Q3 2021 Weatherford International PLC Earnings Call

Ladies and gentlemen, thank you for standing by.

To the Weatherford International third quarter 2021 earnings call.

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I would now like to turn the conference over couple of hardwood pulp of Waller director of Investor Relations and M&A, Sir you may begin.

Welcome everyone to the Weatherford International third quarter 2021 conference call.

Joined today by Gary Sorry, Graham.

And CEO and Keith Jennings Executive Vice President and CFO.

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

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 materially differ 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.

Underlying details and a reconciliation of GAAP to non-GAAP financial measures are included in our third 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 our call today we.

We will start on slide three which highlights very significant accomplishments on our key priorities during an exceptional third quarter.

As you're all aware there have been significant headwinds roiling several industries over the past quarter.

In addition to the ongoing effects of the pandemic the third quarter witnessed pervasive supply chain disruptions inflationary pressures and severe weather impacts. Despite these challenges I am very pleased and proud of our team's commitment to our four strategic imperatives that enabled outperformance against expectations on revenue adjusted EBITDA.

And free cash flow.

We ended the third quarter of 2021 with ample liquidity, our product and service portfolio continued to prove its strength with record breaking accomplishments our market, leading product lines, including managed pressure drilling and tubular running services enabled us to drive synergies across our portfolio and demonstrate the unique value of integrating our offerings.

We have laid out our strategy and approach in prior calls and our results. This quarter are another important proof point of the tangible outcome of the daily efforts of the one <unk>.

Getting into some specifics I'll start with safety, which is a foundational element of our performance, having the discipline rigor and focus to continually ensure that our team goes home safely everyday instincts the same mindset across all operating processes.

Recognize our team in Mexico, where we maintain a 100% safety record for 2021. This is an exemplary achievement and a great example of our continued commitment to safety.

Turning to our financial results, we delivered outstanding performance with reported adjusted EBITDA margins of 19% an improvement of more than 380 basis points sequentially like.

Like prior quarters, where we have exceeded expectations I will temper the enthusiasm with a reminder, that we are still laser focused on fundamental operating performance improvement we have talked in the past about our approach of improving our margin at baseline activity levels.

While capturing increasing activity at higher fall throughs. This came through in spades in Q3 with the very favorable services mix on increased activity.

Also had some one time items during the quarter, which Keith will cover but even without them our margins picked up significantly.

We have also talked about 15% adjusted EBITDA margins as our intermediate goal over the next couple of years and I am pleased that we are delivering at that level well ahead of our timeline. However.

However, we do recognize that we still have work to do to ensure balanced and predictable performance consistently and through cycles.

Our cash performance was remarkable with the company generating $111 million in free cash flow.

This puts us on track for another full year of positive free cash flow, which is a notable achievement.

We recently executed multiple financial transactions to address our capital structure inefficiencies. This basket of transactions resulted in achieving much needed flexibility with our banking partners.

<unk> interest expense and extending our maturities. We appreciate investors for recognizing the underlying and improving capabilities of our company and recognize the current constructive tone towards energy services, which afforded us the window to accomplish these transactions.

With these transactions, we are materially reducing interest expenses, improving our operating profile and enhancing balance sheet flexibility. They give the company a stable foundation to continually drive our focus on customers technology and operations, which should deliver increased margins and free cash flow generation.

None of the results where feasible without the tireless dedication and hard work of our entire one weatherford team and I'm incredibly proud of their commitment and achievement as I reflect back on my first full year with the company I am humbled and grateful that having the privilege to represent their efforts to all of you.

Moving to slide four I want to highlight progress on our strategic vectors, which we shared earlier in the year.

First strategic vector is our product and service portfolio and we continue to make technology commercialization and business model advancements across product lines.

We have talked about a market leading product lines and the pressure pro expansion in managed pressure drilling is a great example of enhancing our offerings to ensure that we have capability across the application and pricing spectrum.

The slide highlights new offerings expansions and technology driven records in each of our market leading product lines, However, where we get an amplification effect is when we are able to integrate our offerings to enhance the synergies among them.

The single largest vehicle for this is our integrated services, which delivered outstanding results this quarter in Europe, and Mexico, and one project in the North Sea, we were able to leverage MPD and Trs to pull through our drilling services business. This has enabled us to replace a competitor to grill three challenging large whole world sections, ultimately saving the customer more than 13 days.

In Mexico on integrated services tripled efficiency from the exploration to the early development phase of a project to deliver early production in a new field development. In fact, we set a field record by drilling one well to total depth and approximately 22 days or two thirds improvement in drilling and well construction time.

The solution spans several drilling and completion technologies, including advanced Geo steering and logging while drilling our lwt tools, the strength of our industry, leading brands and technologies like the Magnus Rotary <unk> system, and the central well construction optimization platform was evident in delivering these solutions.

Our second strategic vectors around our evolution is part of the energy transition.

For us to ensure a bright future in the new energy economy in the future as an energy services company, we need to drive the same technology differentiation and solution creation as we have in traditional oilfield services.

<unk> pursuing opportunities in Cc U S, while working plug and abandonment projects for customers in multiple geographies. We also remain excited about geothermal is an important energy source, where we have been a leader for over 20 years. During the third quarter, we provided the technology and engineering needed to remove scale and enable installing and electrical.

Submersible pumps for the rejuvenation of a geothermal well in Germany.

The final strategic vector for us digitalization and automation is critical to address our customers' needs and we continue to gain traction and increase adoption with customers across all our geos sold a large operating company in Colombia awarded Weatherford, a three year contract with the foresight production optimization platform with this award the foresight platform as the leading.

<unk> monitoring market share in that part of the world on top of that an MLC in the middle East recognized our production automation and software services for performance excellence and problem solving in the face of extreme challenges and following up on these accomplishments Hart energy declared foresight edge a winner of the special Meritorious Award for Engineering innovation. This on a further solidifies.

It is the best in class technology with game, changing technical and economic potential for our industry.

Digital solutions like foresight edge, where again the focus of our <unk> Enterprise software conference or risk for three days at the end of October 2021.

West Coast Weatherford, the largest customer event and the industry's preeminent digitalization photo.

This year marked the 16th annual conference featuring advancements from well construction to production.

Size and scope of the show expanse year after year in 2021, we had virtual participants from Houston to Abu Dhabi in Jakarta, and we held nearly twice the number of breakout sessions for customers.

One thing that didn't change is a unique features where customers not only attend but also share testimonials on weatherford technologies in action.

Our strategic vectors of the central team for the long term approach to preserve our ability to differentiate and create value and with all of these moving in the right direction, we feel confident in their progress ahead of.

That same spirit of differentiation and value creation as evident in our operational highlights shown on slide five we leveraged our industry, leading offerings to deliver differentiated services for our customers and pull through others across our portfolio.

You'll notice that we helped them deliver better wells wells with enhanced integrity from the start and improved reservoir productivity in the long run.

These kinds of outcomes have not gone unnoticed by our customers, which has enabled us to gain market share expand our margins and generate repeat business.

Our market, leading product lines to enable a beachhead offerings with customers that then allows us to gain share of wallet by pulling through other product lines. As an example in NOC and North Africa awarded US a contract for MPD services and in onshore field. The wind comes after multiple years to contracting with our competitors and was based on the strength of our technology with <unk>.

This award we not only gain share, but also expanded the scope of our MPD work in the country beyond deepwater to land.

Additionally, in the same geography, a major customer awarded US a sole source contract to supply completion materials reservoir monitoring systems and associated services.

This award enables us to replace vendors, who historically provided the services. In addition, a major IOC in South America awarded US an offshore Trs contract, but running completions on its next campaign. This opportunity again comes after years on the outside and let us introduce Vero technology with all of its benefits as a premium offering that our techs.

Knowledge provides immediate and lasting benefits to the crew efficiency safety and integrity, all of which bring enormous value to our customers.

With an operator in Australia after serving as the incumbent on a range of deploying our other Trs services, we secured an inaugural contract for battle.

Greeting the customer services has delivered significant rig time savings and reduced personnel onboard for a major operator in the Gulf of Mexico, we replace conventional operations with a vero trial, which allowed the customer to mitigate potentially detrimental connection issues.

We are also driving the same returns focused differentiation across our other product lines, we have seen significant commercial traction and margin expansion in our drilling services product line spearheaded by our Magnus Rotary <unk> system.

In South America, we increased adoption of these services, but competing a successful field trial with an NOC.

Our Magnus Rss and riptide drilling Greenberg, both achieved rates of penetration, 30% faster than planned.

As a result of the performance on the first well the customer signed up additional wells with the potential to expand further.

Another customer our services, including included the Revolution, Rss, which drilled about 13 days faster than planned and saved 27 operational days over the course of the entire campaign.

Turning to slide six for our view on the market, we continue to see improvement in the overall macro environment and believe we are in the early stages of a multiyear up cycle.

North America market fundamentals continue to improve and we continue to see capital discipline from public E&ps are focus however continues to be on generating sustainable returns and going out to work only where it makes sense for us to do so.

We'll talk more about that in relation to our fourth quarter outlook on margin improvement and area, where we continue to see improvement. It is also important to note that our business in North America has changed significantly over the past couple of years, we no longer play in high volume low margin services and are focused on our four market leading product lines conventional lift and other.

High margin offerings, including digital solutions.

This has been a key driver of our continued margin improvement in North America, but it does reduce our growth expectations relative to the rest of the industry. However, we strongly believe that the prioritization of margins and returns is the right call for us now into.

Internationally, we continue to see activity increases in most geographies, particularly the middle East and South America.

In an environment, where we saw increasing signs of economic recovery and very tight oil and gas market tendering activity was above pre pandemic levels and rig counts continued to trend up.

