Q1 2024 Weatherford International PLC Earnings Call
Ladies and gentlemen, thank you for standing by.
Speaker Change: Welcome to the Weatherford International first quarter 2024 earnings call.
All participants will be unless you're the only mode.
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After todays presentation, there will be an opportunity to ask questions.
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Charter question. Please first of all of them too.
As a reminder, this event is being.
Reported.
I would now like to turn the conference over to Mohammed to the wall.
Industrial relations and M&A.
Sir you may begin welcome everyone to the Weatherford International fourth quarter 2024 earnings Conference call I'm joined today by Gary Sorry Graham.
President and CEO and.
Executive Vice President and CFO.
We'll start today with our prepared remarks, and then open it up for questions.
Download a copy of the presentation slides corresponding to 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.
Speaker Change: These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed herein.
Please refer to our latest Securities and Exchange Commission filings for risk factors and cautions regarding forward looking statements.
Our comments today also include non-GAAP financial measures the underlying details and a reconciliation of GAAP to non-GAAP financial measures are included in our fourth quarter earnings press release, which can be found on our website.
As a reminder, today's call is being webcast and a recorded version will be available on our website Investor Relations section. Following the conclusion of this call.
I'd like to turn the call over Girish.
Thanks, Mohammed and thank you all for joining our call.
I will provide an overview of our operating performance commercial and technology highlights our view on the markets and an update on our strategic priorities I don't have and then cover the financial results and specifics on guidance before we open for Q&A.
You will notice an updated format to our investor presentation. As we have tried to provide additional clarity around our portfolio and differentiation.
And we will reference the data and information within the presentation as part of our prepared remarks.
As illustrated in slide three we delivered yet another quarter of exceptional results.
I remain extremely grateful to our entire one weatherford team and I'm excited that we are developing an operating culture that price execution differentiation.
First quarter revenue grew 15% year over year, driven by D. R E N WCC from a segment standpoint.
Our integrated services project team did an excellent job in driving efficiencies and delivered above expectations.
Geographically, we once again witness growth driven by the strength in our national business, which was up 21% year over year spearheaded by our Middle East North Africa, and Asia region, which grew 32%.
While year over year growth a significant we are also encouraged by sequential revenue performance that was essentially flat in a quarter that typically sees a seasonal decline.
This was driven by strong performance in Latin America, and North America, and also aided slightly by our recent acquisitions contributing revenue for part of the quarter.
We have now had 12 consecutive quarters of year over year adjusted EBITDA margin expansion in Q1 represents the ninth consecutive quarter of sequential expansion.
In the first quarter of 2024, adjusted EBITDA margins set another high at 24, 7% driven by accelerated outcomes provide initiatives and continued rigor on the commercial technology and operational front.
The performance in the first quarter has given us the confidence and visibility to raise our margin guidance for the remainder of the year and we now anticipate achieving our goal of 25% adjusted EBITDA margins in 2020 for itself.
We had indicated that our exit rate would be 25%, but now believe that we will hit that milestone on a total year basis importantly, we continue to see opportunities for further enhancements and we'll articulate the next milestone and roadmap towards that once we have delivered the 25%.
We also successfully expanded our credit facility by $130 million to $680 million.
In line with our previous commitment to pay off the six 5% senior secured notes.
This paves the way to providing a comprehensive capital allocation framework that we intend on communicating later this year.
As we have seen the office sector is witnessing a degree of consolidation and I am excited about the opportunities we see with the companies we acquired in the first quarter I am pleased with the progress we've made so far on the integration of our dine probe and ISI into the Weatherford operating structure.
The detailed planning has helped facilitate smooth transitions and ensure that we remain focused on serving customers well.
While still early days, we are starting to see greater opportunities in terms of commercial benefits increased technology cross selling and growing the adoption rates across our expanded portfolio.
These headlights provide greater confidence in the long term value creation potential of these acquisitions.
Now turning to our segment overview on slides five through seven.
The operational and technical highlights showcase synergies between product lines, which is driven by our solutions creation mindset.
In vre I am, particularly excited about our MPD win with PDL in Oman. As this represents another example of growing MPD adoption and our technology differentiation.
We are also seeing some quick wins from our acquisitions with the launch of the HD Spitfire tool as part of our wireline products portfolio.
WCC, we continued to see significant awards through the quarter and the deployment of our pressure balanced liner system. The express XD in an offshore setting for the first time is particularly encouraging.
<unk> our focus on digital solutions has resulted in significant advancements in operational efficiency and value creation for our customers.
A significant development in this segment is the commercial launch of foresight, five three which combines artificial intelligence machine learning and autonomous control for proactive failure prediction, and therefore prevents ESP and rod lift failures.
Speaker Change: We'll now turn to the market outlook, which is laid out on slides nine through 11.
