Q2 2025 Weatherford International PLC Earnings Call
Ladies and gentlemen, thank you for standing by, welcome to the Weatherford International second quarter, 2025 results, all participants will be in listen-only mode. Should you need assistance? Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question. You may press star then 1 on your telephone keypad to withdraw your question. Please press star. Then 2 as a reminder, this event is being recorded. I would now like to turn the conference over to Luke lemoy, senior vice president of corporate development, sir. You may begin
Speaker Change: Welcome everyone to the Weatherford International second quarter 2025 earnings conference call. I'm joined today by grew Solid Ground president CEO and a news Drew Executive, Vice President and CFO.
Speaker Change: We'll start today with a prepared remarks and then open up for questions. May I download a copy of the presentation slides corresponding to today's call from our website's investor relations section.
Speaker Change: I want to remind everyone that some of today's comments include forward-looking statements. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed here in.
Speaker Change: Please refer to our latest Securities and Exchange Commission filings for risk factors.
And cautions regarding forward-looking statements.
Speaker Change: 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 earnings press release which can be found on our website.
Speaker Change: As a reminder, today's call is being webcast. In a recorded version will be available on our website's investor relations section. Following the conclusion of this call.
greece: With that. I'd like to turn the call over to Greece.
Speaker Change: Thanks Luke, and thank you all for joining our call.
Speaker Change: I'll start with an overview of our performance and key highlights and will then share our outlook on the markets.
Speaker Change: I know which will then cover specifics on financial performance. Balance sheet detail guidance. And I will wrap up with some thoughts on weatherford's operating plans for this environment before opening for Q&A.
Speaker Change: As Illustrated on slide 3, our second quarter results were in line with our expectations outlined in April.
Speaker Change: Despite significant Market, headwinds, the impact of the Devastators in Argentina.
Speaker Change: And minimal payments coming out of Mexico.
Speaker Change: The 1 Weatherford team delivered, strong performance. I'm incredibly grateful for the team's unwavering Spirit customer focus, and operating, intensity, that every single person brings every single day.
Speaker Change: For context, normalizing for the Argentina destitutes, our revenue and adjusted ebit, that would have seen a noticeable Improvement on a sequential basis.
Speaker Change: North America, and Latin America performed as expected with both geographies down sequentially.
Speaker Change: The former was driven by the seasonal spring break up in Canada and the latter due to the effect of the Argentina destitutes.
Speaker Change: In Latin America, our view on Mexico hasn't changed and we still expect this to be down approximately 60% this year.
Speaker Change: However, we believe activity levels have now stabilized and simultaneously. We have rightsize our courts structure in the country.
Speaker Change: As expected project startups in Europe, contributed to the growth in the essr region. Further Amplified by FX
Speaker Change: I am very pleased with our team's performance in the Middle East North Africa broader region with several noteworthy performances.
Speaker Change: The market in the Kingdom of Saudi Arabia has softened and will likely have a similar trajectory in the second half.
Speaker Change: However, we achieved sequential growth in the second quarter. Underscoring our belief that we still have a longer term growth opportunity.
Speaker Change: Be clients are primarily concentrated in the service related segments, resulting in a higher detrimental impact.
Speaker Change: While we are seeing margin dilution from direct cost pass throughs and Rising pricing pressure. We have mitigated these impacts through volume, based cost adjustments and structural cost reductions
Speaker Change: this resulted in adjusted ebitda margins for Q2 at 21.1%, which slightly declined relative to q1,
Adjusted free cash flow of 79 million in an interesting quarter with minimal payments. From Mexico is a testament to our unwavering focus on our Northstar of cash generation.
Speaker Change: As shown on slide 6, we have now paid 4 quarterly dividends of 25 cents per share and repurchased approximately 186 million dollars worth of shares over the past 4 quarters which includes approximately 34 million during 2 Q.
While this amount may vary each quarter due to market conditions, we remain committed to our buyback program and still have ample capacity under 500 million. Authorization,
Speaker Change: Now, turning to our segment overview on slides, 8 through 11, the operational and Technical highlights showcase. Advancements in New Market, penetration technology, adoption and continued, innovation of our products and services portfolio.
Speaker Change: As noted in our earnings, release, our continued success in securing high impact contracts, across key regions, reflects the strength of our technology and the trust of our customers.
Speaker Change: In offshore UK.
