted to fund that's how we're looking at it if it's not something that we can clearly see the return on now we're going to continue to be fairly prudent.

That's helpful. And then you mentioned working capital you won't have to benefit that you.

That you had in the first quarter for the rest of the year. Please you also said that maybe tell me to use as you grow how should we think about working capital the rest of this year as a total.

How much cash it makes it so.

So as I think about my my.

My full your view on working capital.

I think.

When I think it through.

A R.

Is the wildcards because it depends on how the second half growth and which markets, where you're growing but that should not be the same profile of 2020, which was more of a.

Ah cash source as we were coming down to cycle. So we expect that.

Might be a slight use in the second half.

Inventory, we are working hard at our inventory rationalization program.

Saw Q1 inventory was a strong source we continue to.

Hope to get.

For a better place.

Across the full year.

Payables, where.

We continue to rationalize so I think net net we expect working capital to be a slight positive on the year, but not as positive as 2020.

Does that imply that you actually.

You won't use anywhere from shuffles, the rest of the year.

For.

I wouldn't say.

I think net for the rest of the year it shouldn't be of use.

Unless.

At the business growth and I increase my ER I think I'm, okay with that.

And your.

You're just the taxes.

That you have that's.

That's for sure.

We still assume about about a little under $80 million for the year.

Just about an $80 million because we're not yet profitable so really the same paradigm of paying deem taxes as what's.

We're faced with.

And just last question for you talked about opportunities carbon capture of geothermal true.

What type of capital G. That's it ultimate require or is your assistant business set up for that.

Yeah, Yeah, I'll I'll take that right now I think it's still a little bit of early days under Jill total side, we don't really expect it to be dramatically different because it's the same sweetest products and technologies that we have and it's really us doing a little bit of Jason work et cetera.

Carbon capture side, you had something we are exploring their understanding but suffice for sale or whatever model. We ended up with will be one debt hazard guns that are accretive to the company and that are substantially higher than what we've got to we're not going to again go chase marginal returns in this business, but dusty.

A lot of work to be done and not in that front and our focus predominantly for right now is leveraging existing technologies and we've got an asset based on income fulfilled most of the work that we see a credit card.

Great. Thank you very much for I'd appreciate all the time and information.

[noise] pleasure.

Ladies and gentlemen. This concludes today's question and answer session and today's conference call for me.

Thank you all sorts, sending today's presentation you may not I'm, just glad you're lines and have a wonderful day.

Thank you. Thank you.

[music].

[music].

Ladies and gentlemen, thank you for standing by.

Welcome to the Weatherford International first quarter 2021 earnings call.

All participants will be able to snow removal.

Should you need assistance. Please signal conference specialist by pressing the star followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on your telephone keypad.

So withdraw your question. Please press Star then two.

As a reminder, this event is being reported.

Now, let's turn the conference over to Mohamad took Waller director Investor Relations and M&A.

Sir you may begin welcome.

Welcome everyone to the Weatherford International fourth quarter 2021 conference call I'm joined today by grief, Sialogram, President and CEO and Keith Jennings Executive Vice President and CFO, We will start today with our prepared remarks, and then we will open it up for questions.

They download a copy of the presentation slides that corresponds with today's call from our website Investor Relations section.

I want to remind everyone that some of today's comments include forward looking statements. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed herein.

Please refer to our latest Securities and Exchange Commission filings for risk factors and cautions regarding forward looking statements.

Our comments today also include non-GAAP financial measures the underlying details and a reconciliation of GAAP to non-GAAP financial measures are included in our fourth quarter press release, which can be found on our website with that I'd like to turn the call over to Girish.

Thanks, Mohammed and thank you all for joining the call today I'd.

I'd like to start today with some highlights from the first quarter and our view on the market.

Pete will then follow it up or details on the financials for the first quarter. Some directional views on the second quarter and updates to the full year for 2021, finally, I will wrap up our commentary with an update on our 2021 imperatives and strategic direction.

We will start today on slide three which lays out our priorities we came into the year with good momentum from 2020, and I'm very proud of our team for carrying that forward into 2021 with another quarter of favorable operating performance, while never losing focus on safety and service quality.

We delivered above the expectations, we outlined on our February call and are keeping pace with larger and more diversified industrial players despite having exited drilling oriented commoditized product lines in several geographies.

Revenue was down very slightly on a sequential basis as we saw 6% growth in North America offset by a 4% decline internationally. However, EBITDA performance was again strong at 12% with this being the fifth consecutive quarter of double digit margins.

Most significantly our cash performance was outstanding with the company generating $70 million in free cash flow, which led to a cash balance of $1 3 billion up.

Our 58 million sequentially.

As you're all aware, we recently announced that we filed the registration of our shares with the SEC and we intend to re list the company on the NASDAQ under the ticker symbol W. <unk> Rd.