We anticipate sustained growth in international land and offshore sectors, particularly driven by the middle East and Latin America.
Our focus remains on production optimization digital solutions and exploration investments with significant potential and gas rich regions, such as Guyana, and eastern Mediterranean and growing unconventional in the middle East paired with oil focused growth across major deepwater basins. The.
The increasing adoption of managed pressure drilling.
Both onshore and offshore and their life extensions via interventions will play well to our strengths in these areas. Additionally, responsible zelle management, including plugging and abandonment services and growth in geothermal and carbon capture present promising opportunities.
Speaker Change: Leveraging our advanced technology suite, we are well poised to capitalize on these trends.
The first quarter results validate our expectations about the market outlook that we presented in the previous quarter to summarize the current stage of the up cycle as reflected by a combination of continued demand for energy.
Assistant investment and activity for oil and gas projects at least through the end of the decade.
We continued to see the most momentum in our <unk> segment with high teens growth reflective of our continued belief in the longevity of the cycle with growth in WCC and P&I that typically follows.
Looking across our geographies for 2024.
In North America, we continue to expect our Canadian business to grow into high single digits, though there is some uncertainty around the second half driven by commodity prices.
We believe the offshore Gulf of Mexico will remain stable.
In U S land business is expected to be relatively flat.
On the international front, there continues to be broad strength broke both offshore and onshore.
Latin America had a solid start to the year and expect growth for the year to be in the mid to high single digit range, mainly driven by Brazil, and Mexico, and partially tempered by Columbia.
In Europe, and sub Saharan Africa offshore continues to be the growth driver, enabling high teens growth led by the Nazis.
As previously discussed Russia continues to be challenging and declining in revenue given the operations complexity as well as FX volatility.
In the Middle East North Africa, and Asia region, we continue to remain optimistic about the growth potential and still foresee a year of high teens growth.
We believe this growth is spread across multiple countries and is backed by the investment plans of our customers.
Key element of our growth has been our integrated contract and as I mentioned before I'm very proud of the work. The team has done and we are focused on the modulation of execution pace to drive optimal outcomes on safety customer hookups and margins.
We are also cognizant of the need for investment to support that growth and to that end, we will continue to drive capex towards 5% of revenue and invest in net working capital and infrastructure support and.
In summary, we don't see any material shift in our market and revenue outlook discussed a couple of months ago.
The most significant risk to our outlook is driven by geopolitical events and we remain focused on the safety and well being of our employees and business continuity plans.
Turning to slide 12, I want to provide a brief update on our strategic priorities, our five strategic priorities of organizational vitality, creating the future customer experience lean operations and financial performance within our guardrails for driving investment and initiatives.
As we deliver phases of each initiative, we revised the targets to raise the bar even higher as you can see we have significantly increased our spend on engineering and technology, but importantly that has been offset in other functions ensuring that our SG&A as a percent of revenue has continued to get more efficient.
We also continued to drive simplification and process improvement into the company.
The most evident result of that is in our net working capital days improved.
As we conclude the first quarter of 2024, I believe our results speak clearly to the progress we have made across our organization and with our customers.
Speaker Change: We remain confident and optimistic about <unk> growth prospects as well as the potential for upward mobility in the stock, but the multiple re rate that should be reflective of top tier industry performance on margins and return on invested capital with that I'd like to hand, it over to her.
Thank you Chris Good morning, and thank you everyone for joining us on the call, let's begin with slide 13 and 14.
Walk you through our consolidated results revenue for the first quarter 'twenty 'twenty four.
136 billion increased 15% year over year, and essentially flat sequentially.
<unk> income was $233 million compared to 185 million in the first quarter of 2023 and $216 million in the fourth quarter of 2023.
Net income was $112 million compared to $72 million in the first quarter of 2023 and $140 million in the fourth quarter of 2023. If you would in fact come back that we had some one time tax benefits in the prior quarter that did not repeat.
And drove the sequential decline.
Adjusted EBITA of 336 million increased 25% year over year, and 5% sequentially with adjusted EBITDA margin of 24, 7% or 206 basis points improvement year over year and 117 basis points.
Sequentially.
Now moving to our segment results on slides 15 through 17, trimming any valuation or D. R. E revenue of $422 million increase probably 15 million or 13% year over year, primarily from higher wireline and training services activity.
DRA also benefited from the impact of weather related push out of activity in Latin America, which we referenced last quarter.
<unk> segment, adjusted EBITA of $130 million increased by $22 million or 20% year over year.
Primarily from training services managed pressure drilling and wireline well construction and completion are W. E T.
Revenue of $458 million increased by 37 million or 9% year over year, primarily due to increased completions and Trs activity in Middle East North Africa, and Asia region, and offshore Latin America, partly offset by lower activity.
In North America.
