ENP Newswire -
Release date- 26022014 -
For the year ended
Fourth Quarter 2013 Highlights
Successful remediation of the long standing material weakness in income tax accounting;
Reduction in net debt by
Positive free cash flow generation of
Completion of the sale of our equity investment in
We will divest our non-core businesses. In the second half of 2013, we identified several non-core businesses that Weatherford had accumulated over the years that are not part of our future growth strategy. These included four businesses: pipeline and specialty services, testing and production services, drilling fluids and wellheads. We have focused teams working on each of the four divestitures and we expect to complete the cash sale of each business by the end of 2014.
In addition to these four businesses, the IPO or spin-off of our land drilling rig business is expected to take place in Q4 2014 or Q1 2015. The cash proceeds from these transactions will be used to pay down debt. Finally, we expect to complete our legacy loss contracts in
We will reduce our cost base of our remaining core businesses, which includes our recently announced plan to reduce our worldwide employee headcount by 7,000 during the first half of this year with targeted annualized cost savings of
There are other areas of cost reductions which will come from shutting down marginal business presence in certain markets that are uneconomic and drain cash. This effort is not expected to result in Weatherford's exit from any country as a whole and is not anticipated to materially reduce our infrastructure footprint.
The third element of our transformation is linked to the first two. Once we divest the non-core businesses and reduce our remaining cost base, the entire management team will refocus on growing the core businesses retained by Weatherford and doing so at attractive cash incremental returns. The core includes well construction, formation evaluation, completion, stimulation and artificial lift. These businesses have good margins and did so even in 2013. The overall 2013 operating income margin (before R&D and corporate expenses) was 11.2%.
The operating income margin for our core businesses was 16.3% compared to a negative operating income margin of (6.9)% for the non-core businesses. Excluding the impact of the U.S. pressure pumping business, the core businesses generated an operating income margin of 18.9% in 2013. These businesses have good capital intensity and capital return characteristics and we believe in their future. The U.S. pressure pumping business is being re-engineered and repaired and, with emerging market conditions, we should be able to improve our performance in this business in 2014.
In summary, Weatherford is committed to transforming itself in 2014 to emerge as a leaner, more efficient and stronger company, with high margin core product lines, strategically positioned and focused on growing them. We are also committed to deleveraging the company through a combination of proceeds from divestitures and internally generated cash flow as quickly and as much as we can. Our medium-term objective is a 25% debt to capitalization ratio.
My entire management team and I are determined to make the above happen. Our direction is clear. Execution is our single minded focus.'
Fourth Quarter 2013 Results
Revenue for the fourth quarter of 2013 was
Net income for the fourth quarter of 2013, before charges, was
The sequential decline in earnings was driven by:
Extreme weather conditions in
Operational disruptions in the
Capital discipline driven activity reductions in
A higher than normal tax rate of 45%, which included certain items that are expected to benefit future tax charges.
Reported net income on a GAAP basis for the fourth quarter of 2013 was a net loss of
Fourth quarter revenues of
Fourth quarter revenues of
Fourth quarter revenues of
The fourth quarter's operating income of
Liquidity and Free Cash Flow
Free cash flow improved by
Days sales in inventory decreased to 80 days from 83 days in the prior quarter and was down seven days compared to the same quarter in the prior year. Days sales outstanding decreased seven days sequentially and compared to the same quarter in the prior year as all regions saw improvements in collections during the fourth quarter. Overall, working capital days were down 14 days for the year.
Income Tax Material Weakness Remediation
During 2013, we completed the remediation of our material weakness in financial reporting for income taxes and concluded that our internal controls are effective. We will continue to focus on maintaining the system of internal controls that was developed and implemented over the last three years and make enhancements as necessary.
In 2014, we remain focused on achieving a step change in profitability by:
Focusing the organization on growing our core businesses;
Making our cost base more efficient;
Divesting our non-core businesses and reducing our net debt.
We have completed the initial phase of our cost reduction initiatives and have identified 6,192 positions for our reduction in workforce, with expected annualized cost savings of
We expect to begin eliminating select operations identified during these reviews in the second quarter of 2014. We expect these actions will bring additional costs savings, both in the form of headcount reductions and other savings. These additional headcount reductions will enable us to deliver fully on the 7,000 reduction target and approach the$500 million annualized cost savings targeted previously.
In 2014, we expect revenue growth in
Capital expenditure for 2014 is targeted at 8% of revenue. The continued focus on reducing working capital coupled with improved earnings is expected to generate positive free cash flow of approximately
Retirement of Board Member
The Company announces the retirement of former Secretary of the
The entire Company and its Board of Directors sincerely thank
Non-GAAP Performance Measures
Unless explicitly stated to the contrary, all performance measures used throughout this document are non-GAAP. Corresponding reconciliations to GAAP financial measures have been provided in the following pages to offer meaningful comparisons between current results and results in prior periods.
Weatherford is a Swiss-based, multinational oilfield service company. It is one of the largest global providers of technology and services for the oil and gas industry. Weatherford operates in over 100 countries, and employs over 67,000 people worldwide. For more information, visit www.weatherford.com
The Company will host a conference call with financial analysts to discuss the quarterly results on
This press release contains, and the conference call announced in this release may include, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, the Company's non-GAAP earnings per share and the size, timing and benefits of the reduction in workforce, and are also generally identified by the words 'believe,' 'project,' 'expect,' 'anticipate,' 'estimate,' 'budget,' 'intend,' 'strategy,' 'plan,' 'guidance,' 'may,' 'should,' 'could,' 'will,' 'would,' 'will be,' 'will continue,' 'will likely result,' and similar expressions, although not all forward-looking statements contain these identifying words.
Such statements are based upon the current beliefs of Weatherford's management, and are subject to significant risks, assumptions and uncertainties. Should one or more of these risks or uncertainties materialize, or underlying assumptions prove incorrect, actual results may vary materially from those indicated in our forward-looking statements.
Readers are also cautioned that forward-looking statements are only predictions and may differ materially from actual future events or results due to the Company's ability to implement workforce reductions in various geographies; possible changes in the size and components of the expected costs and charges associated with the workforce reduction and risks associated with the Company's ability to achieve the benefits of the planned workforce reduction.
Forward-looking statements also are affected by the risk factors described in the company's Annual Report on Form 10-K for the year ended
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