We are very appreciative of our customer support as we have had wins during the quarter throughout every GSO.

Additionally, we have deployed differentiator and drilling and evaluation technologies at the North Sea and Middle East with very positive results and we believe that they will be drivers for continued growth in future quarters.

Looking ahead to 2022, we are now more confident in our growth scenario and despite inflationary headwinds and expect to see continued improvement in profitability reflected in margin expansion on a year over year basis, now I'll hand, it over to Keith for a financial update.

Thank you Girish, please turn to slide seven.

Let's begin with a summary of our third quarter results, which continues to reflect the ongoing improvements in our operations, despite an increasingly challenging cost environment.

We continue to see rising inflation and as a company that deploys equipment to support our services, we are increasingly challenged by logistics and rising transportation costs.

Consolidated revenues were 945 million, 5% better sequentially and 17% better year on year, driven primarily by a 6% sequential increase in service revenues.

Product revenues increased by 2% sequentially and also our production oriented products maintain pace with energy output levels.

The sequential improvement in performance was seen across all geographies with above average results from South America, which continues to reopen along with the middle East region.

The third quarter topline performance, primarily resulted from increased activity in our drilling and evaluation and intervention business or <unk>, which is increasingly being enabled by our integrated services and projects or ISP offering in the middle East region.

In South America, both our completion and production in <unk> and <unk> businesses benefited from increased call ups.

The CMP business activity in Canada, and in Europe, Sub Sahara Africa, and Russia continued to trend well.

Third quarter operating income was $71 million or seven 5% of revenues, which increased $46 million sequentially adjusted.

Adjusted EBITDA for the quarter was $179 million.

And adjusted EBITDA margin of 19% an improvement of 388 basis points sequentially and 605 basis points year over year.

The operating income and adjusted EBITDA growth was driven by the growth in service revenues and improved mix of services bad debt recovery.

Lower inventory charges.

Our EBITDA in the quarter was bolstered by approximately $20 million of one time items.

Without these items, our EBITDA margins were approximately 17%.

Still a significant step up reflecting favorable fall through from the improved services and geographic mix.

Free cash flow for the quarter was $111 million driven primarily by lower cash interest payments as our improved earnings was offset by a working capital investments and asset dispositions effectively funded increased capital expenditures.

Let's look at our geographical breakdown, starting with the western hemisphere on slide eight.

Western Hemisphere revenues of $441 million in the third quarter, 2021 increased 4% sequentially and 40% year on year.

North America revenues of $224 million increased by 2% sequentially, primarily due to increased G&P business activity in Canada.

Third quarter revenues of $217 million in Latin America increased 6% sequentially driven by improved pricing increased activity in both our CMP and <unk> businesses in Columbia, and increased dei business activity and pricing in Brazil.

Adjusted segment EBITDA of $75 million increased $17 million and associated margins of 17% improved 340 basis points sequentially and improved 780 basis points year on year.

The growth in adjusted segment EBITDA was primarily driven by increased <unk>.

Service sales and service mix improvement in North America, and Latin America.

Next on slide nine.

Eastern Hemisphere revenues of $504 million increased 5% sequentially and increased 3% year on year Middle East North Africa, and Asia revenues of $312 million increased 8% sequentially driven by <unk> business activity in ISP pulled through.

In Europe sub Sahara Africa, and Russia revenues of $192 million increased 2% sequentially, primarily due to increased activity in the CMP business and ISP, partially offset by decreased activity in dei visits.

Adjusted segment EBITDA of $118 million increased $25 million and associated margins of 23% improved 390 basis points sequentially and increased 220 basis points year on year.

The growth in adjusted segment EBITDA was primarily due to increased activity and a favorable mix of services and sales in Mena Asia and Russia.

Turning to slide 10 for a summary of our liquidity.

We continue to maintain our disciplined focus on running our business with the intention of generating operating cash flow.

This has been demonstrated through the results of our underlying businesses and cost improvement initiatives.

In the third quarter of 2021, we generated unlevered free cash flow of $141 million, an improvement of $34 million year on year from a 72% increase in adjusted EBITDA.

Free cash flow was $111 million, which improved six 3 million sequentially and $6 million year on year after $28 million more in interest payments versus the corresponding quarter a year ago.

Total cash increased $59 million and we ended the quarter with approximately 145 billion of total cash.

Capital expenditures were $20 million in the third quarter of 2021 compared to 9 million in the second quarter of 2021 and $27 million in the third quarter of 2020.

Our capital expenditures increased this quarter as we increased our focus on our growth capital requirements, given increasing activity levels. We.

We expect to at least double our capital expenditures in the fourth quarter of 2021 to meet the increasing demand for our market leading products and technologies.

I wish to thank all of one weatherford team for their continuing cash flow improvements, which are the result of improved operating performance disciplined capital expenditures and working capital performance driven by our continuous focus on asset utilization.

Slide 11 is a summary of our recent financial transactions during the past few months, we made significant changes to our capital structure, which included not only of refinancing our debt, resulting in lower coupon rates and extended maturities, but also paying down $200 million of our unsecured notes with cash on hand.

After repaying $200 million exit notes, partially refinancing a majority of the remaining exit notes and refinancing all of the prior secured notes or annual interest payments will be approximately $204 million until their maturity, which is an annual cash interest savings of approximately $71 million.

The major highlights of the content of the complete the transactions.

The transaction has begun with the LC facility amendment to permit.

Up to $500 million of debt repayment and very importantly, allowing for an ABL of ICF to enter the desktop and hold a prime position on key working capital assets if required.

Repayment of $200 million of unsecured 11% notes, we generated free cash flow.

Extended maturities on both classes of debt.

We refinanced $500 million of secured notes and extended the maturity to 2028.

And then we refinanced $1 6 billion up the remaining $1 9 billion of the exit notes enabled by a tender process with the new tranche maturing in 2030.

The end results can be summarized in an improved debt metrics.

As weighted average cost of debt reduced to eight 5% versus 10, 6% and maturity increased to seven five years versus three three years.

$300 million of exit polls remain maturing in 2024 with a one O three call option expiring December 'twenty two.

Gary and I are appreciative of the trust the capital markets and placed into view Weatherford team.

I wish to thank all participants agents service providers in the Weatherford team members that worked tirelessly over the past months.

Special Thanks goes to Deutsche Bank Morgan Stanley.

As the lead banks across this basket of transactions.

Turning to slide 12, I will share a few qualitative thoughts on the fourth quarter of 2021.

We now expect our fourth quarter revenues to continue the upward trend and increased by low single digits from the third quarter as we continue to see activity improvements.

<unk> EBITDA margins are expected to be 25 to 50 basis points above year to date Q3, 'twenty one levels of 15, 6%.

Seasonal mix shift created by a step up in product sales will pull negatively on our margins as we continued to be challenged by material and labor inflation and the ongoing Portland logistics challenges present delivery risks the protocol orders and service equipment.

Our third quarter had several positive onetime items totaling approximately $20 million, which we do not expect to repeat in the fourth quarter.

In the fourth quarter, we expect to see an increase in demand for products as activity levels continue to grow.

Net working capital will continue to be an outflow and.

As receivables continued to reflect revenue growth.

We expect capex to be in the range of $40 million to $60 million in the fourth quarter. Thank you for your time today I'll now hand, the call back to <unk> for his closing comments.

Thanks, Keith our results in the third quarter with terrific, but we are firmly focused on the future and the work ahead of US we continue to make progress on our four key focus areas for 2021 as shown on slide 13.

As demonstrated over the last few quarters, we have made significant and meaningful changes to our business as we strengthen our product and service offering optimized our global footprint enhanced customer relationships and began to instill a performance driven culture throughout our organization. These results form a foundation for us to build on.

We will continue to see seasonal shifts in our margin performance based on mix transition challenges and inflation as Keith highlighted for Q4, however over a longer timeframe our effort and focus should continue to create a company with increasing margins and greater value creation.

We're excited about our progress but have the humility to recognize that it is the first step and a lot more needs to be done.

We believe that Weatherford has the technology offerings coverage relationships and most importantly, the people who will propel our journey to further improvements in profitability and free cash flow generation.

We are at the early phases of a multiyear up cycle and as we institutionalize our operating improvement Weatherford is well positioned to remain a key player in the industry and capitalize on increased activity if.

We will continue to focus our offerings in geographies, where there clearly profitable and continue to focus on margin improvement from internal efficiencies with the increased activity. The combination of these two items should continue to provide margin expansion and sector, leading EBITDA rate growth.

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.

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Today's first question kosher and Macpherson with Piper Sandler. Please go ahead.

Thanks, Good morning, congratulations everyone on the team for a.

Strong results.

<unk>.

I understand that you had some outperformance from integrated services.

During Q3.

Keith You also mentioned that you had about two points of favorable one offs in the third quarter that that takes you down from.

19% to 17% adjusted.

Margins without those favorable one offs could you elaborate on those and also just speak to.

But you know what what the spectrum of possibilities with margins above or below your base case guidance for Q4, <unk> with regard to integrated services exposure or other items.

Good morning, Ian.

So.

Good questions.

First when it comes to the $20 million of one time items.

They fall into three buckets, there's about $7 million.

Bob.

Asset sales our gains on.

On asset sales, we have probably an equal or slightly greater amount probably eight.

Which were.

Covered.

Bad debts that were written off prior.

We collected on those so we had to bring that back.

And then the final component.

It was a one time.

Adjustment in Latin America from a contract that had a catch up component.

And that rounded it out and.

We also had some.

Some <unk> that were that was lower in the quarter.

And so those were the four parts of the <unk> 'twenty.

The first three were the major components.