Speaker Change: BP. Awarded Weatherford a 1-year contract to provide cementation, products completions drilling Services intervention, services, and drilling tools and a 1 year contract to provide line of hanger systems for the northern endurance partnership, CO2 storage project.
Speaker Change: In the Gulf of America.
Speaker Change: Shell awarded Weatherford, a 3 year contract to provide intervention services and drilling tools.
Speaker Change: in Norway Weatherford completed a successful field trial of Titan, RS technology, for equinor following the acquisition of Ardine
Speaker Change: The trial, delivered, a full casing cut and Recovery Solution for the plug-in abandonment Market reinforcing weatherford's leadership in advanced well abandonment.
Speaker Change: These highlights underscore the differentiated value of our technology across Global operations.
Speaker Change: Now, turning to our Outlook.
Speaker Change: Last quarter, we provided. What we believed was a prudent View for the balance of 2025 and we continue to believe this Outlook is reasonable in today's market.
Speaker Change: We have tightened the range, a bit on both ends as the visibility window improves.
The overall International Market has softened over the past year a trend that could continue well into 2026.
While commodity prices remained, relatively stable, they have led to increased caution and a Slowdown in customer spending.
Speaker Change: Trade discussions continue to cause significant uncertainty and may lead to demand destruction in the short to midterm.
Speaker Change: In the first half tariff impacts were modest, as most inventory remained at pre tariff levels.
Speaker Change: However, we expect a greater impact on both margins and demand in the second half.
Speaker Change: Currently OPEC plus continues adding Supply back to the market increasing pressure on the global oil supply demand balance.
Speaker Change: While some customers have signaled future spending cuts. Others have not leaving the Outlook uncertain.
Speaker Change: We continue to believe, we are in a distinctly different phase of the cycle, with some markets in a clear downturn.
Speaker Change: Uncertainty Remains the defining feature for this market and downturn.
Speaker Change: While the shape and timing of a recovery are unclear. We anticipate Market, headwinds will persist for at least another 12 months.
While we haven't seen clear direction from all customers, yet it's reasonable to expect sluggish, activity levels in the second half of 2025 and first half of 2026. If global trade, reductions and increased Supply, create a need for customers to reduce capex.
Speaker Change: That said we remain hopeful that the industry discipline of recent years will result in a milder Global downturn than the last 3 Cycles.
Speaker Change: We have continued to adapt our cost structure over the past 3 quarters. And this will further evolve as the market unfolds
Speaker Change: since Q3 of 2024 and excluding devest, we have reduced our headcount by over 1500 and lowered our annualized Personnel expenses by more than 125 million.
While much of this is offset by Revenue, declines are Swift actions, have positioned us to continue operating efficiently.
Speaker Change: On swiftly in the event of a more pronounced Slowdown.
Speaker Change: Even with the potential annualized double-digit Revenue decline, we expect to deliver ebita margins of the low 20s this year.
Speaker Change: Which remarkably is still better than where we were 3 years ago.
Speaker Change: Giving precise outlooks on geom, markets and product lines remains challenging in this market. However, our overall Outlook remains unchanged
Speaker Change: With this in mind, we expect that 2025 North America revenues will decline by high single digits here on year.
Speaker Change: And international will decline low double to Mid double digits?
Speaker Change: Adjusting for Mexico, activity declines, and our Argentina Devastators. We believe our 2025 International revenues will likely be down low to mid single digits.
Speaker Change: I'd like to turn the call over to an before I come back with closing comments.
gears: Thank you, gears.
Speaker Change: Good morning, and thank you everyone for joining us on the call.
Speaker Change: Gears has already shared an overview of our second quarter performance and an update on our Capital return program.
For a more detailed breakdown of the second quarter results. Please refer to our press release and accompanying, slide deck presentation.
Speaker Change: My comments today will center around our cash flow working capital balance sheet, liquidity and guidance.
Speaker Change: Turning to slide 22 for cash. Flows and liquidity.
Speaker Change: For the second quarter, we generated 79 million of adjusted free cash flow at a 31.1%. Free cash flow conversion rate versus 26.1% in q1, 2025.
Speaker Change: As you know, our free cash flow is generally weighted towards the second half of the year. We do not expect 2025 to be any different but there is a significant expectation of payments from Mexico that we do not have precise visibility on
Speaker Change: Networking Capital efficiency measured by networking Capital, as a percentage of revenues moved slightly from 26.3% in Q2.
Speaker Change: 2024 to 26.7% in Q2 20225 due primarily to a lower Revenue base and minimal collections in the quarter from Mexico.
