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01/10 16:01
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call revealed mixed signals: strong free cash flow and liquidity, but challenges in Saudi Arabia and Mexico. The Q&A highlighted uncertainties in cash flow improvements and pricing pressures, although there's optimism in technology and M&A strategies. The guidance shows moderate growth, tempered by tariff impacts. The stock is expected to remain stable over the next two weeks, with no major catalysts for a significant move.
Adjusted EBITDA margins 21.1%, which slightly declined relative to Q1. The decline was due to margin dilution from tariff cost pass-throughs and rising pricing pressure, mitigated by volume-based cost adjustments and structural cost reductions.
Adjusted free cash flow $79 million in Q2 2025, with a 31.1% free cash flow conversion rate versus 26.1% in Q1 2025. This was achieved despite minimal payments from Mexico, showcasing a focus on cash generation.
Net working capital efficiency 26.7% in Q2 2025, up from 26.3% in Q2 2024. The increase was due to a lower revenue base and minimal collections from Mexico.
CapEx $54 million in Q2 2025, down from $77 million in Q1 2025. The reduction was driven by adjustments to align with market conditions and completion of spending related to the Brazil Sub-sea intervention contract.
Share repurchase Approximately $34 million worth of shares repurchased in Q2 2025, as part of a broader $186 million buyback over the past 4 quarters.
Dividends $0.25 per share quarterly dividend paid in Q2 2025, marking the fourth consecutive quarterly dividend.
Net leverage ratio Less than 0.5x, with approximately $1 billion of cash and restricted cash, and liquidity of approximately $1.3 billion, the highest level since emergence.
Restructuring and severance charges $11 million in Q2 2025, following $29 million in Q1 2025, as part of cost reduction actions.
TITAN RS technology: Successfully completed a field trial for Equinor in Norway, delivering a full casing cut and recovery solution for the plug and abandonment market.
Cementation products and Liner Hanger systems: Awarded contracts by bp in Offshore U.K. for CO2 storage projects and other services.
Intervention Services and Drilling Tools: Secured a 3-year contract with Shell in the Gulf of America.
Middle East and North Africa: Achieved sequential growth despite a softened market in Saudi Arabia.
Latin America: Stabilized activity levels in Mexico after a 60% decline and adjusted cost structures accordingly.
ESSR region: Growth driven by project start-ups in Europe and FX benefits.
Cost optimization: Reduced headcount by over 1,500 since Q3 2024, saving $125 million annually.
Adjusted EBITDA margins: Maintained at 21.1% despite market pressures.
Free cash flow: Generated $79 million in Q2 2025, with a 31.1% conversion rate.
Shareholder returns: Paid four quarterly dividends of $0.25 per share and repurchased $186 million worth of shares over the past year.
Cost structure transformation: Implemented a multiyear program focused on sustainable productivity gains through technology and lean processes.
Market Headwinds: Significant market headwinds, including divestitures in Argentina and minimal payments from Mexico, have impacted revenue and adjusted EBITDA.
Mexico Operations: Revenue from Mexico is expected to decline by approximately 60% this year, with minimal payments and uncertainty around future collections.
Saudi Arabia Market: The market in Saudi Arabia has softened, with a likely similar trajectory in the second half of the year, leading to margin dilution and rising pricing pressure.
Tariff Impacts: Tariff cost pass-throughs and rising pricing pressure are causing margin dilution, with greater impacts expected in the second half of 2025.
Global Market Uncertainty: The international market has softened, with increased caution and a slowdown in customer spending due to stable commodity prices and trade discussions causing uncertainty.
OPEC+ Supply Pressure: OPEC+ adding supply back to the market is increasing pressure on the global oil supply-demand balance, potentially leading to customer spending cuts.
Revenue Declines: North America revenues are expected to decline by high single digits year-on-year, and international revenues are expected to decline by low to mid-double digits.
Cost Structure Adjustments: The company has reduced headcount by over 1,500 and lowered annualized personnel expenses by more than $125 million, but much of this is offset by revenue declines.
CapEx Adjustments: CapEx has been reduced to align with market conditions, but further declines are expected, potentially impacting future growth opportunities.
Customer Spending Cuts: Some customers have signaled future spending cuts, contributing to uncertainty and sluggish activity levels in the second half of 2025 and first half of 2026.
Free Cash Flow Uncertainty: Payments from Mexico remain uncertain, impacting free cash flow visibility and financial planning.
Market Outlook: The overall international market has softened over the past year, a trend that could continue well into 2026. Market headwinds are expected to persist for at least another 12 months, with sluggish activity levels anticipated in the second half of 2025 and the first half of 2026. The company expects a milder global downturn compared to the last three cycles due to industry discipline.
Revenue Projections: 2025 North America revenues are expected to decline by high single digits year-on-year. International revenues are projected to decline by low double to mid-double digits. Adjusting for Mexico activity declines and Argentina divestitures, 2025 international revenues are expected to decline by low to mid-single digits.
EBITDA and Margins: The company expects to deliver EBITDA margins in the low 20% range for 2025, despite potential annualized double-digit revenue declines. Adjusted EBITDA for Q3 2025 is expected to be between $245 million and $265 million, with margins slightly improving from Q2 levels.
Capital Expenditures (CapEx): CapEx is expected to trend down over the course of 2025, landing in the range of 3% to 5% of revenues for the full year.
Free Cash Flow: Free cash flow conversion is expected to increase by 100 to 200 basis points year-on-year in 2025. Q3 2025 free cash flow is expected to be flat to slightly up from Q2 levels, with another increase anticipated in Q4.
Geographic and Segment Growth: In the second half of 2025, notable growth is expected in Brazil, North America offshore, UAE, Kuwait, Iraq, Australia, Azerbaijan, and Indonesia. However, U.S. land and Saudi Arabia are expected to face headwinds.
Quarterly Dividends: Weatherford has paid 4 quarterly dividends of $0.25 per share.
Share Repurchase Program: Weatherford repurchased approximately $186 million worth of shares over the past 4 quarters, including $34 million during Q2 2025. The company remains committed to its buyback program with ample capacity under its $500 million authorization.
The earnings call presents a mixed picture: strong EBITDA margin improvements and cost optimization are positives, but revenue declines and market headwinds in key regions are concerning. The Q&A highlights cautious optimism, particularly in Mexico and Saudi Arabia, but also reveals uncertainties in pricing pressures and future spending. The positive aspects are counterbalanced by the cautious guidance and market challenges, leading to a neutral sentiment.
The earnings call revealed mixed signals: strong free cash flow and liquidity, but challenges in Saudi Arabia and Mexico. The Q&A highlighted uncertainties in cash flow improvements and pricing pressures, although there's optimism in technology and M&A strategies. The guidance shows moderate growth, tempered by tariff impacts. The stock is expected to remain stable over the next two weeks, with no major catalysts for a significant move.
The earnings call reveals several negative factors: headcount reductions, uncertain customer spending, potential revenue decline, and unclear management responses in the Q&A. Despite stable dividends and share repurchases, the guidance reduction and market conditions indicate a negative outlook. The stock is likely to react negatively, with a potential decline of -2% to -8% over the next two weeks.
The earnings call highlights several challenges: revenue declines in North America and international markets, significant activity drops in Mexico and Russia, and near breakeven free cash flow in Q1. While there are positive elements like share repurchases and strong liquidity, the negative market outlook and management's unclear responses on recovery timelines overshadow these. The Q&A section further emphasizes the challenges in Mexico and Russia, and the inability of Saudi growth to offset these declines. Overall, the sentiment leans negative, likely leading to a stock price decline.
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