Respect to.

<unk>.

And its ability to incur.

Increased margins I Wouldnt say that we look at it from that perspective, I'll also invite girish into the conversation, but what it does do is it allows us to pull through various product lines. When we are.

Our lead.

Projects provider.

And the region or whatever region, we're working it. So if we have a ISP opportunity that we are delivering and there is a need for that.

Ancillary product line that we also offer sometimes it allows us to pull through things that wasn't was not in our forecast Yeah morning, Ian I think just to add to a couple of things to round out. Your question I think look for us as we look at Q4 really on the downside.

We are probably looking at as Keith mentioned in his remarks, and things like supply chain disruptions and product deliveries.

Everyone's aware in just about every company is talking about right now logistics snack foods.

Really the biggest gating item and so that presents presents the biggest risk for us and making sure that we can get product to customers. We think <unk> got a solid game plan and we've got everything lined up with contingency plans et cetera, but that's something that could drag us down a little bit on the upside scenario. What it really comes down to is look at the services business and dipped.

Pending upon the nature of interventions that we had acquired across our portfolio on a geographic basis.

We have some.

Some events that cause greater services pull through that could create a little bit a little bit more upside. So what we've really tried to do is make sure that we have presented a balanced view of all of that in terms of where we expect Q4 to Atlanta also Ian.

And note that while we are.

Indicating that we will have increased revenue sequentially going from Q3 to Q4.

Buried in there is seasonality we have significant step down in Latin America seasonality, we have significant step down in.

Europe Africa seasonality as well, it's just that we have geographies that continue to show activity increases, but also we have to consider the <unk>.

Mix in Q4, Q4 is traditionally a stronger product quarter, and so with both seasonality mix shift.

We think that the margins should be in line with our threshold numbers, but.

It's going to be an interesting quarter.

Okay. That's very helpful. Thank you both.

Keith also on the balance sheet.

You have I believe another 100 million of 11% unsecured that you would wish to take out upon arrival of the ABL just wanted to confirm that as well and then ask really what sort of flexibility you have retained for another sweeping refinancing between now and 2030, just given the trajectory.

The business it looks like this should not be an eight 5% cost of debt company in two or three years. So what flexibility do you have to go back to the well to improve that.

If if the leverage improves as we think that it probably will.

So.

First we have a $300 million stub remaining from the exit notes.

That will still mature in 2024, it has a 103 call option on it that expires in December of 2022.

We are we continue dialogue with our banks to see what is the right structure for us between an ABL and then Rcs and with that we may choose to address the stub or depending on how free cash flow generation is occurring.

Yes.

The weighted average cost of debt at eight 5% I think is a big improvement from where it was I think the market will is already priced in.

A lower effective yield for our debt.

We will continue to deliver and if we are delivering enough walk up enough operationally and that pricing continues to reflect a better and a better credit profile and business trajectory than liability management is always a way to.

Further improve or weighted average cost of debt. So we have a little bit more runway. As you said, we have until 2028 to think it through so hopefully there's enough in the cycle and this one probably one after that that we can all think about how to readdress the debts the desktop.

Good stuff.

Keith I will pass it over thanks.

Ian.

And our next question today comes from Gregg Brody of Bank of America. Please go ahead.

Good morning, guys.

Greg.

Just.

Since you were just answering that questions I'll just pick up from there so.

How are you how are things progressing with the credit facility.

Do you have a sense of timing on when that will be in place.

Any updates on potential size.

Sure.

The.

The change we made in the LC facility I think accommodates up to a $400 million facility.

We are.

We continue to dialogue with the banks on two fronts. The first.

Is can we get a secured rcs in place because weatherford as a company.

Given our asset profile.

Our business profile with 75% of our business being outside North America, we are less so.

Favorable towards Bill ABL format, because of the re measurement of the availability based upon where the asset side.

And so we'd much rather have a we would we are considering and rcs, but that's because given our still credit rating it becomes a difficult dialogue for our banking partners and so we are working through that because we would rather not have the remeasurement of availability and then we're working through the ABL dialogue on how can we.

Include more assets into the.

The asset base more geographies, given our ownership structure.

Different types of assets, whether we can bring in more rental assets and so forth. So the dialogue continues and we think that it is a constructive dialogue.

Say that because if you look at what we were able to achieve which is a major milestone that facilitated this transaction is for the banks to accept that weatherford needs, an ABL R&R ICF for them to give us the.

The increase in the RP basket to repay debt and also to accept that they can be primed by an ABL and Rcs and so we have very constructive dialogues, but I don't have a timeline.

Does the exploration of the of the of the claw on the 11% to 300 million that you can call him one of the three.

Can you can you.

Can you exercise that.

Without a credit facility put in place are you comfortable doing something like that.

It depends on how much cash we've generated we've exercised $200 million of it without a credit facility in place because that was the cash we generated through the end of the second quarter.

It's all a question of the cycle is the question of many things so.

We are comfortable with the liquidity that we have on our balance sheet. We are business hasnt changed that much we are not going to do anything with it on the balance sheet side or on the P&L side that gets ahead of the activity levels that we see we've approached this in a very cautious manner and so I know that the stuff is still out there lots of calls have come in as the.

When and how to address it but at this point in time, we see that as a small thing I think we feel that we've addressed the major components of the balance sheet and we'll address that in an orderly manner Girish. Yeah look I think Greg the only thing I'd add to what Keith said this whole notion of we are really trying to be prudent and responsible about this a few set.

Rewind about 60 days the whole discussion was around what are you guys going to do and.

All of the things that we've done in 60 days is pretty remarkable given where we were so for us it's really about making sure. We take it step by step we do the thing that is optimal for the company in the longer term without taking undue risk. While we are continue to be very focused on making sure that we don't let our eye off the ball on gender.

<unk>.

Operating improvements in the company that will fuel our cash flow generation and look as we build up more cash flow that gives us another lever to go after the debt.

So what I think I heard Eric because I mean, it's a month away.

It's funny I just wanted to number 22 December 'twenty two the expiry on the call in December 'twenty, two and the one I'm sorry, alright. Thank you.

Yes, I have that confusion.

No.

I have to leave it to the credit analysts to get that messed up.

So yes it is.

It's a month any year, so 13 months.

With it.

Alright, thank you for clarifying.

Maybe just switching back to.

Some of your free cash flow number so.

You pointed out capex.

It's doubling more than doubling essentially more than doubling versus this quarter.

This is coming in below where you thought it would for the year.

I'm trying to figure out how you're thinking about capex going forward.

Here I.

Thank you said, 3% maintenance of revenues, but I think 5% to 7% on growth.

If you are in growth mode. Maybe you can help us think through how we should be thinking about it going forward. After this year.

Yes.

I think after this year.

We believe that our capex is going to start to step back up.

Given activity levels.

Just given the requirements to support.

The asset base that delivers our services, we see the first half of <unk>.

2022, possibly still being in the.

3% range of revenues.

However, the second half of 'twenty two it should move back to the 4% to 5% range as we inch back.

Into.

Refining the asset base that delivers our services in and make changes to our infrastructure. So we have been lucky enough that during most of 2020 as we went through the Covid stepped down and through most of 2021, we were able to.

Do a lot of asset redeployment and repositioning and didn't have to spend as much. Yes, we are slightly below our overall guidance of.

3% on full year 2021, but we think we're close enough.

We are still being effective in delivering everything that our customers need and I think Greg look if I could add to that is just I think it's really important to understand the ethos of the philosophy that we're driving its a very very significant focus on making sure that we are exhausting every avenue to redeploy equipment to reuse equipment to repair equipment.

Before we go out and purchase new equipment, you also got to sort of take a step back and look at the business, where it used to be and we had a much broader asset base as Keith pointed out we've had the luxury to go back and basically harvest from that so what this is really about us again being very mindful of where we see.

Our cash being very mindful of driving a higher set of returns on the asset base that we have rather than go hey, we're not going to spend as much on capex. So we are being very very specific about how we drive it.

Great and then.

The other one items free cash flow cash.

Cash taxes, and severance payments I think they were a little lower this quarter as well.

Then I would have expected based on sort of your annual guidance I'm curious, how we should be thinking about that for fourth quarter and then the two.

Are any of the severance payments.

Slash restructuring into next year.

So I think that.

When we think about cash taxes. This year I think it's quite possible that we could probably see the same the same.

I'm level or a little bit higher in Q4 that we saw in Q3, So I think we're probably be.

Around 6% to 65 number for cash taxes on a full year basis.

Severance and restructuring.

Has slowed because we are using a lot more of the things that we thought we may not have needed and so.

So as the activity picks up I think that when we think about severance and restructuring in terms of overall spending we did spend $5 million in Q3, we could probably spend between five and 10 in Q4, so that will bring bring us to a number.

<unk> that is inside of our starting guidance for the year, but overall when you think about free cash flow for the quarter.

For the upcoming quarter.

But our margins as we talked about will be.

Lower than Q3 that lower margin will fall through and impact our unlevered free cash flow in <unk> interest payments will step up by another roughly $60 million. So free cash flow is going to be at best a breakeven and probably more likely to be slightly.

<unk> open overall, we still think the full year will deliver.

Strong free cash flow.

Great.

There was a positive benefit from deep.

You know inventory charges and increased integration accruals this quarter.

I'm curious if how should we be thinking about that going forward.

So the <unk> accrual.

As always there and the add back is in the other we took the.

The nudge I should say.

The feedback from the group that we speak to every quarter to break up other into its components. So we could all see it better and always usually there.

What we are seeing this quarter or what we saw this past quarter. It was <unk> stepped down so even though if you look at the <unk>.

Earnings Press release is a table in there.

Okay.