While we recognize that we still have work to do to bring the company into an optimal operating efficiency. We are confident in the future and believe this is the right time to make this change I would like to thank our team board partners customers and shareholders for their patience efforts and support in reaching this important milestone.

Moving to specific for the first quarter on slide four I'd like to start with safety an area, where we continue to receive recognition from multiple customers.

For example, our kubler running crew in Tengiz, Kazakhstan received the outstanding operational Excellence award from an IOC B.

We realize that safety continues to be at the core of our values and are now augmenting our historical focus with digital transformation.

This effort to digitalize operations for reduced exposure of personnel at the rig site at exemplified in the Prs product line, which has a high risk profile given the historical manual intensity of operations.

We had several successes, both operationally and commercially over the quarter, which create greater customer stickiness and potentially meaningful expansion opportunities as we have discussed before technology innovation as a large driver of the value we bring to customers several decades ago, we pioneered the tubular running industry.

We continue to build on our leadership position through our virtual automatic automated connection integrity. The first technology of its kind in the oilfield, we commercialized Bureau in 2019 today and proud to announce that in the first quarter of 2021, we had a widow operation every one of our <unk> zones, which.

Marks a major milestone in the commercial traction of this technology.

As an example of the efficacy of this technology Vero automated connection integrity technology enabled an IOC in Nigeria to make our premium connections on a remote high pressured gas well.

The customer decided to replace the incumbent competitors offering with our system on account of several leaks observed in the previous completions in this field our team delivered a flawless solution, which drew a note of commendation from the customer and resulted in the works full scope expanding for several more wells.

This commercial tracks trend was also visible in Indonesia.

Where we executed a successful trial of Vero for a major operator, our solution deliver flawless connection integrity assurance, a hallmark of our offering while enhancing safety by reducing personnel onboard and limiting exposure for personnel in the Red zone.

The customer recognized the value of Vero automated valuation software when it rejected several threads that conventional means could not have identified.

This differentiated capability, thereby reduce the risk of future casing leaks for our customer not to mention the associated time and cost.

Despite travel restrictions. This trial operation received full support with live streaming assistance from our Engineering Center in Germany and operations team in Australia, showcasing our expanding digital capabilities around remote operations.

These results illustrate the value of our tubular running services business, even more powerful is the integration of our tubular running capabilities with other offerings.

For a major operator in the Suriname basin, we leverage the full strength of our tubular running an intervention portfolio displace a global competitor and with a long term contract on two deepwater rigs.

This combination of services helps reduce onboard personnel and enhances safety.

Not only that it addresses unforeseen contingencies for having cross screen fishing technicians on the rig and it reduces the customers' total cost of ownership.

Besides well construction and intervention operations, we enabled effective outcomes in drilling through differentiated technologies in Romania, we saved and operate in nine days of rig time, using an integrated drilling solution that combined the Magnus for 75 rotary <unk> system with turbine and triple combo logging while drilling technologies.

From an offshore well as a result, we delivered a horizontal six inch reentry in record time by doubling the penetration rate compared to our major competitors previous record.

Employing the full scope of our drilling engineering quality process enabled us to design the bottom hole assembly with appropriate bid and stabilization features.

Using our central well construction optimization platform and real time operating center allowed us to manage critical operational parameters, including downhole vibrations in real time.

This successful operation enables us to expand the Magnus portfolio in the Continental Europe market.

Again speaking about drilling in the first quarter, we achieved the first ever use of Vic This intelligent managed pressure drilling or MPD for.

Particular, MLC in the middle East as part of our recently awarded five year contract.

MPD solution enabled the operator to perform dynamic pore pressure in formation integrity Trust Tess.

Drilling statically under balanced conditions, while balancing the formation pressure and eliminate losses, while circulating.

This solution yielded a 67% faster rate of penetration in the reservoir section enabled mitigation of differential sticking incidents and resulted in the elimination of over 14500 barrels of oil based mud loss per well to the formation in offset wells all translating to significant cost savings for the customer.

In another example, a remote collaboration our NPD teams performed a terrific job of engineering preparations that has off study and risk management at a distance from India, Mexico and the UAE.

Also in the Middle East, we completed a successful trial of the industry's first fully Retrievable 15000 Psi gas tight bridge plug for a major operator, there the approved well barrier was set to isolate between Frac stages post frac tracking it was retrieved with wireline, which saved the customer over.

Two days of coiled tubing milling something that would've been required with the use of conventional cement barriers.

In the last quarter of 2020, we highlighted the value delivered to a major operating in Argentina, using a combination of our drilling services and managed pressure drilling technologies.

And I think the value of our integrated solutions with leading technologies. Another major operating in the same field has awarded Weatherford multiple three year contracts for serves the primary provider of many services, including drilling managed pressure drilling tubular running intervention drilling tools cementing products production Packers and liner hanger system.