Speaker Change: We expect our networking Capital efficiency to improve going forward and regardless of the stage of the cycle. We continue to work towards our goal of maintaining Network and capital efficiencies levels at 25% or better.
Speaker Change: We have continued to execute on and initiated a series of cost reduction actions across the company. In this context, we took an additional restructuring and Severance charge of 11 million in Q2 following the 29 million in q1.
Several actions have already been completed and we expect to implement additional measures throughout the remainder of the year as we say, agile and adapt to evolving market conditions.
Speaker Change: While many of our actions are tied to volume or also using this moment to drive long-term productivity through shared services Automation and generative AI.
Speaker Change: At the core of this effort is our continued investment in infrastructure systems as a non-negotiable priority.
Speaker Change: These systems are critical enablers of efficiency scalability and bottom line impact and we remain firmly committed to protecting and advancing them.
We have always maintained that it is critical for us to invest in the future. But at the same time that will never be a crutch to not perform, I'm very pleased to see both of them happening.
Speaker Change: During the second quarter capex, was 54 million versus 77 million in the first quarter driven by adjustments, to align with marketing conditions and completion of spending related to our Brazil, subzi intervention contract.
Speaker Change: We expect capex to decline further and fall within our targeted range by year end.
Speaker Change: In Q2 we repurchased approximately 34 million worth of shares and paid a 25 cent per share quarterly dividend.
In addition, we also bought back 27 million of our 8.625% notes and will continue to do so opportunistically in the market.
Speaker Change: Our net leverage ratio is less than 0.5 times. We have approximately 1 billion dollars of cash and restricted. Cash. We reduced our trap cash by over half during the quarter and our liquidity is approximately 1.3 billion which is the highest level since emergence.
Speaker Change: With this, we feel very confident in the strength of our balance sheet and the corresponding flexibility, it provides the manage the company through this cycle.
Speaker Change: turning to guidance, let me start with Q3
Speaker Change: Expected to be modestly down with us land and Saudi as the primary headwind.
This should be partially offset by the seasonal Rebound in Canada.
Speaker Change: We are expecting 1.165 billion to 1.195 billion in Revenue.
Speaker Change: Looking at the broader second half 2025 versus the first half of 2025, We Believe Brazil, North, America, offshore UAE Kuwait, Iraq, Australia, Azerbaijan and Indonesia will experience notable growth. And while we are hopeful, for a slight uptick, in Q4, we remain very cognizant of the broader slowdown and hence expecting a generally flattish Revenue trajectory in the second half as well.
Speaker Change: Adjusted ebita for Q3 is expected to be between 245 million, and 265 million, and margins should pick up slightly from Q2 levels driven by costs stabilization.
Speaker Change: We expect free cash flow to be flat to slightly up from Q2 levels, followed by another increase in Q4.
Payments from Mexico will be the differential Factor on timing of cash flows. And these are not substantially included in our Q3 free cash flow guidance.
Speaker Change: For 2025, we've tightened the guidance range with the midpoint of Revenue and evit guidance remaining unchanged. We expect revenues of 4.7 billion to 4.9 billion.
Speaker Change: Adjusted ebit da of 1.015 billion to 1.06 billion and free cash flow conversion to increase 100 to 200 basis points year on year.
Speaker Change: Our effective tax rate, can vary quarter to quarter depending on the geographic mix.
Speaker Change: and we still anticipate this will be similar to 2024 and the 20% range for 2025
Speaker Change: capex is expected to Trend down over the course of the year and land in the 3% to 5% of revenues for the full year. Thank you for your time today. I will now pass the call back to giersch for his closing comments.
Speaker Change: Thanks inoue.
I remain highly optimistic about weatherford's future over the next several years.
Speaker Change: As market conditions, continue to evolve, we are staying agile and ready to Pivot as needed.
Speaker Change: The market has changed and our approach. Must continue to adapt.
Despite the headwinds we remain focused on defending margins and maximizing cash generation.
Speaker Change: The past several years, we have been preparing the company to navigate potential Market. Disruptions
Speaker Change: First, our balance sheet is stronger than ever before with total liquidity of 1.3 billion and we have approximately 1 billion dollars of cash.
Speaker Change: Second, our cost structure has radically transformed since 2020 with further value creation opportunities ahead.
Speaker Change: Third, we remain committed to our shareholder return plan.