One of the supplemental tables in the back.

That shows the progression of <unk>.

From Q2 to Q3, you'll see that it's stepped down by Bai five and so as we.

Manage our inventory better we harvest what we have we get into those steel dated bins of things and start to push as we particularly think about Q4 being a stronger product sale quarter.

We'll probably be in that range of about <unk> 10 for the charge, which will be lower than it was.

Over the past quarters, and we are still working through the model for 2022. So then we will come back to you and the start of the year and tell you, where we think that will be.

So that 10 million charge, that's a that would be in.

And in this case it will be a benefit to you.

And your free cash flow from or is it actually add back. It's just a noncash add backs right got it got it.

It was one of those noncash add backs that was buried in other and as we went through a few quarters that we've been here as people try to Peel. It back we decided to open it up.

So not.

Something we love to talk about this level of detail, but it's.

Hopefully helpful.

I will I will not ask about it again on a call but I appreciate it.

Just you have you been even clicking off some small asset sales every quarter.

So if you if theres much more left to do.

No.

Those are a lot more.

Infrastructure type assets as we've consolidated manufacturing sites as we've.

We'll move to a super Central model in the U S, where we have more product lines on a single basis. So we can deploy in and do some other things.

This company was much larger a few years back right, even though up to 2019. This was a $5 billion revenue business going back even five to seven years. This was.

$14 15 billion of revenues. So it was a fair bit of infrastructure assets that as we.

Coalesce around being a.

Three $5 billion to $4 billion business that we are exiting strategically that doesn't make sense for the new footprint and thats really what it is how much more depends on.

Well, what we're going to do with repair and maintenance facilities in our fulfillment centers. We are working through that and we'll have a better profile of that as we get into 2022.

Got it and really the last question for me.

So obviously fine.

Tastic.

Last couple of months or month, plus of refinancing your debt and lowering our cost so congrats there.

The next question is how do you think about it.

Did you ever return to shareholder strategy going forward.

Obviously, you've talked about pivoting to growth Capex in the second half of next year, which requires more capital.

Curious, how you think about Oh.

Average target and potentially actually paying a dividend and how youre thinking about that.

Yeah. So let me start and then I'll ask Keith to follow up with a bit more specifics, Greg. So look I think number one in terms of shareholder returns that is.

An important priority for us, but the way we are really thinking about that as operating performance of the company. So.

As we really showed that we can generate better margins, we can consistently generate free cash flow.

We think that we should get the recognition for that as the operating profile of the company shifts and that should have.

In effect on the on the shareholder value.

At this point in time that really is the main focus is the operating profile and then of course addressing the capital structure right after that which we have taken a very very big.

Chunk out of it and really made a made a big difference in the past couple of months as you pointed out so there's a few other things to do there that will that we could get after.

But beyond that look we don't have any specific plans right now on any other.

Specific type of per ton of dividends or buybacks or anything like that.

Yeah. Thank you.

Sorry to cut you off.

No no no I was I was just going to.

Two what gives us that.

Uh huh.

I think it's a little early for us to be thinking about.

Returning capital to shareholders in the form of either dividends or.

Our share repurchases.

We do need to continue the trajectory of delivering positive free cash flow.

And then as we get there and move towards or objective.

In the earnings positive company overall, I think then we can come back to that conversation.

Got it I appreciate that's not necessarily tomorrow, just thinking about how youre trying to get there and that was that was really helpful. Thanks for the time guys I appreciate it thanks Greg.

Thank you. Our next question today comes from Doug Becker of Benchmark Research. Please go ahead.

Thanks, <unk>, you mentioned more competency growth scenarios for next year some.

Some of the larger service companies have talked about spending next year growing low to mid single digits.

King.

Type growth in North America closer to 20%.

Do you see that playing out for Weatherford, given different business mixes well focus strategic focus on margins more so than growth.

Sure.

<unk>. The question, Doug look I think what you will notice is over the past several quarters.

We have been characterized by being a little bit more I'll call it prudent and a little less.

Brilliant about the growth prospect and that comes from a couple of things. One is we really want to see it play out before we commit to it second as you pointed out we've got a very different mix.

Business mix today. So we are not as broad as we used to be and certainly not as broad as some of our larger peers. So for us it's really about where do we want to go after the growth and it's really that intersection of geography and product line that creates a favorable mix of profitability that's accretive to the company. So that's what we are more focused on <unk>.

Do see the international markets, especially in the Middle East and South America seeing a lot more activity. So we are confident that that will persist over a significant period of time and then we are seeing more in North America, but in North America as I pointed out in my prepared remarks.

Much more of a focused strategy. So so again for us we expect our topline to be a little bit more muted, but we expect that our profitability will will continue to grow and has a much more.

Progressive stance.

No that makes sense now within that outlook does that assume services revenue is growing faster than product revenue next year as well.

It's look we've not gotten down to that specific of guidance for 2022 will come back in.

The early part of next year or two to lay that in a bit more detail, but my overall sense is look I think both have to right.

What we will see as production increases and as production ramps up, especially on the OPEC plus fine some of our production oriented businesses are typically a bit more product oriented and so and even in the U S. That's very true. So we will see that drive product sales, whereas more of the drilling types of businesses are much more services oriented.

So that will drive the services piece. So we expect to see growth on both sides of the exact specifics of what is that relative proportion that mix effect will have a little bit of effect.

On the overall profitability for sure.

That makes sense again.

And then just a housekeeping item you mentioned weather supply chain inflation do you have any quantification associated with that just as we think about <unk> versus <unk>.

Not specifically as we pointed out in the third quarter.

Everyone experienced those but the team did an outstanding job brand.

We were also a little bit fortunate in just the way some of the timing played out. So we can take all the credit that we didn't really feel the impact like a lot of other people did field. So for us in the fourth quarter, it's really the supply chain issues, the logistics constraints getting material into the ports and off of ships.

So that could be probably the limiting factor.

Factor as we as we look at it but it's a little bit hard to quantify exactly how much that's.

That's going to be but I'll ask Keith to jump in with a bit more color. So Doug I think the way to think of it as well.

When we normalize Q3 will probably be a 17% EBITDA margin threshold, but going into Q4. When you put everything that we are faced with whether it's seasonality.

Inflation.

The mix changes, we think that that will have probably a 150 basis points to 200 basis point impact on EBITDA margins, bringing us back to our Q3 year to date average of about 55%. So that's the way to think about it we haven't.

Quantify each of those components, but.

And the forecast.

It is a costly.

Moving into Q3 into Q4.

Got it thank you.

Thanks, Doug.

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

Next question today comes from Scott Levine.

Bloomberg Intelligence. Please go ahead.

Hey, good morning, guys.

Scott.

So just following up on that last question, even with like a 15 and a half two.

Maybe pushing 16% margin in the fourth quarter you guys.

Pretty you guys effectively declaring victory on the 15%.

Intermediate term EBITDA margin target.

Number one and number two just wondering if theres any other maybe guide post you can put out there it sounds like you're expecting margin expansion.

Next year as well any other any other targets youre willing to communicate with regards to your margin expectations going forward.

Yes.

Scott So look as for those who know me really well I'm always a little bit reluctant to declare victory until it is absolutely seen that's fine.

Signed and sealed but look as I pointed out in my prepared remarks, we feel very good about the progress. We are ahead of schedule, but again I think it would be a little bit and prudent of us to do.

Say that until we have actually delivered a full year and then another full year with that so but I think all of the signs are there that we should be a company at these activity levels that can deliver that and then build more importantly build from there to get better in terms of look the next target again as we come out with 'twenty two guidance and give you a little bit more of a flavor.

Early next year, we'll lay out a bit more of a play product longer term roadmap, but what we really strongly believe is that there is a ton of opportunity at weatherford.

To create more margin expansion.

Got it fair enough.

And then maybe one follow up I think earlier on you were asked about possible divestitures.

Do you feel about your business portfolio as a whole I guess I'd ask you are there any are you happy with what you have you see any.

Room for potential subtraction, or maybe even additions as.

As we go forward.

Sure. So look I'll start with just overall, we are happy with the portfolio. What we don't see is the need for massive surgery.

Take out big chunks or anything like that what we are focused on and we have been and then Doug just over the past year is what I'll call surgical tweaks, which is again this intersection of product line and geography, we've got to make sure that every product line is able to stand on its own feet and be accretive to the company on a cash basis.

In every single geography, we cannot have.

Unless it's something Supreme be strategic we really cant have.

Product line subsidizing each other so every single one of them and each geography needs to be self sufficient and we've got to figure out how to run the company that way. So that's what we've been doing on and as a result, that's why we have exited the drilling services business in the U S changed our business model on wireline exited the wellhead business. Those are some examples so far off of what we have done.

Now in terms of additions look they really revolve around our strategic vectors. So one is as we look at our market leading product lines, if we see opportunities to fortify to enhance that but we cannot do organically. That's something that we will look at but we again feel very strongly about those four product lines.

We have and then what we will look is on the energy transition piece and on the digitalization piece, where there are certainly opportunities, but our predominant focus is really focused on organic growth and on operating efficiencies within the company.

Got it great. Thank you thanks for taking my questions.

Happy to.

Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to management for final remarks.

Great Hey, Thank you all for joining today, we really appreciate your interest and support of the company and look forward to speaking to all of you in the new year. Thank you.

Thank you Sir This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Yeah.

[music].

[music].

Ladies and gentlemen, thank you for standing by.

Welcome to the Weatherford International third quarter 2021 earnings call.

All participants will be in a listen only mode.

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

After today's presentation there'll be an opportunity to ask questions.

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

Which all your question. Please press Star then two.

As a reminder, today's event is being recorded.