<unk>.

This comprehensive solutions package will be delivered on a minimum of for wells with potential for expanding the scope of work.

The highlights from this quarter show, how we are harnessing opportunities for profitable growth.

Our strategy involves increasing commercial traction of new technologies that enable differentiated value leveraging scale to grow into adjacent product lines in targeted geographies did.

Digitization to drive remote operations, and creating synergies to cross product line solutions.

These strategies for growth carry over from our core operations for alternative energy last quarter, we hosted a virtual geothermal event in the UK for our global customers.

The digital session highlighted the significant contributions that geothermal energy can make to decarbonization efforts.

This particular power sources clean renewable and generated from the Earth's heat search represents a huge opportunity for the energy transition.

It's worth noting that Burford has a 23 year history of delivering results in geothermal projects. These results, including the world's hottest borehole in Iceland.

<unk> the world's first 90 degree geothermal well in Canada.

Hearing the Turkish geothermal market.

And drilling and logging relative <unk> largest geothermal heating plant.

Clearly our portfolio can make a positive impact from this space for synergies among our product lines. In fact, we can integrate our proprietary technologies from drilling managed pressure drilling tubular running in wireline completion services to help customers harnessed this energy source and fulfill its enormous potential.

Now turning to slide five for a view on the market.

As you all know North America activity was up meaningfully during the quarter and we see the U S rig counts continue on a path of improvement.

As we've previously discussed after making strategic exits and non competitive markets in North America.

We now have greater exposure to the production cycle in businesses like product channel and automation software and artificial lift we generally trail rig count increases.

We're encouraged by the increase in rig count like other industry observers expect capital spending discipline by E&ps to continue.

On the international side, the disruption of logistics, including the deployment of people and assets continues to improve.

But not at a rate commensurate with what we're seeing in North America.

Many mlps continue to use a speedier to reevaluate and re tender long term contract.

While this provides some external pressure on pricing, we see opportunities to gain market share in select <unk>, where tenders have been advanced in timing.

We still believe there is pent up demand that will raise market activity as the pandemic eases and we see early signs of activity firming up in key markets, such as the Middle East and Latin America.

However, as discussed it's a bit early to be definitive on the timing of that coming to bear and it might be more than 2020 to the second half of 2021.

While we see demand signals somewhat improving with vaccinations rising a number of countries that are in the middle of third and fourth waves and operational movements are increasingly restricted in these places our focus remains on the health safety and well being of our operational teams at the same time, we are shifting attention to ensuring that our return to work protocols for office.

Employees provide the highest degree of safety, while enabling in person collaboration to begin again.

Moreover, there are still challenges moving around and changing crews internationally. Our focus continues to be to drive operational improvements from the company based on flat activity.

We will be poised to take advantage of activity increases with higher fall through.

But we're not relying on that on our journey towards sustainable profitability with that let me turn it over to Keith to provide you the financial update.

Thank you Girish, please turn to slide six and I will begin with a summary of for our first quarter results, which reflects the continued momentum of our improving financials.

Revenues were $832 million, 1% below the fourth quarter and 32% below the same period in 2020.

The sequential performance, primarily resulted from increased drilling evaluation and intervention services in the U S and Canada, plus seasonal activity increases in Canada and increased activity across all of our product lines in Latin America.

These gains were offset by seasonally driven decreases in completion and production product sales in the Middle East Asia, and North Africa, and seasonal drilling activity decreases in Russia.

First quarter adjusted EBITDA was $102 million, which is which is an adjusted EBITDA margin of 12%.

As Girish mentioned, we delivered on our commitments in the first in the past quarter by accomplishing another quarter of double digit adjusted EBITDA margins and generating free cash flow, our EBITDA margin improved by approximately 60 basis points sequentially overcoming the impact of risk towards pay and benefits for employees and the seasonal.

A decline in product sales.

In the quarter, we experienced a lower than anticipated seasonal decline in product revenues of 13%.

While not fully offsetting the revenue decline in products for 7% increase in service revenues delivered very accretive earnings fall through.

Operating results in the first quarter also benefited from the continued realization of cost reductions from our initiatives focused on simplifying the organization and managing our variable cost levers.

Overall, the 12% EBITDA margin this quarter, which improved on the EBITDA margin of the prior quarter on lower revenues plus headwinds from material cost inflation, along with treating our employees as they deserve by restoring pay and benefits demonstrates that our cost rationalization initiatives.

Aimed at stabilizing and improving our margin profile are taking hold.

Let me now provide a regional breakdown starting with the western hemisphere on slide seven.

Western Hemisphere revenues of $319 million in the first quarter grew 5% sequentially and declined 34% versus prior year.

In North America revenues grew 6% sequentially driven by the 14% sequential growth in our drilling and evaluation and intervention business or dei aligning with the increased rig activity.

