2019 Weatherford Irish Directors Report and Consolidated Financial
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8FBUIFSGPSE*OUFSOBUJPOBMQMD *3*4)%*3&$5034m3&1035 "/%$0/40-*%"5&% '*/"/$*"-45"5&.&/54 'PSUIFZFBSFOEFE %FDFNCFS WEATHERFORD INTERNATIONAL PUBLIC LIMITED COMPANY DIRECTORS’ REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2019 WEATHERFORD INTERNATIONAL PLC FOR THE YEAR ENDED DECEMBER 31, 2019 TABLE OF CONTENTS TABLE OF CONTENTS 02-37 02 Directors’ Report 34 Statement of Directors’ Responsibilities 36 Independent Auditor’s Report to the Members of Weatherford International plc 38-86 Consolidated Financial Statements as of December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017: 38 Consolidated Statements of Operations 39 Consolidated Statements of Comprehensive Income (Loss) 40 Consolidated Balance Sheets 41 Consolidated Statements of Shareholders’ Equity 42 Consolidated Statements of Cash Flows 44 Notes to Consolidated Financial Statements 87-90 Parent Company Financial Statements: 87 Parent Company Balance Sheet 88 Parent Company Statement of Changes in Shareholders’ Equity 89 Parent Company Cash Flow Statement 90 Notes to Parent Company Financial Statements 2019 Irish Directors’ Report and Consolidated Financial Statements | 1 DIRECTORS’ REPORT FOR THE YEAR ENDED 2019 The directors present their annual report and audited Consolidated Financial Statements and related Notes of Weatherford International plc for the year ended December 31, 2019. The directors have elected to prepare the Consolidated Financial Statements in accordance with section 279 of the Companies Act 2014, which provides that a true and fair view of the assets and liabilities, financial position and profit or loss of a company and its subsidiary undertakings may be given by preparing its group financial statements in accordance with US accounting standards (“US GAAP”), as defined in section 279 (1) of the Companies Act 2014, to the extent that the use of those standards in the preparation of the financial statements does not contravene any provision of Part 6 of the Companies Act 2014. 2 | 2019 Irish Directors’ Report and Consolidated Financial Statements PRINCIPAL ACTIVITIES OF BUSINESS BASIS OF PRESENTATION The accompanying Consolidated Financial Statements include the accounts of Weatherford International plc, an Irish public limited company, and its controlled subsidiary companies (collectively, the “Company”). In this Directors’ Report, we use the terms “Weatherford,” the “Company,” “we,” “us” and “our” to refer to Weatherford International plc and its subsidiaries. The Consolidated Financial Statements include the Consolidated Balance Sheets of Weatherford International plc and its subsidiaries as of December 31, 2019 and 2018, and the related Consolidated Statements of Operations, Comprehensive Loss, Shareholders’ Equity and Cash Flows for the twelve months ended December 31, 2019, 2018 and 2017. The Consolidated Financial Statements and the majority of the information in the Notes thereto have been reconciled to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 submitted to the U.S. Securities and Exchange Commission on March 16, 2020. PRINCIPAL ACTIVITIES Weatherford International plc, an Irish public limited company, together with its subsidiaries (“Weatherford,” the “Company,” “we,” “us” and “our”), is a multinational oilfield service company. Weatherford is the leading wellbore and production solution company providing equipment and services usedinthe drilling, evaluation, completion, production and intervention of oil and natural gas wells. Many of our businesses, including those of our predecessor companies, have been operating for more than 50 years. We conduct operations in over 80 countries and have service and sales locations in virtually all of the major oil and natural gas producing regions in theworld. Our operational performance is reviewed on a geographic basis and we report our Western Hemisphere and Eastern Hemisphere as separate and distinct reporting segments. RECENT DEVELOPMENTS – REORGANIZATION AND EMERGENCE FROM BANKRUPTCY PROCEEDINGS On July 1, 2019 (the “Petition Date”), Weatherford International plc, Weatherford International Ltd., and Weatherford International, LLC (collectively, the “Weatherford Parties” or the “Company”) commenced voluntary cases (the “Cases”), seeking relief under Chapter 11 of Title 11 (“Chapter 11”) of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). On September 9, 2019, the Company filed with the Bankruptcy Court the proposed Second Amended Joint Prepackaged Plan of Reorganization of Weatherford International plc and its Affiliate Weatherford Parties (as amended, the “Plan”). On September 11, 2019, the Bankruptcy Court entered an