WFRD Q2 2025: $1.3B Liquidity, 0.49x Leverage Supports Growth
- Robust Balance Sheet and Liquidity: Management highlighted a strong balance sheet with $1.3B in liquidity and $1.0B in cash, complemented by a low net leverage ratio (0.49x) and proactive debt reduction and refinancing strategies. This provides significant financial flexibility to support future growth initiatives.
- Strength in MPD and Deepwater Opportunities: The team remains bullish on its MPD technology—with contracts in Mexico and interest from major players like Aramco—positioning the company for a meaningful revenue uptick in the second half of next year and beyond.
- Strategic Positioning in Key Markets: Despite softening trends in regions such as Saudi Arabia, management’s close collaboration with key customers and technology-driven execution is expected to drive long-term recovery, potentially beginning in the second half of 2026.
- Continued weakness in key international markets: Management highlighted persistent softness in the Saudi market, including a noted drop in rig counts (from 13,000,000 to 12,000,000) with expectations that weakness will continue through 2025 and not recover until the second half of 2026, suggesting prolonged revenue headwinds.
- Headwinds from tariff impacts in the U.S. Land segment: Comments indicated that after consuming pre‐tariff inventory in Q2, orders are expected to decline in Q3 due to tariff impacts, which could erode margins and contribute to ongoing revenue declines in this competitive segment.
- Uncertainty in Mexico’s cash flows and activity levels: Despite some stabilization, management pointed out persistent uncertainties in payment timing and minimal collections from Mexico, as well as a forecasted 60% decline in activity, which could strain overall cash generation and impact near-term liquidity.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenues | -12% | Revenues declined by 12% YoY as Q1 2025 experienced lower activity levels across all service segments compared to Q1 2024. In the prior period, growth was driven by strong performance in DRE, WCC, and international markets, but the current period was impacted by significant market softening—especially in Latin America (down 35% YoY), ESSR, and North America. |
Net Income | -32% | Net income fell by 32% YoY mainly due to the lower revenue base, which led to a 39% drop in operating income and a 25% decline in adjusted EBITDA when compared to Q1 2024. This decline was partly offset by lower income tax provisions, contrasting with the improved margins seen in the previous period. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q3 2025 | $1,165,000,000 to $1,195,000,000 | $1,165,000,000 to $1,195,000,000 | no change |
Adjusted EBITDA | Q3 2025 | $245,000,000 to $265,000,000 | $245,000,000 to $265,000,000 | no change |
Free Cash Flow | Q3 2025 | Expected to be roughly flat | Expected to be flat to slightly up | raised |
Adjusted EBITDA Margins | Q3 2025 | no prior guidance | Expected to tick up slightly from Q2 levels | no prior guidance |
Revenue | FY 2025 | $4.6 billion to $5 billion | $4.7 billion to $4.9 billion | no change |
Adjusted EBITDA | FY 2025 | $975 million to $1.1 billion | $1,015,000,000 to $1,060,000,000 | no change |
Free Cash Flow Conversion | FY 2025 | Increase by 100 to 200 basis points | Increase by 100 to 200 basis points | no change |
Effective Tax Rate | FY 2025 | Mid-20% range | Approximately 20% | lowered |
Capital Expenditures (CapEx) | FY 2025 | Within 3% to 5% of revenues | Within 3% to 5% of revenues | no change |
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Balance Sheet
Q: Expand on liquidity and debt strategy?
A: Management highlighted a $1,000,000,000 cash position with $1,300,000,000 total liquidity, a net leverage of 0.49x, and a commitment to reduce debt further toward a 1x EBITDA target through opportunistic repurchases and refinancing post-October. -
U.S. Land Tariffs
Q: How are tariffs affecting U.S. Land?
A: Management noted that although the core U.S. Land segment was modestly up sequentially, the overall mix is expected to decline further in Q3 due to tariff impacts and pre-tariff inventory drawdowns, leading to margin dilution. -
Saudi Market
Q: What is the Saudi market trend?
A: They described ongoing softness with a declining rig count, expecting a further Q3 decline and a turnaround not before the second half of 2026, while leveraging strong technology introductions with key customers like Aramco. -
Mexico Stability
Q: What’s the outlook for Mexico?
A: Management explained that activity in Mexico has dropped by more than 50% (projected 60% decline this year) but appears stable now, with cash flow recoveries expected later in the second half, though timing remains uncertain. -
MPD Opportunity
Q: How is the MPD business evolving?
A: They are very bullish on Managed Pressure Drilling, maintaining a strong leadership position in deepwater projects, with revenue contributions expected to materialize in the later half of next year. -
4Q Guidance
Q: Is Q4 boost driven by seasonality?
A: Management attributed the modest 3-4% sales and margin bump in Q4 to seasonal year-end orders and significant project startups, though uncertainty remains due to tariffs. -
Pricing Pressure
Q: Where is pricing pressure most intense?
A: They noted significant pricing pressure in North America and within service segments, where tighter volumes and tariff impacts are prompting efforts to achieve 25 to 75 basis point annual productivity improvements moving into 2026. -
M&A Pipeline
Q: What is the current M&A outlook?
A: Management mentioned a robust pipeline focusing on well construction and production segments, emphasizing strategic fit, value creation through cash flow accretion, and sensible valuations in a challenging market. -
Argentina Divestiture
Q: How impactful was the Argentina sale?
A: They indicated that exiting the major Argentina business led to an approximate 5% sequential increase in normalized revenue and EBITDA, removing a capital-intensive operation from their portfolio.
Research analysts covering Weatherford International.