Revenue for our completions and productions or CMP remained unchanged sequentially largely due to ongoing completion and workover activity, which was partly offset by lower product sales. Additionally, both product lines benefited from seasonal increases activity increases in Canada.

Yes.

First quarter revenues of $176 million in Latin America grew 3% sequentially and declined 29% versus the prior year day.

<unk> revenue growth of 8% sequentially more than offset the CMP revenue decline.

Product line growth was driven by increased activity in South America, which was partially offset by lower production related sales throughout Latin America.

Segment adjusted EBITDA for the Western Hemisphere in the first quarter was $52 million, which grew by $11 million or 27% sequentially.

Adjusted segment EBITDA margins of 13% improved 200 basis 230 basis points sequentially and were 40 basis points above the prior year quarter.

The growth in adjusted segment EBITDA was primarily driven by increased activity and cost rationalization in North America.

Turning to slide eight Easter.

Eastern Hemisphere revenues of $442 million in the first quarter declined 6% sequentially and 30% versus the prior year.

Overall across the eastern Hemisphere, CMP revenues declined 17% sequentially, driven primarily by seasonally lower product sales across the middle East Asia and North Africa.

<unk> revenues increased by 5% sequentially driven by higher drilling activity in Europe, and the middle east more than offsetting the service and activity declines in Russia from weather impacts.

Revenues in the Middle East North Africa, and Asia of $267 million were down 8% sequentially and 34% versus the prior year.

On a sequential basis, our revenue decline here was across CMP, and largely driven by seasonally lower product sales and lower activity across the region, particularly in the middle East and Asia.

Revenues in Europe, sub Sahara Africa, and Russia declined, 3% sequentially and declined 22% versus the prior year.

Adjusted segment EBITDA for the Eastern Hemisphere was $6 6 million in the first quarter, a decrease of $21 million or 24% sequentially.

Adjusted segment EBITDA margins of 15% declined 360 basis points sequentially. The sequential decline in adjusted segment EBITDA margins was primarily driven by a decline in high margin product sales in the fourth quarter of 2020, which did not reoccur in the first quarter and seasonally driven lower activity in sales.

<unk> for completions and drilling.

Slide nine.

We continue to demonstrate our performance improvement by generating positive cash flow, despite a greater than 30% year on year reduction in revenues and a $22 million increase year on year in cash paid for interest Unlevered free cash flow of $94 million in the first quarter of 2021 improved by 94.

<unk> million dollars versus the prior year and free cash flow of $70 million in the first quarter of 2021 improved $72 million sequentially.

Sequentially, adjusted EBITDA and Unlevered free cash flow remain unchanged are relatively flat with the decrease in cash paid for interest and capital expenditures being the primarily primary drivers behind the improvement of $93 million in free cash flow.

First quarter 2021 cash flows provided by operations were $74 million compared to $22 million in the fourth quarter of 2020 and $30 million.

First quarter of 2020.

Our continuing improvements in cash flow performance resulted results from our improved operating performance disciplined cost management returns focused capital expenditures and working capital harvesting driven by accounts receivable collection and continued inventory rationalization.

Capital expenditures were $15 million in the first quarter compared to $38 million in the first quarter of 2020 and $54 million in the fourth quarter of 2020, when we accelerated our investments in selected growth projects in Latin America.

Total cash of approximately $1 3 billion as of March 31, 2021 was up $58 million from the prior quarter.

We believe our cash flow from operating activities and cash balance provides the flexibility to operate through this environment and we have no debt maturities until 2024.

In March of the first quarter, we filed a form 10 registration statement with the United States Securities and Exchange Commission to register or ordinary shares pursuant to section <unk> of the Securities Exchange Act of $19 30 for with no additional shares to be offered for sale.

Our filing of the form 10 is subject to SEC review and upon its effectiveness, we will be subject to the reporting requirements of the exchange Act in conjunction with the form 10, becoming effective we intend to list or ordinary shares on the NASDAQ stock exchange under the ticker symbol <unk>.

Subject to the approval from NASDAQ and in compliance with the applicable listing requirements.

We currently expect the registration and listing process to be completed in the second quarter of 2021.

This is an essential step for the company to fully returned to the public markets. We believe this is the right timing or re emergence to re listed on the NASDAQ stock exchange and that doing so will enhance long term shareholder value by improving the company's visibility expanding liquidity ordinary shares.

And providing a broader institutional investor base, the opportunity to invest in the new Weatherford.

Turning to slide 10, I will share a few qualitative thoughts on both the full year and the second quarter of 2021.

There is still significant economic and industry specific uncertainty that precludes us from providing more specific guidance. These comments do not assume another round of extended pandemic related lockdowns that may further curtailed oil and gas activity or disrupt the expected recovery of hydrocarbon consumption that is <unk>.