WCC segment, adjusted EBITDA of $120 million increased by $24 million or 25% year over year, primarily from higher fall throughs in the Middle East North Africa, and Asia region around E. R S and cementation products as well as increased offshore.
<unk> in Latin America.
Production and intervention RP, alright, and revenue of $348 million was largely flat year over year, primarily from lower activity in North America, partly offset by higher international intervention services and training towards activity.
PRA segment, adjusted EBITA of $73 million increased by $5 million on a 7% year over year, primarily from higher artificial lift margin and increased international activity.
Pension services and training tools.
Speaker Change: We have previous clean cadence despite the pricing pressure in North America, we remain focused on margins and will not chase volume and these segment results are a positive proof point of that intent.
Turning to slide 18 for cash flows and liquidity in the first quarter, we generated operating cash flow of $131 million up 47 million year over year and adjusted free cash flow was 82 million up $55 million.
Over here a solid performance from the pack of strong profitability and improved net working capital performance.
Our net working capital as a percentage of last 12 months' revenue was 26, 1% or 240 basis points improvement year over year. This pro Chris Hi.
Our commitment to continuously improve our working capital cycle, including ongoing internal process enhancement initiatives in billings collections management and inventory management. We remained focused on further optimizations and the order to cash and procure to pay processes to make pro.
Chris towards reaching our longer term call of a sustainable net working capital at.
At 25% of revenues.
First quarter Capex of $15 9 million at four 3% of revenues was down sequentially and year over year, primarily due to timing.
Total cash was approximately $937 million down $46 million carried over here.
Additionally, during the quarter, we repaid $167 million of six 5% senior secured notes, bringing the total amount of six 5% senior secured notes outstanding to 82 million as at the date of this release.
Furthermore, we issued a redemption notice to repay the remaining $82 million of our six.
Six 5% senior secured notes, which will leave us with $1 6 billion long term notes due 2030 outstanding thereafter.
We are also pleased to announce the expansion of our credit facility, which ex.
Their confidence and support of our banking partners and our strong operational and financial performance The amendment to our credit agreement Pro.
<unk> 10 increase in total commitment from 515 million to $680 million.
Adding additional banks to the facility and provides us with greater liquidity and flexibility in managing our balance sheet.
Our net leverage ratio at the end of the quarter was <unk> six times and parks, the lowest ever level and the company in over 15 years.
Turning to our guidance for second quarter and full year 'twenty four.
To slide 19.
For the second quarter 2024, we expect consolidated revenues to increase between 4% to 6% sequentially.
Speaker Change: Across the segments GRE revenue is expected to grow by mid single digits WCC is expected to grow by high single digits and PR is expected to grow by mid single digits.
Adjusted EBITA for the second quarter is expected to expand by 20 to 30 basis points sequentially Capex is expected to be in the range of $65 million to $80 million and adjusted free cash flow is expected to be in line with the first quarter 'twenty four.
Despite.
Speaker Change: Higher cash interest cash taxes.
Net working capital investments for full year 'twenty four.
For the full year 2024, we expect consolidated revenues to grow by double digits to low teens over full year 2023.
<unk> is expected to grow by high teens WCC to grow by high single digits and PR right to grow by mid single digits.
Full year consolidated adjusted EBITDA margins are expected to hit our goal of 25%.
Capex for the full year is expected to be approximately 5% of revenue.
Continue to expect.
<unk> 24, adjusted free cash flow to be greater than 500 million, despite higher capex cash taxes, and net working capital investments.
Thanks, all for joining the call and operator, let's open up the call for questions. Please.
Thank you.
Well now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
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At this time, we will pause momentarily to assemble our roster.
And our first question today comes from Luke Lemoine with Piper Sandler. Please go ahead.
Hey, good morning.
Hey, good morning, Hey, good morning.
I know thats been set a number of times in the past the truly.
Congrats to you and the whole whatever team all the best turnaround or transformation of Ericsson Wolfson risks I mean, this has truly been nothing short of remarkable here with what you've done with the transformation.
Speaker Change: Thank you I appreciate it look the team has done an outstanding job I get the privilege of being the guy that gets to talk about a demand so but truly appreciate the sentiment.
Okay.
I guess with a little rounding you hit 25% margins on <unk>, which I know, it's been an aspirational target for some time now.
And you just brought that target for the whole year.
Then not to pin you down on a multiyear margin, but when you just look at Weatherford over the next two to three years can you talk about what you see the company doing outside of overall market revenue growth I mean, you've talked about expanding MPD technology to other service lines.
Going with managed pressure wells offshore, it's accelerating which will boost Crs and then among other things she got various digital growth initiatives.
Can you just kind of paint the picture on how you see weatherford looking in two to three years.
Hello, Weatherford team I believe your line maybe on mute.
Hello, whether for Dan.
Speaker Change: Is your line on mute perhaps.