I would now like to turn the conference over come off the top of wallet director of Investor Relations and M&A, Sir you may begin.

Welcome everyone to the Weatherford International third quarter 2021 conference call I'm.

I'm joined today by Greece, Saudi Graham, President and CEO, and Keith Jennings Executive Vice President and CFO.

We'll start today with our prepared remarks, and then open it up for questions.

You may 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 materially differ 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.

Underlying details and a reconciliation of GAAP to non-GAAP financial measures are included in our third 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 our call today.

We will start on slide three which highlights very significant accomplishments on our key priorities during an exceptional third quarter.

As you're all aware there have been significant headwinds roiling several industries over the past quarter.

In addition to the ongoing effects of the pandemic the third quarter witnessed pervasive supply chain disruptions inflationary pressures and severe weather impacts. Despite these challenges I am very pleased and proud of our team's commitment to our four strategic imperatives that enabled outperformance against expectations on revenue adjusted EBITDA.

And free cash flow.

We ended the third quarter of 2021 with ample liquidity, our product and service portfolio continued to prove its strength with record breaking accomplishments our market, leading product lines, including managed pressure drilling and tubular running services enabled us to drive synergies across our portfolio and demonstrate the unique value of integrating our offerings.

We have laid out our strategy and approach in prior calls and our results. This quarter are another important proof point of the tangible outcome of the daily efforts of the <unk>.

Getting into some specifics I'll start with safety, which is a foundational element of our performance, having the discipline and rigor and focus to continually ensure that our team goes home safely everyday instincts the same mindset across all operating processes.

To recognize our team in Mexico, where we maintain a 100% safety record for 2021. This is an exemplary achievement and a great example of our continued commitment to safety.

Turning to our financial results, we delivered outstanding performance with reported adjusted EBITDA margins of 19% an improvement of more than 380 basis points sequentially like.

Like prior quarters, where we have exceeded expectations I will temper the enthusiasm with the reminder, that we are still laser focused on fundamental operating performance improvement we have talked in the past about our approach of improving our margin at baseline activity levels.

While capturing increasing activity at higher fall throughs. This came through in spades in Q3 with a very favorable services mix on increased activity.

Also had some one time items during the quarter, which Keith will cover but even without them our margins picked up significantly.

We have also talked about 15% adjusted EBITDA margins as our intermediate goals over the next couple of years and I am pleased that we are delivering at that level well ahead of our timeline. However.

However, we do recognize that we still have work to do to ensure balanced and predictable performance consistently and through cycles.

Our cash performance was remarkable with the company generating $111 million in free cash flow.

This puts us on track for another full year of positive free cash flow, which is a notable achievement.

We recently executed multiple financial transactions to address our capital structure inefficiencies. This bucket of transactions resulted in achieving much needed flexibility with our banking partners, reducing interest expense and extending our maturities. We appreciate investors for recognizing the underlying and improving capabilities of our company.

And recognize the current constructive tone towards energy services, which afforded us the window to accomplish these transactions with.

With these transactions, we are materially reducing interest expenses improve.

Improving our operating profile and enhancing balance sheet flexibility to give the company a stable foundation to continually drive our focus on customers technology and operations, which should deliver increased margins and free cash flow generation.

None of the results where feasible without the tireless dedication and hard work of our entire <unk> team and I'm incredibly proud of their commitment and achievement.

As I reflect back on my first full year that the company I am humbled and grateful that having the privilege to represent their efforts to all of you.

Moving to slide four I want to highlight progress on our strategic vectors, which we shared earlier in the year.

Our first strategic vectors, our product and service portfolio and we continue to make technology commercialization and business model advancements across product lines.

I've talked about a market leading product lines and the pressure pro expansion in managed pressure drilling is a great example of enhancing our offerings to ensure that we have capability across the application and pricing spectrum.

The slide highlights new offerings expansions and technology driven records in each of our market leading product lines.

However, where we get an amplification effect is when we are able to integrate our offerings to enhance the synergies among them.

The single largest vehicle for this is our integrated services, which delivered outstanding results this quarter in Europe, and Mexico, and one project in the North Sea, we were able to leverage NPV and Trs to pull through our drilling services business. This has enabled us to replace a competitor to grill three challenging large whole well sections ultimately saving the customer more than 13 days.

In Mexico, our integrated services tripled efficiency from the exploration to the early development phase of a project to deliver early production in a new field development. In fact, we set a field record by drilling one well to total depth and approximately 22 days, two thirds improvement and drilling and well construction time.

The solution spans several drilling and completion technologies, including advanced Geo steering and logging while drilling our lwt tools, the strength of our industry, leading brands and technologies like the Magnus Rotary <unk> system, and the central well construction optimization platform was evident in delivering these solutions.

Our second strategic vectors around our evolution is part of the energy transition.

For us to ensure a bright future in the new energy economy in the future as an energy services company.

Need to drive the same technology differentiation and solution creation as we have in traditional oilfield services.

<unk> pursuing opportunities in Cc U S, while working plug and abandonment projects for customers in multiple geographies. We also remain excited about geothermal is an important energy source, where we have been a leader for over 20 years.

During the third quarter, we provided the technology and engineering needed to remove scale and enable installing an electrical submersible pump for the rejuvenation of a geothermal well in Germany.

The final strategic vector for us digitalization and automation is critical to address our customers' needs and we continue to gain traction and increase adoption with customers across all our Joseph a large operating company in Colombia awarded <unk>, a three year contract for the foresight production optimization platform with this award the foresight platform as the leading production.

Monitoring market share in that part of the world on top of that an MLC in the middle East recognized our production automation and software services for performance excellence and problem solving in the face of extreme challenges.

And following up on these accomplishments Hart energy declared foresight edge a winner of the special Meritorious Award for Engineering innovation. This on a further solidifies <unk> as the best in class technology with game, changing technical and economic potential for our industry.

Digital solutions like <unk> edge, where again the focus of our <unk> Enterprise software conference or risk for three days at the end of October 2021 <unk>.

<unk> Weatherford, the largest customer event and the industry's preeminent digitalization photo.

This year marks the 16th annual conference featuring advancements from well construction to production.

<unk> scope of the show expanse year after year in 2021, we had virtual participants from Houston to Abu Dhabi in Jakarta, and we held nearly twice the number of breakout sessions for customers.

One thing that didn't change is a unique features where customers not only attend but also share testimonials on weatherford technologies in action are.

Our strategic vectors of a central team for the long term approach to preserve our ability to differentiate and create value and with all of these moving in the right direction, we feel confident in their progress ahead.

That same spirit of differentiation and value creation as evident in our operational highlights shown on slide five we leveraged our industry, leading offerings to deliver differentiated services for our customers and full to others across our portfolio.

You'll notice that we help them deliver better wells wells with enhanced integrity from the start and improved reservoir productivity in the long run these kinds of outcomes have not gone unnoticed by our customers, which has enabled us to gain market share expand our margins and generate repeat business.

Our market, leading product lines to enable a beachhead offerings with customers that then allows us to gain share of wallet by pulling through other product lines. As an example in NOC and North Africa awarded US a contract for MPD services and in onshore field. The wind comes after multiple years to contract being with our competitors and was based on the strength of our technology with this.

Ward, we not only gain share, but also expanded the scope of our MPD work in the country beyond deepwater to lap.

Additionally, in the same geography, a major customer awarded US a sole source contract to supply completion materials reservoir monitoring systems and associated services.

This award enables us to replace vendors who has historically provided the services. In addition, a major IOC in South America awarded US an offshore Trs contract, but running completions on its next campaign. This opportunity again comes after years on the outside and let us introduce Vero technology with all of its benefits as our premium offering <unk>.

<unk> provides immediate and lasting benefits to the crew efficiency safety and integrity, all of which bring enormous value to our customers.

With an operator in Australia after serving as the incumbent on a range of deploying our other Trs services, we secured an inaugural contract for barrel.

Greeting the customer services has delivered significant rig time savings and reduced personnel onboard for a major operator in the Gulf of Mexico, we replace conventional operations with Vero trial, which allowed the customer to mitigate potentially detrimental connection issues.

We are also driving the same returns focused differentiation across our other product lines, we have seen significant commercial traction and margin expansion in our drilling services product line spearheaded by our Magnus Rotary <unk> system.

In South America, we increased adoption of these services by completing a successful field trial with an NOC.

Our Magnus Rss and riptide drilling ream are both achieved rates of penetration 30% faster than planned.

As a result of the performance on the first well the customer signed up additional wells with the potential to expand further.

For another customer our services, including included the Revolution, Rss, which drilled about 13 days faster than planned and saved 27 operational days over the course of the entire campaign.

Turning to slide six for our view on the market, we continue to see improvement in the overall macro environment and believe we are in the early stages of a multiyear up cycle.

In North America market fundamentals continue to improve and we continue to see capital discipline from public E&ps are focus however continues to be on generating sustainable returns and going out to work only where it makes sense for us to do so.

Keith will talk more about that in relation to our fourth quarter outlook on margin improvement and area, where we continue to see improvement. It is also important to note that our business in North America has changed significantly over the past couple of years, we no longer play in high volume low margin services and are focused on our four market leading product lines conventional lift.

In other high margin offerings, including digital solutions.

This has been a key driver of our continued margin improvement in North America, but does reduce our growth expectations relative to the rest of the industry. However, we strongly believe that the prioritization of margins and returns is the right call for us now.

Internationally, we continue to see activity increases in most geographies, particularly the middle East and South America.

In an environment, where we saw increasing signs of economic recovery and very tight oil and gas markets tendering activity was above pre pandemic levels and rig counts continued to trend up.

We are very appreciative of our customer support as we have had wins during the quarter throughout every geo zones.

