Weatherford International (NASDAQ:WFRD) reported first-quarter financial results on Wednesday. The transcript from the company’s first-quarter earnings call has been provided below.
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Summary
Weatherford International PLC reported Q1 2026 revenue of $1.152 billion, adjusted EBITDA of $233 million, and adjusted free cash flow of $85 million.
The company plans to redomesticate from Ireland to Texas, aiming to simplify its corporate structure and enhance shareholder value.
Revenue declined 3% year-over-year due to the divestiture of the pressure pumping business in Argentina and was down 11% sequentially due to seasonality and the Iran conflict.
Strong cash flow and collection improvements were noted, particularly with their key customer in Mexico, contributing to a working capital efficiency improvement.
The company reported operational disruptions in the Middle East due to the Iran conflict, impacting revenue and costs, but expects a rebound in the second half of 2026.
Management is optimistic about the multi-year growth outlook, driven by increased energy security needs and offshore activity, especially in the Middle East and North America.
Weatherford International PLC continues to focus on strategic divestitures of non-core, lower-margin businesses to align with their strategic priorities.
The company anticipates a second-half ramp-up in activity and is optimistic about 2027 growth prospects, with several new contract wins and offshore opportunities.
Full Transcript
OPERATOR
Ladies and gentlemen, thank you for standing by. Welcome to the Weatherford first quarter 2026 results conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation there will be an opportunity to ask questions. To ask a question you may press star and then one on your telephone keypads. To withdraw your questions you may press star and 2. As a reminder, today’s event is being recorded. At this time, I’d like to turn the conference call over to Luke Lemoine, Senior of Corporate Development. Sir, you may begin.
Luke Lemoine (Senior of Corporate Development)
Welcome everyone to the Weatherford International first quarter 2026 earnings conference call. I’m joined today by Grace Elligram, President and CEO and Anuj Executive Vice President, CFO. We’ll start today with our prepared remarks and then open it up for questions. You may download a copy of the presentation slides corresponding to today’s call from our website’s Investor Relations section. I want to remind everyone that some of today’s comments include forward looking statements. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed herein. Please refer to our latest securities and Exchange Commission filings for risk factors and cautions regarding forward looking statements. Our comments today also include non GAAP financial measures. The underlying details and a reconciliation of GAAP to non GAAP financial measures are included in our earnings press release or accompanying slide deck which can be found on our website. As a reminder, today’s call is being webcast and a recorded version will be available on our website’s Investor Relations section following the conclusion of this call. With that, I’d like to turn the call over to Girish.
Girish
Thanks Luke and thank you all for joining our call. I’ll start with an overview of our financial and operational performance followed by a short term outlook on the markets. Anuj will then cover specifics on financial performance, balance sheet, detailed guidance and I will wrap up with some thoughts on the current operating environment and structural market dynamics before opening for QA. To summarize our Q1 2026 performance, we delivered revenue of $1.152 billion, adjusted EBITDA of $233 million at a 20.2% margin and adjusted free cash flow of $85 million. I would like to thank all of our one Weatherford team and especially our Middle east based employees for their focus on customers safety and operational discipline in a complex and challenging environment. I would also like to highlight Our announcement during the quarter of a proposal to redomesticate from Ireland to the United States, specifically Texas, which we believe will simplify our corporate structure, enhance capital management flexibility and support long term shareholder value creation. As illustrated on slide three, revenue declined 3% on a year on year basis, but it is important to note that it was predominantly driven by the divestiture of the pressure pumping business in Argentina. On a sequential basis, revenues were down 11% reflecting typical first quarter seasonality and the conflict in Iraq, partly offset by continued strength in parts of our international portfolio and some second quarter opportunities that materialized earlier. In the first North America was modestly softer as operators maintained tight budgets and U.S. land activity remained under pressure. Latin America declined sequentially as expected, but this was partly offset by higher artificial lift in Argentina. In Mexico, we continued to make meaningful progress in the first quarter. Collections remained strong and consistent, reinforcing our confidence in the new payment mechanisms we discussed on our last call. This not only supported our Q1 cash flow performance, but also contributed to a sequential improvement in working capital efficiency. The Middle East, North Africa and Asia region was impacted by the Iraq conflict in the Middle east, which drove delays, dropped drilling and workover activity and resulted in project suspensions in multiple countries. Since the start of the recent Iraq conflict and over the course of the past few weeks, our priority has been the safety and security of our employees and ensuring business