<unk>.

Consolidated revenues in 2021 will align with current activity levels and we continue to expect them to be in line with our annualized second half 2020 results.

Our focus areas will drive for margin expansion in 2021, and the benefit of these efforts is expected to improve EBITDA margins by 100 to 200 basis points from the second half 2020 levels.

As activity levels stabilize and eventually grow we expect net working capital to be an outflow, particularly if we experience a material growth in activity in the second half of 2021.

For 2021, excluding the impact of net working capital our Unlevered free cash flow is expected to improve slightly year on year.

We expect to reinvest in our business through capital expenditures in the range of $100 million to $130 million.

As a result, we expect slightly negative free cash flow in 2021.

Now, let me turn now to the second quarter of 2021.

We expect second quarter 2021 consolidated revenues to be in line for the first quarter, we just completed.

Adjusted EBITDA margin is expected to be in line with the first quarter 2021 levels.

Second quarter Unlevered cash flow is expected to decline sequentially from the first quarter largely due to the non repeat of the working capital unwind in the first quarter as well as the seasonal timing of cash outflows.

Thank you for your time today I will now hand, the call over to Girish for his closing comments.

Thanks Keith.

As you heard a really strong start to the year and we are focused on bringing the same degree of performance into subsequent quarters. We're.

We are seeing strong signals that our goal of achieving sustainable profitability and free cash flow generation is not just aspirational, but achievable, we believe that our consistency and execution and growth should translate that into reality over the next couple of years.

Turning to slide 11 in February we laid out our 2021 focus areas of North America performance variable cost optimization organizational simplification and inventory along with the strategic vectors of digital transformation ESPN energy transition in our portfolio.

Our first focus area for 2021 is North America, where we have put in place a new leadership team and are realigning our cost structure to be in tune with the realities of today's market.

In the first quarter, we saw the results of that with a 6% revenue growth and them coming through and improve margins. We are driving changes in the way, we manage inventory to a robust sales and operations process inventory categorization and a redeployment process. These changes along with improved organizational agility enabled a significant increase.

Sequential margin performance in the first quarter.

Continuing on variable cost management is a very important focus area for us we appointed an enterprise wide team to establish new cultural and operational frameworks for tracking costs and driving cost reduction initiatives across the organization.

The work we've done on our cost savings initiatives enabled us to maintain almost the same level of gross margin with <unk>.

Only 100 basis point drop on a 32% year over year decline in revenue.

This is an incredible feat in a very challenging market, but we cannot rest there. The actions. We're taking now are critical enablers for us to manage our business and advance towards the goal of sustainable profitable.

To further progress efforts for our third focus area organizational simplification. We recently brought on Joe <unk> as our Chief Human Resources Officer. He had previously been in that role for Anadarko in Cameroon.

Joe and his team our focus from reducing layers and increasing spans of control. While also ensuring robust mechanisms for efficient international assignments and a thriving pipeline program for our next generation of engineers. All these efforts coupled with a natural intensity of our teams enabled our strong first quarter performance I am looking forward to the cumulative impact of.

Initiatives showing up in our results in the coming quarters.

In the area of inventory rationalization, we made incredible progress on our 2021 goal of improving day sales of inventory by 10 days.

Work done so far to simplify the organization is paying dividends, we were able to enhance collaboration throughout our company's entire supply chain and better integrate manufacturing operations and sales for improved inventory management and delivery as a result of these efforts we have seen a four day improvement in our DSI sequentially.

Now, let me briefly touch base on what we've been doing the line ourselves with long term strategic vectors shaping our industry as whole.

Digital transformation is one that is a high priority for us on.

Our investments in digital capabilities have continued to help deliver value to our customers on their ongoing digital transformation journeys.

We've seen renewed interest from customers in our digital offerings, which feature remote operating capabilities visualization edge automation and artificial intelligence.

During the quarter the headway, we made in expanding into new geographies will further the deployment of our digital platforms.

In turn we can help our customers reduce downtime and increase operational efficiencies across drilling well construction completion and production.

Energy transition is an extremely important strategic vector with tremendous traction from our customers, particularly in Europe, where we continued to see increasing levels of engagement on drilling geothermal wells.

We had also having advanced conversations about carbon capture as our firm abandonment instruct recovery solutions make further inroads in the market. This vector has great importance for us and our portfolio is pivotal to making an impact from this area going forward.

And that brings me to our product and service portfolio. The traction of key technologies and commercial operations has a crucial effect on our achievements because it influences winning work in gaining market share a clear indication of this is the success. We have had leveraging adjacent product lines for market expansion as in the case with Vero, which I mentioned earlier, we're trying to.

All eight of our Geo zones in the first quarter.

At the same time, we continue to refine the portfolio by exiting dilutive businesses and refocusing our efforts and capital on parts of the portfolio that are generating positive returns.