I do apologize everybody. Please standby, while we reconnect our speaker location.
Please go ahead.
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Alright, the apologize and we respect for the speaker location. Please proceed.
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Speaker Change: Alright, sorry about that everyone my apologies there having some.
Technical glitches I guess so.
Speaker Change: Look I'm not sure how much of that was caught.
Ill just summarize it by saying.
I don't think anything Scott, yes, Okay, alright, sorry about that so if you look on the.
Speaker Change: On the question.
Look I would just say that we'll round it up but we still haven't got into 25% what we've seen over the course of this year is really the initiatives that we've launched have you've had them for a while now we've gotten a lot more confidence in that youre starting to see.
The outcome of those and we're seeing a slightly greater magnitude than just what's given us the confidence to pullback target forward.
As we look to the future.
Not going to give a specific target, but look I'll reiterate that we will.
Always talked about how we plan the business with flat activity and we look at our role is making sure that we get margin expansion. Despite flat activity of 25 to 75 basis points. So I think it's reasonable to assume that once we stabilize around just 25% goal. We will continue to drive margins upward and so will come.
Over the next few quarters and lay out more specifics around the timeframe and what that next threshold is.
Okay got it and then hopefully this next question won't break the call, but on your integrated project business. This was fairly nascent just a couple of years ago.
Nice margin expansion nice growth could you just talk about where this goes maybe the potential size and whats the right margin profile for the business.
Sure.
Look as I pointed out in our prepared remarks, a couple of things one is.
Difficult part of our growth certainly has come from these integrated projects you've been doing them for a while now in different places.
<unk> in Latin America, but the two once we see once we announced in late 2022 in Saudi Arabia, and Oman has certainly added to that.
We talked about this in the February call. We don't expect to go suddenly start doing a whole lot of these we want to be very measured about what we do.
And we will bid very selectively and maybe add.
One Max to every year that are sizable and offer significant scale that it moves the needle, but we're not focused on the number we are much more focused on the right profile for us to execute where we can actually deliver the cash flow performance that these bring yard.
Projects are generally tend to be a little bit dilutive from a margin standpoint would have terrific cash conversion and also give us a baseload of activity.
We saw in the first quarter was an interesting dynamic.
Our team did an outstanding job of execution and.
What that really resulted in was a much higher degree of revenue and also a greater margin contribution. We don't think that is going to be the norm.
That's why I referenced that we will modulate based a little bit because we've also got to make sure that we are working lockstep with our customers on these projects, making sure that we are sticking to their budgets and their plans and all of that is synchronized. So we expect that rate to come down and moderate a little bit but again all of that is contained within our overall guidance.
For the year and it's been a net positive relative to when we bought it.
Okay got it thanks, a lot Bruce.
Thank you and our next question today comes from James West of Evercore ISI. Please go ahead.
Yeah.
Hey, good morning, guys.
Okay. So youre, assuming that you've got the balance sheet in excellent shape origins are up significantly.
You highlighted that the industry is in somewhat of a consolidation phase now you've made two smaller acquisitions recently, how should we think about your M&A strategy.
Going forward do you think it will still be more of the tuck ins are there larger targets you might be interested in any.
Any change at all to the M&A strategy.
Not really James look I think I'll expand a little bit on what we've talked about really.
For a while M&A has been something we have not considered just given some of the historical issues that would be a passerby aeronautical.
It's a lot more comfortable and confident but for US integration is still the primary thing we want to make sure that anything that we do regardless of size of scale, we have the bandwidth and the capacity to integrate because sometimes look whether it is a $30 million company at a 3 billion dollar company and a lot of this stuff is.
Speaker Change: Similar but it's not about scale, we really look at it from a perspective of strategic fit margin accretion cash generation deleveraging component and we can be really add value to that business to scale it and grow it. So we're very open on.
The sizes, but you're not actively pursuing a specific size of central <unk>. That's what we've got to get after we look at it and say what actually makes sense for the business and we'll look at things that come along from that standpoint.
Okay makes sense and then from a capital allocation of our shareholder return strategy standpoint planes as you've gotten the balance sheet in great shape here.
How are you thinking about potentially returning capital to shareholders.
James Good morning.
Yes, Jim.
Before.
Our priorities are to get access to more liquidity.
Good access to liquidity, which is cheaper.
Speaker Change: And eliminate restrictions.
David.
And potential capital allocation.
Work, which is what we've done and now the next tier.
Curious you mentioned.
His remarks is to announce a comprehensive framework, which will include shareholder returns.
Amongst other things will include continued debt reduction as well.
So you can expect us to talk more about that in the second half.
Second half of the year.
Okay got it thanks, Darren this is Chris.
Yes.
Thank you James Thanks, James.
And our next question today comes from Jim Rollyson with Raymond James. Please go ahead.
Hey, good morning, guys and I would echo the same things <unk> said about the progress it's been phenomenal to watch.
