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    Weatherford International (WFRD)

    Q4 2024 Earnings Summary

    Reported on Feb 20, 2025 (After Market Close)
    Pre-Earnings Price$65.36Last close (Feb 6, 2025)
    Post-Earnings Price$65.44Open (Feb 7, 2025)
    Price Change
    $0.08(+0.12%)
    • Weatherford expects adjusted EBITDA margins to improve significantly starting in Q2 and aims to achieve margins in the high 20% range over the next three years, demonstrating strong profitability potential.
    • The Managed Pressure Drilling (MPD) product line, including the new Motus technology, is poised to drive significant growth, with deployments in multiple regions and increasing customer adoption.
    • Weatherford anticipates growth in key international markets such as the Kingdom of Saudi Arabia, where they are underpenetrated and expect to grow despite overall market declines, indicating potential for market share gains.
    • Significant reduction in activity in Mexico, with expected revenue declines of 30% to 50% in 2025, will negatively impact revenues. The company is not assuming a ramp-up in the second half from Mexico and is taking a conservative approach. ,
    • Expected significant decline in revenues from Russia due to operational challenges and sanctions. Revenues from Russia have decreased from 7.4% to 5.4% of total revenues over two years, and the reduction is expected to continue, creating a negative headwind. ,
    • Margins may be under pressure due to revenue declines, making it challenging to maintain high margins despite cost-cutting efforts. The company acknowledges that when revenues decline, it's "tough to fight math," and margins may decline in the immediate term.
    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Revenues

    Q1 2025

    no prior guidance

    $1.17 billion to $1.21 billion

    no prior guidance

    Adjusted EBITDA

    Q1 2025

    no prior guidance

    $245 million to $265 million

    no prior guidance

    Free Cash Flow

    Q1 2025

    no prior guidance

    Near breakeven, with free cash flow expected to be more second‐half weighted

    no prior guidance

    Operating Income

    Q1 2025

    no prior guidance

    Favorably impacted by a $25 million QoQ decline in depreciation and amortization

    no prior guidance

    Effective Tax Rate

    Q1 2025

    no prior guidance

    High 30% range

    no prior guidance

    Revenues

    FY 2025

    no prior guidance

    $5.1 billion to $5.35 billion

    no prior guidance

    Adjusted EBITDA

    FY 2025

    no prior guidance

    $1.2 billion to $1.35 billion

    no prior guidance

    Free Cash Flow Conversion

    FY 2025

    no prior guidance

    Expected to increase by 100 to 200 basis points YoY

    no prior guidance

    Depreciation and Amortization

    FY 2025

    no prior guidance

    Expected to decline by approximately $100 million

    no prior guidance

    Effective Tax Rate

    FY 2025

    no prior guidance

    Mid-20% range

    no prior guidance

    CapEx

    FY 2025

    no prior guidance

    To remain at 5% of revenues, with higher spending in H1 due to subsea intervention projects in Brazil

    no prior guidance

    TopicPrevious MentionsCurrent PeriodTrend

    EBITDA margin expansion and profitability improvement

    Consistently discussed across Q1–Q3 with strong record margins, sequential and YoY improvements, and clear guidance for high-20s over next years

    Q4 emphasized continued focus despite a temporary drop (24.3% in Q4 vs. 25.1% full‐year high) with plans for improvement from cost and productivity programs

    Persistent emphasis with minor short‐term challenges; overall long‑term commitment remains strong

    Margin pressures and pricing negotiations

    Addressed in Q1–Q3 with consistent focus on pricing discipline, technology differentiation, and structured margin expansion even with revenue headwinds

    Q4 noted margin pressures from lower revenues while stressing pricing resilience and cost optimization in North America

    Steady focus throughout; Q4 shows heightened attention due to revenue declines and tighter market conditions

    International market growth initiatives

    Q1–Q3 calls highlighted growth in Saudi Arabia and the Middle East with solid integrated projects, contracts, and multi‐regional expansion strategies

    Q4 continued to emphasize opportunities in Saudi Arabia and the broader Middle East, despite noting lower activity in some regions and anticipating near‑term challenges in Mexico

    Consistent optimism for growth in underpenetrated markets despite regional variabilities and near‑term headwinds

    Managed Pressure Drilling product technologies

    Q1 and Q3 focused on the launch and adoption of Modus, underscoring growth potential in performance segments

    Q4 shifted to discuss Motus technology with excitement over improved adoption and plans to integrate MPD into additional product lines

    Evolving product portfolio with early emphasis on Modus now broadening to Motus, indicating dynamic innovation and growth opportunities

    Operational challenges and disruptions

    Q1 mentioned challenges in Russia with a generally steady start in Latin America; Q2 and Q3 discussed delays and evolving issues in Mexico and Latin America without deep focus on Russia

    Q4 detailed significant reductions in activity in Mexico, heightened challenges in Russia (declining revenue and FX pressures), and broader Latin America impacts, contributing to a more critical tone

    Growing negative sentiment in Q4 with sharper focus on regional disruptions, particularly in Mexico and Russia

    Strategic product launches and acquisitions

    Q1 through Q3 provided robust discussion on new product launches (TRS, Modus) and strategic acquisitions (Probe, Ardyne, Datagration) aimed at expanding technical breadth and market share

    Q4 did not address new launches or acquisitions, with no mention of TRS systems or deepwater offshore drilling initiatives [document]

    This topic, previously prominent, is no longer mentioned in Q4, suggesting a temporary shift away from new product announcements [document]

    Geopolitical risks

    Q1 acknowledged a volatile geopolitical backdrop with minimal operational impact; Q3 mentioned risks in the Middle East and Latin America in a mixed international picture