order, Docket No. 343 (the “Confirmation Order”), confirming and approving the Plan. On December 13, 2019 (the “Effective Date”), the conditions to effectiveness of the Plan were satisfied and the Weatherford Parties emerged from Chapter 11, including, but not limited to, the effectiveness of the schemes of arrangement in Ireland and Bermuda. Upon emergence from bankruptcy on December 13, 2019, the Company’s then-existing unsecured senior and exchangeable senior notes (including unpaid interest) totaling $7.6 billion were cancelled pursuant to the terms of the Plan, resulting in a gain on settlement of liabilities subject to compromise included in “Reorganization Items” on the Consolidated Statements of Operations. See “Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings” and “Note 3 – Fresh Start Accounting” for additional details on bankruptcy emergence. On the Effective Date, we adopted and applied the relevant guidance with respect to the accounting and financial reporting for entities that have emerged from bankruptcy proceedings, or “Fresh Start Accounting.” Under Fresh Start Accounting, our balance sheet on the Effective Date reflects all our assets and liabilities at fair value. Our emergence from bankruptcy and the adoption of Fresh Start Accounting resulted in a new reporting entity, referred to herein as the “Successor,” for financial reporting purposes. To facilitate discussion and analysis of our financial condition and results of operations herein, we refer to the reorganized Weatherford Parties as the Successor for periods subsequent to December 13, 2019 and as the “Predecessor” for periods on or prior to December 13, 2019. As a result of the adoption of Fresh Start Accounting and the effects of the implementation of the Plan, our consolidated financial statements subsequent to December 13, 2019 may not be comparable to our consolidated financial statements on or prior to December 13, 2019, and as such, “black-line” financial statements are presented to distinguish between the Predecessor and Successor companies. References to the year ended December 31, 2019 relate to the combined Successor and Predecessor Periods for the year ended December 31, 2019 as the 18 days of the Successor Period is not a significant period of time impacting the combined results. 2019 Irish Directors’ Report and Consolidated Financial Statements | 3 PRINCIPAL ACTIVITIES OF BUSINESS STRATEGY Our primary objective is to build stakeholder value through profitable growth in our core product lines with disciplined use of capital and a strong customer focus. Our customers’ objectives are continually evolving and are currently focused on lowering capital and operational expenditures, generating positive cash flow, reducing emissions, and enhancing safety. Weatherford is aligning its technology development and operations around these trends and expanding its role as a leading “Tier 1 solutions provider” that assists our customers in addressing their key operational challenges related to four domains: • Mature Fields: rejuvenating aging assets from the reservoir to the point of sale through optimizing lift efficiency, restoring wellbore efficiency and integrity, accelerating reservoir recovery, and permanently abandoning wells when they are no longer economic to produce; • Unconventionals: enabling customers to monetize wells by drilling faster, deeper, and cheaper and combating production declines through accurate reservoir evaluation, efficient well construction, effective stimulation, and optimizing production; • Offshore: supporting customers sustain high-margin, long-term production with a focus on reducing rig time, enhancing safety and reliability, and increasing well integrity through the optimization of well placement and construction; • Digitalization and Automation: leveraging our core competencies and applying Industry 4.0, including internet of things (IoT), data analytics, and cloud computing across our many solutions. We are enabling this solution-based focus across our organization through a commitment to improving safety and service quality, embedding a returns-focused mindset in our organization, and developing and commercializing new technologies. MARKETS We are the leading wellbore and production solutions company providing equipment and services to the oil and natural gas exploration and production industry. Demand for our industry’s services and products depends upon commodity prices for oil and gas, the number of oil and natural gas wells drilled, the depthand drilling conditions of wells, the number of well completions, the depletion and age of existing wells and the level of workover activity worldwide. Technology is critical to the oil and natural gas marketplace as a result of the maturity of