A rude question for you on cash you guys are still sitting on quite a bit of cash recently upgraded the size of the credit facility, you're about to pay off the debt.
Notes and you just mentioned further debt reduction, but kind of curious as you look forward as your credit facility has increased in size here over the last few quarters like how much cash do you guys think about needing to Sudan or what drives that.
Look.
Mean.
We always.
Want to be able to sit on cash which takes care of it Chris.
Speaker Change: Alright, and I am not convinced.
Got it.
We have enough cash now or we have more cash than we need now but.
What I can tell you is once we shed more light on the capital allocation framework, which will include the shareholder return policy and our test targets you will get a sense of how much liquidity, we will sit on going forward.
Speaker Change: So yes, we feel good about access to liquidity.
Compared to the floor and.
That translates to our confidence that the that we communicated about us being able to come up with a comprehensive framework in the second half of the year.
So you can expect to hear more about this in more detail in the second half and if I could just add to that Jim look I think if you look back at the history right what we have done.
Furniture, a match between the cash on the balance sheet free.
Free cash flow, we've generated and the debt reduction right even take yes.
Yesterday or last Night's announcement for example, we announced increase in liquidity simultaneously did that redemption. So yes. It is cash on the balance sheet, but we are going to take that and pay off.
The secured notes. So we are doing this very methodically nature, we've got the right liquidity as Arne said and we always want to make sure that we've got enough protection against any sort of interest of the company.
Yes, It makes perfect sense, and then just as a follow up.
Obviously, some recent consolidation ongoing and one of your main markets and artificial lift market curious if you have any views on how you think that might impact the market and does that create benefits for you potentially or just kind of how you see that.
Well look we always look at these things, but the duality right on the on the one hand it is a very formidable.
Combination and so we've got tremendous respect for both organizations.
And that combination will likely create more opportunity for them at the same time, we also look at it as an opportunity for ourselves and so we will.
Speaker Change: We are focused on driving innovation and serving our customers I do think it's important though to point out that on the artificial lift space again, we don't play in the ESG space, We really play in all other forms of lift so it's a little bit a little bit more insulated for us if you will.
Speaker Change: Got it. Thank you guys have a great day.
Thank you.
And our next question today comes from Doug Becker with Cowen.
Please go ahead.
Thank you.
Chris I was hoping you could expand on the prospects for the opex versus the drilling and completions spend.
Spending cycle, just as it relates to the company in particular is thinking about the longer term growth prospects for PRA.
Yeah, Hey, look I think longer term, we continue to be very excited.
Opex spend we believe will continue to increase.
It depends on the geography, you'd look at in terms of the rate of growth rate as I pointed out in our prepared remarks right now, we really see Dr. Reed, leading a little bit but PRA. Eventually will follow so I think that rate of growth will modulate, but look even if you look at this year.
Q1 was a little bit different it's got some dynamics around seasonality that typically happens as well as what we've talked about some of the complexity in Russia et cetera.
Over the course of the year, we see PRA going.
Very decently over the course of the year, and especially look what our interventions business as we look at more production optimization, our digital solutions business, a greater amount of focus on plug and abandonment locked recoveries those kinds of things. We're really excited about that and also where we have probably the maximum impact of our digital solution.
<unk>.
Is this a segment you could see in three or four years, leading the growth.
Or is it just the makeup one that probably is always a little bit of a slower growth business.
Yes look I think to a certain extent is going to depend on how much of it we classify that goes into the digital piece et cetera, but I will also look for US. We are also trying to make sure that we are driving a less capital intensive strategy. So for example, what we what I think you should really look for is growth in <unk>.
Margins and growth in cash versus necessarily just growth in top line I'll give you a classic example in pressure pumping we're not.
Not going to grow the same way the rest of the market is because we are being very focused on controlling our footprint.
We also of course don't have a north America pressure pumping.
<unk>, but then also driving a strategic change and providing more engineered fluids chemistry, which has a much greater value addition, and much greater margin impact to the company. So those are the kinds of things. We are doing so for us I really looked at it more from margin impact and free cash flow impact, but look over the next few years, we still see Daddy as <unk>.
We'll be having a little bit more juice.
Got it.
Some of those comments kind of feed into the sustainability of Capex, one 5% of revenue based on some of the things you were alluding to I think that's still a good target as we think about the years ahead.
Yes look absolutely we've talked about it now for two years and look we are steadily inched up closer to that 5%.
I'm very pleased with the efficiencies our team has been able to drive it.
In green deployment of Capex, and we use but also shifting our business strategy to a less capital intensive model and that's a big part of this is lot about staying with Barcelona invest enough capital, it's about making a conscious in a purposeful shift in strategy and making sure that we've got the overall portfolio balance and look some product lines.