Additionally, we have deployed differentiating drilling and evaluation technologies to the North Sea and Middle East with very positive results and we believe that they will be drivers for continued growth in future quarters.

Looking ahead to 2022, we are now more confident in our growth scenario and despite inflationary headwinds expect to see continued improvement in profitability reflected in margin expansion on a year over year basis, now I'll hand, it over to Keith for our financial update.

Thank you Girish, please turn to slide seven.

Let's begin with a summary of our third quarter results, which continues to reflect the ongoing improvements in our operations, despite an increasingly challenging cost environment.

We continue to see rising inflation and as a company that deploys equipment to support our services, we are increasingly challenged by logistics and rising transportation costs.

Consolidated revenues were 945 million, 5% better sequentially and 17% better year on year, driven primarily by a 6% sequential increase in service revenues.

Product revenues increased by 2% sequentially and also our production oriented products maintain pace with energy output levels.

The sequential improvement in performance, we're seeing across all geographies with above average results from South America, which continues to reopen along with the middle East region.

The third quarter topline performance, primarily resulted from increased activity in our drilling and evaluation and intervention business or <unk>, which is increasingly being enabled by our integrated services and projects or ISP offering in the middle East region.

In South America, both our completion and production in <unk> and <unk> businesses benefited from increased callouts.

The CMP business activity in Canada, and in Europe, Sub Sahara Africa, and Russia continues to trend well.

Third quarter operating income was $71 million or seven 5% of revenues, which increased $46 million sequentially adjusted.

Adjusted EBITDA for the quarter was $179 million and adjusted EBITDA margin of 19% an improvement of 388 basis points sequentially and 605 basis points year over year the.

The operating income and adjusted EBITDA growth was driven by the growth in service revenues and improved mix of services bad debt recovery.

Lower inventory charges.

Our EBITDA in the quarter was bolstered by approximately $20 million of one time items.

Without these items, our EBITDA margins were approximately 17%.

Still a significant step up reflecting favorable fall through from the improved services and geographic mix.

Free cash flow for the quarter was $111 million driven primarily by a lower cash interest payments as our improved earnings was offset by a working capital investments and asset dispositions effectively funded increased capital expenditures.

Let's look at our geographical breakdown, starting with the western hemisphere on slide eight.

Western Hemisphere revenues of $441 million in the third quarter, 2021 increased 4% sequentially and 40% year on year.

North America revenues of $224 million increased by 2% sequentially, primarily due to increased E&P business activity in Canada.

Third quarter revenues of $217 million in Latin America increased 6% sequentially driven by improved pricing increased activity in both our CMP and <unk> businesses in Columbia, and increased business activity and pricing in Brazil.

Adjusted segment EBITDA of $75 million increased $17 million and associated margins of 17% improved 340 basis points sequentially and improved 780 basis points year on year.

The growth in adjusted segment EBITDA was primarily driven by increased.

Service sales and service mix improvement in North America, and Latin America.

Next on slide nine.

Eastern Hemisphere revenues of $504 million increased 5% sequentially and increased 3% year on year Middle East North Africa, and Asia revenues of $312 million increased 8% sequentially driven by <unk> business activity in ISP pulled through.

In Europe sub Sahara Africa, and Russia revenues of $192 million increased 2% sequentially, primarily due to increased activity in the E&P business and ISP, partially offset by decreased activity in dei visits.

Adjusted segment EBITDA of $118 million increased $25 million and associated margins of 23% improved 390 basis points sequentially and increased 220 basis points year on year.

The growth in adjusted segment EBITDA was primarily due to increased activity and a favorable mix of services and sales in Mena Asia and Russia.

Turning to slide 10 for a summary of our liquidity.

We continue to maintain our disciplined focus on running our business with the intention of generating operating cash flow.

This has been demonstrated through the results of our underlying businesses and cost improvement initiatives.

In the third quarter of 2021, we generated unlevered free cash flow of $141 million, an improvement of $34 million year on year from a 72% increase in adjusted EBITDA.

Free cash flow was $111 million, which improved 63 million sequentially and $6 million year on year after $28 million more in interest payments versus the corresponding quarter a year ago.

Total cash increased $59 million and we ended the quarter with approximately 145 billion of total cash.

Capital expenditures were $20 million in the third quarter of 2021 compared to 9 million in the second quarter of 2021 and $27 million in the third quarter of 2020.

Our capital expenditures increase this quarter as we increased the focus on our growth capital requirements, given increasing activity levels. We.

We expect to at least double our capital expenditures in the fourth quarter of 2021 to meet the increasing demand for our market leading products and technologies.

I wish to thank over one weatherford team for their continuing cash flow improvements, which are the result of improved operating performance disciplined capital expenditures and working capital performance driven by our continuous focus on asset utilization.

Slide 11 is a summary of our recent financial transactions during the past few months, we made significant changes to our capital structure, which included not only of refinancing our debt, resulting in lower coupon rates and extended maturities, but also paying down $200 million of our unsecured notes with cash on hand.

After repaying $200 million exit notes, partially refinancing a majority of the remaining exit notes and refinancing all the prior secured notes or annual interest payments will be approximately 204 million until their maturity, which is an annual cash interest savings of approximately $71 million.

The major highlights of the content of the complete the transaction.

The transaction has begun with the LC facility amendment to permit up.

Up to $500 million of debt repayment and very importantly, allowing for an ABL ICF to enter the desktop and hold a prime position on key working capital assets if required.

Repayment of $200 million of unsecured 11% notes, we generated free cash flow.

Extended maturities on both classes of debt.

We re refinanced $500 million of secured notes and extended the maturity to 2028.

And then we refinanced $1 $6 billion of the remaining $1 9 billion of the exit notes enabled by a tender process with the new tranche maturing in 2030.

The end results can be summarized in an improved debt metrics.

As weighted average cost of debt reduced to eight 5% versus 10, 6% and maturity increased to seven five years versus three three years.

$300 million of exit notes remain maturing in 2024 with a 103 call option expiring December 'twenty two.

Gary and I are appreciative of the trust the capital markets are placed in the view Weatherford team.

I wish to thank all participants agents service providers in the Weatherford team members that worked tirelessly over the past months.

Special Thanks goes to Deutsche Bank and Morgan Stanley.

As indeed banks across this basket of transactions.

Turning to slide 12, I will share a few qualitative thoughts on the fourth quarter of 2021.

We now expect our fourth quarter revenues to continue the upward trend and increased by low single digits from the third quarter as we continue to see activity improvement.

Adjusted EBITDA margins are expected to be 25 to 50 basis points above year to date Q3, 'twenty one levels of 15, 6%.

Seasonal mix shift created by a step up in product sales will pull negatively on our margins as we continue to be challenged by material and labor inflation and the ongoing port and logistics challenges present delivery risks the product orders and service equipment.

Our third quarter had several positive onetime items totaling approximately $20 million, which we do not expect to repeat in the fourth quarter.

In the fourth quarter, we expect to see an increase in demand for products as activity levels continue to grow.

Net working capital will continue to be an outflow and.

As receivables continued to reflect revenue growth.

We expect capex to be in the range of $40 million to $60 million in the fourth quarter. Thank you for your time today I will now hand, the call back to <unk> for his closing comments.

Thanks, Keith our results in the third quarter with terrific, but we are firmly focused on the future and the work ahead of US we continue to make progress on our four key focus areas for 2021 as shown on slide 13.

As demonstrated over the last few quarters, we have made significant and meaningful changes to our business as we strengthen our product and service offering optimized our global footprint enhanced customer relationships and began to instill a performance driven culture throughout our organization. These results form a foundation for us to build on we.

We will continue to see seasonal shifts in our margin performance based on mix clumsy and challenges in inflation as Keith highlighted for Q4, however over a longer timeframe our efforts and focus should continue to create a company with increasing margins and greater value creation.

We are excited about our progress but have the humility to recognize that it is the first step and a lot more needs to be done.

We believe that Weatherford has the technology offerings coverage relationships and most importantly, the people who will propel our journey to further improvements in profitability and free cash flow generation.

We are at the early phases of a multiyear up cycle and as we institutionalize our operating improvement Weatherford is well positioned to remain a key player in the industry and capitalize on increased activity.

We'll continue to focus our offerings in geographies, where they are clearly profitable and continue to focus on margin improvement from internal efficiencies with the increased activity. The combination of these two items should continue to provide margin expansion and sector, leading EBITDA rate growth. Thank you all for joining us today and with that operator, let's open it up for <unk>.

<unk> please.

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

Yes, I have a question. Please press star one on your Touchtone telephone.

We are using a speaker phone please.

Please pickup your handset before pressing the keys.

To withdraw your question. Please first star then two.

Today's first question kosher and Macpherson with Piper Sandler. Please go ahead.

Thanks, Good morning, congratulations everyone on the team for a.

Strong results.

<unk>.

I understand that you had some outperformance from integrated services.

During Q3.

Keith You also mentioned that you had about two points of favorable one off in the third quarter that that takes you down from.

19% to 17% adjusted.

Margins without those favorable one offs could you elaborate on those and also just speak to.

But what the spectrum of possibilities with margins above or below your base case guidance for Q4, <unk> with regard to integrated services exposure or other items.

Good morning, Ian.

So good.

Good questions.

First when it comes to the $20 million of one time items.

They fall into three buckets.

About $7 million.

<unk>.

Asset sales our gains on.

On asset sales, we have probably an equal or slightly greater amount of probably eight.

Which were.

Recovered.

Bad debts that were written off prior.

We collected on those so we had to bring that back and then the final component.

It was a one time.

Price adjustment in Latin America from a contract that had a catch up component.