continuity to the extent it was feasible. Each country in the Middle east has been impacted in different ways and we have taken actions in close coordination with customers and advice from local authorities. While the drop in revenue and resultant high decremental margins are the most obvious manifestation financially, we are also working through additional complexities. Freight costs have risen dramatically and with logistical disruptions, there are both delays and higher costs in moving materials and people to the appropriate locations. With a strong manufacturing supply chain base and local expertise in the region, we were able to navigate the first month of the conflict well. There was a financial impact, but that has been offset through contributions from the rest of the international regions and other items in the first quarter. However, with the prolonged nature of the conflict, the impact of lead times, inventory drawdowns, logistical bottlenecks, the impact is expected to show more clearly in the second quarter, both in the region and to shipments outside the region. With the assumption that the conflict is behind us and activity starts to normalize towards the latter part of the quarter, we believe the conflict would result in about $30 million to $50 million profit impact over the first half of the year. However, we are very encouraged about second half 2026 along with increasing confidence in activity levels in 2027 as the region rebounds in response to a growing need for energy security, we believe we will be well positioned to assist our customers in their efforts to normalize operations and provide that energy to the world. From a segment perspective, WCC revenue was largely flat year over year with higher liner hangar activity partly offsetting lower cement addition products and Tubular Running Services activity in MENA. DRE revenue declined 8% year over year, primarily from lower activity in Latin America, MENA and North America, partly offset by higher wireline and drilling services activity in Europe. Pri revenue declined 11% year over year, mostly driven by the sale of our pressure pumping business in Argentina, partly offset by higher subsea intervention activity across all three segments. Our product lines continue to benefit from differentiated technology, a strong installed base and the operational and manufacturing capability we have built over the past several years. Our first quarter adjusted EBITDA margin came in at 20.2%. Typical Q1 seasonality resulted in lower margins and that was further exacerbated starting in March by the Iraq conflict. We remain focused on productivity and cost actions to support margin performance and barring the Iraq conflict persisting, we believe they will result in margin expansion in the second half of 2023. We are also taking further actions to fine tune our portfolio through a series of small non core divestitures. These will each be smaller than our Argentina pressure pumping divestiture. By divesting these businesses should remove lower margin revenue from our portfolio base, reduce capital intensity and align with our strategic priorities. Our adjusted free cash flow for the first quarter was $85 million which was supported by very strong collections across most of our geographies including continued progress on payments from our largest customer in Mexico. Importantly, our Q1 working capital efficiency improved by approximately 100 basis points sequentially reflecting disciplined execution and the positive impact of continued strong collections. We believe free cash flow conversion will improve for the full year versus our prior expectations with continued progress towards our 50% through cycle target. Turning to our segments, slide 7 through 9 lay out key highlights during the quarter we continued to build momentum with new contract wins across our portfolio and key regions. These wins are a testament to our operational and technical capabilities to deliver a range of differentiated technology and cost effective solutions for our customers. I’m especially encouraged by key awards this quarter quarter including a multi year integrated completions contract with Total Energies in Denmark, a five year Tubular Running Services contract with Phu Quoc POC in Vietnam and a multi year contract with Shell to provide artificial lift in Argentina. On the operational side. In our PRI segment we completed the first half a week casing system deployment in the UK sector of Liverpool Bay. We also achieved important milestones in the Kingdom of Saudi Arabia where we set a new global record for extended reach y line work logging over 29,000ft measured depth with our compact well shuttle system successfully executed the first rigless through tubing sand control gravel pack there restoring a shut in gas well without a workover rig and we also successfully trialed our rod lift system at the Jafura gas field. Now turning to our outlook as we near the second half, we are encouraged by a number of contract awards and project startups that are that should lead to noticeable second half growth over the first half. However, it goes without saying that the conflict in the Middle east must conclude and operations must normalize to pre conflict levels. These startups in the second half include Argentina, UAE, Brazil, Australia, Indonesia and Egypt. We are encouraged that second half 2026 international revenues could possibly be up year on year and are constructive on 2027 being a year of growth. Furthermore, we are seeing early signs of improvement in offshore deepwater activity underpinned by rising service related demands in core basins such as Gulf of America, Brazil, the Caribbean and the Caspian Sea. With that, I’d like to turn the call over to Anuj.