Speaker Change: Are much higher than 5% some are much lower but that blend is what we're really looking for and that's where it all comes together.
No makes sense.
Speaker Change: Just like to Echo the positive sentiments on the execution of the turnaround really just very impressive.
Thank you appreciate it.
Yes.
Thank you and our next question today comes from David Anderson of Barclays. Please go ahead.
Douglas Lee Becker: Hey, good morning, Gary.
If you could talk about the initiatives that have driven the margin expansion here I think you said it sounds like we're maybe a little bit more than halfway through your fulfillment plant. Just wanted to ask you. What are the next steps we intend to execute over the next say 12 to 18 months I think you've taken a lot of manufacturing facilities, but what else is left there is that on the services side on supply chain just kind of.
Give us sort of a roadmap a little bit if you wouldn't mind just to what's left here in this procurement.
Absolutely. Thanks for the question David look up so on the fulfillment. Yes. This is a fairly herculean task and it's it's really changing the footprint of the company. That's evolved over 25 years to a certain extent, what we call fulfillment, which is a combination of manufacturing supply chain or sourcing practices on repair and maintenance and logistics.
It was never really designed for what Weatherford is today and Thats. What we are doing so what's left really it's still a little bit more work on manufacturing, making sure that our work transfers to get completed.
But you're right that's been well underway for a couple of years. The next couple of big milestones for US really first of all on our supply chain. We've talked about on prior calls that we are looking to move more of our spend in Q.
Lower cost regions of the World and this is something a lot of other companies did several years ago. So we had a little bit behind but what's exciting is we're still able to post the margins that we do today without that benefit so that'll actually be a much more positive impact for us that's well underway, we've got a terrific manufacturing.
<unk> in India, and we are making sure that we are developing the supplier ecosystem around that but also making sure. We are complementing it with the right engineering support.
The other piece is on repair and maintenance. Yes. This is something that we're really focused it's much more about improving cycle times and asset utilization than it is really about taking cost out but that improvement in cycle times and asset utilization will help in more revenue greater fall tools and a better return on invested capital So thats real.
What we're doing there we brought in a terrific leader to drive that for us and I'm excited about some of the gains that we are starting to see on that.
And then if I could just move into kind of more of the businesses to very.
Very unique product lines that are levered to deepwater activity in the Crs in MPD systems.
As we look out the next year or two I would think that those will bolster start to lead the topline growth and margin expansion considering that both rental businesses and the visibility we have on subsea and offshore rigs I was just wondering do you think second half 'twenty four could be the inflection.
On that based upon what you are having with your conversations with your customers and kind of the timing of this equipment.
We are very excited about both MPD and Prs and especially some of the new product launches that we've had in bolt.
On Prs, we've talked about our screen guard.
Our solution, which I'm excited about more deployment of the fully automated battle solution and then on NPD, We launched motors, which really cracks. This performance segment, that's likely to be a bit more for 2025 inflection than a second half of 'twenty four more based on availability of assets and getting that fully deployed in.
Throughout the world. So I think we'll probably see more of that in 'twenty five but look I think it's also really important to point out that while these two product lines are critical.
A lot more time that they spend on talking to them.
The rest of the portfolio is actually doing really well as well and you'll see that for example in some of the WCC growth you've seen over the last.
A couple of years, especially also on DIY, our drilling services business, our wireline business, our completions business and WCC all of those are also.
Showing tremendous growth and actually helping that overall ecosystem. So one of the things we are seeing and be excited about it.
Douglas Lee Becker: Talk about the solution mindset is to pull through from different product lines.
Okay.
And just one final question there I'll just come back to the capital.
The amount of Capex that you're spending more I would think Trs probably just judging from where the rig count it was before where it is today.
Probably don't need to build out capacity in Trs. However on the other side of NPD, you'll probably do because that seems to be on kind of pretty much every deepwater rig. These days in my thinking about that right.
Yes look it's a little bit of a mix David.
Some of these things and NPD for example, as I talked about on Motors, that's certainly lot more capital injection.
Douglas Lee Becker: <unk> actually build new packages right. So that does take up and of course every new system that we deploy in deepwater we build a new system that is additional capex Crs.
Historically, we have had a lot more equipment, but when you think about things like Bento again, our fully automated solution. We are building new system for that but the order of magnitude of that Capex dollar of investment is very different and much higher on the <unk> side.
That's what I thought thank you appreciate it.
Thank you and our next question comes from a few monarch with Goldman Sachs. Please go ahead.
Yes. Thanks, Good morning, Tim you talked about the earliest stages of the integration of the acquisitions that you've made last quarter.
Monarch: Seeing incremental opportunity. So maybe can you provide some color in terms of revenue synergies or cost synergies that you think we can actually get into that asset over the next couple of years ago.
Yeah, Hey.
Again, as we talked about in the first quarter. These are kind of much smaller businesses and so.
