Weatherford International (NASDAQ:WFRD) reported a 17% year-on-year increase and a 3% sequential rise in revenue for Q3 2023, demonstrating the resilience of its operating strategy amid challenging market conditions. The company's North American team achieved improved profitability despite a revenue decline, and it generated an adjusted free cash flow of $137 million in the quarter. Weatherford also secured a $550 million credit facility and reduced its net leverage to 0.9x.
Key takeaways from the call include:
- Weatherford won several contracts across its segments, including contracts for MPD systems and services, Liner Hanger systems, Drilling and Fishing jars, and digital solutions.
- The company introduced new products and solutions to enhance drilling efficiencies and operational efficiency.
- Weatherford expects slight activity improvement in the North American market in 2024 and double-digit activity growth in international and offshore markets.
- The company remains focused on driving margin expansion and cash generation through revenue quality and pricing.
- Weatherford reported consolidated revenue of $1.31 billion and adjusted EBITDA margins of 23.2%.
- The company closed the quarter with total cash of approximately $946 million and a total debt level of $1.88 billion, the lowest since 2007.
- Weatherford expects low single-digit revenue growth in Q4 2023 and a margin expansion of approximately 400 basis points.
The company also highlighted its focus on improving net working capital efficiency and announced a credit facility to strengthen its balance sheet. Weatherford has made significant progress in reducing its debt, reaching the lowest gross debt level since 2007. The company expects consolidated revenues to grow in the low single digits sequentially in Q4 2023, with adjusted EBITDA margins higher than previously anticipated.
Weatherford also discussed its plans to transition to asset-lighter models, improve working capital efficiency, and reduce taxes. The company expects to see quarterly fluctuations but aims for annual improvements. The cash conversion cycle for Q2 2022 was 112 days but dropped to 100 days in the last quarter, though it increased slightly to 104 days in the current quarter.
The company also highlighted its successful collaboration with Chevron (NYSE:CVX) and its ability to differentiate product lines and win with customers in the offshore market. Weatherford expects continued consolidation in the industry, which presents both challenges and opportunities for them. They are engaging in constructive conversations with their customers to help them expand their portfolios and address new challenges arising from consolidation.
Regarding debt reduction, the company plans to focus on paying down debt, particularly senior secured notes, to improve their gross debt and interest coverage. They expect to continue this path for the next six to twelve months and will discuss shareholder returns in the future. The call concluded with management expressing gratitude for participants and mentioning the upcoming fourth-quarter update.
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