Anuj
Thank you Girish Good morning and thank you everyone for joining us on the call. Girish has already shared an overview of our first quarter performance. For a more detailed breakdown of the results, please refer to our press release and accompanying slide deck presentation. My comments today will center around our cash flow working capital balance sheet, liquidity, capital allocation and guidance. Turning to Slide 21 for cash flows and liquidity in the first quarter we generated $85 million of adjusted free cash flow, representing a 36.5% adjusted free cash flow conversion. This compares favorably to the 26.1% conversion we delivered in the first quarter of 2025 and was supported by very strong collections across most of our geographies, including continued progress on collections from our key customer in Mexico. While sizable collections remain outstanding, recent payment trends have remained consistent, reinforcing our confidence in the full year free cash flow outlook. Our adjusted net working capital as a percentage of revenues was 27.9% in the first quarter, a sequential improvement of approximately 100 basis points driven largely by improved collections relative to the revenue base supported by continued collections from our key customer in Mexico. While the year over year comparison remains affected by the revenue base decline, we are encouraged by the direction of travel. All things considered, we remain fully committed to our internal initiatives aimed at achieving the goal of 25% or better. As we stay agile and adapt to evolving market conditions, we continue to execute on a series of cost improvement actions across the company during the first quarter. Our cost optimization efforts remain guided by two objectives. First, we are right sizing elements of our cost structure including headcount, real estate and supply chain footprint to better align with activity levels with a clear focus on ensuring each incremental dollar invested supports profitability. Second, we are maximizing the productivity of the current cost base by leveraging shared services, digital platforms and artificial intelligence to enhance efficiency and margin performance. We have seen the impact of these cost actions in the first quarter and they have helped partially offset the impact of revenue decrementals, pricing pressure, geopolitical conflict in the Middle east and the Argentina divestiture impact during the first quarter CapEx was $54 million or 4.7% of revenues, down approximately $23 million compared to the first quarter of 2025. As we align our budgets with the current market conditions, we continue to expect the midpoint of CAPEX for the full year 2026 to decline relative to 2025. Given our investment in our infrastructure programs, the mix of our capex spend in 2026 will be noticeably different. Our CAPEX on product and service line assets will decline commensurate with market activity and and the completion of build out on key projects, but we will see an increase in IT related spend on our ERP systems. We continue to remain in the 3 to 5% range that we have laid out and will make the appropriate and prudent trade offs through the cycle with cash returns guiding our decisions. In the first quarter of 2026, we returned $30 million to shareholders comprising $20 million in dividends and $10 million in share repurchases, reflecting the 10% increase in the quarterly dividend announced in January. Since the inception of the shareholder return program, we have now returned more than $330 million to shareholders via share repurchases and dividends. Our balance sheet remains very strong. At the end of the first quarter we had approximately $1.05 billion of cash and restricted cash and our net leverage ratio remained well below 0.5 times. This outcome reflects our focus on strengthening the capital structure over time. Our stronger than ever balance sheet provides a solid foundation to not just navigate business operations in a challenging environment, but also pursue strategic opportunities. Turning to second quarter 2026 guidance on slide 22, we expect revenues to be in the range of 1.017 billion to $1.110 billion and adjusted EBITDA to be between 195 million and 220 million. The sequential decline in the range is primarily a function of the Iran conflict and the operational disruptions in the Middle East. We expect adjusted free cash flow in the second quarter to be broadly in line with first quarter levels for the full year 2026. We have greater confidence in the second half ramp, but are refining our guidance ranges to reflect the impact of the Iran conflict. In the first half. Revenues are now expected to be in the range of 4.5 billion to 4.95 billion and adjusted EBITDA is expected to be in the range of 945 million to 1.075 billion. Adjusted free cash flow conversion is now expected to be in the mid 40% range, reflecting increased confidence on collections combined with their operational initiatives and their effective tax rate is expected. Expect it to be in the low to mid 20% range for 2026. Thank you for your time today. I will now pass the call back to Girish for his closing comments.
Girish
Thanks Anuj. Before we open it up to questions, I want to step back and address the macro backdrop as I know it’s the lens every one of you is applying to our results and to our guide. The first quarter unfolded against the most severe disruption to the physical oil market in the industry’s history. I want to acknowledge and recognize the leadership, efforts and resilience of our colleagues, customers and partners across the Middle east region. Our people performed extraordinarily through this period, operations continued in a lot of cases and the attitude and focus of our team was frankly one of the proof points I’m proudest of this quarter. The conflict in Iran, the closure of the Strait of Hormuz in early March and the subsequent damage to infrastructure across the Gulf pulled roughly 20% of seaborne crude and significant LNG volumes out of the market almost overnight. Several well respected sources have indicated this will take months to years to fully repair. The IEA has characterized this as the largest supply disruption in the history of the global oil market and I don’t think that framing is hyperbole. The April 8 ceasefire was a welcome development, but OPEC output supply fell by more than 9 million barrels a day, month on month and prompt physical cargoes are still trading at meaningful premiums to the Strip. Even right now. It is clear with the daily announcements and volatility that the notion of the Strait being completely open to passage …
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