And that rounded it out.

And then we also had some.

From Endo.

That where that was lower in the quarter.

And so those were the four parts of the 20 <unk>.

<unk> III, who are the major components.

With respect to.

ISP.

And its ability to.

Increased margins I Wouldnt say that we look at it from that perspective, I'll also invite girish into the conversation, but what it does do is it allows us to pull through various product lines. When we are there.

The lead.

Projects provider.

And the region or whatever region, we're working in so if we have a ISP opportunity that we are delivering and there is a need for that.

Ancillary product line that we also offer sometimes it allows us to pull through things that wasn't was not in our forecast. Yes, again, I think just to add to a couple of things to round out. Your question I think look for us as we look at Q4 really on the downside.

What we are probably looking at as Keith mentioned in his remarks, so things like supply chain disruptions and product deliveries.

As everyone's aware in just about every company is talking about right now logistics staff foods are really the biggest gating item and so that presents presents the biggest risk for us and making sure that we can get product to customers. We think we've got a solid game plan and we've got everything lined up with contingency plans et cetera, but thats something that could draw.

It's down a little bit on the upside scenario, what it really comes down to is look at the services business and depending upon the nature of interventions that we require across our portfolio on a geographic basis.

We have some.

Some events that cause greater services pull through that could create a little bit.

Little bit more upside so what we've really tried to do is make sure that we have presented a balanced view of all of that in terms of where we expect Q4 to Atlanta.

So Ian.

I note that while we are.

Indicating that we will have increased revenue sequentially going from Q3 to Q4.

Buried in there is seasonality we have significant step down in Latin America seasonality, we have significant step down in.

Europe Africa seasonality as well.

That we have geographies that continue to show activity increases, but also we have to consider the.

The mix in Q4, Q4 is traditionally a stronger product quarter, and so with both seasonality mix shift.

We think that the margins should be in line with our threshold numbers, but.

It's going to be an interesting quarter.

Okay. That's very helpful. Thank you both.

Keith also on the balance sheet.

You have I believe another 100 million of 11% unsecured that you would wish to take out upon arrival of the ABL just wanted to confirm that as well and then ask really what sort of flexibility you have retained for another.

Sweeping refinancing between now and 2030, just given the trajectory of the business. It looks like this should not be an eight 5% cost of debt company in two or three years. So what flexibility do you have to go back to the well to improve that.

If the leverage improves as we think that it probably will.

So.

First we have a $300 million stub remaining from the exit notes.

That will still mature in 2024, it has a 103 call option on it that expires in December of 2022.

We are we continue dialogue with our banks to see what is the right structure for us between an ABL and then Rcs and with that we may choose to address the stub or depending on how free cash flow generation is occurring.

Yes.

The weighted average cost of debt at eight 5% I think is a big improvement from where it was I think.

The market will is already priced in.

Lower effective yield for our debt.

We will continue to deliver and if we are delivering in nava up enough operationally and that pricing continues to reflect a better and a better credit profile and business trajectory than liability management is always a way too.

Further improve or weighted average cost of debt. So we have a little bit more runway. As you said, we have until 2028 to think it through so hopefully there's enough in the cycle and this one and probably one after that that we can all think about how to readdress that thats the desktop.

Good stuff. Thank you Keith I will pass it over.

Ian.

And our next question today comes from Gregg Brody of Bank of America. Please go ahead.

Good morning, guys.

Greg.

Just.

Since you were just answering that questions I'll just pick up from there so.

How are you how are things progressing with the credit facility.

Do you have a sense of timing on when that will be in place.

Any updates on potential size.

So the.

With the change we made in the LC facility I think accommodates up to a $400 million facility.

We are.

We continue to dialogue with the banks on two fronts. The first is.

Can we get a secured rcs in place because weatherford.

The company.

Given our asset profile.

Our business profile with 75% of our business being outside North America, we are less so.

Favorable towards Bill ABL format, because of the re measurement of the availability based upon where the asset side.

And so we'd much rather have a we would we are considering and rcs, but thats because given our still credit rating it becomes a difficult dialogue for our banking partners and so we're working through that because we would rather not have the remeasurement of availability and then we are working through the ABL dialogue on how can we.

Include more assets into the.

The asset base more geographies, given our ownership structure.

Different types of assets, whether we can bring in more rental assets and so forth. So the dialogue continues and we think that it is a constructive dialogue.

Say that because if you look at what we were able to achieve which is a major milestone that facilitated this transaction is for the banks to accept that weatherford needs, an ABL R&R ICF for them to give us the.

The increase in the RP basket to repay debt and also to accept that they can be primed by an ABL and Rcs and so we have very constructive dialogues that don't have a timeline.

Just the expiration of the of the of the claw on the 11% to $300 million you can call. It one of the three.

Can you can you can you exercise that.

Without a credit facility put in place are you comfortable doing something like that.

It depends on how much cash we've generated we've exercised $200 million of it without a credit facility in place because that was the cash we generated through the end of the second quarter.

It's all a question of the cycle is the question of many things so.

We're comfortable with the liquidity that we have on our balance sheet. We are business hasnt changed that much we are not going to do anything with it on the balance sheet side or on the P&L side that gets ahead of the activity levels that we see we've approached this in a very cautious manner and so I know that the stuff is still out there lots of calls have come in as the.

When and how to address it but at this point in time, we see that as a small thing I think we feel that we've addressed the major components of the balance sheet and we'll address that in an orderly manner Girish, Yes look I think Greg the only thing I'd add to what Keith said this whole notion of we are really trying to be prudent and responsible about this.

You sort of rewind about 60 days the whole discussion was around what are you guys going to do and.

All of the things that we've done in 60 days is pretty remarkable given where we were so for us it's really about making sure. We take it step by step we do the thing that is optimal for the company in the longer term without taking undue risk. While we are continue to be very focused on making sure that we don't let our eye off the ball on.

<unk>.

Operating improvements in the company that will fuel our cash flow generation and then look as we build up more cash flow that gives us another lever to go after the debt.

So what I think I heard Eric because I mean, it's a month away.

It's funny I was wondering to number 22 December 'twenty two the expiry on the call. It December 'twenty, two and the one I'm sorry, alright. Thank you.

I guess I have that confusion.

No.

I have to leave it to the credit analysts to get that messed up.

So yes it is.

It's a month any year, so 13 months.

Okay.

Alright, thank you for clarifying.

Maybe just switching back to.

Some of your free cash flow number so.

You pointed out capex.

It's doubling more than doubling essentially more than doubling versus this quarter.

It is coming in below where you thought it would for the year.

I'm trying to figure out how you're thinking about capex going forward.

Sure I.

Thank you said, 3% maintenance of revenues, but I think 5% to 7% on gross.

Growth mode, maybe you can help us think through how we should be thinking about it going forward. After this year.

So.

I think after this year.

We believe that our capex is going to start to step back up given activity levels.

Just given the requirements to support.

The asset base that delivers our services, we see the first half of <unk>.

2022, possibly still being in the.

3% range of revenues, we think.

However, the second half of 'twenty two it should move back to the 4% to 5% range as we inch back.

Into.

Refining the asset base that delivers our services in and make changes to our infrastructure. So we have been lucky enough that during most of 2020 as we went through the Covid stepped down and through most of 2021, we were able to do.

Do a lot of asset redeployment and repositioning and didn't have to spend as much. Yes, we are slightly below our overall guidance of the <unk>.

3% on full year 2021, but we think we're close enough.

We are still being effective in delivering everything that our customers need and I think Greg look if I could add to that is just I think it's really important to understand the ethos of the philosophy that we're driving its a very very significant focus on making sure that we are exhausting every avenue to redeploy equipment to reuse equipment to repair equipment.

Before we go out and purchase new equipment, you also got to sort of take a step back and look at the business, where it used to be and we had a much broader asset base as Keith pointed out we have had the luxury to go back and basically harvest from that so what this is really about is us again being very mindful of where we spin.

Our cash being very mindful of driving a higher set of returns on the asset base that we have rather than hey, we're not going to spend as much on capex. So we are being very very specific about how we drive it.

Great and then.

The other one items to free cash flow cash taxes, and severance payments I think they were a little lower this quarter as well.

Then I would have expected based on sort of your annual guidance.

Curious, how we should be thinking about that for fourth quarter and then.

Do any of the severance payments.

Restructuring into next year.

So I think that when.

When we think about cash taxes this year I think.

It's quite possible that we could probably see the same.

Same level or a little bit higher in Q4 that we saw in Q3, So I think we're probably be.

Around 6% to 65 number for cash taxes on a full year basis.

Severance and restructuring.

As slowed because we are using a lot more of the things that we thought we may not have needed.

So as the activity picks up I think that when we think about severance and restructuring in terms of overall spending we did spend $5 million in Q3, we could probably spend between five and 10 in Q4, so that will bring bring us to a number that is inside of our staff.

Guidance for the year, but overall when you think about free cash flow for the quarter.

For the upcoming quarter.

EBITDA margins as we talked about will be.

Lower than Q3.

That lower margin will fall through and impact our unlevered free cash flow insurance interest payments will step up by another roughly $60 million. So free cash flow is going to be at best a breakeven and probably more likely to be slightly negative open overall, we still think the full year will.

River.

<unk> free cash flow.

Great.

There was a positive benefit from the.

Inventory charges and increased integration.

<unk> this quarter.

I'm curious if how should we be thinking about that going forward.

So the <unk> accrual.

As always there and the add back is in the other we took the.

The nudge or I should say.

The feedback from the group that we speak to every quarter to breakup other.

Into its components, so we could all see it better and always usually there.

What we are seeing this quarter of what we saw this past quarter was <unk> stepped down so even though if you look at the.