Weatherford has been through some challenging periods over the past few years, but we continue to remain optimistic about the future and believe that our best days are ahead.

The results of 2020 and now the first quarter of 2021 of leading indicators that should provide confidence and justify our optimism.

Our decision to reenter the public markets for some other sign up for our belief and we look forward to updating all of you on our progress in the coming quarter.

You all for joining us today and with that operator, let's open it up for Q&A. Please.

Thank you we will now begin the question and answer session.

I ask a question for a start in one on your Touchtone phone.

Never speak for phone we ask for.

Handset before pressing the keys. So it's all your question. Please press Star then two.

And today's first question comes from Connor Lynagh with Morgan Stanley. Please go ahead.

Yes. Thanks.

I was wondering if you guys could expand on some of the comments you made on.

Some potential big re tenders from national oil companies in Europe.

Potential to gain market share there could.

Could you maybe provide some extra color on what these tenders looked like as in are they large projects or the a specific product line tenders.

Where geographically are they and sort of what are you targeting in terms of gains there.

Sure. Thanks, Gary Good morning first of all.

What we are seeing I would say the predominant activity is in the middle East that's where we're seeing the bulk of this and most of these are really product line specific tenders and I think there's a combination of you've got a natural citizen.

The cycle in the next cycle, starting up by in some cases and in some cases as we mentioned the disk customers, saying, Hey look lets re tender the overall piece.

Some of these tenders happened as we were going through our chapter 11 process and we've lost some of the share. That's why we are looking to be able to get back in and gains from.

Share secondly, we've made a lot of investment in terms of our local infrastructure, which as you know is a critical component in some of these.

Our geographies and then last but not least as we've talked about we believe we've got a very strong suite of technology that can help so we've put our best fault put forward on these tenders, we hope and I will have to see what the outcome.

Outcome of these now in terms of timing.

Most of these tenders typically run between three and sometimes five to seven years. So in some cases, so they are varying lengths and we expect over the next few months to get the decisions on these as you know in this sector. The way. These tenders a lot of them at least work as they are typically share it across multiple service providers and so it's not.

Not only winning the tender, but then it's also about how you execute which is a really important part so you've got to continue to deliver on debt performance every day to make sure that you're capturing the full share of what you were originally awarded.

Yes understood.

There's been a lot of focus on.

International.

I think frankly in middle East in particular pricing for service companies.

Do you agree with the sentiment debt capacity is a bit tighter than it was last cycle that there is maybe some longer term potential for price increases for service companies and I guess the question from your perspective is.

Are you are you trading price for market share how are you sort of approaching the market given given the balance between market share it.

Desire for higher margin.

Sure Yeah look I think it's a little bit of a mixed mixed bag right now I think where you've got product lines to truly have a higher risk profile and you can deliver incremental value to either a differentiated service product offering I think there is the ability to drive price in terms of capacity and I also club debt with a little bit of a.

From a deal inflation in certain pieces. So there is a bit of an opportunity for sure around that having said that I think part of the rationale that a lot of customers go through with these standards is exactly that to make sure that they're getting the optimal pricing and too.

To ensure that they're getting the best cost structure. So what we're trying to do is is really put together overall holistic view and its actually good that many of these are coming together. So we can figure out where we can get synergies across our operations to provide the right cost point and get as much price as possible.

In terms of share versus price, we've been very clear in that obviously share is important and we are focused on top line growth, but we are not going to chase volume at the expense of margins.

It is something that we are very very clear about we have talked about that at length internally. We have had conversations about that with customers now in the event in certain places.

From a let's say a 5% share on a particular tender to a 20% share gives you volume efficiencies. It gives us scale if that actually changes the profile that we will certainly look at consider and go after but in a generic sense trading off volume for for margin is not something we're doing.

Got it.

I'll turn it back.

Yes.

Alright, Thank you very much.

Question for it. Our next question today comes from Ian Macpherson with please go ahead.

Good morning <unk>. Thanks.

Thanks for taking the question.

I wanted to ask you first about the MPD business now that we're especially since we're beginning to see.

All the offshore drillers come out of chapter 11.

With more capital.

<unk>.

Hopefully some some reemergence with offshore activity as well as our leadership position with you a unique niche for Weatherford can you talk about that outlook, maybe also frame it within ware.

Today's penetration of MPV is in the high value markets.

Where do you think it could go to over the next couple of years.

And a good scenario.

Sure absolutely.

Really appreciate it and not to have you on the call look NPV. Our managed pressure drilling is a business. That's a technology that I'm personally tremendously excited about and something that Weatherford has had a as you said leadership position for a very long time.

We've been pioneers in this technology in a number of different ways and it's something that we've continued to invest in over multiple cycles, we've got a fantastic global team.