    Q4 emphasized geopolitical challenges—particularly in Russia (sanctions, FX volatility) and Mexico (activity declines)—as significant hurdles affecting future revenues

    Increased focus on geopolitical risks in Q4 signals growing concerns that could materially impact operations, contrasting with earlier lower-risk sentiment

    Customer activity and supply chain optimization challenges

    Q1 briefly noted shifts (e.g., growth in gas activity) and efforts to optimize sourcing; Q2 reported timing shifts and normal operational changes, while Q3 detailed scheduling delays and a multi‑year plan for supply chain network optimization

    Q4 reported substantial reductions in customer activity (notably in Latin America and U.S. land) along with significant cost optimization measures, including facility consolidation and improved inventory management

    Recurring concerns with increasing intensity in Q4; supply chain and customer activity challenges are being addressed more aggressively now

    Free cash flow conversion and operational efficiencies

    Q1 showcased robust free cash flow growth and clear initiatives (improved working capital, process enhancements); Q2 and Q3 continued to highlight systematic progress in improving conversion rates and working capital metrics

    Q4 reported strong annual free cash flow conversion (37.9% full‑year, with a strategic goal of 50%) and emphasized ongoing structural cost improvements and productivity gains

    Steady and positive trend with consistent process improvements across quarters, reinforcing a strong focus on cash generation

    Market volatility and pricing power in a flat to moderately growing environment

    Q1 described a positive pricing environment coupled with caution over sustainability; Q2 reiterated pricing discipline and contribution to margin growth; Q3 noted stable markets with constructive pricing conversations

    Q4 discussed market volatility in a flat environment, noting regional challenges but also highlighting resilient pricing power driven by technology differentiation

    Consistent emphasis on pricing discipline remains, though Q4 shows a nuanced view with rising concerns over volatility juxtaposed against resilient pricing strategies

    1. Mexico and Russia Declines
      Q: What is the outlook for Mexico and Russia in 2025?
      A: Weatherford expects significant declines in both Mexico and Russia in 2025, contributing to a mid-single-digit decrease in international revenue. In Mexico, activity is anticipated to decline by 30% to 50%, and the company is not assuming a dramatic recovery in the second half. In Russia, operations will continue but are expected to further decline due to increasing complexity from sanctions and FX volatility. The Russian business has decreased from 7.4% to 5.4% of total revenue over two years.

    2. Margin Outlook
      Q: How will margins be affected in the current environment?
      A: Weatherford anticipates margins to decline in the immediate term due to lower revenues from Mexico and Russia. However, they expect margins to improve significantly from the second quarter onward, aiming to exit the year with margins similar to or better than 2024. The goal of achieving high-20s EBITDA margins remains intact, though it may be delayed by 6 to 9 months.

    3. Capital Return Program
      Q: Will you increase share repurchases given current share prices?
      A: Weatherford has been exceeding its capital return commitments, repurchasing almost $15 million in shares per quarter, which is ahead of the required run rate for their $500 million three-year program. While they will continue this pace, they also prioritize debt reduction and opportunistic M&A, taking a holistic approach to capital allocation rather than focusing solely on share buybacks.

    4. Saudi Arabia Growth
      Q: How is Weatherford growing in Saudi Arabia when peers are declining?
      A: Due to underpenetration in key areas, Weatherford expects growth in Saudi Arabia by introducing significant technology improvements and enhancing operational execution. While not immune to market declines, their opportunity for growth provides some insulation, and they anticipate Saudi Arabia will aid overall growth, though it won't fully offset declines in Mexico and Russia.

    5. North America Margins
      Q: How are North America margins improving despite market declines?
      A: Through cost reduction initiatives like facility consolidation and efficiency improvements, Weatherford has improved North America margins. They've also focused on driving and holding pricing by leveraging technology differentiation and service quality. Additionally, they've grown into underpenetrated areas, boosting margins despite a flat to down market.

    6. Well Services Growth
      Q: What is driving growth in the well services business?
      A: The well services business has grown over 50% in the last three years, driven by capabilities in reservoir engineering, digital technologies like fiber optics for real-time data, and through-tubing rigless intervention, which eliminates the need for rigs and offers efficient production enhancement. This provides customers with a compelling OpEx-driven business case, and Weatherford is excited about future growth prospects.

    7. MPD Business Potential
      Q: What is the outlook for the Managed Pressure Drilling business?
      A: Weatherford is optimistic about their Managed Pressure Drilling (MPD) business, seeing increasing adoption and demand for offerings like Motus. They've deployed MPD packages in multiple regions and expect significant contributions this year. They're also expanding MPD technology into other product lines and services, creating new growth platforms.

    8. International Markets Outlook
      Q: Which international markets are expected to grow in 2025?
      A: Weatherford anticipates growth in Brazil, Argentina, Asia (including Thailand and Malaysia), and parts of the Middle East like Kuwait, Oman, and Qatar. They're optimistic about the offshore cycle's longevity despite early-year volatility. Conversely, the UK market is challenging due to operator activity reductions, but opportunities remain in areas like plug and abandonment.

    9. Europe and Sub-Sahara Africa Recovery
      Q: How will Europe and Sub-Sahara Africa impact results?
      A: Weatherford expects a significant ramp-up in Europe and Sub-Sahara Africa starting in the second quarter due to committed contract starts and mobilization plans. There will be a seasonal uptick in Russia, though small, and overall, they are confident about a Q1 to Q2 ramp in these regions.

    10. Opportunity in Mexico
      Q: How does Weatherford view future opportunities in Mexico?
      A: Weatherford remains focused on margins and cash in Mexico, maintaining a prudent approach to risk. They believe in the long-term potential and are well-positioned to capitalize on any positive market changes while ensuring operational performance and limiting exposure to payment risks.

    Research analysts covering Weatherford International.