Monarch: Things that will automatically and by directly by themselves move the needle on the total company. So it's all baked in but look we think about the sort of smaller technology acquisitions that over the next few years, we really hope to build out into $100 million type of platforms and thats kind of the goal that we see and that will come from a combination.
Acquired radio just predominantly focused in the North Sea and we continue to see a great opportunity in the Nazi growth, but also the ability to take that to the middle East or North America to Latin America to Asia that gives us scale and growth and we hope to grow that significantly over the next few years on the probe and impact select.
The business is the wireline products businesses right. Now this really gives us an ability to have a comprehensive wireline portfolio and allows us to really become a partner of choice for other service companies to really for wide wireline products and technology in places, where we don't have a footprint right. So so that's the kind of thing that we're thinking.
About so we'll give more color on that but look our hope is to really grow these businesses and that's what it's about it's about growth and using our scale. We're supposed to say, we're going to get cost synergies out of it.
Speaker Change: Got it I appreciate that and then I think you spoke about this a little bit on the market penetration status for the MPD offering.
Can you just give us any color on where that stands now and where the incrementals in the room is to grow onshore maybe a little bit.
And then it seems like there are some equipment manufacturers that are focused on MPD, maybe also give us an update on what the competitive landscape. It is either on the equipment on the service side.
Sure.
So look I think the really good news with MPD is we see adoption growing.
And we've highlighted a few few examples the Florida, especially countries in the Middle East, We talked about an award with PDL and Oman Thats another great illustration of growing adoption, but in totality adoption on a global basis. All in is still sort of order of magnitude around 10%, So which is great.
Excitement comes in so as we talk about product launches like motors.
It really gets to that performance here off the market that allows customers to do now have a solution between kind of your basic MPD service and the very high end that we used to offer. So this hits the sweet spot and opens up a new segment as an example on the offshore side. This really opens up a jackup market.
We are very excited about on the motor side of it.
So our goal will be over the next year. He can get adoption to let's say 12, and maybe eventually 15% that's a tremendous growth for the business and that's what we're excited about it.
Speaker Change: It's also from my standpoint, very heartening and very encouraging to see additional players come into the space and everyone's starting to talk about it I think that's fantastic we welcome.
The industrial growing adoption youll customers getting more news on this more education on this because we think it's better for the industry as a whole to increase MPD adoption.
This is a capital intensive game.
I've always said this is not about share we are clearly the market leader in this product line, but for us it's about growth and adoption and so more people that come in especially on some of the lower end side of it we think it's great and we remain focused on where we can capture the highest value.
Great. Thank you.
Thanks Avi.
And our next question comes from Kurt <unk> with.
Benchmark. Please go ahead.
Hey, good morning, everybody.
Hey, good morning, Kurt.
Great.
Im curious right you are obviously the execution has been phenomenal as everybody has highlighted.
The multiple still has a ways to go to catch up to when the.
Prior management team ran the company into the ground, so still a long way to go there.
But my question for you really is on the on the margin progression when you get out beyond 2024, I'm not looking for a specific data point I'm, just kind of trying to get inside your head a little bit right. So when you think about the dynamics.
I'm curious as to what the drivers of that margin progression are going to be is it going to be flow through of pricing on existing contracts is it going to be volume absorption is it going to be pricing power on new contract execution internal initiatives, probably all of the above but if you were to rank them, which what do you think is going to be the key driver too.
Due to incremental margin improvement from here.
Yes look so it is most definitely a bit of an all of the above.
But look I will reiterate look for us we are not going to count on incremental volumes coming through in revenue growth being the only driver. So I would actually put that a little bit lower for us.
I'm also very cognizant that while pricing has been very positive and it's been a very good pricing environment desktop and our last indefinitely right. So we focus on the things that we can control and to me I think a couple of things that are going to be really important is number one us driving productivity within the organization.
Both from a manufacturing and fulfillment standpoint, but also in how we manage our support costs in the organization, how we get simpler how we get leaner and Thats a combination of both cycle time, and just pure cost so that's going to be a significant factor.
Second piece of it and Thats the thing I'm, probably most excited about is the commercialization of the technology solutions that we have got look we pointed out our increase in engineering and technology spend it is the highest increase across the company from a functional spend and we've made sure that we'll prioritize that.
These things take a little bit of time re Dupont engineered stuff overnight, but I'm tremendously excited about the improvements that our engineering teams have made our product line teams have made in improving our on time delivery our cycle time reduction, but most importantly, the solutions that we are getting after and what you're bringing to market and you see that in some of our.
Technology announcements.
What we're really trying to do with those is capture the white space of where customers have very clear needs that we can go attack versus just sort of providing a <unk> solution and we think that will lead to incremental and accretive margins.
Alright, that's great that's great color I got one more follow up right. There has been an emerging theme here about the need.