And we've got deep domain expertise in the in the product line and the thing about NPD is look we truly believe it's a better paradigm around grilling, but it is still something that is less than 10 per cent of the wells drilled in the world. So.

If you think about it from that context, regardless of what the share position is I would just say, we've got a leading position on share in that product line.

In peak debt sub 10%.

Adoption rate, we'll call it and grow that to say, 15% over the next two.

Two to three years, that's a tremendous increase in the overall market itself and so we believe with the portfolio debt. We have that we are adding two we are continuing to invest in technologies to span the full spectrum.

We think it's something that is a is a critical part of the growth engine for the company.

And the thing about our MPD businesses, it's both onshore and offshore we've clearly got leading edge technology on the offshore side, our <unk> product, which has been successfully deployed and is running.

Well, that's something that we're very proud off and it continues to be a market leader, but it also got a very very strong basic RCD business, starting with the U S than we do in multiple parts. So we're augmenting that overall product line, making sure that we are covering every part of the spectrum at the same time, there is a big focus from us on really ensure.

<unk> that we are spending time with customers.

Making sure that we are going through the understanding of what the technology brings how do we make it part and parcel of debt overall paradigm in drilling so.

Thanks for bringing that Ive look it's something we're very very excited about we think it'll be a big part of our future going forward.

Super Thanks, Thanks, Gration I wanted to ask a follow up about your outlook for the year, we're calling this qualitative outlook not guidance I got that but you got off to a good start with Q1.

I wouldn't say starting on second base, but certainly a good start and.

Your guidance.

For the outlook for Q2, it's flatter on I know you know this than what all of your peers.

Are pointing towards and expecting more.

More in the range of mid to high single digit growth sequentially from Q1 into Q2, you mentioned some some important considerations with regard to COVID-19.

COVID-19 impacts that are still happening.

Mobility internationally as well as some of the lag effect to the rig count in your North American businesses, but that being said do you see any particular areas where.

You would hope to do a little bit better than flat.

Sure in the second quarter should look I'll, let me give you a little bit of a macro view and Keith can jump in with some additional points look first of all I would say start with.

The philosophy that we have taken in debt, we are really trying to drive hard within the company is making sure that the company is profitable at flat activity levels and so we are very cognizant of the fact that in this sector and especially with US historically, we have relied on an up cycle to get the company profitable and then inevitably we suffer the consequence.

This on the next down cycle. So we are absolutely determined to make sure that doesn't happen and so we are laser focused on ensuring that we are making the structural changes in the company to drive the change that's required for us to be sustainably profitable. So that's really why we keep sort of hammering debt team secondly, as you point out look we in certain.

Geographies, we've exited unprofitable commoditized product lines that didn't really contribute so as activity picks back up the first part that picks back up are those product line. As an example, we've talked about drilling services.

In North America, we have just recently made a decision on our Wellheads business because we didn't have.

Debt was as profitable on that line. It is very commoditized and so those are the things that we will pick up fairly quickly and we don't expect that to contribute to us meaningfully having said that look we are excited about the production side of the equation.

Artificial lift as an example in the U S. In fact <unk> activity come through we have position we are poised to capture that and we expect that to come through at an increased fall true secondly, look if the restrictions around logistics and people movement, especially in some parts of the world, but it's still very strong where the pandemic is still raging.

If that abates over the second half I think we will have a.

A better opportunity to go capture some of that but we don't want to get a way to head up our skis and so we are being a little bit more prudent and we are really focused on what we need to do and what we can control, while always being ready to pounce on the market opportunity.

Good morning from.

Yes.

I think the thing. We are also have to think about is Q1 was a strong quarter and it was partially strong.

Because the the products.

Products business did not step down as hard seasonally.

And so we are working with our frontline salespeople to understand if that was just some of the Q2 pull forward because of the U S is picking up.

If not then we have to balance the forecast for Q2 with the step up in.

For the services business and then the leveling off the product sales. So that's how we've kind of.

Thought about it if theres more activity that we're seeing then we will be happy to sell into it.

Good. Thank you thanks for the day to clarification, Keith I appreciate it.

Hello, Ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press Star then one day.

Your next question comes from Gregg Brody It would be a day. Please go ahead.

Good morning, guys. Thank you for all the information.

Good morning, Greg.

Last quarter, you talked a little bit about.

Try and should put in place a regular way credit facility.

I'm curious.

Where that stands and what your current thoughts on that are.

Sure. So we continue to have dialogue with our banking partners.

The.

Overall credit spectrum.

And feeling towards the sub investment grade oilfield services market. We are part of I think is getting better.

We see more.

Issues, we see more for.

Facilities being put in place. So we are working with our partners, we're having better conversations that we had in Q4, we still have not launched a process yet, but as we get out of the quiet period here will pick back up those dialogues.

You said you haven't launched.

Do you have a sense of timing and how long you for.

For two.

To get inked in total is once you do.