Earnings Press release is a table in there.

One of the supplemental tables in the back.

That shows the progression of <unk>.

From Q2 to Q3, you'll see that it's stepped down by Bai five and so as we <unk>.

Manage our inventory better we harvest what we have we get into those steel dated bins of things and start to push as we particularly think about Q4 being a stronger product sale quarter.

It will probably be in that range of about 10% for the charge, which will be lower than it was.

Over the past quarters, and we are still working through the model for 2022. So then we will come back to you and the start of the year and tell you, where we think that will be.

So that $10 million charge, that's that would be.

And in this case it will be a benefit to you.

And your free cash flow from or is it actually add back. It's just a noncash add backs right got it got it.

It was one of those noncash add backs that was buried in other and as we went through a few quarters that we've been here as people try to Peel. It back we decided to open it up.

So not.

Something we love to talk about this level of detail, but it's.

Hopefully helpful.

I will not ask about it again on a call but I appreciate it.

Just you have you been kicking off some small asset sales every quarter.

So if theres much more of a left to do.

No.

Those are a lot more infrastructure type assets as we've consolidated manufacturing sites as we've.

We'll move to a super Central model in the U S.

Where we have more product lines on single basis. So we can deploy and do some other things.

This company was much larger a few years back right, even though up to 2019. This was a $5 billion revenue business going back even five to seven years. This was.

$14 15 billion of revenues. So it was a fair bit of infrastructure assets that as we.

Coalesce around being a.

Three $5 billion to $4 billion business that we are exiting strategically that doesn't make sense for the new footprint and thats really what it is how much more depends on.

Well, what we're going to do with our repair and maintenance facilities in our fulfillment centers, we are working through that and we will have.

A better profile of that as we get into 2022.

Got it and really the last question for me.

So obviously fine.

Tastic.

Last couple of months or month, plus of refinancing your debt and lowering our cost so congrats there.

The next question is how do you think about it.

You return to shareholder strategy going forward.

Obviously, you've talked about pivoting to growth Capex in the second half of next year, which requires more capital.

Curious, how you're thinking about.

Our leverage target and potentially actually paying a dividend and how youre thinking about that.

Yeah. So let me start and then I'll ask Keith to follow up with a bit more specifics, Greg. So look I think number one in terms of shareholder returns that is.

Important priority for us, but the way we are really thinking about that as operating performance of the company. So.

As we really showed that we can generate better margins, we can consistently generate free cash flow.

We think that we should get the recognition for that as the operating profile of the company shifts and that should have.

In effect on the on the shareholder value.

At this point in time that really is the main focus is the operating profile and then of course addressing the capital structure right after that which we have taken a very very big.

Chunk out of it and really made a made a big difference in the past couple of months as you pointed out. So there's a few other things to do there that will that will get after.

But beyond that look we don't have any specific plans right now on any other.

Specific type of a ton of dividends or buybacks or anything like that.

Yes. Thank you.

Sorry, I cut you off.

No no no I was I was just going to.

To what Gary said.

Uh huh.

I think it's a little early for us to be thinking about.

Returning capital to shareholders in the form of either dividends or.

Our share repurchases.

We do need to continue the trajectory of delivering positive free cash flow.

And then as we get there and move towards our objective.

In the earnings positive company overall, I think then we can come back to that conversation.

Got it I appreciate that's not necessarily tomorrow, just thinking about how youre trying to get there and that was that was really helpful. Thanks for the time guys I appreciate it thanks Greg.

Thank you. Our next question today comes from Doug Becker of Benchmark Research. Please go ahead.

Thanks, Girish, you mentioned more confidence in growth scenarios for next year some.

Some of the larger service companies have talked about spending next year growing low to mid single digits.

King.

Type growth in North America closer to 20%.

Do you see that playing out for Weatherford, given different business mixes well focus strategic focus on margins more so than growth.

Sure.

<unk>. The question, Doug look I think what you will notice is over the past several quarters.

We have been characterized by being a little bit more I'll call it prudent and a little less.

Brilliant about the growth prospect and that comes from a couple of things. One is we really want to see it play out before we commit to it second as you pointed out look we've got a very different.

Business mix today. So we are not as broad as we used to be and certainly not as broad as some of our larger peers. So for us it's really about where do we want to go after the growth and it's really that intersection of geography and product line that creates a favorable mix of profitability that's accretive to the company. So that's what we are more focused on <unk>.

Do see the international markets, especially in the Middle East and South America seeing a lot more activity. So we are confident that that will persist over a significant period of time and then we are seeing more in North America, but in North America as I pointed out in my prepared remarks.

Much more of a focus strategy. So so again for us we expect our top line to be a little bit more muted, but we expect that our profitability will will continue to grow and has a much more.

Progressive stance.

No that makes sense now within that outlook does that assume services revenue is growing faster than product revenue next year as well.

It's look we've not gotten down to that specific of guidance for 2022 will come back in.

The early part of next year or two to lay that in a bit more detail, but my overall sense is look I think both have to right.

What we will see as production increases and as production ramps up, especially on the OPEC plus frankly, some of our production oriented businesses are typically a bit more product oriented and so and even in the U S. That's very true. So we will see that drive product sales, whereas more of the drilling types of businesses are much more services oriented.

So that will drive the services piece. So we expect to see growth on both sides. The exact specifics of what is that relative proportion that mix effect will have a little bit of effect on the overall profitability for sure.

That makes sense again.

And then just a housekeeping item you mentioned weather supply chain inflation do you have any quantification associated with that just as we think about <unk> versus <unk>.

Not specifically as we pointed out in the third quarter.

Everyone experienced those but the team did an outstanding job brand.

We were also a little bit fortunate in just the way some of the timing played out. So we can take all the credit that we didn't really feel the impact like a lot of other people did field. So for us in the fourth quarter, it's really the supply chain issues, the logistics constraints getting material into the ports and off of shifts.

So that could be probably the limiting factor.

Factor as we as we look at it but it's a little bit hard to quantify exactly how much.

So it's going to be but I'll ask Keith to jump in with a bit more color. So Doug I think the way to think of it as well.

When we normalize Q3, we're probably 17% EBITDA margin threshold, but going into Q4, when you put everything that we are faced with whether it's seasonality.

Inflation.

The mix changes, we think that that will have probably a 150 basis points to 200 basis point impact on EBIT margins, bringing us back to our Q3 year to date average of about 55%. So that's the way to think about it we haven't.

Quantify each of those components, but in.

The forecast.

It is a cost.

Impactful going into into Q3 into Q4.

Got it thank you.

Thanks, Doug.

Ladies and gentlemen, as a reminder, if you'd like to ask a question. Please press Star then one on our next question today comes from Scott Levine of Bloomberg Intelligence. Please go ahead.

Hey, good morning, guys.

Thanks Scott.

So just following up on that last question, even with like a 15 and a half to.

And maybe pushing 16% margin in the fourth quarter you guys.

Are you guys effectively declaring victory on the 15%.

Intermediate term EBITDA margin target number.

Number one and number two just wondering if theres any other maybe guidepost you can put out there it sounds like youre expecting margin expansion.

Next year as well any other any other targets youre willing to communicate with regards to your margin expectations going forward.

Yeah, Hey, Scott So look as for those who know me really well I'm always a little bit reluctant to declare victory until it is absolutely fine.

Signed and sealed but look as I pointed out in my prepared remarks, we feel very good about the progress. We are ahead of schedule, but again I think it would be a little bit in prudent of us to say that until we have actually delivered a full year and then another full year with that so but I think all of the signs are there that we should be a company at these activity.

Levels that can deliver that and then build more importantly build from there to get better in terms of look the next target again as we come out with 'twenty two guidance and give you a little bit more of a flavor.

Early next year, we'll lay out a bit more of a broader longer term roadmap, but what we really strongly believe is that there is a ton of opportunity at weatherford.

To create more margin expansion.

Got it fair enough.

And then maybe one follow up I think earlier on you were asked about possible divestitures I mean, how do you feel about your business portfolio as a whole I guess I'd ask you are there any are you happy with what you have did you see any.

Room for potential subtraction, or maybe even additions is.

As we go forward.

Sure. So look I'll start with just overall, we are happy with the portfolio. What we don't see is the need for massive surgery.

Take out big chunks or anything like that what we are focused on and we have been.

And Doug just over the past year is what I'll call surgical tweaks, which is again this intersection of product line and geography, we've got to make sure that every product line is able to stand on its own feet and be accretive to the company on a cash basis. In every single geography, we cannot have unless it's something supreme be strategic.

You really cant have.

Product line subsidizing each other so every single one of them and each geography needs to be self sufficient and we got to figure out how to run the company that way. So that's what we've been doing on and as a result, that's why we have exited the drilling services business in the U S changed our business model on wireline exited the wellhead business. Those are some examples of of of what we have done.

Now in terms of additions look they really revolve around.

Our strategic vectors. So one is as we look at our market leading product lines, if we see opportunities to fortify to enhance that but we cannot do organically.

That's something that we would look at but we again feel very strongly about those four product lines that we have and then what we look is on the energy transition piece and on the digitalization piece, where there are certainly opportunities, but our predominant focus is really focused on organic growth and on operating efficiency.

Within the company.

Got it great. Thank you thanks for taking my question.

Happy to.

Ladies and gentlemen that does conclude.

A question and answer session I would like to turn the conference back over to management for final remarks.

Great Hey, Thank you all for joining today, we really appreciate your interest and support of the company and look forward to speaking to all of you in the new year. Thank you.

Thank you Sir.

Today's conference call. We thank you all for attending today's presentation you may now.

Now disconnect your lines and have a wonderful day.