Thank you.
For more power Gen or AI data centers and that being natural gas fueled.
And obviously being sourced from the U S. Obviously, a lot of your growth and a big piece of your business is international and offshore I'm curious as to whether or not you've had an opportunity to assess.
Assess the dynamics at play with respect to this surge in power demand and the opportunities that Weatherford may have to participate.
Yes look I think it comes back to again, what we talked a little bit about in our prepared remarks, which is we see energy demand continuing to grow whatever the source of that might be and we've always maintained that gas is a really important part of the energy mix. So and we don't see that changing any point now even with depressed commodity prices.
Gas prices that you see in North America, we think that will eventually set a set.
Sort of resolved itself and get back to.
Healthier level, but across the world. We think this is going to be something that will drive both LNG.
Our growth as well as local infrastructure and ultimately it is going to drive more gas production. So gas continues to be a important focus for us and a lot of the solutions that we're trying to drive from a technology standpoint, and also folks from that so it's the only part of the thesis.
Okay. Thanks for that appreciate it.
Speaker Change: Thanks, Kurt Thank you.
Comes from sovereign bonds.
Please go ahead.
Hi, Good morning, good Esher I don't I, just start by echoing nuc on Jim's the sentiment on just the tremendous turnaround that you continue to deliver quarter after quarter.
So congratulations on that.
Sharon.
Appreciate it.
Speaker Change: Yeah.
Hey, great.
Can you still hear me.
Yes, yes, okay awesome.
Start with one on the international side, just overall I'm thinking big picture.
You did outgrow your big fields in 2023 first quarter international growth again fantastic.
Is that is there something we should think about in terms of where you should be growing beyond what the market offers you from an opportunity standpoint is it market share or is it your product mix. How are we thinking about that because I know youre not focused on market share, but is there an element of just winning your normal market share and that allows for you to gain and outgrow the market.
How would you characterize that your opportunity versus just the market as a whole.
Sure Yeah look it's a great question sorry.
And because we've.
We've actually talked about the fact that people should expect that we might be a little bit.
I don't have that same extensive footprint, but what we are very very focused on is having.
Penetration, where we've got critical mass and really performing we have we have chosen to play and I think thats, where we are really aiming to do better but look I also think that it's.
Element of us capturing of recapturing some of the share that they lost over the last 10 years and finally, when you put it into our numbers were smaller so an incremental win and share does having greater impact on us that will allow us to do to grow faster. So I think what it clearly.
International right, where we're not going to chase volume, but they are actually improved our margins year after year.
Right right no. That's very helpful. That's what I was thinking just getting to a normalized market share Oh, just relative to your history over the past 10, 15 years and just a quick follow up a good issue I'm not thinking AI and data centers, but I'm, just thinking about gas more broadly and we heard Oh.
One of the key middle Eastern customers talk about potentially doing more things on the gas side versus the oil side right. So maybe there's a little bit of mix shift going on in the middle East in general and maybe maybe that maybe the world, though more broadly right. So if that's what we see over the medium to long term, but not in the short term medium to long term.
Gas activity as a proportion of the total activity grows.
How should we think that impacts of weather fluid is it net neutral is it net positive or is it a net negative and why is that.
Look I think it's going to come down to execution again, I think it's really going to be up to us to make sure that we can capture the market I talked about on the February call that we actually see that gas is an opportunity for us to continue to grow the business you know we've got a terrific portfolio.
That we play in several gas place, but we think <unk> got an opportunity to do more than that but that's going to come down that a lot of ability to make sure. We've got the right product innovation, we've got the right commercialization, but then most importantly, the operational execution to capture capture that so ulta.
Ultimately that that's kind of what it is but I would look at it as pretty much. We had the rest of the market is growing and will continue to play in that.
Speaker Change: Okay, Okay Fantastic and just one last quick one if I may go to Asia in your prepared remarks you.
Give you a 2020 for outlook and then you said that the biggest risk is geopolitics more than anything is any update because there has been a lot of attention, especially in the middle East any update any impact you have seen to date, though to yard operations.
Speaker Change: No we have not urban which is why we made sure that we clarified that we kept we have kept our revenue outlook intact that there is no change, but I think it's just prudent to point out that the world is a volatile place and so we just want to be prepared for that so thats really what it is but no no change at all.
Okay perfect. Okay, great. Thank you I'll turn it back.
Thank you.
Mhm.
Yes.
The question and answer session I would like to turn the conference back over to management for closing remarks.
Great. Thank you Rocco and thank you all for joining the call today, hopefully you've got a sense of our continued performance on execution, we will keep our focus on that and we look forward to updating you again in July. Thank you again for calling in.
Thank you. This concludes today's conference call. Thank.
Thank you all for attending today's presentation.
You may now disconnect your lines, who have a wonderful day.
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