Speaker Change: We set the dividend at a level that is sustainable through the cycle, and we intend to remain opportunistic, disciplined, and thoughtful in our share repurchase program.
Speaker Change: Moving forward, we will be flexible with our operating structure support costs and capex adjusting as needed to align with market conditions.
Speaker Change: Our cost optimization program is being designed to go beyond volume adjustments.
Speaker Change: It's a multi-year program focused on achieving sustainable, productivity, gains.
Speaker Change: So technology and lean processes. Not just flexing, headcount data market conditions,
Speaker Change: also working capital efficiency remains a core. Focus area to drive free cash, flow conversion to a sustainable 50%.
Speaker Change: The new weatherford's transformation is an ongoing journey and the initiatives already positioned us to navigate this part of the cycle far better than in the past.
Speaker Change: It's now clear that the market will be more challenging than many expected just 6 months ago.
Speaker Change: Now, however, I'm confident that our team will stay agile, adaptively and emerge as a stronger company through this period.
Speaker Change: And now operator, please open the call for questions.
We will now begin the question and answer session to ask a question. You may press star then 1 on your telephone keypad,
If you were using a speaker-phone, please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please. Press star. Then 2
Speaker Change: To allow time for all participants, please limit yourself to 1 question. At this time, we will pause momentarily to assemble our roster.
Gish: Hi, good morning Gish. How are you?
Speaker Change: How you doing?
Dave: I'm doing well. Um, I wanted to focus a little bit on Saudi, uh, it's your largest International Market. It's uh been going through quite a bit of transition. This year, the recounts Fallen to Forest potentially ramping up. Uh, you're expecting further softness in the second half. I was wondering if you could provide some more color around some of the moving Parts in the kingdom. And, and you mentioned, you're growing against this backdrop. Maybe talk about how you're doing that. And then, while we're here, if you could maybe talk about kind of, when you see this starting to turn positive again in KSA and and potentially kind of what does international start to look like in 2026, we recognizing is very, very early, all sorts of moving all sorts of challenges out there. But if you a little bit of color on, that would be very helpful as well. Thank you. Sure Dave. Um, you know, so look I'm incredibly pleased with how our teams operated, uh, and executed in, uh, in the Kingdom. You know, we've talked for the past several quarters about the softness, and the market really starting, uh, with an inflection point, uh, in q1 last year.
Speaker Change: when, uh, you know, when the Saudi changed the direction a little bit and dropped from
Speaker Change: the 1300 million to back to the 12. Um, and, and since then we've seen a bit of a steady decline in Rick count. A lot of announcements and, you know, there was another round recently, uh, that'll sort of bleed itself out to, uh, through third quarter. So, there's clearly a, a down graph, but we've always maintained through that, that we are underpenetrated in several businesses. And as we have trans,
Speaker Change: The company.
Speaker Change: And really driven a significant amount of transformation of the portfolio. New technology introduction, There's an opportunity. So, you know, the way we've been able to, uh, to drive that performance is really working very closely, uh, with the ramco, uh, showcasing and highlighting, where we can bring value in, uh, you know, a couple of years ago, we announced the lstk contract, but you know, that's fully baked. And then on a comp basis that product, uh, Delta this year, it was last year but it's really all about technology introduction and making sure we're staying very close to our customer there, as well as very strong execution. So, look, as I mentioned, in my prepared remarks, you know, we think it'll continue to be soft as we go through the rest of this year, there will be a decline in Q3 versus Q2 and I'm
Speaker Change: Uh well, I'm still pretty confident about uh, our performance. Uh, there will likely be a a decline for us as well, you know, the recount is something that affects everyone, and we think that will sort of, you know, play itself out through the end of the year. We are hopeful that there will be a little bit of a transition in, uh, 2026 but not counting on that. And it really is more likely to be the second half of 26. And then if you extrapolate that that's sort of what we are seeing across the International markets, you know um Mexico stabilized a little bit. So I think that will be uh that that won't be an inflection. Uh, next year on the negative like it was this year.
Speaker Change: But the rest of the markets, including, especially the offshore side, we see softness through 25 probably into early 26 and really the earliest recovery. Uh, we see is the second half of uh, of 26. But uh, again, we don't expect it to be a dramatic decline. I think that's really important to understand.
Speaker Change: Thank you very much for your thoughts.
Speaker Change: Our next question comes.
Scott Gruber: From Scott, Gruber. With Citi group. Please go ahead.
Speaker Change: Yes, good morning Grace. Hey Scott.
