Houston-based Weatherford International plc has emerged from Chapter 11 with yet another CEO at the helm, who has charged the executive team to be “relentlessly focusing” on extending its global options and improving liquidity. 

Lower 48 DUCs

Girish Saligram, who took the helm less than a month ago, is the third CEO in three years for the battered oilfield services (OFS) giant. Weatherford, in financial turmoil for years, filed for bankruptcy in 2019 to reduce long-term debt and establish a “more sustainable” business. 

Saligram during the third quarter conference call said he plans to right the ship and build market share.

“I believe our company has a unique combination of key attributes” to strengthen, he said, with a “comprehensive technology portfolio, a global footprint, deep customer relationships, an extraordinary culture and a talented employee base that is committed to seeing the company succeed.”

Covid-19 exacerbated a smooth transaction from bankruptcy, but improving oil and natural gas prices have led to a pick up in activity in North America. It’s still slow, but for the OFS sector, business is gaining as producer customers are finishing up more drilled but uncompleted wells, or DUCs.

“While our market outlook remains cautious, we are encouraged by the fact that we have started to see activity stabilize in certain geographies and a gradual path to recovery in others,” Saligram told investors. “We have extended our runway for capitalizing on new opportunities, and we will be working as a team to refine the company’s strategy over the coming months, focusing on leveraging our sustainable competitive advantages in order to achieve our objectives.”

Completions Climbing

In North America, “we do not anticipate a meaningful recovery in drilling activity over the near term,” as “commodity prices remain range bound,” Saligram said. “However, we do expect to see gradual increases in completion and production activity as operators go through DUCs and continue bringing production back online.”

COO Karl Blanchard said the decline in drilling activity in North America during 3Q2020 was in line with expectations, as the “average rig counts in North America declined 28%” from the second quarter.

“However, shut-ins and production cuts were lifted slightly faster than anticipated, resulting in higher completion and workover activity,” Blanchard said. 

North American revenue increased 2% sequentially to $175 million, mostly because of the increased production and workover activity, as well as seasonal activity increases in Canada following spring break-up. 

In Latin America, revenues of $141 million also were 2% higher sequentially, with activity in Argentina and Colombia “beginning to recover from shutdowns associated with the Covid-19 pandemic,” partially offset by reduced activity and lower customer spending in other countries, Saligram said.

“Internationally, we expect activity to be flat to slightly down overall with perhaps a slightly negative bias as reductions in customer spending in the Middle East, and parts of Latin America may outweigh recoveries in other locations,” he said. “We have seen significant reductions in rig count and customer spending globally this year, and our near-term outlook for the market remains cautious.”
The CEO said “there are many external factors whose impact and outcome on our industry are far from certain, including the recovery in global economic activity, rising Covid-19 cases and the reinstatement of community protection measures, the timing and effectiveness of a potential vaccine and global policy measures.”
Volatility remains high, he said, “and it is likely too early to draw any definitive conclusions based on near-term trends. As a result, we are continuing our planning based on current activity levels with the confidence that we can act quickly and adapt to evolving conditions as we have demonstrated.”

Weatherford’s overall share in the global oilfield services market “is in the mid-single digits, we have some outstanding market leaders across our segments and geographies,” Saligram noted. He wants the company to capture the “strength of businesses” that include tubular, pressure drilling and cementation products “to spearhead our goal of profitability and free cash flow generation…”

Using customer feedback and support, “we know while our customers have significant challenges that they’re dealing with, and our products and services represent a cost to them,” Saligram said. Weatherford enjoys “strong support from our loyal customers, and they want us to succeed. 

“Clearly, we must earn the right every day to serve them, and demonstrate a superior value proposition. Still that encouragement, access and spirit of collaboration is something we’ll continue to rely on and leverage.”

Net losses in 3Q2020 totaled $174 million (minus $2.48/share), compared with year-ago net losses of $821 million (minus 82 cents) and a second quarter loss of $581 million (minus $8.30). Revenue fell 39% year/year and 2% sequentially to $807 million. The reported operating loss was $60 million, versus a loss of $447 million in 3Q2019.

Weatherford recorded restructuring and other charges in 3Q2020 of $47 million related to headcount reductions, facility consolidation and other activities.