But.

No sense of timing, we're not rushing this as you know.

Story for Weatherford.

The prior leadership team.

Think probably rushed coming out of bankruptcy and the.

The facility was not.

Where it needed to be so it was part of the problem that led to the need.

The need to unwind it.

It became.

Something off so this time, we're taking our time, we're being more cautious we're making sure that we put together a facility that better reflects the geographic footprint of the company asbestos possible.

And so that's really why it's taken so long it's not an easy thing, particularly when you are coming off of the.

A single B credit spectrum in a world where people have moved away from your industry.

That makes sense and then.

<unk>.

You gave some commentary on free.

Free cash flow for the share is expected to be slightly negative.

I'm just.

I just wanted to rehash couple the guidance numbers you gave us last quarter just to make sure. They are still the same.

For us.

The restructuring charges, how much are you estimating for this year.

The restructuring spend for this year.

So I think we've had 60 in the forecast.

We may not hit all of that.

We're still thinking that.

Pending on how the second half plays out.

And our cost and organizational rationalization program continues.

Is that.

The corporate out the corporate cost for the quarter.

Oh for $18 million.

Good run rate now.

I think that's a good run rates.

Think we could probably use 20 to 25 in your models, but I think we're in a.

Good place with the corporate cost.

Got it and then I think what you have to remember, though in that line we carry.

Intercompany eliminations and that's what we'll move it up or down we started to footnote that in our Q. So people can get a better look.

Into that number.

But this quarter intercompany eliminations were minimal so.

It's a better look at that number.

Got it.

So it's up to 20% to 25% it sounds like.

Kind of interest and taught it makes more sense, though.

Yes.

Just.

Capex you reduced it I think by about $20 million.

How should we think about.

Is that something that moved out for next year.

How should we be thinking about our Capex may grow as you mentioned the business opportunity improves.

So.

Okay.

Let's peg it at $3 $5 billion revenue business I think steady state Capex should probably average roughly 5% we should be about 175, we are under that at the moment, partially particularly because we were overcapitalized in some ways in the last part of the cycle. So as we rationalize the assets.

The rationalize the assets that can go into service, we're rationalizing what we need to investing as growth assets than at the moment. We see the 100 per 130 is what we need for 2021 that may pick up as we get a better look at for.

For 'twenty, two but at the moment, we're spending just what we need and what we believe we will.

Provide a return as you can tell I remember from last quarter Q4, we accelerated and spent over $50 million because we had some particularly in.

Interesting.

Growth opportunities that we wanted to fund and that's how we're looking at it if it's not something that we can clearly see the return on and we're going to continue to be fairly prudent.

That's helpful. And then you mentioned working capital you won't have the benefit that you do.

You had in the first quarter for the rest of the year. Thank you also said that maybe some of US as you grow how should we think about working capital the rest of this year.

Sort of how much cash in basin sales.

So as I think about my.

My full year view on working capital.

<unk>.

I think.

When I think through.

<unk>.

Is the wildcard because it depends on how the second half growth and which markets were growing but that should not be the same profile as 2020, which was more of a.

Our cash source as we were coming down to cycle. So we expect that might.

Might be a slight use in the second half.

Inventory, we are working hard at our inventory rationalization program.

So our Q1 inventory was a strong source we continue to.

Hope to get.

To a better place.

Across the full year.

Payables, where.

We continue to rationalize so I think net net we expect working capital to be a slight positive on the year, but not as positive as 2020.

Does that imply that you actually think youll.

Just on the working capital for the rest of the year.

Alright.

I wouldn't say.

I think net for the rest of the year it shouldnt be a use.

Yes.

And if the business growth and I increase my AI I think I'm, okay with that.

Okay.

Just the.

Taxes.

Debt you'd have debt.

This is Jim.

We still assume about about a little under $80 million for the year.

Just about an $80 million because we're not yet profitable so really the same paradigm of paying diem taxes.

We're faced with.

Got it and just last question. So you talked about opportunities for carbon capture and geothermal drilling.

Okay.

What type of capital.

But ultimately require share assisting business set up for that.

Yeah, I'll take that look right now I think it's still a little bit of early days on the Geo total side, we don't really expect it to be dramatically different because it's the same suite of products and technologies that we have and it's really us doing a little bit of adjacent work et cetera.

On the carbon capture side, that's something we're exploring their understanding.

Suffice to say look whatever model, we end up with will be one debt has returns that are accretive to the company and that are substantially higher than what we've got to we're not going to again go chase marginal returns in this business but.

Still a lot of work to be done on that front and are focused predominantly for right now is leveraging existing technologies and we've got an asset base that you think can fulfill most of the work that we see in front of us.

Great. Thank you very much guys appreciate all the time and information.

Pleasure.

Ladies and gentlemen. This concludes today's question and answer session and today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.