Speaker Change: Um, I want to ask about the uh, the implied 4q guide. Uh, solid guide overall with the applied for Q as a, you know, 3 to 4% bump in sales uh close to 100 basis points. Better margin is this. Largely Year, End Sales, um,
Speaker Change: You know that that looks normal for your end sales. Uh but just in a softer crude environment you know those those can be a little bit lighter or are you seeing you know, some improvement in those countries which are still growing?
Speaker Change: Yeah, um, Scott really, you know, couple of things. Uh, we've talked in the past about the 2 ramps.
Speaker Change: A little bit more muted this year though, and there's a lot of uncertainty on that given tariffs. But in addition we have actually got a couple of significant project startups. So, uh, we've got very good visibility, very strong line of sight, uh, to those. And that's really what that, uh, guidance is, uh, is based upon. So, there's still some degree of uncertainty as there. Always is, but we feel pretty good about that, uh, ramp based on having, uh, orders in hand.
Speaker Change: I appreciate it. You got my questions. Thank you. Thanks.
Speaker Change: Our next question.
Hey, good morning, everyone.
Speaker Change: Ruth on on on going back to you know us land has obviously been a a challenging area for the last couple years and seems like it's only gotten a bit worse this year with the macro situation. Maybe just my recollection is you know, for Weatherford. You guys have been more tied here recently to the production side versus drilling or completions, but maybe you could refresh kind of, you know, that mix and what you're seeing. And also, if there's any, uh, quantification you might have you mentioned tariffs. If there's any quantification you have on the impacts, you're seeing there too. Thanks.
Speaker Change: Yeah. Uh, Jim, you know, us land has been a very steady, sort of uh uh decline. Uh you're absolutely right. We are far more product oriented in US land as well as far more production product, uh, oriented. So, you know, artificial lift obviously is a very big uh, big part of that uh, for us. Uh so, you know, us land uh, you know was actually up just
Speaker Change: Core US Landings was actually up just a tad. Uh, going from q1 to Q2, obviously, the broader. North America offset by the Canada spring break up. Uh and and the decline, now, look what we see happening in Q3 is a, is a further Decline. And that's really driven by, you know, the data of impact. Uh, we were able to consume a significant amount of free tariffs inventory that we had in Q2, you know, interestingly enough, uh, you know, it created actually a bit of a rush to get, uh, some of the, uh, the orders filled before the tariffs, uh, potentially hit. So it's still a lot of, uh, uncertainty on how exactly that will, uh, play out. Uh, and so if we do see an uptick on that, it will be, you know, it'll be because we've got more certainty there, but more than likely, we'll also have a little bit of dilution because of that, um, that tariff impact
So we don't really see the US land market changing dramatically over the next few quarters. Sort of, as we get into Q4, we'll have Clarity on tariffs and we'll get into more of a stable situation versus sort of this, uh, continual decline that we've seen. And our Focus has remained to be on improving our cost position defending margins and we're really not going to chase price look. Uh it is a hyper competitive market. Hey ready? No.
Speaker Change: Okay.
Speaker Change: Thank you. I'm hoping that was not directed at us but
Speaker Change: So, um, but uh, but at any rate, so, look, we will continue to focus on margins, uh, Drive value, and then manage that through. But it is a challenging Market. No question at this point.
Speaker Change: Appreciate that. Thank you.
Rob Pant: The next question comes from Sir, Rob pant with Bank of America, please go ahead.
Hi, good morning, G.
Speaker Change: Hey, s.
Rob Pant: Uh, Gish, maybe I want to touch on Mexico, a little bit. Uh, I think it was good to hear about stability in that market that market has moved quickly. Obviously we know that right, but maybe talk to that a little bit. Girish that stability. How how uh, how you're seeing at that market? Uh, do you think we improve in the near term medium term, your line of sight to that market and then also on the, on the cash side of the equation? Right? I think you said you got many
Speaker Change: Stabilized. So we really don't see a significant inflection from here to the end of the year, you know, given the nature of the Mexico business. You know, there's always the sort of 1 well, moves from 1 month to 1 quarter to the other, it causes a little bit of a variation, uh, given our size. But uh, in in sort of a broader aggregate sense, uh, we feel pretty good about the stability of the business, and we feel very good about now, uh, how we have structured our team.
Speaker Change: Uh, to respond to that activity level, and we are now getting into a much more of a operating Cadence and Rhythm, uh, working very closely with our customer base PMX and, uh, multiple other customers, uh, in the country to, uh, to drive the operational effectiveness. You know, on, on the cash side, it has been a very challenging uh uh uh period as everyone understands. So, you know, as we pointed out multiple times, in our remarks, uh, you know, the team uh team's done an outstanding job uh across the rest of the world and managing working capital to deliver the results. Uh with with very few payments coming in. Uh, we are hopeful that uh the second half will see a significant change. We are extremely uh, hardened by some of the commentary coming out and we have a high degree of confidence.
Speaker Change: Both in the government as well as in fex that they will continue to work, uh, with us and the rest of the industry in managing the payment stream and getting everyone paid. Uh, having said all of that, it is very unclear as to the Precision of timing, um, which is why we thought it's prudent to provide guidance, but be more explicit uh, that it really did not anticipate a significant uh uh bolus of payment. So we do expect that sometime in the second half and we'll update you as we come back with Q3 earnings on where that really lies.
Grace: Okay, perfect. Thank you, Grace.
Our next question comes from James West, with Melius research. Please go ahead.
James West: Hey, good morning. Uh, gears gentlemen.
Speaker Change: Hey James.
Speaker Change: So, uh, here's very curious on the now that your, your balance sheets is such a great shape, um, and you've got a, you know, a ton of cash and we've got some Market volatility, the m&a environment, um, should be picking up and and and pricing should be, you know, better. Uh, so I'm curious to hear about kind of the pipeline kind of, what's your, what's your thinking, what you're seeing? Um, in regards to, you know, technologies that are out there or businesses that are out there, that might be nice, uh, tuck-ins, or bolts on or maybe even somewhat transformational. Um, and then maybe, if I could throw in a second to an
Is, um, I'd love to get, uh, your thoughts as you're, you know, new to the company, your initial, these thoughts on on, on Weatherford and its position and, and how you feel about the company, uh, you know, kind of going forward and, and what, what, what drove you to whatever. Thanks guys. Uh, thanks Sam. So, okay, first of all, congratulations on the new role. Uh, so, uh, welcome back in this capacity. Um, so James look, I think the m&a landscape is really interesting. Um, there's some very interesting opportunities and all of you have heard me on this, uh, call for about a couple of years. With my view that I I think the industry has an opportunity to improve returns through consolidation. But, you know, it has to be done sensibly and it has to be done with the right returns focused. So that's what we're focused on. We've got a very robust, uh, pipeline. Uh, and look, our, our predominant. Focus is really going to be far more probably on the well Construction.
Speaker Change: Uh, leading into the production, uh, segments. Uh, you know, and if we do something in the drilling side of it, it will really be something that is augmenting. Our, uh, our leadership position in, uh, you know, where we've got, uh, we've already got, uh, leadership. So, uh, but we see a very robust pipeline but these things are always a function of several variables. And uh, most importantly, we are focused on the rigor of the lens that we have put forward on. Making sure that it
Speaker Change: You beyond just sort of the obvious map. So, um, that's kind of how we look at it. I'll let ano take the second part.
James West: Sure. Hey thanks. Thanks for the question, James.
Speaker Change: So today is my 3-month anniversary and so very happy to be celebrating here on this call with you all. So you asked 2 questions, James, I'll maybe take the second 1 first, why Weatherford. And so in the spirit of brevity I'll I'll say you know there's a solid foundation in place.
Speaker Change: We have a very strong balance sheet. Here we have a hardworking culture, there's a lot going on in the company to improve upon and ensure I think significant opportunity exists
Speaker Change: It's a really focusing. Now, on your first question around. What are my key priorities?
Speaker Change: I'd say there there's 4 key items. First is capital allocation and long-term balance sheet strength. You heard me talk in q1. And my second day here on the Fortress balance sheet that we have here. This gives us flexibility and optionality, and this view is unchanged.
Speaker Change: It's to drive free cash flow and margins. And right now there's a lot of focus on costs cyclical costs.
Speaker Change: But we're also looking at structural cost improvements to drive longer term efficiencies.
Speaker Change: Let's say as part of the free cash flow initiatives, there's a there's numerous other initiatives underway in the company on optimizing working capital and essentially the aim is to further create a cache and margin mindset. Throughout the company, as garish mentioned, this is our Northstar
Speaker Change: third, I'd say a simplification. So further further, building out our processes utilizing Systems and Technology. I tell my team that speed is a strategy and by improving these Technologies and systems. And essentially allows us to move with speed and remain Nimble. And then lastly is the key for me is to be a very strong business partner and to create more operational bandwidth.
Speaker Change: Which ultimately will enable greater bandwidth for gear as well. To spend more time to focus on broader strategic beams.
Speaker Change: Got it. Thank you.
Our next question comes from Doug Becker with capital 1. Please go ahead.
Doug Becker: Sure, you mentioned pricing pressure which countries and what product lines of this most acute and then separately, how would you frame the benefits from the incremental cost out measures being taken?
Doug Becker: Yeah, um Douglas you know pricing we've talked about in the past, you know, North America's clearly some uh you know place where we're seeing that we see a lot of pressure especially as you know the volumes come down the way can goes down. Uh, but
Doug Becker: That's something that we are very used to look on the international side, I would say we're starting to see a few pockets and it's in multiple uh regions but I, I am continuously hopeful that.
That the discipline that the industry has had over the past few years. Uh will maintain and I think given the fact that as an industry we didn't build up a whole ton of spare capacity.
Doug Becker: I think, should keep us in, in good stead, uh, as we go through it. But, uh, but clearly there is a little bit, uh, a little bit greater emphasis on that, uh, you know, but look, we remain very focused on maintaining, uh, margins. And really pricing is the first and most significant uh, uh, lever on that. Uh, from a segment standpoint, it's probably most noticeable. I would say, on the, uh, service businesses, which have seen the most uh, decline. So really the D segment, uh, and it's natural because with some of the activity declines in some regions, you've got excess tool capacity for multiple players and they can get redeployed into other parts of the world. So, so that's, uh, really what's happening. Um, you know, to your other question, uh, Douglas what we are doing right now, as we mentioned on the call, you know, we're really driving our
Doug Becker: Focus.
Doug Becker: In a very thoughtful and systematic passion and making sure that, you know, whatever we end up with is also scalable in addition to giving us the margin benefits. So, look up until now, I would say for so far, the first 6 months, it's really be an offset to the revenue declines and given the detrimental on the service piece. Um, we haven't been able to quite match that so we've seen a little bit of uh, that uh, that margin degradation. But I would say, look going forward. What we really get into with these cost reductions is this thesis of order of magnitude? You know, 25 to 75 Pips per year on annualized basis of productivity and I think we'll start to see that as we get into 26 and Beyond on sort of flattish volumes.
Thank you.
Speaker Change: Our next question comes from Derek pad, is there with Piper Sandler, please go ahead.
Speaker Change: 1.3 billion of liquidity, a billion of cash, you know, you continue to reduce debt opportunistically. Can you maybe expand on your strategy with the balance sheet from here? Just thinking about continued, debt, reduction, and potentially refinancing, just, maybe expand on balance sheet, liquidity strategy, if you could. Yeah, sure. Look, uh, for us. It's really not changing, but I'll let I know it's maybe talk a little bit more about, uh, the specifics on if you want to sure. Sure, thanks. So I'll take the time again to emphasize that the comments you just made Derek around our balance sheet. You know was mentioned on the call. We have a billion 3 of liquidity which is the greatest or most liquidity we've had on our balance sheet since the emergence. We have over a billion dollars of cash. The the team has done a great job over the last several years to bring down our our net debt to Eva ratio. We currently sit at 0.49 times, so all in all we have a very robust balance sheet, it gives us optionality, it gives us flexibility as well.
Speaker Change: From a metric standpoint, taking a step back. We have communicated that our intent in the long run is to Target a gross leverage ratio, worth leverage, to ebit out ratio of about 1 turn. And so, we will continue to be opportunistic in the market to, to continue reducing debt as we see feasible and, and economical. Uh, as if you look at our current actions in H1, we repurchased around 61 million of our 8.625% notes already, and we're in the market to, uh, to
Just continuing to be opportunistic to see when we will do more open market repurchases.
Speaker Change: With regards to more of our long-term structural notes.
Speaker Change: We are in a position of strength. We have ample time before 2030 to go and address our notes.
Speaker Change: However, we do have a step down in October of this year and so it will be even more attractive to potentially pursue.
Speaker Change: A refinancing thereafter but there's really 4 key things that we look for. When it comes to refinancing our 2030 notes first, it's the reducer overall Tower sized from 1.6 billion to
Speaker Change: Towers that are a bit smaller and a bit more manageable. Uh, second is to manage our maturity profiles by pushing out the towers a bit further and and breaking out the size. Third, it's the lower our interest expense. And this ties back to our focus on free, cash flow and and driving cash outcomes.
Speaker Change: And lastly, it's to review and really eliminate and revise. Some of the covenants we had in place since emergence on the notes.
Speaker Change: Going forward.
Speaker Change: Great, appreciate all the call. They're very helpful and turn it back.
AI Modak: Our next question comes from AI modak with Goldman Sachs. Please go ahead.
AI Modak: Hey, good morning Gish, um, Argentinian asset sales. Is there a way to quantify that? And then are there other parts of the portfolio that could be optimized? As you think about the Strategic aspects of cost in the business?
AI Modak: Yeah. Um I I'll talk to the second part. Uh, first, I'll be if that's okay. So, you know, look, we we've talked about this uh, multiple times and uh, you know, it's sort of the philosophy week took of we really want to focus on the intersection of product line and Country and that's what we've been doing and really driving businesses that are sustainable over the long term.
AI Modak: For cash generation standpoint. So we've been systematically over the past, uh, 5 years, you know, working through businesses that were unprofitable that, you know, were taught to be strategic, but didn't make money. And we said, there's nothing strategic about losing money. So we've gotten out of most of those. And now, we are sort of on these last few things that uh, are a significant cash plan. So Argentina was the most significant 1. The pressure pumping business as well as some of the uh, slick line and the W line businesses in southern Argentina that were atrophying. So we uh we executed on that uh, earlier this year. This I would say a few more, um, that we have uh, that are not anywhere close to the size of of the Argentina Devastator but much smaller ones.
AI Modak: For sequential Revenue, increase and sequentially, but the increase. So that sort of, uh, uh, the order of magnitude of, uh, the business. But, uh, but look, ultimately, again, the reason we decided to make this change was 1. It was an important strategic action for, uh, the customers that we ended up selling the business to. And secondly, this was a business that was going to be extremely Capital intensive, uh, as we went into 2026. And so from an economic basis on a cash flow basis, uh, made a lot of sense for us.
AI Modak: Thank you.
Speaker Change: again, if you have a question, please press star then 1
Josh Jane: Josh Jane with Daniel Energy Partners. Please go ahead.
Josh Jane: Thanks. Good morning. I wanted to focus my question on, uh, MPD and as it pertains to deep water. Could you talk about the opportunity Set? Uh, today for Weatherford, you highlighted a 3 year, deep water development project in Mexico. And then also in a ramco award for onshore and offshore um our customers still evaluating incremental opportunities to add MPD equipment at the same Pace they have been. And could you speak to how MPD equipment is evolving and how you expected to improve uh, going forward? Thanks. Yeah, sure Josh. Um, look
Josh Jane: It's just a product line, we continue to be extremely bullish on um and a lot of the case studies uh and and you know, literature to the be put out on this uh papers that they're putting out, really point to the efficacy of MPD as a mechanism, not just to improve drilling outcomes, but in additional areas. So, this concept of transitioning from managed pressure, drilling to really a more holistic concept of managed pressure Wells. Uh, we think is very significant uh, for the industry. So you know, on the deep water side, we have a very strong, uh, leadership position, and we are very committed to maintaining. That what we are seeing is a fair degree of, uh, of interest and a lot of different, uh, uh, tender and quotation, uh, activity.
Josh Jane: So, you know, essentially what that uh, what that really means is, you know, multiple systems that are being coded uh, combination of capital sales and rentals. Now, what we don't really see is any of this coming to fruition from a revenue standpoint? Uh if you will up until I would say, you know, the second half of next year. Uh but certainly into the second half of next year and then going into 2027, we think there will be a significant uh update uh in activity. So, you know, we are seeing MPD become a differentiator for rig, operators to make sure that they've got the capability and upgrading systems from gen 1 to Gen 2, potentially gen 3,
Josh Jane: And and we've got, uh, very strong technology leadership there. So, you know, big, big big push on that lots of different activity, but it will take a little bit more time for that to come to fruition. But we are seeing some things like, uh, the project that we announced in Mexico uh with with an ioc, which look is critical. Not just for you know it's a 3 year contract to provide MPD Services. It's very significant, but it's also a testament to the diversification of the revenue based in Mexico.
Josh Jane: Great, thanks.
Josh Jane: Thank you.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.
Great. Hey, thank you all for joining. Uh, again, appreciate uh, all all of the interest and we look forward to coming back in 90 days with a update on the third quarter. Thank you.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect