e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, DC
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2007
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission file number 1-31339
WEATHERFORD INTERNATIONAL
LTD.
(Exact name of registrant as
specified in its charter)
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Bermuda
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98-0371344
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(State or other jurisdiction
of
incorporation or organization)
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(IRS Employer Identification
No.)
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515 Post Oak Boulevard
Suite 600
Houston, Texas
(Address of principal
executive offices)
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77027-3415
(Zip Code)
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Registrants telephone number, including area code:
(713) 693-4000
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Name of each exchange on which registered
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Common Shares, $1.00 Par Value
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Note Checking the box above will not relieve
any registrant required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, and accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Ruler
12b-2 of the
Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Act).
Yes o No þ
The aggregate market value of the voting stock held by
nonaffiliates of the registrant as of June 30, 2007 was
approximately $14.2 billion based upon the closing price on
the New York Stock Exchange as of such date.
Indicate the number of shares outstanding of each of the
registrants classes of common shares, as of the latest
practicable date:
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Title of Class
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Outstanding at February 15, 2008
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Common Shares, $1.00 Par Value
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339,224,381
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DOCUMENTS
INCORPORATED BY REFERENCE
Certain information called for by Items 10, 11, 12, 13 and
14 of Part III will be included in an amendment to this
annual report on
Form 10-K
or incorporated by reference from the registrants
definitive proxy statement for the annual meeting to be held on
June 2, 2008.
TABLE OF CONTENTS
PART I
Weatherford International Ltd. (NYSE:WFT) is one of the
worlds leading providers of equipment and services used
for the drilling, evaluation, completion, production and
intervention of oil and natural gas wells. We were originally
incorporated in Delaware in 1972, and as a result of our
corporate reorganization in 2002, are now incorporated in
Bermuda. Many of our businesses, including those of Weatherford
Enterra, have been operating for more than 50 years.
When referring to Weatherford and using phrases such as
we and us, our intent is to refer to
Weatherford International Ltd. and its subsidiaries as a whole
or on a regional basis, depending on the context in which the
statements are made.
We operate in approximately 100 countries through approximately
800 service, sales and manufacturing locations, which are
located in nearly all of the oil and natural gas producing
regions in the world.
We reviewed the presentation of our reporting segments during
the first quarter of 2007 in connection with an organizational
realignment. Based on this review, we determined that our
operational performance is segmented and reviewed on a
geographic basis. As a result, we realigned our financial
reporting segments and now report the following regions as
reporting segments: (1) North America, (2) Latin
America, (3) Europe/West Africa/the Commonwealth of
Independent States (CIS) and (4) Middle
East/North Africa/Asia. Our historical segment data previously
reported under the Evaluation, Drilling & Intervention
Services and Completion & Production Systems divisions
have been restated for all periods to conform to the new
presentation.
Our growth strategy has included a mix of organic product and
service development, the acquisition of key technologies,
products and services and several notable divestitures. One of
our most substantial acquisitions was in August 2005, when we
acquired Precision Energy Services and Precision Drilling
International. Precision Energy Services broadened our wireline
and directional capabilities and strengthened our controlled
pressure drilling and testing product lines. Precision Drilling
International added land rigs to our portfolio, primarily in the
Eastern Hemisphere.
Our divestitures include the April 2000 spin-off of our Drilling
Products Division to our shareholders through a distribution of
the stock of our Grant Prideco, Inc. subsidiary. In February
2001, we completed the merger of essentially all of our
Compression Services division into a subsidiary of Universal
Compression Holdings, Inc. in exchange for 13.75 million
shares of Universal common stock. During 2004 and 2005, we sold
our interest in Universal Compression Holdings, Inc. In 2005, we
sold our non-core Gas Services International compression
fabrication business. In 2007, we approved a plan to sell our
oil and gas development and production business. A portion of
this business was sold in late 2007, and we expect to complete
the sale of the remaining portion during the first half of 2008.
Our compression fabrication and oil and gas development
businesses have been reflected as discontinued operations in our
financial statements.
Our principal executive offices are located at 515 Post Oak
Boulevard, Suite 600, Houston, Texas 77027. Our telephone
number is
(713) 693-4000,
and our Internet address is www.weatherford.com. General
information about us, including our Corporate Governance
Policies and charters for the committees of our board of
directors, can be found on our Web site. On our Web site we make
available, free of charge, our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file or furnish
them to the SEC. The public may read and copy any materials we
have filed with the SEC at the SECs Public Reference Room
at 100 F Street, NE, Room 1580, Washington, DC
20549. Information on the operation of the Public Reference Room
may be obtained by calling the SEC at
1-800-SEC-0330.
The SEC maintains an internet site that contains our reports,
proxy and information statements, and our other SEC filings. The
address of that site is www.sec.gov.
The following is a summary of our business strategies and the
markets we serve. We have also included a description of our
products and services offered and our competitors. Segment
financial information appears in Item 8. Financial
Statements and Supplementary Data Notes to
Consolidated Financial Statements Note 21.
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Strategy
Our primary objective is to provide our shareholders with
above-average returns on their investment through income growth
and asset appreciation.
Principal components of our strategy include:
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Continuously improving the efficiency, productivity and quality
of our products and services and their respective delivery in
order to grow revenues and operating margins in all of our
geographic markets at a rate exceeding underlying market
activity;
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Through a commitment to innovation and invention, developing and
commercializing new products and services capable of meeting
evolving needs of our customers; and
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Further extending our global infrastructure in scope and scale
at a level consistent with meeting customer demand for our
products and services in an efficient manner.
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Markets
We are a leading provider of equipment and services to the oil
and natural gas exploration and production industry. Demand for
our industrys services and products depends upon the
number of oil and natural gas wells being drilled, the depth and
drilling conditions of wells, the number of well completions and
the level of workover activity worldwide.
During the mid-1980s, the drilling industry contracted sharply,
correcting a condition of significant overcapacity that existed
in the supply of oilfield service and equipment. For the past
20 years, global rig count has cycled up and down with
factors such as world economic and political trends that
influence supply and demand for energy, the price of oil and
natural gas and the level of exploration and drilling for those
commodities.
As a result of the maturity of the worlds oil and natural
gas reservoirs, accelerating production decline rates and the
focus on complex deepwater prospects, technology has become
increasingly critical to the marketplace. Clients continue to
seek, test and prove production-enabling technologies at an
increasing rate. Technology is an important aspect of our
products and services, as it helps us provide our clients with
more efficient tools to find and produce oil and natural gas. We
have invested a substantial amount of our time and resources in
building our technology offerings. We believe our products and
services enable our clients to reduce their costs of drilling
and production
and/or
increase production rates. Furthermore, these offerings afford
us additional opportunities to sell our traditional core
products and services to our clients.
Product
Offerings
Our product offerings can be grouped into ten service lines:
1) artificial lift systems; 2) drilling services;
3) well construction; 4) drilling tools;
5) completion systems; 6) wireline and evaluation
services; 7) re-entry and fishing; 8) stimulation and
chemicals; 9) integrated drilling; and 10) pipeline
and specialty services. The following discussion provides an
overview of our various product offerings. With the exception of
integrated drilling, our product line offerings are provided in
all of our regional segments. Our integrated drilling product
line is primarily offered in the Eastern Hemisphere.
Artificial
Lift Systems
Artificial lift systems are installed in oil wells and, to a
lesser extent, natural gas wells that do not have sufficient
reservoir pressure to raise the produced hydrocarbon to the
surface. These systems supplement the natural reservoir
pressures to produce oil or natural gas from the well. There are
six principal types of artificial lift technologies used in the
industry. We are able to provide all forms of lift, including
progressing cavity pumps, reciprocating rod lift systems, gas
lift systems, electrical submersible pumps, hydraulic lift
systems, plunger lift systems and hybrid lift systems. We also
offer wellhead systems and production optimization.
Progressing Cavity Pumps A progressing cavity
pump (PCP) is a downhole pump driven by an above-ground electric
motor system connected to it by a coupled rod or continuous rod
string. These pumps are designed to
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work in wells of depths up to 6,000 feet with production
between 10 and 4,500 barrels of oil per day. PCPs are
particularly useful in heavy-oil-producing basins around the
world.
Reciprocating Rod Lift Systems A
reciprocating rod lift system is an artificial lift pumping
system that uses an above-ground mechanical unit connected to a
sucker rod and a downhole pump. It uses an
up-and-down
suction process to lift the oil from the reservoir.
Reciprocating rod lift is used primarily for the production of
oil from wells of depths up to 14,000 feet and production
rates from 20 to 8,000 barrels per day.
Gas Lift Systems Gas lift is a form of
artificial lift that uses natural gas to lift oil in a producing
reservoir to the surface. The process of gas lift involves the
injection of natural gas into the well through an above-ground
injection system and a series of downhole mandrels and gas lift
valves in the production tubing string. The injected gas acts as
the lifting agent for the oil. Gas lift systems are used
primarily for offshore wells (including deepwater and
ultra-deepwater) and for wells that have a high component of gas
in the produced fluid or have a gas supply near the well. Gas
lift systems are designed to operate at depths up to
15,000 feet with volumes up to 20,000 barrels of oil
per day.
Electric Submersible Pumps An electric
submersible pump (ESP) is an electrically powered downhole
pumping system that is typically landed near the perforations of
the producing reservoir. To lift fluid to the surface, the
system converts electrical power to centrifugal motion via the
rotating motor and pump shafts. Electrical power is transmitted
downhole through a power cable that runs the length of the
production tubing. ESPs are designed to operate at depths of up
to 13,500 feet with produced fluid volumes ranging from 100
to 60,000 barrels per day. We sold our ESP product line in
January 2008 to Premier Business Solutions (PBS), in which we
have an equity investment. PBS conducts business in Russia and
is one of the worlds largest electric submersible pump
manufacturers by volume.
Hydraulic Lift Systems A hydraulic lift oil
pumping system uses an above-ground surface power unit to
operate a downhole hydraulic pump (jet or piston) to lift oil
from the reservoir. These systems are designed for wells of
depths up to 20,000 feet and volumes up to
15,000 barrels per day. Hydraulic pumps are well suited for
wells with high volumes and low solids.
Plunger Lift Systems Plunger lift is the only
artificial lift method that requires no assistance from outside
energy sources. The typical system consists of a plunger (or
piston), top and bottom bumper springs, a lubricator and a
surface controller. As the plunger travels to the surface, it
creates a solid interface between the lifted gas below and
produced fluid above to maximize lift energy. Plunger lift is a
low-cost, easily maintained method of lift. It is particularly
useful for dewatering gas wells and increasing production from
wells with emulsion problems. Plunger lift also keeps wells free
of paraffin and other tubing deposits and can be used to produce
a well to depletion.
Hybrid Lift Systems We offer a variety of
hybrid artificial lift systems which are engineered for special
applications and may incorporate two or more of the artificial
lift methods described above.
Wellhead Systems We offer a line of
conventional wellhead equipment and valves manufactured to the
latest API industry specifications and client requirements,
including conventional surface wellheads through 20,000 psi;
gate valves from 2,000 to 20,000 psi; complete wellhead systems
(drill-through, multi-bowl, unitized and mud-line); and all the
accessories and aftermarket services to go with them.
Production Optimization Production
optimization is the process of increasing production, reducing
production costs, or both, of oil and natural gas fields. The
ultimate goal is to assist operators in making better decisions
that maximize profits through improved well productivity
management. The major benefits of production optimization are
increased production with decreased operating costs resulting in
increased bottom-line profits for producers.
Weatherford offers products for optimizing at the well,
reservoir and field level. Both hardware and software are
combined into solutions that fit the customers specific
needs for optimizing production.
Well Optimization For wellsite intelligence,
we offer specific controllers for each type of artificial lift.
These controllers contain computers with specific logic to
control the well during changes in the reservoir,
artificial-lift equipment or well components. The desktop
software provides advanced analytical tools that allow the
operator to make changes by controlling the well directly or by
changing the parameters that the controller is using to operate
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the well. In 2007, we enhanced our plunger lift controller and
added a new variable speed drive for progressing cavity pumps
(PCP), rod pumping, and electric submersible pumps (ESP).
Flow Measurement Our Production Optimization
group develops metering and software solutions to supply
real-time production information to the operator, allowing
accurate production measurements as a part of asset optimization.
Field Optimization We provide tools for
optimizing workflow. These software tools assist the operator in
tracking the operations needed for optimal field management.
Tasks such as chemical injection, well workovers and injection
allocation can easily generate unnecessary expenses by
inefficient prioritization of tasks, poor recordkeeping and lack
of analysis of the effectiveness of the total field operations.
The combination of our experienced consultants and advanced
software tools help the operator optimize operations for entire
fields.
Drilling
Services
These capabilities include directional drilling, measurement
while drilling (MWD), logging while drilling (LWD), rotary
steerable systems (RSS), Controlled Pressure
Drilling®
(CPD®)
& Well Testing and drilling-with-casing
(DwCtm)
and drilling-with-liner
(DwLtm)
systems.
Directional drilling involves the personnel, equipment and
engineering required to control the direction of a wellbore.
Directional drilling allows drilling of multiple wells from a
single offshore platform or a land-based pad site. It also
allows drilling of horizontal wells and penetration of multiple
reservoir pay zones from a single wellbore. We supply a range of
specialized, patented equipment for directional drilling,
including:
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Measurement while drilling (MWD) and logging while drilling
(LWD). MWD and LWD measure, respectively,
wellbore trajectory and formation properties, in real time,
while the well is being drilled.
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Rotary steerable systems (RSS). These systems
allow control of wellbore trajectory while drilling at the
surface with continuous rotation of the drillstring. They are
crucial for enabling long, step-out, directional wells and for
reducing completion-running complications resulting from abrupt
hole-angle changes caused by conventional drilling methods.
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Directional drilling services. These services
include surveying, design and operational support for
directional and horizontal drilling; products include drilling
motors and other associated equipment.
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Our directional drilling capabilities are supported by our
Advantage Engineering facility in Houston, which houses
qualified engineers, scientists and technicians, all focused on
developing technologies for the MWD/LWD and directional drilling
markets, both land based and offshore.
Controlled Pressure
Drilling®
(CPD®)
& Well Testing Well testing uses
specialized equipment and procedures to obtain essential
information about oil and gas wells after the drilling process
has been completed. Typical information derived may include
reservoir performance, reservoir pressure, formation
permeability, formation porosity and formation fluid
composition. Weatherfords CPD & Well Testing
offerings are provided through three disciplines:
1) Managed Pressure Drilling, 2) Underbalanced
Drilling and 3) Air Drilling.
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Managed Pressure Drilling (MPD) This
discipline provides an advanced form of primary well control,
using a closed, pressurized fluid system that more precisely
controls the wellbore pressure profile than mud weight
adjustments alone. The main objective of MPD is to optimize
drilling processes by decreasing non-productive time and
mitigating drilling hazards.
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Underbalanced Drilling (UBD) This discipline
is used in development, exploration and mature field
applications to minimize formation damage and maximize
productivity. UBD is defined as drilling with bottomhole
pressure that is maintained below reservoir pressure to
intentionally invite fluid influx. This technique permits the
reservoir to flow while drilling takes place, thereby protecting
the formation from damage by the drilling fluids.
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Air Drilling This discipline applies reduced
density fluid systems to drill sub-hydrostatically. Air drilling
is used primarily in hard rock applications to reduce drilling
costs by increasing the rate of penetration.
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A full range of downhole equipment, such as high temperature
motors, wireline steering tools, drillpipe, air rotary hammer
drills, casing exit systems, downhole deployment valves and
downhole data acquisition equipment, make our product offerings
unique.
A related application is our separation business, which supplies
personnel and equipment on a wellsite to recover a mixture of
solids, liquids and gases from oil and gas wells. These services
are used during drilling, after stimulation or after
re-completion to clean up wells. The operator requires that a
well be properly cleaned before undertaking a well test to
ensure that the true deliverability of the well is attained and
that debris and spent stimulation chemicals do not ultimately
flow to the process plant.
Drilling-with-casing and drilling-with-liner
systems. These systems allow operators to
simultaneously drill, case and evaluate oil and natural gas
wells. Our DwC and DwL techniques eliminate downhole complexity,
reducing expensive rig modifications and the number of trips
downhole. Consequently, well construction is simplified, and
productivity can be improved when drilling through the reservoir.
Well
Construction
This grouping includes the primary services and products
required to construct a well and spans tubular running services,
cementation tools, liner systems and solid tubular expandable
technologies.
Tubular Running Services These services
consist of a wide variety of tubular connection and installation
services for the drilling, completion and workover of an oil or
natural gas well. We provide tubular handling, preparation,
inspection and wellsite installation services from a single
source. We offer a suite of products and services for improving
rig floor operations by reducing personnel exposure, increasing
operational efficiency and improving safety. We also specialize
in critical-service installations where operating conditions,
such as downhole conditions
and/or
metallurgical characteristics, call for specific handling
technology.
Cementation Tools Cementing operations
comprise one of the most expensive phases of well completion. We
produce specialized equipment that allows operators to
centralize the casing throughout the wellbore and control the
displacement of cement and other fluids. Our cementing engineers
also analyze complex wells and provide recommendations to help
optimize cementing results.
Liner Systems Liner hangers allow suspension
of strings of casing within a wellbore without the need to
extend the casing to the surface. Most directional wells include
one or more liners to optimize casing programs. We offer both
drilling and production liner hangers. Drilling liners are used
to isolate areas within the well during drilling operations.
Production liners are used in the producing area of the well to
support the wellbore and to isolate various sections of the well.
Solid Tubular Expandable Technologies
Proprietary expandable tools are being developed for downhole
solid tubular applications in well remediation, well completion
and well construction. Our solid tubular expandable products
include the
MetalSkin®
line, used for well cladding to shut off zones, retro-fit
corroded sections of casing and strengthen existing casing.
MetalSkin open-hole clad systems are used for controlling
unwanted fluid loss or influx and slim-bore drilling liners.
Slim-bore and, ultimately, monobore liner systems are designed
to allow significant cost reductions by reducing consumables for
drilling and completion of wells, allowing use of smaller rigs
and reducing cuttings removal needs. The benefits are derived
because of the potential of expandable technologies to
significantly reduce or eliminate the reverse-telescoping
architecture inherent in traditional well construction.
Drilling
Tools
We design and manufacture patented tools, including our drilling
jars, rotating control devices and other pressure-control
equipment. We also offer a broad selection of in-house or
third-party manufactured equipment for the drilling, completion
and workover of oil and natural gas wells. We offer these
proprietary and nonproprietary drilling tools to our
clients primarily operators and drilling
contractors on a rental basis, allowing the clients
to use unique equipment without the cost of holding that
equipment in inventory.
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Our drilling tools include the following:
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Drillpipe and related drillstem tools, drill collars,
heavyweight pipe and drilling jars;
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Downhole tools;
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Pressure-control equipment such as blowout preventers,
high-pressure valves, accumulators, adapters and
choke-and-kill
manifolds; and
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Tubular handling equipment such as elevators, spiders, slips,
tongs and kelly spinners.
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Completion
Systems
We offer our clients a comprehensive line of completion tools
and sand screens. These products and services include the
following:
Completion Tools These tools are incorporated
into the tubing string used to transport hydrocarbons from the
reservoir to the surface. We offer a wide range of devices for
enhancing the safety and functionality of the production string,
including permanent and retrievable packer systems, subsurface
safety systems, flow controls and tool string, specialized
downhole isolation valves and associated servicing equipment.
During the past 10 years, we have evolved our portfolio
from one of basic cased-hole commodity products to one that
focuses more heavily on premium offerings for deepwater and
high-pressure/high-temperature environments.
Sand Screens Sand production often results in
premature failure of artificial-lift and other downhole and
surface equipment and can obstruct the flow of oil and natural
gas. To remedy this issue, we provide two different sand screen
approaches: conventional and expandable.
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Conventional sand screens: These products are
used in the fluid-solid separation processes and have a variety
of product applications. Our primary application of well screens
is for the control of sand in unconsolidated formations. We
offer premium, pre-pack and wire-wrap sand screens. We also
offer a
FloRegtm
line of inflow control devices that balance horizontal wellbore
production, ultimately maximizing reservoir drainage. We also
operate the water well and industrial screen business of Johnson
Screens. Served markets include water well, petrochemical,
wastewater treatment and surface water intake, mining and
general industrial applications.
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Expandable Sand Screens (ESS) Our
ESS®
systems are proprietary step-change sand-control devices that
reduce cost and improve production. An ESS system consists of
three layers, including slotted base pipe, filtration screens
and an outer protective shroud. The system can be expanded using
a fixed cone
and/or
compliantly using our proprietary axial and rotary expansion
system. This system aids productivity because it stabilizes the
wellbore, prevents sand migration and has a larger inner
diameter. ESS technology can replace complex gravel-packing
techniques in many sand-control situations.
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Reservoir Optimization Our intelligent
completion technology (ICT) uses optical sensing to allow
operators to remotely monitor the downhole pressure,
temperature, flow rate, phase fraction and seismic activity of
each well and the surrounding reservoir. This advanced
monitoring capability allows the operator to monitor the
reaction of the reservoir to the production of the well.
Combining this monitoring with multiple-zone downhole flow
control allows field pressure management and shutoff of unwanted
flows of water or gas.
Wireline
and Evaluation Services
Wireline services measure the physical properties of underground
formations to help determine the location and potential
deliverability of oil and gas from a reservoir. Wireline
services are provided from surface logging units, which lower
tools and sensors into the wellbore mainly on a single or
multiple conductor wireline.
The provision of wireline and evaluation services is divided
into five categories: open hole wireline, geoscience services,
cased hole wireline, slickline services and integrated
evaluation services:
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Open Hole Wireline This service helps locate
oil and gas by measuring certain characteristics of geological
formations and providing permanent records called
logs. Open hole logging can be performed
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at different intervals during the well drilling process or
immediately after a well is drilled. The logging data provides a
valuable benchmark to which future well management decisions may
be referenced. The open hole sensors and tools are used to
determine well lithology and the presence of hydrocarbons.
Formation characteristics such as resistivity, density and
porosity are measured using electrical, nuclear, acoustic,
magnetic and mechanical technologies.
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The log data is then used to characterize the reservoir and
describe it in terms of porosity, permeability, oil, gas or
water content and an estimation of productivity. Wireline
services can relay this information from the wellsite on a
real-time basis via a secure satellite transmission network and
secure Internet connection to the clients office for
faster evaluation and decision making.
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Geoscience Services This business unit,
consisting of geologists, geophysicists, and drilling,
completion, production and reservoir engineers, serves as the
interdisciplinary bridge across our diverse product lines to
support client efforts to maximize their oil and gas assets for
the life of the well from well planning through
drilling, evaluation, completion, production, intervention and,
finally, abandonment.
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Major computing centers in Calgary and Houston, along with
branches in Europe, the Middle East and Latin America, use the
latest technology to deliver data to our clients
from real-time (LWD) geosteering for critical well
placement decisions to ongoing reservoir monitoring with
permanent intelligent completion sensors. We provide
advanced reservoir solutions by incorporating open hole, cased
hole and production data.
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Cased Hole Wireline This service is performed
at various times throughout the life of the well and includes
perforating, completion logging, production logging and casing
integrity services. Perforating creates the flow path between
the reservoir and the wellbore. Production logging can be
performed throughout the life of the well to measure
temperature, fluid type, flow rate, pressure and other reservoir
characteristics. In addition, cased hole services may involve
wellbore remediation, which could include the positioning and
installation of various plugs and packers to maintain production
or repair well problems, and casing inspection for internal or
external abnormalities in the casing string.
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SlicklineServices This service uses a solid
steel or braided nonconductor line, in place of a single or
multiple conductor braided line used in electric logging, to run
downhole memory tools, manipulate downhole production devices
and provide fishing services primarily in producing wells.
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Integrated Evaluation Services We have
expertise in wellsite sampling, core management services,
geomechanical analysis and the evaluation of unconventional
reservoirs.
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Re-entry
and Fishing
Our re-entry, fishing and thru-tubing services help clients
repair wells that have mechanical problems or that need work to
prolong production of oil and natural gas reserves.
Fishing Services Fishing services are
provided through teams of experienced fishing tool supervisors
and a comprehensive line of fishing and milling tools. Our teams
provide conventional fishing services, such as removing wellbore
obstructions, including stuck or dropped equipment, tools,
drillstring components and other debris, that have been left
behind unintentionally during the drilling, completion or
workover of new and old wells. Specialty fishing tools required
in these activities include fishing jars, milling tools, casing
cutters, overshots and spears. Our Fishing Services business
unit also provides well patches and extensive
plug-and-abandonment
products.
Re-entry Services Our re-entry services
include casing exit services and advanced multilateral systems.
Conventional and advanced casing exit systems allow sidetrack
and lateral drilling solutions for clients who either cannot
proceed down the original well track or want to drill lateral
wells from the main or parent wellbore.
Thru-tubing Services Thru-tubing services are
used in well re-entry activity to allow operators to perform
complex drilling, completion and cementing activities from
existing wellbores without removing existing production systems.
We provide a full range of thru-tubing services and products,
including drilling motors, casing exits, fishing and milling,
zonal isolation packers and other well remediation services.
7
Stimulation
and Chemicals
We offer our clients advanced chemical technology and services
for safer and more effective production enhancement. These
products and services include the following:
Fracturing Technologies Hydraulic reservoir
fracturing (fracturing) is a stimulation method
routinely performed on oil and natural gas wells in
low-permeability reservoirs to increase productivity and oil and
gas recovery. Current operations are located in most major
fracturing markets within the U.S.
Production Chemical Systems Our Engineered
Chemistry®
business combines proprietary chemical solutions with internally
developed oilfield equipment technologies. Our high-performance
chemistry solutions include: customized chemical solutions for
production, refining, completion, water treatment and other
industrial processes; a total service package (product
selection, application and optimization); and precise
formulations and multi-functional chemical formulations that
include the only formulas certified for capillary injection.
Capillary Injection Technology and Services
Capillary technology maximizes well production while protecting
tubular goods. With systems installed in live wells in just
three to four hours, reservoir production is not interrupted.
Integrated
Drilling
Our land drilling business was owned and operated under the name
of Weatherford Drilling International. The majority of our rigs
are located in the Eastern Hemisphere. We also have the ability
to offer project management services to our clients, in which we
provide a number of products and services needed to drill and
complete a well, including the rig.
Pipeline
and Specialty Services
We provide a range of services used throughout the life cycle of
pipelines and process facilities, onshore and offshore. Our
pipeline group can meet all the requirements of the pipeline,
process, industrial and energy markets worldwide. We also can
provide any service (or package of services) carried out on
permanently installed client equipment that involves inspecting,
cleaning, drying, testing, improving production, running or
establishing integrity from the wellhead out.
Competition
We provide our products and services worldwide, and compete in a
variety of distinct segments with a number of competitors. Our
principal competitors include Baker Hughes, BJ Services,
Halliburton, Schlumberger and Smith International. We also
compete with various other regional suppliers that provide a
limited range of equipment and services tailored for local
markets. Competition is based on a number of factors, including
performance, safety, quality, reliability, service, price,
response time and, in some cases, breadth of products.
Other
Business Data
Raw
Materials
We purchase a wide variety of raw materials as well as parts and
components made by other manufacturers and suppliers for use in
our manufacturing. Many of the products sold by us are
manufactured by other parties. We are not dependent on any
single source of supply for any of our raw materials or
purchased components.
Customers
Our principal customers consist of major and independent oil and
natural gas producing companies. During 2007, 2006 and 2005,
none of our customers individually accounted for more than 10%
of consolidated revenues.
8
Research
and Development and Patents
We maintain world-class technology and training centers
throughout the world. Our 34 research, development and
engineering facilities are focused on improving existing
products and services and developing new technologies to meet
customer demands for improved drilling performance and enhanced
reservoir productivity. Our expenditures for research and
development totaled $169.3 million in 2007,
$149.4 million in 2006 and $107.4 million in 2005.
As many areas of our business rely on patents and proprietary
technology, we have followed a policy of seeking patent
protection both inside and outside the U.S. for products
and methods that appear to have commercial significance. In the
U.S., we currently have 1,089 patents issued and over 419
pending. We have 1,881 patents issued in international
jurisdictions and over 1,401 pending. We amortize patents over
the years expected to be benefited, ranging from 3 to
20 years.
Although in the aggregate our patents are important to the
manufacturing and marketing of many of our products, we do not
believe that the loss of any one of our patents would have a
material adverse effect on our business.
Seasonality
Weather and natural phenomena can temporarily affect level of
demand for our products and services. Spring months in Canada
and winter months in the North Sea tend to negatively affect
operations. In the summer of 2005, the Gulf of Mexico suffered
an unusually high number of hurricanes with unusual intensity
that adversely impacted our operations. The widespread
geographical locations of our operations serve to mitigate the
impact of the seasonal nature of our business.
Federal
Regulation and Environmental Matters
Our operations are subject to federal, state and local laws and
regulations relating to the energy industry in general and the
environment in particular.
In January 2003, a subsidiary of Precision Energy Services was
notified by the U.S. Environmental Protection Agency
(EPA) that it was a potentially responsible party to
the Gulf Nuclear Superfund Sites in Odessa, Tavenor and Webster,
Texas. Based upon the information provided, it appears we will
be classified as a de minimus party. Over the last three
years, we have also been named as de minimus potentially
responsible party in several other state and federal
governmental superfund sites and have settled all of these
matters for an aggregate of approximately $50,000. In February
2008, we paid a civil penalty of $208,000 to the Federal
Aviation Administration to settle a complaint regarding the
improper labeling of hazardous materials (lithium batteries)
that were to be shipped aboard a commercial airliner.
Our 2007 expenditures to comply with environmental laws and
regulations were not material, and we currently expect the cost
of compliance with environmental laws and regulations for 2008
also will not be material.
Employees
At December 31, 2007, we employed approximately
38,000 employees. Certain of our operations are subject to
union contracts. These contracts, however, cover less than two
percent of our employees. We believe that our relationship with
our employees is generally satisfactory.
Forward-Looking
Statements
This report, as well as other filings made by us with the
Securities and Exchange Commission (SEC), and our
releases issued to the public contain various statements
relating to future results, including certain projections and
business trends. We believe these statements constitute
Forward-Looking Statements as defined in the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements generally are identified by the words
believe, project, expect,
anticipate, estimate,
intend, strategy, plan,
may, should, will,
9
would, will be, will
continue, will likely result, and similar
expressions, although not all forward-looking statements contain
these identifying words.
From time to time, we update the various factors we consider in
making our forward-looking statements and the assumptions we use
in those statements. However, we undertake no obligation to
publicly update or revise any forward-looking events or
circumstances that may arise after the date of this report. The
following sets forth the various assumptions we use in our
forward-looking statements, as well as risks and uncertainties
relating to those statements. Certain of the risks and
uncertainties may cause actual results to be materially
different from projected results contained in forward-looking
statements in this report and in our other disclosures. These
risks and uncertainties include, but are not limited to, the
following:
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A downturn in market conditions could affect projected
results. Any material changes in oil and natural
gas supply and demand, oil and natural gas prices, rig count or
other market trends would affect our results and would likely
affect the forward-looking information we provide. The oil and
natural gas industry is extremely volatile and subject to change
based on political and economic factors outside our control. In
recent years, worldwide drilling activity has increased;
however, if an extended regional
and/or
worldwide recession were to occur, it would result in lower
demand and lower prices for oil and natural gas, which would
adversely affect drilling and production activity and therefore
would affect our revenues and income. We have assumed increases
in worldwide demand will continue throughout 2008.
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Availability of a skilled workforce could affect our
projected results. Due to the high activity in
the exploration and production and oilfield service industries
there is an increasing shortage of available skilled labor,
particularly in our high-growth regions. Our forward-looking
statements assume we will be able to recruit and maintain a
sufficient skilled workforce for activity levels.
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Increases in the prices and availability of our raw materials
could affect our results of operations. We use
large amounts of raw materials for manufacturing our products.
The price of these raw materials has a significant impact on our
cost of producing products for sale or producing fixed assets
used in our business. We have assumed that the prices of our raw
materials will remain within a manageable range and will be
readily available. If we are unable to attain necessary raw
materials or if we are unable to minimize the impact of
increased raw materials costs through our supply chain
initiatives or by passing through these increases to our
customers, our margins and results of operations could be
adversely affected.
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Our long-term growth depends upon technological innovation
and commercialization. Our ability to deliver our
long-term growth strategy depends in part on the
commercialization of new technology. A central aspect of our
growth strategy is to develop our products and services, to
obtain technologically advanced products through internal
research and development
and/or
acquisitions, to protect proprietary technology from
unauthorized use and to expand the markets for new technology
through leverage of our worldwide infrastructure. The key to our
success will be our ability to commercialize the technology that
we have acquired and demonstrate the enhanced value our
technology brings to our customers operations. Our major
technological advances include, but are not limited to, those
related to controlled pressure drilling and testing systems,
expandable solid tubulars, expandable sand screens and
intelligent well completion. Our forward-looking statements have
assumed successful commercialization of, and above-average
growth from, these new products and services.
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Nonrealization of expected benefits from our 2002 corporate
reincorporation could affect our projected
results. We are incorporated in Bermuda and we
operate through our various subsidiaries in numerous countries
throughout the world including the United States. Consequently,
we are subject to changes in tax laws, treaties or regulations
or the interpretation or enforcement thereof in the U.S.,
Bermuda or jurisdictions in which we or any of our subsidiaries
operates or is resident. Our income tax expense is based upon
our interpretation of the tax laws in effect in various
countries at the time that the expense was incurred. If the
U.S. Internal Revenue Service or other taxing authorities
do not agree with our assessment of the effects of such laws,
treaties and regulations, this could have a material adverse
effect on us including the imposition of a higher effective tax
rate on our worldwide earnings or a reclassification of the tax
impact of our significant corporate restructuring transactions.
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Nonrealization of expected benefits from our acquisitions
could affect our projected results. We expect to
gain certain business, financial and strategic advantages as a
result of business acquisitions we undertake, including
synergies and operating efficiencies. Our forward-looking
statements assume that we will successfully integrate our
business acquisitions and realize the benefits of that. An
inability to realize expected strategic advantages as a result
of the acquisition would negatively affect the anticipated
benefits of the acquisition.
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The cyclical nature of or a prolonged downturn in our
industry could affect the carrying value of our
goodwill. As of December 31, 2007, we had
approximately $3.4 billion of goodwill. Our estimates of
the value of our goodwill could be reduced in the future as a
result of various factors, some of which are beyond our control.
Any reduction in the value of our goodwill may result in an
impairment charge and therefore adversely affect our results.
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Currency fluctuations could have a material adverse financial
impact on our business. A material change in
currency rates in our markets could affect our future results as
well as affect the carrying values of our assets. World
currencies have been subject to much volatility. Our
forward-looking statements assume no material impact from future
fluctuations in currency exchange rates.
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Adverse weather conditions in certain regions could adversely
affect our operations. In the summer of 2005, the
Gulf of Mexico suffered several significant hurricanes. These
hurricanes and associated hurricane threats reduced the number
of days on which we and our customers could operate, which
resulted in lower revenues than we otherwise would have
achieved. In parts of 2006, and particularly in the second
quarter of 2007, climatic conditions in Canada were not as
favorable to drilling as we anticipated, which limited our
results in that region. Similarly, unfavorable weather in Russia
and in the North Sea could reduce our operations and revenues
from those areas during the relevant period. Our forward-looking
statements assume weather patterns in our primary areas of
operations will be conducive to our operations. In particular,
we have assumed the favorable winter conditions in Canada will
continue later into the year in 2008 than was the case in 2007.
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Political disturbances, war, or terrorist attacks and changes
in global trade policies could adversely impact our
operations. We have assumed there will be no
material political disturbances or terrorist attacks and there
will be no material changes in global trade policies. Any
further military action undertaken by the U.S. or other
countries could adversely affect our results of operations.
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U.S. Government and internal investigations could affect
our results of operations. We are currently
involved in government and internal investigations involving
various of our operations. These investigations are ongoing, and
we cannot anticipate the timing, outcome or possible impact of
these investigations, financial or otherwise. The governmental
agencies involved in these investigations have a broad range of
civil and criminal penalties they may seek to impose against
corporations and individuals for violations of trading sanctions
laws, the Foreign Corrupt Practices Act and other federal
statutes including, but not limited to, injunctive relief,
disgorgement, fines, penalties and modifications to business
practices and compliance programs. In recent years, these
agencies and authorities have entered into agreements with, and
obtained a range of penalties against, several public
corporations and individuals in similar investigations, under
which civil and criminal penalties were imposed, including in
some cases multi-million dollar fines and other penalties and
sanctions. Under trading sanctions laws, the Department of
Justice (DOJ) may also seek to impose modifications
to business practices, including immediate cessation of all
business activities in sanctioned countries, and modifications
to compliance programs, which may increase compliance costs. Any
injunctive relief, disgorgement, fines, penalties, sanctions or
imposed modifications to business practices resulting from these
investigations could adversely affect our results of operations.
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Finally, our future results will depend upon various other risks
and uncertainties, including, but not limited to, those detailed
in our other filings with the SEC. For additional information
regarding risks and uncertainties, see our other filings with
the SEC under the Securities Exchange Act of 1934, as amended,
and the Securities Act of 1933, as amended, available free of
charge at the SECs website at www.sec.gov.
11
An investment in our common shares involves various risks. When
considering an investment in our company, you should consider
carefully all of the risk factors described below, as well as
other information included and incorporated by reference in this
report.
Foreign
Operations
Like most multinational oilfield service companies, we have
operations in certain international areas, including parts of
the Middle East, North and West Africa, Latin America, the Asia
Pacific region and the Commonwealth of Independent States, that
are subject to risks of war, political disruption, civil
disturbance, economic and legal sanctions (such as restrictions
against countries that the U.S. government may deem to
sponsor terrorism) and changes in global trade policies. Our
operations may be restricted or prohibited in any country in
which the foregoing risks occur.
In particular, the occurrence of any of these risks could result
in the following events, which in turn, could materially and
adversely impact our results of operations:
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disruption of oil and natural gas exploration and production
activities;
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restriction of the movement and exchange of funds;
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inhibition of our ability to collect receivables;
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enactment of additional or stricter U.S. government or
international sanctions; and
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limitation of our access to markets for periods of time.
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U.S.
Government and Internal Investigations
We are currently involved in government and internal
investigations involving various of our operations. We
participated in the United Nations oil-for-food program
governing sales of goods and services into Iraq. The SEC has
subpoenaed certain documents in connection with an investigation
into our participation in the oil-for-food program. The
U.S. Department of Justice is also conducting an
investigation of our participation in the oil-for-food program.
We are cooperating fully with these investigations. We have
retained legal counsel, reporting to our audit committee, to
investigate this matter. These investigations are ongoing, and
we cannot anticipate the timing, outcome or possible impact of
these investigations, financial or otherwise.
The U.S. Department of Commerce, Bureau of
Industry & Security and the U.S. Department of
Justice are investigating allegations of improper sales of
products and services by us and our subsidiaries in sanctioned
countries. We are cooperating fully with this investigation. We
have retained legal counsel, reporting to our audit committee,
to investigate this matter. This investigation is ongoing, and
we cannot anticipate the timing, outcome or possible impact of
the investigation, financial or otherwise.
In light of this investigation and of the current U.S. and
foreign policy environment and the inherent uncertainties
surrounding these countries, we decided in September 2007 to
direct our foreign subsidiaries to discontinue doing business in
countries that are subject to U.S. economic and trade
sanctions, including Cuba, Iran, Sudan and Syria. Effective
September 2007, we ceased entering into any new contracts
relating to these countries. We have begun an orderly
discontinuation and winding down of our existing business in
these sanctioned countries.
With the assistance of outside counsel and in connection with
the U.S. government investigations, we are conducting
internal investigations regarding the embezzlement of
approximately $175,000 at a European subsidiary and the possible
improper use of these funds, including possible payments to
government officials in Europe, during the period from 2000 to
2004, and the Companys compliance with the Foreign Corrupt
Practices Act and other laws worldwide. These internal
investigations are preliminary and ongoing, and we cannot
anticipate the timing, outcome or possible impact, if any, of
the investigations, financial or otherwise. We have informed the
SEC and the DOJ of these internal investigations, and the
results of the internal investigations will be provided to the
SEC and DOJ.
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The DOJ, the SEC and other agencies and authorities have a broad
range of civil and criminal penalties they may seek to impose
against corporations and individuals for violations of trading
sanctions laws, the Foreign Corrupt Practices Act and other
federal statutes including, but not limited to, injunctive
relief, disgorgement, fines, penalties and modifications to
business practices and compliance programs. In recent years,
these agencies and authorities have entered into agreements
with, and obtained a range of penalties against, several public
corporations and individuals in similar investigations, under
which civil and criminal penalties were imposed, including in
some cases multi-million dollar fines and other penalties and
sanctions. Under trading sanctions laws, the DOJ may also seek
to impose modifications to business practices, including
immediate cessation of all business activities in sanctioned
countries, and modifications to compliance programs, which may
increase compliance costs. In addition, our activities in
sanctioned countries, such as Sudan and Iran, could result in
certain investors, such as government sponsored pension funds,
divesting or not investing in our common shares. Based on
available information, we cannot predict what, if any, actions
the DOJ, SEC or other authorities may take in our situation or
the effect any such actions may have on our consolidated
financial position or results of operations.
We have incurred costs of approximately $13 million through
December 31, 2007 in connection with complying with these
ongoing investigations and certain exit costs associated with
sanctioned countries. We will have additional charges related to
these matters in future periods, but we cannot quantify those
charges or be certain of the timing of them.
Currency
Exposure
A portion of our net assets are located outside the
U.S. and are carried on our books in local currencies.
Changes in those currencies in relation to the U.S. dollar
result in translation adjustments, which are reflected as
accumulated other comprehensive income in the shareholders
equity section in our Consolidated Balance Sheets. We recognize
remeasurement and transactional gains and losses on currencies
in our Consolidated Statements of Income, which may adversely
impact our results of operations. We enter into foreign currency
forward contracts and other derivative instruments as an effort
to reduce our exposure to currency fluctuations; however, there
can be no assurance that these hedging activities will be
effective in reducing or eliminating foreign currency risks.
In certain foreign countries, a component of our cost structure
is denominated in a different currency than our revenues. In
those cases, currency fluctuations could adversely impact our
operating margins.
Litigation
and Environmental Exposure
In the ordinary course of business, we become the subject of
various claims and litigation. We maintain insurance to cover
many of our potential losses and we are subject to various
self-retentions and deductibles with respect to our insurance.
Although we are subject to various ongoing items of litigation,
we do not believe any of our current items of litigation will
result in any material uninsured losses to us. However, it is
possible an unexpected judgment could be rendered against us in
cases in which we could be uninsured and beyond the amounts we
currently have reserved or anticipate incurring.
We are also subject to various federal, state and local laws and
regulations relating to the energy industry in general and the
environment in particular. Environmental laws have in recent
years become more stringent and have generally sought to impose
greater liability on a larger number of potentially responsible
parties. While we are not currently aware of any situation
involving an environmental claim that would be likely to have a
material adverse effect on our business, it is always possible
that an environmental claim with respect to one or more of our
current businesses or a business or property that one of our
predecessors owned or used could arise and could involve
material expenditures.
Industry
Exposure
The concentration of our customers in the energy industry may
impact our overall exposure to credit risk as customers may be
similarly affected by prolonged changes in economic and industry
conditions. Further, laws in some jurisdictions in which we
operate could make collection difficult or time consuming. We
perform ongoing credit evaluations of our customers and do not
generally require collateral in support of our trade
receivables. While
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we maintain reserves for potential credit losses, we cannot
assure such reserves will be sufficient to meet write-offs of
uncollectible receivables or that our losses from such
receivables will be consistent with our expectations.
Credit
Markets Exposure
Recent turmoil in the credit markets, including events related
to the sub-prime mortgage market, and the potential impact on
liquidity of major financial institutions may have an adverse
effect on our ability to fund growth opportunities through
borrowings, under either existing or newly created instruments
in the public or private markets on terms we believe to be
reasonable.
Terrorism
Exposure
The terrorist attacks that took place in the U.S. on
September 11, 2001 and the subsequent ongoing war on terror
have created many global economic and political uncertainties.
The potential for future terrorist attacks, the national and
international responses to terrorist attacks, and other acts of
war or hostility have created many economic and political
uncertainties that could adversely affect our businesses.
Tax
Exposure
On June 26, 2002, the stockholders and Board of Directors
of Weatherford International, Inc. (Weatherford
Inc.) approved our corporate reorganization, and
Weatherford International Ltd. (Weatherford
Limited), a newly formed Bermuda company, became the
parent holding company of Weatherford International, Inc. The
realization of the tax benefit of this reorganization could be
impacted by changes in tax laws, tax treaties or tax regulations
or the interpretation or enforcement thereof or differing
interpretation or enforcement of applicable law by the U.S.
Internal Revenue Service or other taxing jurisdictions. The
inability to realize this benefit could have a material impact
on our financial statements.
Insurance
We currently carry a variety of insurance for our operations. We
are partially self-insured for certain claims in amounts we
believe to be customary and reasonable.
Although we believe we currently maintain insurance coverage
adequate for the risks involved, there is always a risk our
insurance may not be sufficient to cover any particular loss or
that our insurance may not cover all losses. For example, while
we maintain product liability insurance, this type of insurance
is limited in coverage and it is possible an adverse claim could
arise in excess of our coverage. Finally, insurance rates have
in the past been subject to wide fluctuation. Changes in
coverage, insurance markets and our industry may result in
further increases in our cost and higher deductibles and
retentions.
Bermuda
Governance Risks
We are a Bermuda exempt company, and it may be difficult for you
to enforce judgments against us or our directors and executive
officers. The rights of holders of our shares will be governed
by Bermuda law and our memorandum of association and bye-laws.
The rights of shareholders under Bermuda law may differ from the
rights of shareholders of companies incorporated in other
jurisdictions. One of our directors is not a resident of the
U.S., and a substantial portion of our assets are located
outside the U.S. As a result, it may be difficult for
investors to effect service of process on those persons in the
U.S. or to enforce in the U.S. judgments obtained in
U.S. courts against us or those persons based on the civil
liability provisions of the U.S. securities laws.
Uncertainty exists as to whether courts in Bermuda will enforce
judgments obtained in other jurisdictions, including the U.S.,
against us or our directors or officers under the securities
laws of those jurisdictions or entertain actions in Bermuda
against us or our directors or officers under the securities
laws of other jurisdictions.
Our bye-laws restrict shareholders from bringing legal action
against our officers and directors.
Our bye-laws contain a broad waiver by our shareholders of any
claim or right of action, both individually and on our behalf,
against any of our officers or directors. The waiver applies to
any action taken by an officer or director, or the
14
failure of an officer or director to take any action, in the
performance of his or her duties, except with respect to any
matter involving any fraud or dishonesty on the part of the
officer or director. This waiver limits the right of
shareholders to assert claims against our officers and directors
unless the act or failure to act involves fraud or dishonesty.
Our bye-laws have anti-takeover provisions that may discourage a
change of control. These anti-takeover provisions could result
in a lower market price for our shares and may limit a
shareholders ability to obtain a premium for our shares.
Our bye-laws contain provisions that could make it more
difficult for a third party to acquire us without the consent of
our board of directors, even if the third partys offer may
be considered beneficial by many shareholders. As a result,
shareholders may be limited in their ability to obtain a premium
for their shares and this may cause the market price of our
shares to decrease significantly. These provisions also provide
for:
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directors to be removed only for cause;
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restrictions on the time period in which directors may be
nominated; and
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the board of directors to determine the powers, preferences and
rights and the qualifications, limitations and restrictions of
our preference shares and to issue the preference shares without
shareholder approval.
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Our board of directors may issue preference shares and determine
their powers, preferences and rights and their qualifications,
limitations and restrictions. The issuance of preference shares
may delay, defer or prevent a merger, amalgamation, tender offer
or proxy contest involving us.
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Item 1B.
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Unresolved
Staff Comments
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None.
Our operations are conducted in approximately 100 countries. We
currently have 128 manufacturing facilities and approximately
800 sales, service and distribution locations throughout the
world. The following table describes the material facilities we
owned or leased as of December 31, 2007:
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Facility Size
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Property
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Principal Services and Products
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Location
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(Sq. Ft.)
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Size (Acres)
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Tenure
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Offered or Manufactured
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North America:
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Pearland, Texas
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335,360
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60.64
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Owned
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Fishing, drilling equipment
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New Brighton, Minnesota
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211,600
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25.75
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Owned
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Water well and industrial screens
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Nisku, Alberta, Canada
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206,400
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15.40
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Owned
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Reciprocating rod lift
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Houma, Louisiana
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175,000
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13.00
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Owned
|
|
Cementing products
|
Houston, Texas
|
|
|
173,000
|
|
|
|
18.19
|
|
|
Owned
|
|
Research and development
|
Nisku, Alberta, Canada
|
|
|
149,193
|
|
|
|
27.79
|
|
|
Owned
|
|
Drilling equipment, fishing, wireline, controlled pressure
drilling and testing services
|
Houston, Texas
|
|
|
130,000
|
|
|
|
14.00
|
|
|
Owned
|
|
Sand screens
|
Woodward, Oklahoma
|
|
|
118,000
|
|
|
|
49.58
|
|
|
Leased
|
|
Reciprocating rod and hydraulic lift
|
Houston, Texas
|
|
|
115,649
|
|
|
|
2.65
|
|
|
Owned
|
|
Cased hole and flow control
|
Huntsville, Texas
|
|
|
112,648
|
|
|
|
20.00
|
|
|
Owned
|
|
Liner hangers
|
Houston, Texas
|
|
|
109,451
|
|
|
|
|
|
|
Leased
|
|
Operations center
|
Edmonton, Alberta, Canada
|
|
|
108,797
|
|
|
|
11.34
|
|
|
Owned
|
|
Reciprocating rod lift, progressing cavity pumps
|
Greenville, Texas
|
|
|
108,300
|
|
|
|
26.43
|
|
|
Owned
|
|
Reciprocating rod lift, electric submersible pumps
|
Broussard, Louisiana
|
|
|
101,434
|
|
|
|
9.01
|
|
|
Owned
|
|
Tubular running
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility Size
|
|
|
Property
|
|
|
|
|
Principal Services and Products
|
Location
|
|
(Sq. Ft.)
|
|
|
Size (Acres)
|
|
|
Tenure
|
|
Offered or Manufactured
|
|
Latin America:
|
|
|
|
|
|
|
|
|
|
|
|
|
Neuquen, Argentina
|
|
|
107,639
|
|
|
|
3.70
|
|
|
Leased
|
|
Well installation services, downhole and controlled pressure
drilling and testing services, fishing, cementing, drilling
equipment
|
Sao Leopoldo, Brazil
|
|
|
103,490
|
|
|
|
9.46
|
|
|
Owned
|
|
Progressing cavity pumps
|
Europe/West Africa/CIS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dubnica nad Vahom, Slovakia
|
|
|
163,396
|
|
|
|
5.75
|
|
|
Owned
|
|
Electric submersible pumping
|
Aberdeen, Scotland
|
|
|
148,379
|
|
|
|
8.67
|
|
|
Leased
|
|
Expandable slotted tubulars
|
Alberton, South Africa
|
|
|
123,237
|
|
|
|
5.40
|
|
|
Owned
|
|
Conventional screen technologies
|
Forus, Norway
|
|
|
113,182
|
|
|
|
4.66
|
|
|
Leased
|
|
Downhole services, well installation services, drilling
equipment, thru tubing, cementing, fishing, re-entry, well
intervention, completion systems
|
Middle East/North Africa/Asia:
|
|
|
|
|
|
|
|
|
|
|
|
|
Hassi Messaoud, Algeria
|
|
|
226,849
|
|
|
|
40.20
|
|
|
Owned
|
|
Fishing, liner hangers, controlled pressure drilling and testing
services
|
Singapore, Singapore
|
|
|
160,170
|
|
|
|
2.33
|
|
|
Leased
|
|
Fishing, re-entry and decommissioning drilling tools and
services, production operations and systems
|
Awjila, Libya
|
|
|
150,910
|
|
|
|
27.67
|
|
|
Leased
|
|
Warehouse and service
|
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, Texas
|
|
|
254,438
|
|
|
|
|
|
|
Leased
|
|
Corporate offices
|
|
|
Item 3.
|
Legal
Proceedings
|
In the ordinary course of business, we become the subject of
various claims and litigation. We maintain insurance to cover
many of our potential losses, and we are subject to various
self-retention limits and deductibles with respect to our
insurance.
See Item 1. Business Other Business
Data Federal Regulation and Environmental
Matters on page 9 of this report, which is
incorporated by reference into this item.
Although we are subject to various ongoing items of litigation,
we do not believe any of the items of litigation to which we are
currently subject will result in any material uninsured losses
to us. It is possible, however, an unexpected judgment could be
rendered against us in the cases in which we are involved that
could be uninsured and beyond the amounts we currently have
reserved.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
No matters were submitted to a vote of shareholders of the
Company during the fourth quarter of the year ended
December 31, 2007.
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Shareholder Matters
and Issuer Purchases of Equity Securities
|
Our common shares are traded on the New York Stock Exchange
under the symbol WFT. As of February 15, 2008,
there were 2,049 shareholders of record. Additionally,
there were 259 stockholders of Weatherford International, Inc.
as of the same date who had not yet exchanged their shares. The
following table sets forth, for the
16
periods indicated, the range of high and low sales prices per
common share as reported on the New York Stock Exchange.
|
|
|
|
|
|
|
|
|
|
|
Price
|
|
|
|
High
|
|
|
Low
|
|
|
Year ending December 31, 2007
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
47.03
|
|
|
$
|
35.90
|
|
Second Quarter
|
|
|
59.04
|
|
|
|
45.00
|
|
Third Quarter
|
|
|
71.00
|
|
|
|
48.63
|
|
Fourth Quarter
|
|
|
72.22
|
|
|
|
56.36
|
|
Year ending December 31, 2006
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
46.19
|
|
|
$
|
36.50
|
|
Second Quarter
|
|
|
58.73
|
|
|
|
44.04
|
|
Third Quarter
|
|
|
51.70
|
|
|
|
37.08
|
|
Fourth Quarter
|
|
|
47.05
|
|
|
|
38.25
|
|
On February 15, 2008, the closing sales price of our common
shares as reported by the New York Stock Exchange was $65.20 per
share. We have not declared or paid cash dividends on our common
shares since 1984.
In December 2005, our Board of Directors approved a share
repurchase program under which up to $1 billion of our
outstanding common shares could be purchased. Future purchases
of our shares can be made in the open market or privately
negotiated transactions, at the discretion of management and as
market conditions warrant. During the quarter ended
December 31, 2007, we purchased our common shares in the
following amounts at the following average prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number
|
|
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased as
|
|
|
Maximum Number (or
|
|
|
|
|
|
|
|
|
|
Part of
|
|
|
Approximate Dollar
|
|
|
|
|
|
|
|
|
|
Publicly
|
|
|
Value) of Shares
|
|
|
|
Total Number
|
|
|
Average
|
|
|
Announced
|
|
|
that May Yet Be
|
|
|
|
of Shares
|
|
|
Price Paid
|
|
|
Plans or
|
|
|
Purchased Under the
|
|
Period
|
|
Purchased
|
|
|
per Share
|
|
|
Programs
|
|
|
Plans or Programs
|
|
|
October 1-October 31, 2007
|
|
|
1,000,000
|
|
|
$
|
66.93
|
|
|
|
1,000,000
|
|
|
$
|
205,233,968
|
|
November 1-November 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205,233,968
|
|
December
1-December 31,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205,233,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000
|
|
|
|
66.93
|
|
|
|
1,000,000
|
|
|
|
205,233,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition, under our restricted share plan, employees may
elect to have us withhold common shares to satisfy minimum
statutory federal, state and local tax withholding obligations
arising on the vesting of restricted stock awards and exercise
of options. When we withhold these shares, we are required to
remit to the appropriate taxing authorities the market price of
the shares withheld, which could be deemed a purchase of the
common shares by us on the date of withholding.
During the quarter ended December 31, 2007, we withheld
common shares to satisfy these tax withholding obligations as
follows:
|
|
|
|
|
|
|
|
|
|
|
No. of
|
|
|
Average
|
|
Period
|
|
Shares
|
|
|
Price
|
|
|
October 1-October 31, 2007
|
|
|
3,998
|
|
|
$
|
63.50
|
|
November 1-November 30, 2007
|
|
|
133
|
|
|
|
65.75
|
|
December
1-December 31,
2007
|
|
|
470,158
|
|
|
|
66.43
|
|
On February 28, 2002, we issued a warrant to purchase up to
6.5 million of our common shares at $30.00 per share as
part of the consideration given to obtain a worldwide license to
Shell Technology Ventures Inc.s expandable technology.
Effective July 12, 2006, we and Shell Technology Ventures
Inc. amended and restated this
17
warrant. The amendments reflect, among other things, changes in
our capital and organizational structure since the original
warrant was issued in February 2002. The warrant is exercisable
until February 28, 2012 and is subject to adjustment for
changes in our capital structure or our issuance of dividends in
cash, securities or property. To the extent that the amendment
and restatement of the warrant constitutes the issuance of a new
security, that new security was issued solely in exchange for
the original warrant. There were no cash proceeds from the
exchange. That new security was an exempted security not subject
to registration as provided by Section 3(a)(9) of the
Securities Act of 1933.
On August 31, 2005, in connection with our acquisition of
Precision Energy Services and Precision Drilling International,
we issued 52.0 million of our common shares to Precision
Drilling Corporation in a private placement exempt from
registration under Section 4(2) of the Securities Act of
1933, as amended.
Information concerning securities authorized for issuance under
equity compensation plans is set forth in Part III of this
report under Item 12(d). Security Authorized for
Issuance Under Equity Compensation Plans, which is
incorporated herein by reference.
18
Performance
Graph
This graph compares the yearly cumulative return on our common
shares with the cumulative return on the Dow Jones U.S. Oil
Equipment and Services Index and the Dow Jones U.S. Index
for the last five years. The graph assumes the value of the
investment in the Companys common shares and each index
was $100 on December 31, 2002. The stockholder return set
forth below is not necessarily indicative of future performance.
The following graph and related information shall not be deemed
soliciting material or to be filed with
the SEC, nor shall such information be incorporated by reference
into any future filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that
Weatherford specifically incorporates it by reference into such
filing.
Comparison
of Five Year Total Return
|
|
Item 6.
|
Selected
Financial Data
|
The following table sets forth certain selected historical
consolidated financial data and should be read in conjunction
with Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations
and the Consolidated Financial Statements and Notes thereto
included elsewhere herein. The following information may not be
deemed indicative of our future operating results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005(a)
|
|
|
2004(b)
|
|
|
2003(c)
|
|
|
|
|
|
|
(In thousands, except per share amount)
|
|
|
|
|
|
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
7,832,062
|
|
|
$
|
6,578,928
|
|
|
$
|
4,333,227
|
|
|
$
|
3,131,774
|
|
|
$
|
2,562,034
|
|
Operating Income
|
|
|
1,624,336
|
|
|
|
1,354,687
|
|
|
|
570,598
|
|
|
|
402,995
|
|
|
|
279,365
|
|
Income From Continuing Operations
|
|
|
1,091,975
|
|
|
|
906,106
|
|
|
|
470,095
|
|
|
|
337,969
|
|
|
|
147,243
|
|
Basic Earnings Per Share From Continuing Operations
|
|
|
3.23
|
|
|
|
2.62
|
|
|
|
1.57
|
|
|
|
1.26
|
|
|
|
0.58
|
|
Diluted Earnings Per Share From Continuing Operations
|
|
|
3.14
|
|
|
|
2.55
|
|
|
|
1.48
|
|
|
|
1.18
|
|
|
|
0.56
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
13,190,957
|
|
|
$
|
10,139,248
|
|
|
$
|
8,580,304
|
|
|
$
|
5,543,482
|
|
|
$
|
4,994,324
|
|
Long-term Debt
|
|
|
3,066,335
|
|
|
|
1,564,600
|
|
|
|
632,071
|
|
|
|
1,404,431
|
|
|
|
1,379,611
|
|
Shareholders Equity
|
|
|
7,406,719
|
|
|
|
6,174,799
|
|
|
|
5,666,817
|
|
|
|
3,313,389
|
|
|
|
2,708,068
|
|
Cash Dividends Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
(a) |
|
In August 2005, we acquired Precision Energy Services and
Precision Drilling International for $942.7 million in cash
and 52.0 million Weatherford common shares. In connection
with the acquisition we recorded exit and restructuring charges
of $114.2 million, $78.7 million net of tax. In
December 2005, we recorded a $115.5 million gain on the
sale of our remaining shares of Universal common stock with no
related income tax impact. |
|
(b) |
|
In 2004, we recorded a $77.6 million gain on the sale of
Universal common stock. There was no income tax impact related
to the sale. |
|
(c) |
|
In August 2003, we incurred $20.9 million,
$13.6 million net of taxes, of debt redemption expenses
related to the early extinguishment of our Convertible Preferred
Debentures. |
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Our Managements Discussion and Analysis of Financial
Condition and Results of Operations (MD&A)
begins with an executive overview which, provides a general
description of our company today, a synopsis of industry market
trends, insight into managements perspective of the
opportunities and challenges we face and our outlook for 2008
and 2009. Next, we analyze the results of our operations for the
last three years, including the trends in our business. Then we
review our cash flows and liquidity, capital resources and
contractual commitments. We conclude with an overview of our
critical accounting judgments and estimates and a summary of
recently issued accounting pronouncements.
The following discussion should be read in conjunction with our
Consolidated Financial Statements and Notes thereto included in
Item 8. Financial Statements and Supplementary
Data. Our discussion includes various forward-looking
statements about our markets, the demand for our products and
services and our future results. These statements are based on
certain assumptions we consider reasonable. For information
about these assumptions, you should refer to the section
entitled Item 1. Business Forward-Looking
Statements.
Overview
General
We provide equipment and services used for drilling, completion
and production of oil and natural gas wells throughout the
world. We conduct operations in approximately 100 countries and
have service and sales locations in nearly all of the oil and
natural gas producing regions in the world. Our offerings
include drilling services, well construction services, wireline
services, fishing and intervention services, completion systems
and all forms of artificial lift.
We reviewed the presentation of our reporting segments during
the first quarter of 2007. Based on this review, we determined
that our operational performance is segmented and reviewed on a
geographic basis. As a result, we realigned our financial
reporting segments and now report the following regions as
separate, distinct reporting segments (1) North America,
(2) Latin America, (3) Europe/West Africa/CIS and
(4) Middle East/North Africa/Asia. Our historical segment
data previously reported under our Evaluation,
Drilling & Intervention Services and Completion and
Production Systems divisions have been restated for all periods
to conform to the new presentation.
In June 2007, we approved a plan to sell our oil and gas
development and production business. The business was formerly
reported within our North America and Europe/West Africa/CIS
segments and has been reclassified as a discontinued operation
for all periods presented.
In July 2005, we sold our Gas Services International compression
fabrication business. Results of this business were formerly
reported within our Middle East/North Africa/Asia segment and
have been reclassified as a discontinued operation for all
periods presented.
Industry
Trends
Changes in the current price and expected future prices of oil
and natural gas influence the level of energy industry spending.
Changes in expenditures result in an increased or decreased
demand for our products and
20
services. Rig count is an indicator of the level of spending for
the exploration for and production of oil and natural gas
reserves.
The following chart sets forth certain statistics that reflect
historical market conditions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
|
|
|
|
|
|
|
Henry Hub
|
|
|
American Rig
|
|
|
International
|
|
|
|
WTI Oil(1)
|
|
|
Gas(2)
|
|
|
Count(3)
|
|
|
Rig Count(3)
|
|
|
2007
|
|
$
|
95.98
|
|
|
$
|
7.48
|
|
|
|
2,171
|
|
|
|
1,122
|
|
2006
|
|
|
61.05
|
|
|
|
6.30
|
|
|
|
2,178
|
|
|
|
1,029
|
|
2005
|
|
|
61.04
|
|
|
|
11.23
|
|
|
|
2,046
|
|
|
|
948
|
|
|
|
|
(1) |
|
Price per barrel as of December 31 Source:
Applied Reasoning, Inc. |
|
(2) |
|
Price per MM/BTU as of December 31 Source:
Oil World |
|
(3) |
|
Average rig count for December Source: Baker
Hughes Rig Count and other third-party data |
Oil prices have increased during the twelve months of 2007
ranging from a low of $50.48 per barrel in mid-January to a high
of $98.18 per barrel in November. Natural gas prices have
increased approximately 19% since December 31, 2006, with
prices ranging from a low of $5.38 MM/BTU at the end of
August to a high of $8.64 MM/BTU in November. Factors
influencing oil and natural gas prices during the period include
hydrocarbon inventory levels, realized and expected economic
growth, levels of spare production capacity within the
Organization of Petroleum Exporting Countries
(OPEC), weather and geopolitical uncertainty.
North America rig count has stayed relatively flat as compared
to the end of 2006, as a reduction in Canadian activity was
offset by an increase in U.S. activity. International rig
count has increased approximately 9% since the end of 2006.
During 2007, drilling and completion spending continued to
increase in both North America and the international markets.
According to Spears & Associates, 2007 drilling and
completion spending increased approximately 3% in North America
and 19% in international markets compared to 2006 levels.
Drilling and completion spending growth during 2008 is
anticipated to be driven by the international markets. According
to Spears & Associates, drilling and completion
spending during 2008 is anticipated to increase approximately
18% in international markets while declining approximately 6% in
North America markets as compared to 2007 levels.
Opportunities
and Challenges
The nature of our industry offers many opportunities and
challenges. We have created a long-term strategy aimed at
growing our business, servicing our customers, and most
importantly, creating value for our shareholders. The success of
our long-term strategy will be determined by our ability to
manage effectively any industry cyclicality, respond to industry
demands and successfully penetrate new markets with our younger
technologies.
The cyclicality of the energy industry impacts the demand for
our products and services. Certain of our products and services,
such as our drilling and evaluation services, well installation
services and well completion services, depend on the level of
exploration and development activity and the completion phase of
the well life cycle. Other products and services, such as our
production optimization and artificial lift systems, are
dependent on production activity. We believe that decline rates,
a measure of the fall in production from a well over time, are
accelerating. We also believe that there has been, and will
continue to be, a deterioration in the quality of incremental
hydrocarbon formations that our customers develop and that these
formations will require more of our products and services than
higher quality formations. The market for oilfield services will
grow
year-on-year
relative to the decline rates and the implicit rate of demand
growth. We are aggressively, but methodically, growing our
employee base, manufacturing capacity and equipment base to meet
the demands of the industry.
2008
and 2009 Outlook
We believe the outlook for our businesses is favorable. As
decline rates accelerate and reservoir productivity complexities
increase, our clients will face growing challenges securing
desired rates of production growth. Assuming the demand for
hydrocarbons does not weaken, we believe this provides us with a
robust outlook. The
21
acceleration of decline rates and the increasing complexity of
the reservoirs increase our customers requirements for
technologies that improve productivity and efficiency.
Looking into 2008 and 2009, we expect average worldwide rig
activity to grow as compared to fourth quarter 2007 levels, and
we expect our business to continue to grow at a faster rate than
the underlying rig count. We expect the Eastern Hemisphere to be
our highest growth market during 2008, followed by the Latin
America market. We expect our growth in 2008 and 2009 to be
broad based, with all of our product and service lines
continuing to build on 2007 achievements. These improvements
should be driven by the strength of our technology and our
global infrastructure. We expect our newer technologies to
continue to gain traction across a wider breadth of geographic
markets, similar to our performance in 2006 and 2007.
Geographic Markets. Climate, natural gas and
oil storage levels and commodity prices will dictate the rate of
oilfield service activity growth in North America during 2008
and 2009. While these factors are difficult to predict with any
certainty over short periods of time, we believe that the North
American market has positive secular growth attributes over the
longer term. During 2008, we expect North America activity to
remain at or around current levels, on average. In October 2007,
the Alberta provincial government adopted a new royalty regime
applicable to hydrocarbon production in this province of Canada.
Although the new program does not begin until 2009, we believe
our customers have already begun to factor the increased costs
imposed by the program into their economic planning process. We
believe the net effect of the program will be a negative factor
weighing on Canadian oil and gas activity.
We expect most of our growth in 2008 and 2009 will come out of
the international markets. We expect Eastern Hemisphere growth
rates for 2008 to be similar to our growth rates achieved for
2007 as compared to 2006. Furthermore, we believe it is likely
we will experience similar growth rates in 2009. We expect North
Africa, Russia, Middle East, West Africa, China and Central
Europe to show the largest
year-on-year
growth. In addition, we expect volume increases in Latin America
with the larger growth improvements stemming from Brazil,
Mexico, Venezuela and Argentina. Similar to the Eastern
Hemisphere, we anticipate Latin America growth rates for 2008
and 2009 to approximate
year-on-year
growth rates achieved during 2007.
Pricing. The overall pricing outlook is
positive. Pricing is trending upwards, concurrently with raw
material and labor cost inflation. We expect pricing to remain
positive throughout 2008, net of cost increases. Price
improvements are being realized on a
contract-by-contract
basis and are occurring in different classes of products and
service lines depending upon the region.
Overall, the level of improvements for our businesses for 2008
will continue to depend heavily on our ability to further
penetrate existing markets with our younger technologies and to
successfully introduce these technologies to new markets. The
recruitment, training and retention of personnel will also be a
critical factor in growing our business in 2008 and beyond. The
continued strength of the industry will be highly dependent on
many external factors, such as world economic and political
conditions, member country quota compliance within OPEC and
weather conditions. The extreme volatility of our markets makes
predictions regarding future results difficult.
22
Results
of Operations
The following charts contain selected financial data comparing
our consolidated and segment results from operations for 2007,
2006 and 2005. On August 31, 2005, we completed the
acquisition of Precision Energy Services and Precision Drilling
International, divisions of Precision Drilling Corporation. The
results of operations from the acquired businesses are included
in our results of operations from the date of acquisition;
therefore, the year ended December 31, 2005 includes four
months of activity from these acquired businesses.
Comparative
Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except percentages and
|
|
|
|
per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
3,937,456
|
|
|
$
|
3,672,630
|
|
|
$
|
2,400,705
|
|
Latin America
|
|
|
882,318
|
|
|
|
726,197
|
|
|
|
423,974
|
|
Europe/West Africa/CIS
|
|
|
1,188,519
|
|
|
|
827,343
|
|
|
|
659,308
|
|
Middle East/North Africa/Asia
|
|
|
1,823,769
|
|
|
|
1,352,758
|
|
|
|
849,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,832,062
|
|
|
|
6,578,928
|
|
|
|
4,333,227
|
|
Gross Profit%(a):
|
|
|
35.4
|
%
|
|
|
36.0
|
%
|
|
|
31.9
|
%
|
Research and Development:
|
|
|
169,317
|
|
|
|
149,429
|
|
|
|
107,362
|
|
Selling, General and Administrative Attributable to Segments
|
|
|
850,359
|
|
|
|
746,386
|
|
|
|
535,465
|
|
Corporate General and Administrative
|
|
|
130,440
|
|
|
|
115,593
|
|
|
|
77,154
|
|
Exit Costs and Restructuring Charges
|
|
|
|
|
|
|
|
|
|
|
93,581
|
|
Operating Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
1,012,402
|
|
|
|
1,035,804
|
|
|
|
509,290
|
|
Latin America
|
|
|
201,810
|
|
|
|
132,616
|
|
|
|
60,117
|
|
Europe/West Africa/CIS
|
|
|
293,823
|
|
|
|
171,437
|
|
|
|
121,179
|
|
Middle East/North Africa/Asia
|
|
|
416,058
|
|
|
|
279,852
|
|
|
|
158,109
|
|
Exit Costs and Restructuring Charges
|
|
|
|
|
|
|
|
|
|
|
(93,581
|
)
|
Corporate and other(b)
|
|
|
(299,757
|
)
|
|
|
(265,022
|
)
|
|
|
(184,516
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,624,336
|
|
|
|
1,354,687
|
|
|
|
570,598
|
|
Gain on Sale of Universal Common Stock
|
|
|
|
|
|
|
|
|
|
|
115,456
|
|
Debt Redemption Expense
|
|
|
|
|
|
|
|
|
|
|
(4,733
|
)
|
Interest Income
|
|
|
11,847
|
|
|
|
6,656
|
|
|
|
11,208
|
|
Interest Expense
|
|
|
(183,128
|
)
|
|
|
(109,216
|
)
|
|
|
(80,189
|
)
|
Other, Net
|
|
|
(8,569
|
)
|
|
|
(13,218
|
)
|
|
|
19,777
|
|
Effective Tax Rate
|
|
|
23.0
|
%
|
|
|
25.9
|
%
|
|
|
25.5
|
%
|
Income from Continuing Operations per Diluted Share
|
|
$
|
3.14
|
|
|
$
|
2.55
|
|
|
$
|
1.48
|
|
Loss from Discontinued Operation, Net of Taxes
|
|
|
(21,369
|
)
|
|
|
(9,737
|
)
|
|
|
(2,675
|
)
|
Net Income per Diluted Share
|
|
|
3.08
|
|
|
|
2.53
|
|
|
|
1.47
|
|
Depreciation and Amortization
|
|
|
606,226
|
|
|
|
482,948
|
|
|
|
334,330
|
|
|
|
|
(a) |
|
During the year ended December 31, 2005, we incurred
$20.7 million of inventory write-downs associated with our
2005 acquisition of Precision. |
|
(b) |
|
Includes research and development expenses, which are not
allocated geographically. |
23
Consolidated
Revenues by Product Line
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Artificial Lift Systems
|
|
|
18
|
%
|
|
|
18
|
%
|
|
|
21
|
%
|
Well Construction
|
|
|
16
|
|
|
|
15
|
|
|
|
17
|
|
Drilling Services
|
|
|
15
|
|
|
|
15
|
|
|
|
12
|
|
Drilling Tools
|
|
|
12
|
|
|
|
12
|
|
|
|
13
|
|
Completion Systems
|
|
|
10
|
|
|
|
10
|
|
|
|
13
|
|
Wireline
|
|
|
8
|
|
|
|
10
|
|
|
|
7
|
|
Re-entry & Fishing
|
|
|
8
|
|
|
|
8
|
|
|
|
7
|
|
Stimulation & Chemicals
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
Integrated Drilling
|
|
|
5
|
|
|
|
5
|
|
|
|
2
|
|
Pipeline & Specialty Services
|
|
|
2
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
Results
Revenues
Consolidated revenues increased $1,253.1 million, or 19.0%,
in 2007 as compared to 2006. The increase resulted primarily
from organic growth as our businesses continued to benefit from
increasing market activity and share gains. Approximately 79% of
our revenue growth was derived from outside of North America.
International revenues increased $988.3 million, or 34.0%,
in 2007 as compared to 2006. This increase outpaced the 8%
increase in average international rig count over the comparable
period. Revenues from our drilling services, well construction
and artificial lift product lines were strong contributors to
the
year-over-year
increase.
Consolidated revenues increased $2,245.7 million, or 51.8%,
in 2006 as compared to 2005. The 2005 acquisition of Precision
Energy Services and Precision Drilling International contributed
approximately $1,040 million of the increase. Excluding our
acquisitions, the revenue increase was generated by increased
volume through market share and activity improvement and
increased pricing obtained through the renewal of long-term
contracts.
Gross
Profit
Our gross profit as a percentage of revenues declined marginally
to 35.4% in 2007 from 36.0% in 2006. The decline in margin was
driven by the downturn in the Canadian market experienced during
2007. This decline was offset by stronger contributions from our
international markets, all of which increased their gross profit
and margins
year-over-year.
Our gross profit as a percentage of revenues increased from
31.9% in 2005 to 36.0% in 2006. This increase was primarily the
result of the positive impact of higher base revenues to cover
fixed costs, with additional contributions from stronger North
America and international pricing. In addition, the year ended
December 31, 2005 included inventory write downs of
$20.7 million associated with our 2005
integration/reorganization plan.
Research
and Development
Research and development expenses increased $19.9 million,
or 13.3%, in 2007 as compared to 2006 and $42.1 million, or
39.2%, in 2006 as compared to 2005. Research and development
expenses as a percentage of revenues were 2.2%, 2.3% and 2.5% in
2007, 2006 and 2005, respectively. Our 2005 acquisition
accounted for approximately $40 million of the increase
experienced during 2006. The remaining increases of research and
development expenditures reflect our continued focus on
developing and commercializing new technologies as well as
investing in our core product offerings.
24
Selling,
General and Administrative Attributable to
Segments
Selling, general and administrative expenses attributable to
segments increased $104.0 million, or 13.9%, in 2007 as
compared to 2006, and $210.9 million, or 39.4%, in 2006
compared to 2005. Selling, general and administrative expenses
as a percentage of revenues were 10.9%, 11.3% and 12.4% in 2007,
2006 and 2005, respectively. The percentage decline was due
primarily to our higher revenue base to absorb fixed costs.
Corporate
General and Administrative
Corporate general and administrative expenses increased
$14.8 million, or 12.8%, from 2006 to 2007 and
$38.4 million, or 49.8%, from 2005 to 2006. The current
year increase is primarily attributable to approximately
$13 million in costs incurred during the current year in
connection with on-going investigations by the
U.S. government (see Item 1A. Risk
Factors-U.S. Government and Internal Investigations).
Severance charges of approximately $15 million and
$17 million were incurred during the years ended
December 31, 2007 and 2006, respectively. The increase in
corporate, general and administrative expenses from 2005 to 2006
was due to the $17 million in severance charges incurred
during 2006 with the remainder of the increase primarily due to
increased costs associated with higher employee compensation
expense and professional services fees.
Exit
Costs and Restructuring Charges
During 2005, we underwent both a restructuring related to our
acquisition of Precision and reorganization activities related
to our historical businesses, including a change in management,
a change in regional structure and an evaluation of product
lines. We incurred exit costs of $114.2 million related to
this exit and reorganization. The charge included an inventory
write-down of $20.7 million which has been recorded in Cost
of Products and a remaining amount of $93.6 million which
has been recorded as Exit Costs and Restructuring Charges in the
accompanying Consolidated Statements of Income.
The 2005 integration and reorganization plans were substantially
complete as of December 31, 2006. No additional costs were
recorded during the years ended December 31, 2007 or 2006,
and we do not anticipate future charges relating to these
activities.
Gain
on Sale of Universal Common Stock
We sold our remaining 6.75 million shares of Universal
Compression common stock during 2005 for net proceeds of
$276.8 million and recognized a gain of $115.5 million
with no related tax impact.
Interest
Expense
Interest expense increased $73.9 million, or 67.7%, in 2007
compared to 2006. The increase in interest expense was primarily
attributable to an overall increase in our long-term debt
combined with higher effective interest rates associated with
the long-term debt. The incremental borrowings added during the
current year were used to fund capital expenditures, to fund our
current year acquisitions and to fund our acquisition of shares
under our share repurchase program.
Interest expense increased $29.0 million, or 36.2%, in 2006
as compared to 2005. This increase was due primarily to our
additional long-term debt issuances during 2006 used to fund our
acquisition of shares under our share repurchase program and to
fund current year acquisitions. The increase was partially
offset by the settlement of our Zero Coupon Convertible Senior
Debentures and the reduction of our outstanding debt balance
with the proceeds received from the sale of our remaining
investment in Universal Compression, which occurred in the third
and fourth quarters of 2005, respectively.
Other,
Net
Other, net increased $4.7 million from 2006 to 2007 and
decreased $33.0 million from 2005 to 2006. The decrease
from 2005 to 2006 was primarily a result of unfavorable changes
in foreign currency exchange rates experienced during 2006. In
addition, the year ended December 31, 2005 included equity
in earnings of $9.5 million
25
from our investment in Universal Compression. Our remaining
interest in Universal Compression was sold in December of 2005.
Income
Taxes
Our effective tax rates were 23.0% in 2007, 25.9% in 2006 and
25.5% in 2005. The decrease in our effective tax during 2007 as
compared to 2006 was due to benefits realized from the
refinement of our international tax structure and changes in our
geographic earnings mix.
During 2006, we realized a tax benefit of $26.4 million
related to the favorable settlement of certain foreign tax
exposures, which lowered our effective rate for the period.
During 2005, we incurred exit and restructuring charges and debt
redemption expense of $119.0 million, $81.9 million
net of tax, and a gain on our sale of Universal Compression
common stock of $115.5 million with no related tax impact.
We also incurred additional tax expense of $23.9 million
associated with the impairment of certain foreign tax credits
resulting from the integration of the Precision acquisition into
our tax structure. On a net basis, these items and their
associated income tax impact reduced our 2005 effective income
tax rate.
Segment
Results
North
America
North America revenues increased $264.8 million, or 7.2%,
in 2007 as compared to 2006. The increase in North America
revenues was entirely attributable to the U.S. where the
average rig count increased 7% over the same period. Our
Canadian revenues decreased approximately 15% in 2007 as
compared to 2006, which reflected the deterioration in drilling
activity in the region. Canadian rig count over the comparable
period decreased 27%. Revenues from our artificial lift, well
construction, stimulation & chemicals and drilling
services product lines were the strongest contributors to the
year-over-year
increase.
Operating income decreased $23.4 million, or 2.3%, from
$1,035.8 million in 2006 to $1,012.4 million in 2007.
Operating margins were 25.7% in 2007 compared to 28.2% in 2006.
The decline in operating income and margin was the result of the
adverse conditions experienced in the Canadian market during
2007, particularly in our services businesses which typically
contribute higher margins.
North America revenues increased $1,271.9 million, or
53.0%, in 2006 as compared to 2005. The increase in North
America revenues was primarily attributable to the U.S., which
increased approximately 56% over 2005. This increase exceeded
the 19% increase in U.S. rig count over the same period.
Excluding revenues from acquisitions, North America revenues
increased approximately 33% over the prior year. This
regions increase outpaced the North America rig count
increase of 15%. The increase in activity and pricing in the
U.S. and Canadian markets were key contributors to revenue
growth during 2006.
Operating income increased $526.5 million, or 103.4%, from
$509.3 million in 2005 to $1,035.8 million in 2006.
Operating margins were 28.2% in 2006 compared to 21.2% in 2005.
The increase in operating income and margins was due primarily
to the additional incremental revenues generated during 2006 to
cover our fixed cost base. Our operating income for 2006
includes a full year of results from our acquisition of
Precision Energy Services versus four months during 2005. In
addition, 2005 operating results were negatively impacted by
hurricane activity in the Gulf Coast region.
Latin
America
Revenues in our Latin America segment increased
$156.1 million, or 21.5%, in 2007 as compared to 2006. This
increase outpaced the 10% increase in Latin American rig count
over the comparable period. Revenues from our artificial lift,
drilling tools and drilling services service lines were the
strongest contributors to the
year-over-year
increase.
Operating income increased $69.2 million, or 52.2%, from
$132.6 million in 2006 to $201.8 million in 2007.
Operating margins were 22.9% in 2007 compared to 18.3% in 2006.
The increase in operating income and margins was primarily
attributable to the incremental revenues generated during the
current year to cover our fixed cost base.
26
Revenues in our Latin America segment increased
$302.2 million, or 71.3%, in 2006 as compared to 2005. The
revenue increase was partially attributable to increased
activity in the region. Excluding acquisitions, Latin America
revenues increased approximately $100 million, or 30%, over
the prior year. This increase outpaced the 3% increase in Latin
American rig count over the comparable period.
Operating income increased $72.5 million, or 120.6%, from
$60.1 million in 2005 to $132.6 million in 2006.
Operating margins were 14.2% in 2005 compared to 18.3% in 2006.
The increase in operating income and margins was primarily
attributable to the incremental revenues generated during 2006
through both acquisitions and organic growth combined with a
shift to more service-based activity, which typically
contributes higher margins.
Europe/West
Africa/CIS
Revenues in our Europe/West Africa/CIS segment increased
$361.2 million, or 43.7%, in 2007 as compared to 2006. The
region contributed approximately 29% of our total revenue growth
for 2007 and exceeded the 1% increase in average rig count in
the region over the comparable period. Revenues from our well
construction, drilling services and completion systems product
lines were the strongest contributors to the
year-over-year
increase.
Operating income increased $122.4 million, or 71.4%, from
$171.4 million in 2006 to $293.8 million in 2007.
Operating margins were 24.7% in 2007 compared to 20.7% in 2006.
This
year-over-year
improvement in operating income and margins was primarily the
result of higher revenues during the current year absorbing the
regions fixed cost base. In addition, the current year
operating results includes our share in earnings from our equity
investment in a Russian joint venture acquired in June 2007.
Revenues in our Europe/West Africa/CIS segment increased
$168.0 million, or 25.5%, in 2006 as compared to 2005,
which exceeded the 11% increase in average rig count in the
region over the comparable period. Operating income increased
$50.3 million, or 41.5%, from $121.2 million in 2005
to $171.4 million in 2006. Operating margins were 18.4% in
2005 compared to 20.7% in 2006. This
year-over-year
improvement in operating income and margins was primarily the
result of higher revenues during the current year absorbing the
regions fixed cost base.
Middle
East/North Africa/Asia
Revenues in our Middle East/North Africa/Asia segment increased
$471.0 million, or 34.8%, in 2007 as compared to 2006. This
region contributed approximately 38% of our total revenue growth
for 2007 and exceeded the average rig count increase of 9% for
this region over the comparable period. Revenues from our
drilling services, re-entry & fishing and well
construction product lines were among the strongest contributors
to the
year-over-year
increase.
Operating income increased $136.2 million, or 48.7%, from
$279.9 million in 2006 to $416.1 million in 2007.
Operating margins were 22.8% in 2007 compared to 20.7% in 2006.
The increase in operating income and margins was due to the
incremental revenues generated during the current period to
cover our fixed cost base.
Revenues in our Middle East/North Africa/Asia segment increased
$503.5 million, or 59.3%, in 2006 as compared to 2005.
Excluding acquisitions, revenues increased approximately
$250 million, or 34%, over the prior year. This increase
exceeded the average rig count increase of 15% for this region
over the comparable period.
Operating income increased $121.7 million, or 77.0%, from
$158.1 million in 2005 to $279.9 million in 2006.
Operating margins were 18.6% in 2005 compared to 20.7% in 2006.
Similar to the increase experienced in the current year,
operating income and margins were up due primarily to the
incremental revenues generated, which helped cover our fixed
cost base.
Discontinued
Operations
Our discontinued operations consist of our oil and gas
development and production company and our Gas Services
International fabrication business. We had losses from our
discontinued operations, net of taxes, of $21.4 million,
$9.7 million and $2.7 million for the years ended
2007, 2006 and 2005, respectively.
27
We had a loss from our oil and gas development and production
company, net of taxes, of $21.4 million, $9.7 million
and $3.9 million, respectively, for the years ended
December 31, 2007, 2006, and 2005. The current year loss
includes approximately $17 million, net of tax, for asset
impairment charges related to write-downs of the
operations U.S. properties currently held for sale.
We completed the sale of the operations international
properties in November 2007 and recorded a gain of approximately
$5 million, net of tax, in connection with the sale.
We generated income from our fabrication business discontinued
operation of $1.2 million, net of taxes, for the year ended
December 31, 2005. The sale of the fabrication business was
finalized in July 2005 for a gain of approximately
$0.6 million.
Equity
Investment Acquisition
We acquired a 33% ownership interest in Premier Business
Solutions (PBS) in June 2007 for approximately
$330 million. PBS conducts business in Russia and is the
worlds largest electric submersible pump manufacturer by
volume. Subsequent to year-end, we sold our electrical
submersible pumps product line to PBS.
Liquidity
and Capital Resources
Sources
of Liquidity
Our sources of liquidity include current cash and cash
equivalent balances, cash generated from operations, and
committed availabilities under our Revolving Credit Facility
(defined below). In 2005, we also generated cash proceeds from
the sale of our investment in Universal Compression Holdings,
Inc. and non-core businesses. We also historically have accessed
banks for short-term loans from uncommitted borrowing
arrangements and the capital markets with debt, equity and
convertible offerings. We maintain a shelf registration
statement covering the future issuance of various types of
securities, including debt, common shares, preferred shares and
warrants.
Committed
Borrowing Facility
We maintain a revolving credit agreement with a syndicate of
banks of which JPMorgan Chase Bank is the Administrative Agent
(Revolving Credit Facility). This facility allows
for a combination of borrowings, support for our commercial
paper program and issuances of letters of credit and expires in
May 2011. The weighted average interest rate on the outstanding
borrowings of this facility was 5.2% at December 31, 2007.
The Revolving Credit Facility requires us to maintain a
debt-to-capitalization
ratio of less than 60% and contains other covenants and
representations customary for an investment-grade commercial
credit. We were in compliance with these covenants at
December 31, 2007. The following is a recap of our
availability under the Revolving Credit Facility at
December 31, 2007 (in millions):
|
|
|
|
|
Facility amount
|
|
$
|
1,500.0
|
|
Less uses of facility:
|
|
|
|
|
Amount drawn
|
|
|
491.0
|
|
Commercial paper
|
|
|
191.6
|
|
Letters of credit
|
|
|
68.6
|
|
|
|
|
|
|
Availability
|
|
$
|
748.8
|
|
|
|
|
|
|
Commercial
Paper
We have a $1.5 billion commercial paper program under which
we may from time to time issue short-term, unsecured notes. Our
commercial paper issuances are supported by the Revolving Credit
Facility. The weighted average interest rate related to
outstanding commercial paper issuances at December 31, 2007
was 5.1%.
Cash
Requirements
During 2008, we anticipate our cash requirements to include
working capital needs, capital expenditures and the repurchase
of our common shares, subject to market conditions, and business
acquisitions. We anticipate funding these requirements from cash
generated from operations and availability under our Revolving
Credit
28
Facility. In addition, we anticipate receiving approximately
$200 million during the first quarter of 2008 from the sale
of our electrical submersible pumps product line to PBS and from
entering into a long-term joint venture with Qatar Petroleum
Company.
Capital expenditures for 2008 are projected to be approximately
$1.8 billion. The expenditures are expected to be used
primarily to support the growth of our business and operations.
Capital expenditures during the year ended December 31,
2007 were $1,568.0 million, net of proceeds from tools lost
down hole of $67.0 million.
In December 2005, our board authorized us to repurchase up to
$1.0 billion of our outstanding common shares. We may from
time to time repurchase our common shares depending upon the
price of our common shares, our liquidity and other
considerations. During the year ended December 31, 2007, we
repurchased 5.1 million of our common shares at an
aggregate price of $246.2 million.
From time to time we acquire businesses or technologies that
increase our range of products and services, expand our
geographic scope or are otherwise strategic to our businesses.
During the year ended December 31, 2007, we used
approximately $275.1 million in cash, net of cash acquired,
in business acquisitions.
Contractual
Obligations
The following summarizes our contractual obligations and
contingent commitments by period. The obligations we pay in
future periods may vary from those reflected here due to certain
assumptions including the duration of our obligations and
anticipated actions by third parties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less than
|
|
|
1-3
|
|
|
4-5
|
|
|
After
|
|
Obligations and Commitments
|
|
Total
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
|
|
(In millions)
|
|
|
Short-term debt
|
|
$
|
762.6
|
|
|
$
|
762.6
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Long-term debt(a)
|
|
|
3,076.5
|
|
|
|
9.2
|
|
|
|
13.0
|
|
|
|
954.3
|
|
|
|
2,100.0
|
|
Interest on long-term debt
|
|
|
2,562.6
|
|
|
|
188.0
|
|
|
|
376.0
|
|
|
|
333.1
|
|
|
|
1,665.5
|
|
Noncancellable operating leases
|
|
|
345.7
|
|
|
|
71.8
|
|
|
|
91.5
|
|
|
|
51.9
|
|
|
|
130.5
|
|
Purchase obligations
|
|
|
280.0
|
|
|
|
280.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
6,747.4
|
|
|
$
|
1,031.6
|
|
|
$
|
480.5
|
|
|
$
|
1,339.3
|
|
|
$
|
3,896.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Amounts represent the expected cash payments for our total debt
and do not include any unamortized discounts or deferred gains
on terminated interest rate swap agreements. |
Due to the uncertainty with respect to the timing of future cash
flows associated with the Companys unrecognized tax
benefits at December 31, 2007, we are unable to make
reasonably reliable estimates of the period of cash settlement
with the respective taxing authorities. Therefore, unrecognized
tax benefits, including interest and penalties, of
$48.9 million have been excluded from the contractual
obligations table above.
Senior
Notes
On June 18, 2007, we completed a $1.5 billion
long-term debt offering comprised of (i) $600 million
of 5.95% senior notes due 2012 (5.95% Senior
Notes), (ii) $600 million of 6.35% senior
notes due 2017 (6.35% Senior Notes) and
(iii) $300 million of 6.80% senior notes due 2037
(6.80% Senior Notes). Net proceeds of
approximately $1.486 billion were used to repay outstanding
borrowings on our commercial paper program and for general
corporate purposes. Interest on these notes are due payable
semi-annually on June 15 and December 15 of each year.
On August 7, 2006, we completed an offering of
$600.0 million senior notes at a coupon rate of 6.50%
(6.50% Senior Notes) with a maturity in August
2036. Net proceeds of $588.3 million were used to partially
repay outstanding borrowings on our commercial paper program.
Interest on the notes is payable semi-annually in arrears on
February 1 and August 1 of each year.
29
On May 15, 2006, the stated maturity date, we repaid in
full the outstanding $200.0 million of 7.25% Senior
Notes plus all accrued interest.
On February 17, 2006, we completed an offering of
$350.0 million of 5.50% senior notes due 2016
(5.50% Senior Notes). Interest on the notes is
payable semi-annually in arrears on February 15 and August 15 of
each year. Net proceeds from the offering were
$346.2 million and were used to reduce borrowings on our
commercial paper program.
Interest
Rate Swaps
As of December 31, 2007 and 2006, we had net unamortized
gains of $12.0 million and $14.3 million,
respectively, associated with interest rate swap terminations.
Our interest expense was reduced by $2.3 million,
$4.0 million and $6.8 million for 2007, 2006 and 2005,
respectively, as a result of our interest rate swap activity.
There were no interest rate swap agreements outstanding as of
December 31, 2007 and 2006.
Other
Derivative Instruments
As of December 31, 2007 and 2006, we had several foreign
currency forward contracts and one option contract with notional
amounts aggregating $681.7 million and $271.0 million,
respectively, which were entered into to hedge exposure to
currency fluctuations in various foreign currencies, including,
but not limited to, the British pound sterling, the Canadian
dollar, the euro and the Norwegian krone. The total estimated
fair value of these contracts at December 31, 2007 resulted
in an asset of $2.4 million and at December 31, 2006
resulted in a liability of $1.0 million. These derivative
instruments were not designated as hedges and the changes in
fair value of the contracts are recorded each period in current
earnings.
In addition, after the closing of the acquisition of Precision
Energy Services and Precision Drilling International, we entered
into a series of cross-currency swaps between the
U.S. dollar and Canadian dollar to hedge certain exposures
to the Canadian dollar created as a result of the acquisition.
At December 31, 2007, we had notional amounts outstanding
of $364.3 million. The total estimated fair value of these
contracts at December 31, 2007 and 2006 resulted in a
liability of $73.8 million and $11.1 million,
respectively. These derivative instruments were not designated
as hedges and the changes in fair value of the contracts are
recorded each period in current earnings.
Warrant
On February 28, 2002, we issued Shell Technology Ventures
Inc. a warrant to purchase up to 6.5 million common shares
at a price of $30.00 per share. Effective July 12, 2006,
this agreement was amended and restated to reflect, among other
things, changes in our capital structure. The warrant remains
exercisable until February 28, 2012 and is subject to
adjustment for changes in our capital structure or the issuance
of dividends in cash, securities or property. Upon exercise by
the holder, settlement may occur through physical delivery, net
share settlement, net cash settlement or a combination of those
methods. The net cash settlement option upon exercise is at our
sole discretion. In addition, the amended and restated warrant
no longer contains a conversion feature, which previously
allowed the warrant holder to convert the warrant into common
shares. The amendment did not affect the accounting or
classification of the warrant.
Pension
Plans
We have defined benefit pension plans covering certain of our
U.S. and international employees that provide various
pension benefits. During 2007, we contributed $12.5 million
towards those plans, and for 2008, we anticipate funding
approximately $13.2 million through cash flows from
operating activities.
30
Zero
Coupon Convertible Senior Debentures
On June 30, 2000, we completed the private placement of
$910.0 million face amount of Zero Coupon Debentures. These
debentures were issued at $501.6 million, providing the
holders with an annual 3% yield to maturity. At June 30,
2005, the holders had the option to require us to repurchase the
Zero Coupon Debentures at the accreted amount which was
$582.2 million. In total, $11.0 million of face value
for an aggregate accreted value of $7.1 million was put to
us. We settled this obligation during July 2005 with cash on
hand.
On July 28, 2005, we called for redemption on
August 29, 2005 of all of the outstanding Zero Coupon
Debentures. At their option, certain holders tendered for
conversion an aggregate of $367.4 million principal amount
at maturity. The debentures were converted to an aggregate of
approximately 7.3 million of our common shares. We redeemed
the remaining $531.6 million aggregate principal amount at
maturity for a cost of $341.8 million.
Off
Balance Sheet Arrangements
Guarantees
The following obligations of Weatherford International, Inc.
(Issuer) were guaranteed by Weatherford
International Ltd. (Parent) as of December 31,
2007: (i) the 6.625% Senior Notes, (ii) the
5.95% Senior Notes, (iii) the 6.35% Senior Notes,
and (iv) the 6.80% Senior Notes.
The following obligations of the Parent were guaranteed by the
Issuer as of December 31, 2007: (i) the Revolving
Credit Facility, (ii) the 4.95% Senior Notes,
(iii) the 5.50% Senior Notes, (iv) the
6.50% Senior Notes and (v) issuances of notes under
the commercial paper program.
Letters
of Credit
We execute letters of credit in the normal course of business.
While these obligations are not normally called, these
obligations could be called by the beneficiaries at any time
before the expiration date should we breach certain contractual
or payment obligations. As of December 31, 2007, we had
$216.1 million of letters of credit and bid and performance
bonds outstanding, consisting of $147.5 million outstanding
under various uncommitted credit facilities and
$68.6 million letters of credit outstanding under our
committed facilities. If the beneficiaries called these letters
of credit, the called amount would become an on-balance sheet
liability, and our available liquidity would be reduced by the
amount called.
Critical
Accounting Policies and Estimates
Our discussion and analysis of our financial condition and
results of operation is based upon our consolidated financial
statements. We prepare these financial statements in conformity
with U.S. generally accepted accounting principles. As
such, we are required to make certain estimates, judgments and
assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the periods
presented. We base our estimates on historical experience,
available information and various other assumptions we believe
to be reasonable under the circumstances. On an on-going basis,
we evaluate our estimates; however, actual results may differ
from these estimates under different assumptions or conditions.
The accounting policies we believe require managements
most difficult, subjective or complex judgments and are the most
critical to our reporting of results of operations and financial
position are as follows:
Business
Combinations and Goodwill and Indefinite-Lived Intangible
Assets
Goodwill and intangible assets acquired in connection with
business combinations represent the excess of consideration over
the fair value of tangible net assets acquired. Certain
assumptions and estimates are employed in determining the fair
value of assets acquired, the fair value of liabilities assumed,
as well as in determining the allocation of goodwill to the
appropriate reporting unit.
We perform an impairment test for goodwill and indefinite-lived
intangible assets annually as of October 1, or earlier if
indicators of potential impairment exist. Our goodwill
impairment test involves a comparison of the fair
31
value of each of our reporting units with their carrying value.
Our impairment test for indefinite-lived intangible assets
involves the comparison of the fair value of the intangible
asset and its carrying value. The fair value is determined using
discounted cash flows. Certain estimates and judgments are
required in the application of these fair value models. The
discounted cash flow analysis consists of estimating the future
cash flows that are directly associated with each of our
reporting units. These cash flows are inherently subjective and
require significant estimates based upon historical experience
and future expectations such as budgets and industry
projections. We have determined no impairment exists; however,
if for any reason the fair value of our goodwill or that of any
of our reporting units or the fair value of our intangible
assets with indefinite lives declines below the carrying value
in the future, we may incur charges for the impairment. The
amount of the impairment, if any, is then determined based on an
allocation of the reporting unit fair values to individual
assets and liabilities.
Long-Lived
Assets
Long-lived assets, which includes property, plant and equipment
and definite-lived intangibles, comprise a significant amount of
our total assets. In accounting for long-lived assets, we must
make estimates about the expected useful lives of the assets and
the potential for impairment based on the fair value of the
assets and the cash flows they are expected to generate. The
value of the long-lived assets is then amortized over its
expected useful life. A change in the estimated useful lives of
our long-lived assets would have an impact on our results of
operations. We estimate the useful lives of our long-lived asset
groups as follows:
|
|
|
|
|
Useful Lives
|
|
Buildings and leasehold improvements
|
|
5-40 years or lease term
|
Rental and service equipment
|
|
2-20 years
|
Machinery and other
|
|
2-12 years
|
Intangible assets
|
|
2-20 years
|
In estimating the useful lives of our property, plant and
equipment, we rely primarily on our actual experience with the
same or similar assets. The useful lives of our intangible
assets are determined by the years over which we expect the
assets to generate a benefit based on legal, contractual or
regulatory terms.
Long-lived assets to be held and used by us are reviewed to
determine whether any events or changes in circumstances
indicate that we may not be able to recover the carrying amount
of the asset. Factors that might indicate a potential impairment
may include, but are not limited to, significant decreases in
the market value of the long-lived asset, a significant change
in the long-lived assets physical condition, the
introduction of competing technologies, legal challenges, a
change in industry conditions or a reduction in cash flows
associated with the use of the long-lived asset. If these or
other factors exist that indicate the carrying amount of the
asset may not be recoverable, we determine whether an impairment
has occurred through the use of an undiscounted cash flow
analysis. The undiscounted cash flow analysis consists of
estimating the future cash flows that are directly associated
with and expected to arise from the use and eventual disposition
of the asset over its remaining useful life. These cash flows
are inherently subjective and require significant estimates
based upon historical experience and future expectations such as
budgets and internal projections. If the undiscounted cash flows
do not exceed the carrying value of the long-lived asset, an
impairment has occurred, and we recognize a loss for the
difference between the carrying amount and the estimated fair
value of the asset. The fair value of the asset is measured
using market prices, or in the absence of market prices, is
based on an estimate of discounted cash flows. Cash flows are
generally discounted at an interest rate commensurate with our
weighted average cost of capital for a similar asset.
Employee
Stock-Based Compensation
In December 2004, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 123 (Revised
2004) Share-Based Payment
(SFAS No. 123R).
SFAS No. 123R addresses the accounting for all
share-based payment awards, including shares issued under
employee stock purchase plans, stock options, restricted stock
and stock appreciation rights. Under the new standard, companies
are no longer able to account for share-based compensation
transactions using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees. Under the intrinsic method,
no compensation expense is recognized when the exercise price of
an
32
employee stock option is equal to the common share market price
on the grant date and all other factors of the grant are fixed.
Under SFAS No. 123R, companies must account for
share-based compensation transactions using a fair-value method
and recognize the expense in the consolidated statement of
income. Effective January 1, 2006, we adopted
SFAS No. 123R using the modified-prospective
transition method. Under this method, compensation cost is
recognized for all awards granted, modified or settled after the
adoption date as well as for any awards that were granted prior
to the adoption date for which the requisite service has not yet
been rendered.
Effective January 1, 2003, we adopted
SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123), to
expense the fair value of employee stock-based compensation for
awards granted, modified or settled subsequent to
December 31, 2002. We elected the prospective method of
adoption, and under this method, the fair value of employee
stock-based awards granted or modified subsequent to adoption is
measured at the grant date and is recognized as an expense over
the service period, which is usually the vesting period.
Accordingly, the adoption of SFAS No. 123Rs fair
value method did not have a significant impact on our reported
results of operations for the year ended December 31, 2006
as all of the grants issued prior to the adoption of
SFAS No. 123 were fully vested in the prior year and
the grants issued subsequent to January 1, 2003 are being
expensed at their estimated fair value.
The fair value of each option is estimated using the
Black-Scholes option pricing model. Key assumptions in the
Black-Scholes option pricing model, some of which are based on
subjective expectations, are subject to change. A change in one
or more of these assumptions would impact the expense associated
with future grants. These key assumptions include the volatility
of our common shares, the risk-free interest rate and the
expected life of options.
We used the following weighted average assumptions in the
Black-Scholes option pricing model for determining the fair
value of our 2006 and 2007 stock option grants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
|
|
Risk-Free
|
|
Expected
|
|
|
|
|
Volatility
|
|
Interest Rate
|
|
Life
|
|
Dividends
|
|
2006
|
|
|
36.2
|
%
|
|
|
4.7
|
%
|
|
|
5.0
|
|
|
|
None
|
|
2007
|
|
|
31.0
|
%
|
|
|
4.5
|
%
|
|
|
5.0
|
|
|
|
None
|
|
We calculated the expected volatility of options granted in 2007
using a blended rate based upon implied volatility calculated on
actively traded options on our common shares and upon the
historical volatility of our common shares. We calculated the
expected volatility for options granted in 2006 by measuring the
volatility of our historical stock price for a period equal to
the expected life of the option and ending at the time the
option was granted. We determined the risk-free interest rate
based upon the interest rate on a U.S. Treasury Bill with a
term equal to the expected life of the option at the time the
option was granted. In estimating the expected lives of our
stock options, we have relied primarily on our actual experience
with our previous stock option grants. The expected life is less
than the term of the option as option holders, in our
experience, exercise or forfeit the options during the term of
the option.
Pension
and Other Postretirement Benefits
In September 2006, the FASB issued Statement No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R)
(SFAS No. 158). Among other items,
SFAS No. 158 requires recognition of the overfunded or
underfunded status of an entitys defined benefit or
postretirement plan as an asset or liability in the financial
statements, requires the measurement of defined benefit or
postretirement plan assets and obligations as of the end of the
employers fiscal year, and requires recognition of the
previously deferred portion of defined benefit or postretirement
plans in other comprehensive income.
Amounts recognized in the financial statements must be
determined on an actuarial basis. Two of the more critical
assumptions in the actuarial calculations are the discount rate
for determining the current value of plan benefits and the
expected rate of return on plan assets. Discount rates are based
on the yields of government bonds or high quality corporate
bonds in the respective country or economic market. The expected
long-term rates of return on plan assets are based on a
combination of historical experience and anticipated future
returns in each of the asset categories. As we have both
domestic and international plans, the assumptions, though the
same in nature, are based on varying factors specific
33
to each particular country or economic environment. Changes in
any of the assumptions used could impact our projected benefit
obligations and benefit costs as well as other pension and
postretirement benefit calculations.
Due to the significance of the discount rates and expected
long-term rates of return, the following sensitivity analysis
demonstrates the effect that a 50 basis point change in
those assumptions will have on annual pension expense:
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) of Annual
|
|
|
Pension Expense
|
|
|
50 Basis Point
|
|
50 Basis Point
|
|
|
Increase
|
|
Decrease
|
|
|
(In millions)
|
|
Discount rate
|
|
$
|
(1.3
|
)
|
|
$
|
1.6
|
|
Expected long-term rate of return
|
|
$
|
(0.8
|
)
|
|
$
|
0.8
|
|
Income
Taxes
We provide for income taxes in accordance with
SFAS No. 109, Accounting for Income Taxes. This
standard takes into account the differences between the
financial statement treatment and tax treatment of certain
transactions. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
The effect of a change in tax rates is recognized as income or
expense in the period that includes the enactment date. Our
effective tax rates for 2007, 2006 and 2005 were 23.0%, 25.9%
and 25.5%, respectively.
Effective January 1, 2007, we adopted the provisions of
FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes an interpretation of FASB Statement
No. 109 (FIN No. 48).
FIN No. 48 clarifies the accounting for uncertainty in
income taxes recognized in an enterprises financial
statements and prescribes a recognition threshold and
measurement attributes of income tax positions taken or expected
to be taken on a tax return. Under FIN No. 48, the
impact of an uncertain tax position taken or expected to be
taken on an income tax return must be recognized in the
financial statements at the largest amount that is
more-likely-than-not to be sustained upon examination by the
relevant taxing authority.
We operate in approximately 100 countries through various legal
entities. As a result, we are subject to numerous domestic and
foreign tax jurisdictions and tax agreements and treaties among
the various taxing authorities. Our operations in these
jurisdictions are taxed on various bases: income before taxes,
deemed profits (which is generally determined using a percentage
of revenues rather than profits) and withholding taxes based on
revenue. The calculation of our tax liabilities involves
consideration of uncertainties in the application and
interpretation of complex tax regulations in a multitude of
jurisdictions across our global operations. We recognize
potential liabilities and record tax liabilities for anticipated
tax audit issues in the U.S. and other tax jurisdictions
based on our estimate of whether, and the extent to which,
additional taxes will be due. The tax liabilities are reflected
net of realized tax loss carryforwards. We adjust these reserves
upon specific events; however, due to the complexity of some of
these uncertainties, the ultimate resolution may result in a
payment that is different from our current estimate of the tax
liabilities. If our estimate of tax liabilities proves to be
less than the ultimate assessment, an additional charge to
expense would result. If payment of these amounts ultimately
proves to be less than the recorded amounts, the reversal of the
liabilities would result in tax benefits being recognized in the
period when the contingency has been resolved and the
liabilities are no longer necessary. If the tax liabilities
relate to tax uncertainties existing at the date of the
acquisition of a business, the adjustment of such tax
liabilities will result in an adjustment to the goodwill
recorded at the date of acquisition. Changes in tax laws,
regulations, agreements and treaties, foreign currency exchange
restrictions or our level of operations or profitability in each
taxing jurisdiction could have an impact upon the amount of
income taxes that we provide during any given year.
Valuation
Allowance for Deferred Tax Assets
We record a valuation allowance to reduce the carrying value of
our deferred tax assets when it is more likely than not that a
portion or all of the deferred tax assets will expire before
realization of the benefit or that future deductibility is not
probable. The ultimate realization of the deferred tax assets
depends on the ability to generate sufficient taxable income of
the appropriate character and in the related jurisdiction in the
future. In evaluating our
34
ability to recover our deferred tax assets, we consider all
reasonably available positive and negative evidence, including
our past operating results, the existence of cumulative losses
in the most recent years and our forecast of future taxable
income. In estimating future taxable income, we develop
assumptions, including the amount of future state, federal and
international pretax operating income, the reversal of temporary
differences and the implementation of feasible and prudent tax
planning strategies. These assumptions require significant
judgment.
We have identified various domestic and international tax
planning strategies that we would implement, if necessary, to
enable the realization of our deferred tax assets; however, when
the likelihood of the realization of existing deferred tax
assets changes, adjustments to the valuation allowance are
charged to our income tax provision in the period in which the
determination is made.
As of December 31, 2007, our net deferred tax assets were
$66.3 million before a related valuation allowance of
$61.6 million. As of December 31, 2006, our net
deferred tax assets were $90.0 million excluding a related
valuation allowance of $51.8 million.
For a more comprehensive list of our accounting policies, see
Item 8. Financial Statements and Supplementary
Data Notes to Consolidated Financial
Statements Note 1.
New
Accounting Pronouncements
In June 2006, the FASB ratified the consensus reached on
Emerging Issues Task Force Issue
No. 06-3
(EITF 06-3),
How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income
Statement (That Is, Gross versus Net Presentation).
EITF 06-3
requires a company to disclose its policy regarding the
presentation of tax receipts on the face of the income
statement. The scope of this guidance includes any tax assessed
by a governmental authority that is directly imposed on a
revenue-producing transaction between a seller and a customer
and may include, but is not limited to, sales, use, value added,
and some excise taxes. The provisions of
EITF 06-3
are effective for periods beginning after December 15,
2006. Therefore, we adopted
EITF 06-3
on January 1, 2007. We present taxes collected from
customers on a net basis.
In September 2006, the FASB issued Statement No. 157,
Fair Value Measurements
(SFAS No. 157), which defines fair
value, established a framework for measuring fair value under
generally accepted accounting principles (GAAP) and
expands disclosures about fair value measurements.
SFAS No. 157 applies to other accounting
pronouncements that require or permit fair value measurements.
The new guidance is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and for
interim periods within those fiscal years. We are currently
evaluating the potential impact, if any, of the adoption of
SFAS No. 157 on our consolidated financial position,
results of operations and cash flows.
In February 2007, the FASB issued Statement No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities
(SFAS No. 159). This standard allows
companies to elect to follow fair value accounting for certain
financial assets and liabilities in an effort to mitigate
volatility in earnings without having to apply complex hedge
accounting provisions. SFAS No. 159 is applicable only
to certain financial instruments and is effective for fiscal
years beginning after November 15, 2007. We are currently
evaluating the potential impact, if any, of the adoption of
SFAS No. 159 on our consolidated financial position,
results of operations and cash flows.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS No. 141R).
SFAS No. 141R establishes principles and requirements
for how a company recognizes assets acquired, liabilities
assumed, contractual contingencies and contingent consideration
measured at fair value at the acquisition date. The Statement
also establishes disclosure requirements which will enable users
to evaluate the nature and financial effect of the business
combination. SFAS No. 141R is effective for business
combinations completed in fiscal years beginning after
December 15, 2008.
In December 2007, the FASB issued SFAS No. 160
Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51
(SFAS No. 160). SFAS No. 160
establishes accounting and reporting standards for ownership
interests in subsidiaries held by parties other than the parent,
the amount of consolidated net income attributable to the parent
and to the noncontrolling interest, changes in a parents
ownership interest and the valuation of retained noncontrolling
equity investments when a subsidiary is deconsolidated. The
Statement also establishes reporting requirements that provide
sufficient disclosures that clearly identify and distinguish
between
35
the interest of the parent and the interest of the
noncontrolling owners. SFAS No. 160 is effective for
fiscal years beginning after December 15, 2008. We are
currently evaluating the impact that the adoption of
SFAS No. 160 will have on our financial position,
results of operation and cash flows.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosure About Market Risk
|
We are currently exposed to market risk from changes in foreign
currency and changes in interest rates. From time to time, we
may enter into derivative financial instrument transactions to
manage or reduce our market risk, but we do not enter into
derivative transactions for speculative purposes. A discussion
of our market risk exposure in these financial instruments
follows.
Foreign
Currency Exchange Rates
We operate in virtually every oil and natural gas exploration
and production region in the world. In some parts of the world,
such as the Middle East and Southeast Asia, the currency of our
primary economic environment is the U.S. dollar. We use
this as our functional currency. In other parts of the world, we
conduct our business in currencies other than the
U.S. dollar and the functional currency is the applicable
local currency. In those countries in which we operate in the
local currency, the effects of foreign currency fluctuations are
largely mitigated because local expenses of such foreign
operations are also generally denominated in the same currency.
Assets and liabilities of which the functional currency is the
local currency are translated into U.S. dollars using the
exchange rates in effect at the balance sheet date, resulting in
translation adjustments that are reflected as Accumulated Other
Comprehensive Income in the shareholders equity section on
our Consolidated Balance Sheets. A portion of our net assets are
impacted by changes in foreign currencies in relation to the
U.S. dollar. We recorded a $334.2 million adjustment
to increase our equity account for the year ended
December 31, 2007 to reflect the net impact of the
strengthening of various foreign currencies against the
U.S. dollar.
As of December 31, 2007 and 2006, we had several foreign
currency forward contracts and one option contract with notional
amounts aggregating $681.7 million and $271.0 million,
respectively, which were entered into to hedge exposure to
currency fluctuations in various foreign currencies, including,
but not limited to, the British pound sterling, the Canadian
dollar, the euro and the Norwegian krone. The total estimated
fair value of these contracts at December 31, 2007 resulted
in an asset of $2.4 million and at December 31, 2006,
resulted in a liability of $1.0 million. These derivative
instruments were not designated as hedges and the changes in
fair value of the contracts are recorded each period in current
earnings.
In addition, after the closing of the acquisition of Precision
Energy Services and Precision Drilling International, we entered
into a series of cross-currency swaps between the
U.S. dollar and Canadian dollar to hedge certain exposures
to the Canadian dollar created as a result of the acquisition.
At December 31, 2007, we had notional amounts outstanding
of $364.3 million. The estimated fair value of these
contracts at December 31, 2007 and 2006 resulted in a
liability of $73.8 million and $11.1 million,
respectively. These derivative instruments were not designated
as hedges and the changes in fair value of the contracts are
recorded each period in current earnings.
Interest
Rates
We are subject to interest rate risk on our long-term
fixed-interest rate debt and variable-interest rate borrowings.
Variable rate debt, where the interest rate fluctuates
periodically, exposes us to short-term changes in market
interest rates. Fixed rate debt, where the interest rate is
fixed over the life of the instrument, exposes us to changes in
market interest rates reflected in the fair value of the debt
and to the risk that we may need to refinance maturing debt with
new debt at a higher rate. All other things being equal, the
fair value of our fixed rate debt will increase or decrease as
interest rates change.
36
Our long-term borrowings that were outstanding at
December 31, 2007 subject to interest rate risk consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
|
(In millions)
|
|
|
6.625% Senior Notes due 2011
|
|
$
|
355.6
|
|
|
$
|
369.0
|
|
|
$
|
356.9
|
|
|
$
|
368.8
|
|
5.95% Senior Notes due 2012
|
|
|
598.9
|
|
|
|
617.6
|
|
|
|
|
|
|
|
|
|
4.95% Senior Notes due 2013
|
|
|
254.7
|
|
|
|
245.0
|
|
|
|
255.4
|
|
|
|
245.2
|
|
5.50% Senior Notes due 2016
|
|
|
348.7
|
|
|
|
337.8
|
|
|
|
348.6
|
|
|
|
339.9
|
|
6.35% Senior Notes due 2017
|
|
|
599.5
|
|
|
|
623.9
|
|
|
|
|
|
|
|
|
|
6.50% Senior Notes due 2036
|
|
|
595.8
|
|
|
|
597.6
|
|
|
|
595.7
|
|
|
|
619.5
|
|
6.80% Senior Notes due 2037
|
|
|
298.1
|
|
|
|
312.8
|
|
|
|
|
|
|
|
|
|
We have various other long-term debt instruments of
$21.6 million at December 31, 2007, but believe the
impact of changes in interest rates in the near term will not be
material to these instruments. Short-term borrowings of
$762.6 million at December 31, 2007 approximate fair
value.
As it relates to our variable rate debt, if market interest
rates average 1.0% more in 2008 than the rates as of
December 31, 2007, interest expense for 2008 would increase
by $7.8 million. This amount was determined by calculating
the effect of the hypothetical interest rate on our variable
rate debt. This sensitivity analysis assumes there are no
changes in our financial structure.
Interest
Rate Swaps
We manage our debt portfolio to achieve an overall desired
position of fixed and floating rates and may employ interest
rate swaps as a tool to achieve that goal. The major risks from
interest rate derivatives include changes in the interest rates
affecting the fair value of such instruments, potential
increases in interest expense due to market increases in
floating interest rates and the creditworthiness of the
counterparties in such transactions. The counterparties to our
interest rate swaps are multinational commercial banks. In light
of recent events in the global credit markets and the potential
impact of these events on the liquidity of the banking industry,
we continue to monitor the creditworthiness of our
counterparties.
We have used interest rate swaps to take advantage of available
short-term interest rates. Amounts received upon termination of
the swaps represent the fair value of the agreements at the time
of termination and are recorded as an adjustment to the carrying
value of the related debt. These amounts are being amortized as
a reduction to interest expense over the remaining term of the
debt.
As of December 31, 2007 and 2006, we had net unamortized
gains of $12.0 million and $14.3 million,
respectively, associated with interest rate swap terminations.
Our interest expense was reduced by $2.3 million and
$4.0 million for the years ended December 31, 2007 and
2006, respectively. There were no interest rate swap agreements
outstanding as of December 31, 2007.
37
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
INDEX TO
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
|
|
|
|
|
|
|
Page
|
|
Managements Report on Internal Control Over Financial
Reporting
|
|
|
39
|
|
Report of Independent Registered Public Accounting Firm on
Internal Control over Financial Reporting
|
|
|
40
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
41
|
|
Consolidated Balance Sheets as of December 31, 2007 and 2006
|
|
|
42
|
|
Consolidated Statements of Income for each of the three years in
the period ended December 31, 2007
|
|
|
43
|
|
Consolidated Statements of Shareholders Equity for each of
the three years in the period ended December 31, 2007
|
|
|
44
|
|
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 2007
|
|
|
45
|
|
Notes to Consolidated Financial Statements
|
|
|
46
|
|
|
|
|
|
|
Valuation and Qualifying Accounts and Allowances
|
|
|
95
|
|
38
MANAGEMENTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting
as such term is defined in the Securities Exchange Act of 1934
Rule 13a-15(f).
The Companys internal controls were designed to provide
reasonable assurance as to the reliability of our financial
reporting and the preparation of financial statements for
external purposes in accordance with U.S. generally
accepted accounting principles.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Companys
internal control over financial reporting as of
December 31, 2007. In making its assessment, management has
utilized the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal
Control-Integrated Framework. Based on this assessment,
management concluded that as of December 31, 2007 the
Companys internal control over financial reporting is
effective.
The effectiveness of the Companys internal control over
financial reporting as of December 31, 2007, has been
audited by Ernst & Young LLP, an independent
registered public accounting firm, as stated in their report
which appears herein.
39
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of
Weatherford International Ltd. and Subsidiaries
We have audited Weatherford International Ltds internal
control over financial reporting as of December 31, 2007,
based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria).
Weatherford International Ltds management is responsible
for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of
internal control over financial reporting included in the
accompanying Managements Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion
on the companys internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Weatherford International Ltd. maintained, in
all material respects, effective internal control over financial
reporting as of December 31, 2007 based on the COSO
criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Weatherford International Ltd.
and Subsidiaries as of December 31, 2007 and 2006 and the
related consolidated statements of income, shareholders
equity, and cash flows for each of the three years in the period
ended December 31, 2007, and our report dated
February 20, 2008 expressed an unqualified opinion thereon.
Houston, Texas
February 20, 2008
40
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of
Weatherford International Ltd. and Subsidiaries
We have audited the accompanying consolidated balance sheets of
Weatherford International Ltd. and subsidiaries as of
December 31, 2007 and 2006, and the related consolidated
statements of income, shareholders equity, and cash flows
for each of the three years in the period ended
December 31, 2007. Our audits also included the financial
statement schedule listed in the Index at Item 15. These
financial statements and schedule are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Weatherford International Ltd and
subsidiaries at December 31, 2007 and 2006, and the
consolidated results of their operations and their cash flows
for each of the years in the period ended December 31,
2007, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
As discussed in Note 1 to the consolidated financial
statements, effective January 1, 2007, the Company adopted
FASB Interpretations FIN 48: Accounting for
Uncertainty in Income Taxes an Interpretation of FASB Statement
No. 109 and, as discussed in Note 17, effective
December 31, 2006 the Company adopted Statement of
Financial Accounting Standards No. 158, Employers
Accounting for Defined Benefit Pension and Other Postretirement
Plans, an amendment of FASB Statements No. 87, 88, 106, and
132(R).
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Weatherford International Ltd.s internal control over
financial reporting as of December 31, 2007, based on
criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated February 20, 2008
expressed an unqualified opinion thereon.
Houston, Texas
February 20, 2008
41
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except par value)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
170,714
|
|
|
$
|
126,287
|
|
Accounts Receivable, Net of Allowance for Uncollectible Accounts
of $13,760 in 2007 and $13,452 in 2006
|
|
|
1,961,854
|
|
|
|
1,560,849
|
|
Inventories
|
|
|
1,607,684
|
|
|
|
1,239,034
|
|
Current Deferred Tax Assets
|
|
|
165,508
|
|
|
|
144,833
|
|
Other Current Assets
|
|
|
566,009
|
|
|
|
320,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,471,769
|
|
|
|
3,391,775
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, at Cost:
|
|
|
|
|
|
|
|
|
Land, Buildings and Leasehold Improvements
|
|
|
557,081
|
|
|
|
433,671
|
|
Rental and Service Equipment
|
|
|
3,984,942
|
|
|
|
2,813,739
|
|
Machinery and Other
|
|
|
2,011,884
|
|
|
|
1,657,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,553,907
|
|
|
|
4,904,448
|
|
Less: Accumulated Depreciation
|
|
|
2,400,062
|
|
|
|
1,925,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,153,845
|
|
|
|
2,979,271
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
3,358,490
|
|
|
|
3,000,589
|
|
Other Intangible Assets, Net
|
|
|
596,999
|
|
|
|
599,828
|
|
Equity Investments
|
|
|
368,618
|
|
|
|
31,175
|
|
Other Assets
|
|
|
241,236
|
|
|
|
136,610
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,190,957
|
|
|
$
|
10,139,248
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Short-term Borrowings and Current Portion of Long-term Debt
|
|
$
|
774,220
|
|
|
$
|
648,736
|
|
Accounts Payable
|
|
|
612,775
|
|
|
|
509,942
|
|
Accrued Salaries and Benefits
|
|
|
239,870
|
|
|
|
240,327
|
|
Foreign Income Taxes Payable
|
|
|
105,982
|
|
|
|
217,815
|
|
Other Current Liabilities
|
|
|
469,518
|
|
|
|
426,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,202,365
|
|
|
|
2,043,145
|
|
|
|
|
|
|
|
|
|
|
Long-term Debt
|
|
|
3,066,335
|
|
|
|
1,564,600
|
|
Deferred Tax Liabilities
|
|
|
197,494
|
|
|
|
136,208
|
|
Other Liabilities
|
|
|
318,044
|
|
|
|
220,496
|
|
Shareholders Equity:
|
|
|
|
|
|
|
|
|
Common Shares, $1 Par Value, Authorized
1,000,000 Shares, Issued 363,602 and 361,921 Shares,
Respectively
|
|
|
363,602
|
|
|
|
361,921
|
|
Capital in Excess of Par Value
|
|
|
4,359,349
|
|
|
|
4,275,534
|
|
Treasury Shares, Net
|
|
|
(924,202
|
)
|
|
|
(681,116
|
)
|
Retained Earnings
|
|
|
3,170,182
|
|
|
|
2,099,307
|
|
Accumulated Other Comprehensive Income
|
|
|
437,788
|
|
|
|
119,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,406,719
|
|
|
|
6,174,799
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,190,957
|
|
|
$
|
10,139,248
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
42
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
2,983,427
|
|
|
$
|
2,490,059
|
|
|
$
|
1,856,278
|
|
Services
|
|
|
4,848,635
|
|
|
|
4,088,869
|
|
|
|
2,476,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,832,062
|
|
|
|
6,578,928
|
|
|
|
4,333,227
|
|
Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Products
|
|
|
2,087,296
|
|
|
|
1,731,373
|
|
|
|
1,301,738
|
|
Cost of Services
|
|
|
2,970,314
|
|
|
|
2,481,460
|
|
|
|
1,647,329
|
|
Research and Development
|
|
|
169,317
|
|
|
|
149,429
|
|
|
|
107,362
|
|
Selling, General and Administrative Attributable to Segments
|
|
|
850,359
|
|
|
|
746,386
|
|
|
|
535,465
|
|
Corporate General and Administrative
|
|
|
130,440
|
|
|
|
115,593
|
|
|
|
77,154
|
|
Exit Costs and Restructuring Charges
|
|
|
|
|
|
|
|
|
|
|
93,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,207,726
|
|
|
|
5,224,241
|
|
|
|
3,762,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
1,624,336
|
|
|
|
1,354,687
|
|
|
|
570,598
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on Sale of Universal Common Stock
|
|
|
|
|
|
|
|
|
|
|
115,456
|
|
Interest Income
|
|
|
11,847
|
|
|
|
6,656
|
|
|
|
11,208
|
|
Interest Expense
|
|
|
(183,128
|
)
|
|
|
(109,216
|
)
|
|
|
(80,189
|
)
|
Debt Redemption Expense
|
|
|
|
|
|
|
|
|
|
|
(4,733
|
)
|
Other, Net
|
|
|
(8,569
|
)
|
|
|
(13,218
|
)
|
|
|
19,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Before Income Taxes and
Minority Interest
|
|
|
1,444,486
|
|
|
|
1,238,909
|
|
|
|
632,117
|
|
Provision for Income Taxes
|
|
|
(332,760
|
)
|
|
|
(321,473
|
)
|
|
|
(161,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Before Minority Interest
|
|
|
1,111,726
|
|
|
|
917,436
|
|
|
|
470,912
|
|
Minority Interest, Net of Taxes
|
|
|
(19,751
|
)
|
|
|
(11,330
|
)
|
|
|
(817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
1,091,975
|
|
|
|
906,106
|
|
|
|
470,095
|
|
Loss from Discontinued Operations, Net of Taxes
|
|
|
(21,369
|
)
|
|
|
(9,737
|
)
|
|
|
(2,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
1,070,606
|
|
|
$
|
896,369
|
|
|
$
|
467,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
$
|
3.23
|
|
|
$
|
2.62
|
|
|
$
|
1.57
|
|
Loss from Discontinued Operations
|
|
|
(0.07
|
)
|
|
|
(0.03
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
3.16
|
|
|
$
|
2.59
|
|
|
|
1.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
$
|
3.14
|
|
|
$
|
2.55
|
|
|
$
|
1.48
|
|
Loss from Discontinued Operations
|
|
|
(0.06
|
)
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
3.08
|
|
|
$
|
2.53
|
|
|
$
|
1.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
338,516
|
|
|
|
346,123
|
|
|
|
300,336
|
|
Diluted
|
|
|
347,758
|
|
|
|
354,832
|
|
|
|
322,286
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
43
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Capital in
|
|
|
|
|
|
Other
|
|
|
Treasury Shares
|
|
|
Total
|
|
|
|
Shares
|
|
|
Excess of Par
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
|
|
|
Share
|
|
|
Deferred
|
|
|
Shareholders
|
|
|
|
$1 Par
|
|
|
Value
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Shares
|
|
|
Value
|
|
|
Compensation
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except par value)
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
$
|
290,558
|
|
|
$
|
2,386,086
|
|
|
$
|
735,518
|
|
|
$
|
129,291
|
|
|
|
(18,088
|
)
|
|
$
|
(244,533
|
)
|
|
$
|
16,469
|
|
|
$
|
3,313,389
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
467,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
467,420
|
|
Foreign Currency Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,856
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,856
|
)
|
Pension Liability Adjustment, Net of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,880
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,880
|
)
|
Unrealized Loss on Derivative Instruments, Net of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,180
|
)
|
Realized Loss on Derivative Instruments, Net of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
467,420
|
|
|
|
(36,639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
430,781
|
|
Shares Issued in Acquisition
|
|
|
52,000
|
|
|
|
1,346,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,398,020
|
|
Conversion of Zero Coupon Convertible Senior Debentures
|
|
|
7,346
|
|
|
|
228,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
236,191
|
|
Equity Awards Granted, Vested and Exercised
|
|
|
9,069
|
|
|
|
130,907
|
|
|
|
|
|
|
|
|
|
|
|
6,064
|
|
|
|
74,971
|
|
|
|
|
|
|
|
214,947
|
|
Excess Tax Benefit of Share-Based Compensation Plans
|
|
|
|
|
|
|
72,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,507
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165
|
|
|
|
(473
|
)
|
|
|
1,455
|
|
|
|
982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
358,973
|
|
|
|
4,164,365
|
|
|
|
1,202,938
|
|
|
|
92,652
|
|
|
|
(11,859
|
)
|
|
|
(170,035
|
)
|
|
|
17,924
|
|
|
|
5,666,817
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
896,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
896,369
|
|
Foreign Currency Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,445
|
|
Pension Liability Adjustment, Net of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,292
|
|
Unrealized Gain on Derivative Instruments, Net of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,693
|
|
Realized Loss on Derivative Instruments, Net of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
896,369
|
|
|
|
53,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
949,933
|
|
Adjustment to Initially Apply FASB Statement No. 158, Net
of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,063
|
)
|
Divestiture of Subsidiary Shares
|
|
|
|
|
|
|
5,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,336
|
|
Purchase of Treasury Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,525
|
)
|
|
|
(548,575
|
)
|
|
|
|
|
|
|
(548,575
|
)
|
Equity Awards Granted, Vested and Exercised
|
|
|
2,948
|
|
|
|
87,087
|
|
|
|
|
|
|
|
|
|
|
|
2,113
|
|
|
|
18,176
|
|
|
|
|
|
|
|
108,211
|
|
Excess Tax Benefit of Share-Based Compensation Plans
|
|
|
|
|
|
|
14,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,121
|
|
Other
|
|
|
|
|
|
|
4,625
|
|
|
|
|
|
|
|
|
|
|
|
139
|
|
|
|
1,535
|
|
|
|
(141
|
)
|
|
|
6,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
361,921
|
|
|
|
4,275,534
|
|
|
|
2,099,307
|
|
|
|
119,153
|
|
|
|
(22,132
|
)
|
|
|
(698,899
|
)
|
|
|
17,783
|
|
|
|
6,174,799
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
1,070,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,070,606
|
|
Foreign Currency Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
334,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
334,217
|
|
Defined Benefit Pension Plans, Net of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,736
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,736
|
)
|
Realized Loss on Derivative Instruments, Net of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
1,070,606
|
|
|
|
318,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,389,241
|
|
Purchase of Treasury Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,112
|
)
|
|
|
(246,190
|
)
|
|
|
|
|
|
|
(246,190
|
)
|
Equity Awards Granted, Vested and Exercised
|
|
|
1,681
|
|
|
|
53,712
|
|
|
|
|
|
|
|
|
|
|
|
2,751
|
|
|
|
2,733
|
|
|
|
|
|
|
|
58,126
|
|
Excess Tax Benefit of Share-Based Compensation Plans
|
|
|
|
|
|
|
28,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,895
|
|
Adoption of FIN No. 48
|
|
|
|
|
|
|
|
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
269
|
|
Other
|
|
|
|
|
|
|
1,208
|
|
|
|
|
|
|
|
|
|
|
|
(16
|
)
|
|
|
(2,886
|
)
|
|
|
3,257
|
|
|
|
1,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
363,602
|
|
|
$
|
4,359,349
|
|
|
$
|
3,170,182
|
|
|
$
|
437,788
|
|
|
|
(24,509
|
)
|
|
$
|
(945,242
|
)
|
|
$
|
21,040
|
|
|
$
|
7,406,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
44
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
1,070,606
|
|
|
$
|
896,369
|
|
|
$
|
467,420
|
|
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
606,226
|
|
|
|
482,948
|
|
|
|
334,330
|
|
Gain on Sale of Universal Common Stock
|
|
|
|
|
|
|
|
|
|
|
(115,456
|
)
|
(Gain) Loss on Sale of Assets and Businesses, Net
|
|
|
(41,185
|
)
|
|
|
(42,232
|
)
|
|
|
6,625
|
|
Loss from Discontinued Operation
|
|
|
21,369
|
|
|
|
9,737
|
|
|
|
2,675
|
|
Employee Stock-Based Compensation Expense
|
|
|
64,901
|
|
|
|
62,739
|
|
|
|
28,948
|
|
Excess Tax Benefits from Share-Based Compensation
|
|
|
(28,895
|
)
|
|
|
(14,121
|
)
|
|
|
|
|
Minority Interest
|
|
|
19,751
|
|
|
|
11,330
|
|
|
|
817
|
|
Non-cash Portion of Exit Costs and Restructuring Charges
|
|
|
|
|
|
|
|
|
|
|
65,200
|
|
Amortization of Original Issue Discount
|
|
|
|
|
|
|
|
|
|
|
11,432
|
|
Debt Redemption Expense
|
|
|
|
|
|
|
|
|
|
|
4,733
|
|
Deferred Income Tax Provision
|
|
|
28,873
|
|
|
|
48,413
|
|
|
|
30,816
|
|
Other, Net
|
|
|
4,608
|
|
|
|
5,760
|
|
|
|
(13,867
|
)
|
Change in Operating Assets and Liabilities, Net of Effect of
Businesses Acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
|
(296,120
|
)
|
|
|
(299,335
|
)
|
|
|
(244,947
|
)
|
Inventories
|
|
|
(417,305
|
)
|
|
|
(338,323
|
)
|
|
|
(150,762
|
)
|
Other Current Assets
|
|
|
(45,794
|
)
|
|
|
(66,561
|
)
|
|
|
3,543
|
|
Accounts Payable
|
|
|
74,815
|
|
|
|
27,018
|
|
|
|
31,074
|
|
Accrued Current Liabilities
|
|
|
(108,362
|
)
|
|
|
255,009
|
|
|
|
140,228
|
|
Other, Net
|
|
|
(70,833
|
)
|
|
|
55,155
|
|
|
|
(95,287
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities-Continuing Operations
|
|
|
882,655
|
|
|
|
1,093,906
|
|
|
|
507,522
|
|
Net Cash Used by Operating Activities-Discontinued Operations
|
|
|
(10,149
|
)
|
|
|
(6,887
|
)
|
|
|
(4,428
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
872,506
|
|
|
|
1,087,019
|
|
|
|
503,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of Businesses, Net of Cash Acquired
|
|
|
(275,149
|
)
|
|
|
(194,314
|
)
|
|
|
(991,067
|
)
|
Capital Expenditures for Property, Plant and Equipment for
Continuing Operations
|
|
|
(1,635,041
|
)
|
|
|
(1,051,100
|
)
|
|
|
(522,841
|
)
|
Acquisition of Intellectual Property
|
|
|
(23,035
|
)
|
|
|
(31,201
|
)
|
|
|
(13,423
|
)
|
(Purchase) Sale of Equity Investments in Unconsolidated
Affiliates
|
|
|
(335,220
|
)
|
|
|
14,240
|
|
|
|
(16,424
|
)
|
Proceeds from Sale of Universal Common Stock
|
|
|
|
|
|
|
|
|
|
|
276,750
|
|
Proceeds from Sale of Assets and Businesses, Net
|
|
|
84,476
|
|
|
|
39,860
|
|
|
|
15,874
|
|
Other Investing Activities
|
|
|
(38,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used by Investing Activities-Continuing Operations
|
|
|
(2,222,469
|
)
|
|
|
(1,222,515
|
)
|
|
|
(1,251,131
|
)
|
Net Cash Used by Investing Activities-Discontinued Operations
|
|
|
(10,579
|
)
|
|
|
(19,984
|
)
|
|
|
(3,777
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used by Investing Activities
|
|
|
(2,233,048
|
)
|
|
|
(1,242,499
|
)
|
|
|
(1,254,908
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of (Repayments on) Short-term Debt, Net
|
|
|
117,865
|
|
|
|
(109,490
|
)
|
|
|
731,132
|
|
Borrowings of Long-term Debt
|
|
|
1,488,934
|
|
|
|
947,820
|
|
|
|
3,259
|
|
Repayments on Long-term Debt
|
|
|
(18,171
|
)
|
|
|
(215,805
|
)
|
|
|
(5,633
|
)
|
Redemption of Convertible Debentures
|
|
|
|
|
|
|
|
|
|
|
(348,816
|
)
|
Purchase of Treasury Shares
|
|
|
(246,190
|
)
|
|
|
(548,575
|
)
|
|
|
|
|
Proceeds from Exercise of Stock Options
|
|
|
34,192
|
|
|
|
55,438
|
|
|
|
191,127
|
|
Excess Tax Benefits from Share-Based Compensation
|
|
|
28,895
|
|
|
|
14,121
|
|
|
|
|
|
Other Financing Activities, Net
|
|
|
(3,896
|
)
|
|
|
1,603
|
|
|
|
(960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities-Continuing Operations
|
|
|
1,401,629
|
|
|
|
145,112
|
|
|
|
570,109
|
|
Net Cash Provided by Financing Activities-Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
1,401,629
|
|
|
|
145,112
|
|
|
|
570,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
3,340
|
|
|
|
2,410
|
|
|
|
(1,489
|
)
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
|
|
44,427
|
|
|
|
(7,958
|
)
|
|
|
(183,194
|
)
|
Cash and Cash Equivalents at Beginning of Year
|
|
|
126,287
|
|
|
|
134,245
|
|
|
|
317,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year
|
|
$
|
170,714
|
|
|
$
|
126,287
|
|
|
$
|
134,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
45
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
1.
|
Summary
of Significant Accounting Policies
|
Basis
of Presentation
Principles
of Consolidation
The consolidated financial statements include the accounts of
Weatherford International Ltd. (a Bermuda exempted company)
(Weatherford Limited), all majority-owned
subsidiaries and all joint ventures for which we control or
variable interest entities for which the Company has determined
they are the primary beneficiary (collectively, the
Company). Investments in affiliates in which the Company
exercises significant influence over operating and financial
policies are accounted for on the equity method. All material
intercompany accounts and transactions have been eliminated in
consolidation.
Nature of
Operations
The Company is one of the largest global providers of innovative
mechanical solutions, technology and services for the drilling
and production sectors of the oil and natural gas industry.
Reclassifications
Certain reclassifications have been made to conform prior year
financial information to the current period presentation.
Segment
Presentation
The Company reviewed the presentation of its reporting segments
during the first quarter of 2007. Based on this review, the
Company determined that its operational performance is segmented
and reviewed on a geographic basis. As a result, the Company
realigned its financial reporting segments and now report the
following regions as separate, distinct reporting segments:
(1) North America, (2) Latin America,
(3) Europe/West Africa/the Commonwealth of Independent
States (CIS) and (4) Middle East/North
Africa/Asia. The Companys historical segment data
previously reported under the Evaluation, Drilling &
Intervention Services and Completion & Production
Systems divisions have been restated for all periods to conform
to the new presentation (See Notes 5, 9 and 21).
Discontinued
Operations
In June 2007, the Companys management approved a plan to
sell its oil and gas development and production business. The
business was historically included in the Companys North
America and Europe/West Africa/CIS segments. The results of
operations, financial position and cash flows of the business
have been reflected in the consolidated financial statements and
notes as a discontinued operation for all periods presented. The
assets and liabilities held for sale are included in Other
Current Assets and Other Current Liabilities, respectively, in
the Consolidated Balance Sheets.
In July 2005, the Company sold its non-core Gas Services
International (GSI) compression fabrication
business. This business was historically included in the Middle
East/North Africa/Asia segment. The GSI compression fabrication
business results of operations, financial position and cash
flows have been reflected in the consolidated financial
statements and notes as a discontinued operation for all periods
presented.
Use of
Estimates
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period and disclosure of
contingent liabilities. On an ongoing basis, the Company
evaluates its estimates, including those
46
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
related to uncollectible accounts receivable, lower of cost or
market value of inventories, equity investments, intangible
assets and goodwill, property, plant and equipment, income
taxes, self-insurance, pension and postretirement benefit plans
and contingent liabilities. The Company bases its estimates on
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities not readily apparent from other
sources. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The Company considers all highly liquid investments with
original maturities of three months or less to be cash
equivalents.
Accounts
Receivable and Allowance for Uncollectible
Accounts
Accounts receivable are stated at the historical carrying amount
net of allowances for uncollectible accounts. The Company
establishes an allowance for uncollectible accounts based on
specific customer collection issues the Company has identified.
Uncollectible accounts receivable are written off when a
settlement is reached for an amount less than the outstanding
historical balance or when the Company has determined the
balance will not be collected.
Major
Customers and Credit Risk
Substantially all of the Companys customers are engaged in
the energy industry. This concentration of customers may impact
the Companys overall exposure to credit risk, either
positively or negatively, in that customers may be similarly
affected by changes in economic and industry conditions. The
Company performs ongoing credit evaluations of its customers and
does not generally require collateral in support of its trade
receivables. The Company maintains reserves for potential credit
losses, and actual losses have historically been within the
Companys expectations. International sales also present
various risks, including risks of war, civil disturbances and
governmental activities that may limit or disrupt markets,
restrict the movement of funds, result in the deprivation of
contract rights or the taking of property without fair
consideration. Most of the Companys international sales,
however, are to large international or national companies. In
2007, 2006 and 2005, there was no individual customer who
accounted for 10% or greater of consolidated revenues.
Inventories
Inventories are stated at the lower of cost or market. Cost
represents third-party invoice or production cost. Production
cost includes material, labor and manufacturing overhead. The
Company values inventories at lower of cost or market using
either the
first-in,
first-out (FIFO) or average cost methods.
Property,
Plant and Equipment
Property, plant and equipment, both owned and under capital
lease, is carried at cost less accumulated depreciation. The
carrying value of fixed assets is based on estimates and
judgments relative to capitalized costs, useful lives and
salvage value where applicable. Maintenance and repairs are
expensed as incurred. Expenditures for renewals, replacements
and betterments are capitalized. Depreciation on fixed assets,
including those under capital leases, is computed using the
straight-line method over the estimated useful lives after
allowing for salvage value, where applicable. Depreciation
expense for the years ended December 31, 2007, 2006 and
2005 was $552.5 million,
47
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$432.6 million and $303.3 million, respectively. The
estimated useful lives of the major classes of property, plant
and equipment are as follows:
|
|
|
|
|
Estimated
|
|
|
Useful Lives
|
|
Buildings and leasehold improvements
|
|
5-40 years or lease term
|
Rental and service equipment
|
|
2-20 years
|
Machinery and other
|
|
2-12 years
|
During 2005, the Company acquired Precision Drilling
International, a land rig contractor. Rig assets are classified
in Rental and Service Equipment on the Consolidated Balance
Sheets. From time to time, the Company may review the estimated
remaining useful lives of its drilling rigs and may extend the
useful life when events and circumstances, such as upgrades or
refurbishment activities, indicate the drilling rig can operate
beyond its original useful life. All estimated useful lives were
evaluated and established based upon appraisal concurrent with
the acquisition. No changes in the estimated useful lives have
occurred since the acquisition date.
Long-Lived
Assets
Long-lived assets, excluding goodwill and indefinite-lived
intangibles, to be held and used by the Company are reviewed to
determine whether any events or changes in circumstances
indicate the carrying amount of the asset may not be
recoverable. Factors that might indicate a potential impairment
may include, but are not limited to, significant decreases in
the market value of the long-lived asset, a significant change
in the long-lived assets physical condition, a change in
industry conditions or a reduction in cash flows associated with
the use of the long-lived asset. If these or other factors
indicate the carrying amount of the asset may not be
recoverable, the Company determines whether an impairment has
occurred through the use of an undiscounted cash flow analysis
of the asset at the lowest level for which identifiable cash
flows exist. If an impairment has occurred, the Company
recognizes a loss for the difference between the carrying amount
and the fair value of the asset. The fair value of the asset is
measured using market prices or, in the absence of market
prices, is based on an estimate of discounted cash flows. Cash
flows are generally discounted at an interest rate commensurate
with our weighted average cost of capital for a similar asset.
Assets are classified as held for sale when the Company has a
plan for disposal of certain assets and those assets meet the
held for sale criteria of Statement of Financial Accounting
Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets
(SFAS No. 144).
Goodwill
and Indefinite-Lived Intangible Assets
The Company tests for the impairment of goodwill and other
intangible assets with indefinite lives on at least an annual
basis. The Companys goodwill impairment test involves a
comparison of the fair value of each of the Companys
reporting units with its carrying amount. The Companys
indefinite-lived asset impairment test involves a comparison of
the fair value of the intangible asset and its carrying value.
Fair value is estimated using discounted cash flows. If the fair
value is less than the carrying value, the asset is considered
impaired. The amount of the impairment, if any, is then
determined based on an allocation of the reporting unit fair
values to individual assets and liabilities.
Intangible
Assets
The Companys intangible assets, excluding goodwill, are
developed technology, technology licenses, patents, customer
relationships and contracts, trademarks and other identifiable
intangible assets. Intangible assets are amortized on a
straight-line basis over their estimated economic lives ranging
from 2 to 20 years except for intangible assets with
indefinite lives. As many areas of the Companys business
rely on patents and proprietary technology, it has followed a
policy of seeking patent protection both inside and outside the
U.S. for products and methods that appear to have
commercial significance. The Company capitalizes patent defense
costs when it determines that a successful defense is probable.
48
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Pension
and Postretirement Benefit Plans
The Company has defined benefit pension and other postretirement
benefit plans covering certain of its employees. Costs of the
plan are charged to income and consist of several components,
known collectively as net periodic pension cost, which are based
on various actuarial assumptions regarding future experience of
the plans. Amounts recorded for these defined benefit plans
reflect estimates related to future interest rates, investment
rates of return, employee turnover and wage increases. The
Company reviews all assumptions and estimates on an ongoing
basis. As of December 31, 2007 and 2006, the Company has
recognized the overfunded or underfunded status of its plans as
an asset or liability in the Consolidated Balance Sheets.
Research
and Development Expenditures
Research and developments expenditures are expensed as incurred.
Environmental
Expenditures
Environmental expenditures that relate to the remediation of an
existing condition caused by past operation and that do not
contribute to future revenues are expensed. Liabilities for
these expenditures are recorded when it is probable that
obligations have been incurred and costs can be reasonably
estimated. Estimates are based on available facts and
technology, enacted laws and regulations and the Companys
prior experience in remediation of contaminated sites. Accrued
undiscounted environmental liabilities were $7.2 million
and $9.0 million at December 31, 2007 and 2006,
respectively.
Insurance
The Company is self-insured up to certain retention limits for
general liability, vehicle liability, group medical and for
workers compensation claims for certain of its employees.
The amounts in excess of the self-insured levels are fully
insured, up to a limit. Self-insurance accruals are based on
claims filed and an estimate for significant claims incurred but
not reported.
Derivative
Financial Instruments
The Company accounts for all derivative instruments under
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, as amended
(SFAS No. 133). This standard requires
that every derivative instrument be recorded at fair value in
the balance sheet as either an asset or a liability. Changes in
the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on
whether the derivative is designated as part of a hedge
relationship, and if so, the type of hedge transaction. Any gain
or loss associated with the termination of a swap is deferred
and amortized over the remaining debt term.
Foreign
Currency
The functional currency for most of the Companys
international operations is the applicable local currency.
Results of operations for foreign subsidiaries with functional
currencies other than the U.S. dollar are translated using
average exchange rates during the period. Assets and liabilities
of these foreign subsidiaries are translated using the exchange
rates in effect at the balance sheet dates, and the resulting
translation adjustments are included as Accumulated Other
Comprehensive Income, a component of shareholders equity.
For
non-U.S. subsidiaries
where the functional currency is the U.S. dollar,
inventories, property, plant and equipment and other
non-monetary assets, together with their related elements of
expense, are translated at historical rates of exchange. All
other assets and liabilities are translated at current exchange
rates. All other
49
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
revenues and expenses are translated at average exchange rates.
Translation gains and losses for these subsidiaries are
recognized in the Companys results of operations during
the period incurred. The gain or loss related to individual
foreign currency transactions are reflected in results of
operations when incurred.
Stock
Options
Effective, January 1, 2006, the Company adopted
SFAS No. 123 (Revised 2004) Share-Based
Payment (SFAS No. 123R) using the
modified-prospective transition method. Under this method,
compensation cost is recognized for all awards granted, modified
or settled after the adoption date as well as for any awards
that were granted prior to the adoption date for which the
requisite service has not yet been rendered. Previously on
January 1, 2003, the Company adopted
SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123), to
expense the fair value of employee stock-based compensation for
awards granted, modified or settled subsequent to
December 31, 2002. The Company selected the prospective
method of adoption, and under this method, the fair value of
employee stock-based awards granted or modified subsequent to
adoption is measured at the grant date and is recognized as an
expense over the service period, which is usually the vesting
period. Accordingly, the adoption of
SFAS No. 123Rs fair value method did not have a
significant impact on the Companys reported results of
operations for the year ended December 31, 2006 as all of
the grants issued prior to the adoption of
SFAS No. 123 were fully vested in the prior year and
the grants issued subsequent to January 1, 2003 are
currently being expensed at their estimated fair value.
SFAS No. 123R requires the cash outflows resulting
from the tax benefits from the tax deductions in excess of
compensation cost recognized for share based payment awards to
be classified as financing cash flows. Had the Company not
adopted SFAS No. 123R, the excess tax benefits would
have been classified as an operating cash inflow.
Accounting
for Income Taxes
Income taxes have been provided based upon the tax laws and
rates in the countries in which operations are conducted and
income is earned. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
A valuation allowance for deferred tax assets is recorded when
it is more likely than not that some or all of the benefit from
the deferred tax asset will not be realized.
Effective January 1, 2007, the Company adopted the
provisions of Financial Accounting Standards Board
(FASB) Interpretation No. 48, Accounting for
Uncertainty in Income Taxes an interpretation of
FASB Statement No. 109
(FIN No. 48). FIN No. 48
clarifies the accounting for uncertainty in income taxes
recognized in an enterprises financial statements and
prescribes a recognition threshold and measurement attributes of
income tax positions taken or expected to be taken on a tax
return. Under FIN No. 48, the impact of an uncertain
tax position taken or expected to be taken on an income tax
return must be recognized in the financial statements at the
largest amount that is more-likely-than-not to be sustained upon
examination by the relevant taxing authority.
Revenue
Recognition
Revenue is recognized when all of the following criteria have
been met: a) evidence of an arrangement exists,
b) delivery to and acceptance by the customer has occurred,
c) the price to the customer is fixed and determinable and
d) collectibility is reasonably assured.
Both contract drilling and pipeline service revenue is
contractual by nature and both are day-rate based contracts. The
Company recognizes revenue for these contracts based on the
criteria outlined above which is consistent with our other
product offerings.
From time to time, the Company may receive revenues for
preparation and mobilization of equipment and personnel. In
connection with new drilling contracts, revenues earned and
incremental costs incurred directly
50
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
related to preparation and mobilization are deferred and
recognized over the primary contract term of the project using
the straight-line method. Costs of relocating equipment without
contracts to more promising market areas are expensed as
incurred. Demobilization fees received are recognized, along
with any related expenses, upon completion of contracts.
The Company incurs rebillable expenses including shipping and
handling, third-party inspection and repairs, and custom and
duties. The Company recognizes the revenue associated with these
rebillable expenses as Products Revenues and all related costs
as Cost of Products in the accompanying Consolidated Statements
of Income.
Earnings
Per Share
Basic earnings per share for all periods presented equals net
income divided by the weighted average number of the
Companys common shares, $1.00 par value (Common
Shares) outstanding during the period. Diluted earnings
per share is computed by dividing net income, as adjusted for
the assumed conversion of dilutive debentures, by the weighted
average number of Common Shares outstanding during the period as
adjusted for the dilutive effect of the Companys stock
option and restricted share plans, warrant and the incremental
shares for the assumed conversion of dilutive debentures.
Net income for the diluted earnings per share calculation for
the year ended 2005 is adjusted to add back the amortization of
original issue discount, net of taxes, relating to the
Companys Zero Coupon Convertible Senior Debentures (the
Zero Coupon Debentures) totaling $7.9 million.
The following reconciles basic and diluted weighted average
number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Basic weighted average shares outstanding
|
|
|
338,516
|
|
|
|
346,123
|
|
|
|
300,336
|
|
Dilutive effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
|
|
|
2,785
|
|
|
|
2,205
|
|
|
|
1,497
|
|
Stock option and restricted share plans
|
|
|
6,457
|
|
|
|
6,504
|
|
|
|
8,476
|
|
Convertible debentures
|
|
|
|
|
|
|
|
|
|
|
11,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
347,758
|
|
|
|
354,832
|
|
|
|
322,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Accounting Pronouncements
In June 2006, the FASB ratified the consensus reached on
Emerging Issues Task Force Issue
No. 06-3
(EITF 06-3),
How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income
Statement (That Is, Gross versus Net Presentation).
EITF 06-3
requires a company to disclose its policy regarding the
presentation of tax receipts on the face of the income
statement. The scope of this guidance includes any tax assessed
by a governmental authority that is directly imposed on a
revenue-producing transaction between a seller and a customer
and may include, but is not limited to, sales, use, value added,
and some excise taxes. The provisions of
EITF 06-3
are effective for periods beginning after December 15,
2006. Therefore, we adopted
EITF 06-3
on January 1, 2007. We present taxes collected from
customers on a net basis.
In September 2006, the FASB issued Statement No. 157,
Fair Value Measurements
(SFAS No. 157), which defines fair
value, established a framework for measuring fair value under
generally accepted accounting principles (GAAP) and
expands disclosures about fair value measurements.
SFAS No. 157 applies to other accounting
pronouncements that require or permit fair value measurements.
The new guidance is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and for
interim periods within those fiscal years. We are currently
evaluating the potential impact, if any, of the adoption of
SFAS No. 157 on our consolidated financial position,
results of operations and cash flows.
51
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In February 2007, the FASB issued Statement No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities
(SFAS No. 159). This standard allows
companies to elect to follow fair value accounting for certain
financial assets and liabilities in an effort to mitigate
volatility in earnings without having to apply complex hedge
accounting provisions. SFAS No. 159 is applicable only
to certain financial instruments and is effective for fiscal
years beginning after November 15, 2007. The Company is
currently evaluating the potential impact, if any, of the
adoption of SFAS No. 159 on its consolidated financial
position, results of operations and cash flows.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations
(SFAS No. 141R).
SFAS No. 141R establishes principles and requirements
for how a company recognizes assets acquired, liabilities
assumed, contractual contingencies and contingent consideration
measured at fair value at the acquisition date. The Statement
also establishes disclosure requirements which will enable users
to evaluate the nature and financial effect of the business
combination. SFAS No. 141R is effective for business
combinations completed in fiscal years beginning after
December 15, 2008.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51
(SFAS No. 160). SFAS No. 160
establishes accounting and reporting standards for ownership
interests in subsidiaries held by parties other than the parent,
the amount of consolidated net income attributable to the parent
and to the noncontrolling interest, changes in a parents
ownership interest and the valuation of retained noncontrolling
equity investments when a subsidiary is deconsolidated. The
Statement also establishes reporting requirements that provide
sufficient disclosures that clearly identify and distinguish
between the interest of the parent and the interest of the
noncontrolling owners. SFAS No. 160 is effective for
fiscal years beginning after December 15, 2008. The Company
is currently evaluating the impact that the adoption of
SFAS No. 160 will have on our financial position,
results of operation and cash flows.
The Company has acquired businesses critical to its long-term
growth strategy. Results of operations for acquisitions are
included in the accompanying Consolidated Statements of Income
from the date of acquisition. The balances included in the
Consolidated Balance Sheets related to acquisitions consummated
in the preceding twelve months are based on preliminary
information and are subject to change when final asset
valuations are obtained and the potential for liabilities has
been evaluated. Acquisitions are accounted for using the
purchase method of accounting and the purchase price is
allocated to the net assets acquired based upon their estimated
fair values at the date of acquisition. Final valuations of
assets and liabilities are obtained and recorded within one year
from the date of the acquisition.
On August 31, 2005, the Company acquired Precision Energy
Services and Precision Drilling International, former divisions
of Precision Drilling Corporation. Precision Energy Services is
a provider of cased hole and open hole wireline services,
drilling and evaluation services and production services. These
operations broadened the Companys wireline and directional
capabilities and strengthened the Companys controlled
pressure drilling and testing product lines. Precision Drilling
International is a land rig contractor owning and operating rigs
with a concentrated presence in the Eastern Hemisphere.
Consideration paid for these businesses was approximately
$2,340.7 million consisting of $942.7 million in cash
and 52.0 million Weatherford Common Shares. The fair value
of the shares issued was determined using an average price of
$26.89, which represented the average closing price of the
Companys stock for a short period before and after the
agreement date. The purchase price was subject to a working
capital adjustment mechanism, which was settled on
January 10, 2007 resulting in additional consideration paid
of approximately $17 million.
The total purchase price was allocated to Precision Energy
Services and Precision Drilling Internationals net
tangible and identifiable intangible assets based on their
estimated fair values. The excess of the purchase price over the
net assets was recorded as goodwill.
52
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In association with the acquisition, the Company identified
pre-acquisition contingencies related to duties and taxes
associated with the importation of certain equipment assets to
foreign jurisdictions. The Company calculated a range of
reasonable estimates of the costs associated with these duties.
As no amount within the range appeared to be a better estimate
than any other, the Company used the amount that is the low end
of the range in accordance with SFAS No. 5,
Accounting for Contingencies, and its interpretations. At
December 31, 2007, the Company has a liability of
approximately $13 million for this matter. If the Company
used the high end of the range, the aggregate potential
liability would be approximately $19 million higher.
The following presents the consolidated financial information
for the Company on a pro forma basis assuming the acquisition of
Precision Energy Services and Precision Drilling International
had occurred as of the beginning of the periods presented. The
historical financial information has been adjusted to give
effect to pro forma items that are directly attributable to the
acquisition and expected to have a continuing impact on the
consolidated results. These items include adjustments to record
the change in functional currencies of certain acquired foreign
entities, incremental amortization and depreciation expense
related to the increase in fair value of the acquired assets,
change in depreciation methodology, additional interest expense
related to the incremental borrowings and to reclassify certain
items to conform to the Companys financial reporting
presentation.
The unaudited financial information set forth below has been
compiled from historical financial statements and other
information, but is not necessarily indicative of the results
that actually would have been achieved had the transaction
occurred on the dates indicated or that may be achieved in the
future.
|
|
|
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
2005
|
|
|
(In thousands, except per
|
|
|
share amounts)
|
|
|
(Unaudited)
|
|
Revenues
|
|
$
|
5,077,127
|
|
Income from continuing operations
|
|
|
486,484
|
|
Net income
|
|
|
483,809
|
|
Basic earnings per share from continuing operations
|
|
|
1.45
|
|
Diluted earnings per share from continuing operations
|
|
|
1.38
|
|
The Company also acquired various other businesses during the
years ended December 31, 2007, 2006 and 2005 for cash
consideration of approximately $253.3 million,
$186.8 million and $105.9 million, respectively.
|
|
3.
|
Equity
Investment Acquisition
|
The Company acquired a 33% ownership interest in Premier
Business Solutions (PBS) in June 2007 for
approximately $330 million. PBS conducts business in Russia
and is the worlds largest electric submersible pump
manufacturer by volume. The Companys investment in PBS is
included in Equity Investments in Unconsolidated Affiliates in
the accompanying Condensed Consolidated Balance Sheet at
December 31, 2007.
|
|
4.
|
Discontinued
Operations
|
In June 2007, the Companys management approved a plan to
sell its oil and gas development and production business. The
business was historically included in the Companys North
America and Europe/West Africa/CIS segments. The results of
operations, financial position and cash flows of the business
have been reflected in the condensed consolidated financial
statements and notes as a discontinued operation for all periods
presented. The Current Assets Held for Sale and Current
Liabilities Held for Sale are included in Other Current Assets
and Other Current Liabilities, respectively, in the Consolidated
Balance Sheets.
Interest charges have been allocated to discontinued operations
based on a pro rata calculation of the net assets of the
discontinued business to the Companys consolidated net
assets.
53
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Operating results of the oil and gas development and production
business are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Revenues
|
|
$
|
2,299
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Before Income Taxes
|
|
$
|
30,303
|
|
|
$
|
14,686
|
|
|
$
|
5,925
|
|
Benefit for Income taxes
|
|
|
8,934
|
|
|
|
4,949
|
|
|
|
2,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Discontinued Operation, Net of Taxes
|
|
$
|
21,369
|
|
|
$
|
9,737
|
|
|
$
|
3,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The current year loss includes approximately $17 million,
net of tax, for asset impairment charges related to write-downs
of the operations U.S. properties currently held for
sale. In addition, the Company completed the sale of the
operations international properties in November 2007 and
recorded a gain of approximately $5 million, net of tax, in
connection with the sale.
Balance sheet information for the oil and gas development and
production business is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Other Current Assets
|
|
$
|
4,563
|
|
|
$
|
1,715
|
|
Property, Plant and Equipment, Net
|
|
|
21,639
|
|
|
|
24,377
|
|
Other Assets
|
|
|
|
|
|
|
7,401
|
|
|
|
|
|
|
|
|
|
|
Current Assets Held for Sale
|
|
$
|
26,202
|
|
|
$
|
33,493
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
$
|
85
|
|
|
$
|
2,553
|
|
Other Current Liabilities
|
|
|
169
|
|
|
|
4,826
|
|
Other Liabilities
|
|
|
383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities Held for Sale
|
|
$
|
637
|
|
|
$
|
7,379
|
|
|
|
|
|
|
|
|
|
|
In June 2004, the Companys management approved a plan to
sell its non-core GSI compression fabrication business. The sale
of this business was finalized in July 2005 for a gain of
$0.6 million. The GSI Compression fabrication business was
historically included in the Companys Middle East/North
Africa/Asia segment. The GSI compression fabrication business
results of operations, financial position and cash flows have
been reflected in the consolidated financial statements and
notes as a discontinued operation for all periods presented.
Operating results of the GSI compression fabrication business
were as follows:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Revenues
|
|
$
|
20,794
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
$
|
777
|
|
Benefit for Income Taxes
|
|
|
434
|
|
|
|
|
|
|
Net Income from Discontinued Operation, Net of Taxes
|
|
$
|
1,211
|
|
|
|
|
|
|
54
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
5.
|
Exit
Costs, Severance, Restructuring and Asset Impairment
Charges
|
During 2005, the Company underwent both a restructuring related
to its acquisition of Precision and reorganization activities
related to its historical businesses, including a change in
management, a change in regional structure and an evaluation of
product lines. It incurred exit costs of $114.2 million
related to its exit and reorganization. The charge included an
inventory write-down of $20.7 million which has been
recorded in Cost of Products and a remaining amount of
$93.6 million which has been recorded as Exit Costs and
Restructuring Charges in the accompanying Consolidated
Statements of Income.
The exit plan related to the Precision acquisition resulted in
exit costs and restructuring charges of $105.5 million. The
Company initiated an integration plan to combine worldwide
operations, rationalize product lines, and eliminate certain
products, services and locations. Product line rationalization
included wireline, controlled pressure drilling and testing and
directional product and service offerings. Inventory totaling
$20.7 million was written-down. Asset impairment charges
included $20.9 million for fixed assets, $12.9 million
related to information technology and $1.7 million related
to investments. Employee severance and termination benefits
totaled $33.0 million. Contract terminations and facility
closures of $7.3 million were also recorded. In connection
with the valuation of the Precision assets, $9.0 million
was identified as purchased in process research and development
and was written-off.
The exit plan related to the reorganization activities
surrounding its historical businesses resulted in exit costs and
restructuring charges of $8.7 million. The Company incurred
severance and termination benefits of $3.6 million and
recorded $2.6 million of facility termination charges
related to the rationalization of two facilities in the
United Kingdom and the U.S. The remaining
$2.5 million charge related to the write-off of other
assets.
The 2005 integration and reorganization plans were complete as
of December 31, 2006. No additional costs were recorded
during the years ended December 31, 2007 or 2006, and the
Company does not anticipate future charges relating to these
activities. A summary of the exit costs and restructuring
charges by segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe/
|
|
|
Middle East/
|
|
|
|
|
|
|
|
|
|
North
|
|
|
Latin
|
|
|
West Africa/
|
|
|
North Africa/
|
|
|
|
|
|
|
|
|
|
America
|
|
|
America
|
|
|
CIS
|
|
|
Asia
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Cost of Products
|
|
$
|
14,284
|
|
|
$
|
903
|
|
|
$
|
2,843
|
|
|
$
|
6,466
|
|
|
$
|
|
|
|
$
|
24,496
|
|
Cost of Services
|
|
|
14,143
|
|
|
|
3,248
|
|
|
|
6,721
|
|
|
|
2,737
|
|
|
|
|
|
|
|
26,849
|
|
Research and Development
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
Selling General & Administrative
|
|
|
21,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,152
|
|
Corporate General & Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,738
|
|
|
|
32,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
58,579
|
|
|
|
4,151
|
|
|
|
9,564
|
|
|
|
9,203
|
|
|
|
32,738
|
|
|
|
114,235
|
|
Cash Payments
|
|
|
(23,345
|
)
|
|
|
(750
|
)
|
|
|
(3,648
|
)
|
|
|
(622
|
)
|
|
|
(14,023
|
)
|
|
|
(42,388
|
)
|
Non-cash Utilization
|
|
|
(35,234
|
)
|
|
|
(3,401
|
)
|
|
|
(5,916
|
)
|
|
|
(8,581
|
)
|
|
|
(15,852
|
)
|
|
|
(68,984
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,863
|
|
|
$
|
2,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007, the remaining accrual was
comprised primarily of severance benefits. The length of time
the Company is obligated to make severance payments varies, with
the longest obligation continuing through 2018.
55
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In 2005, the Company sold its remaining 6.75 million shares
of Universal common stock for net proceeds of
$276.8 million. This sale, which had no related tax
effects, generated a gain of $115.5 million. The Company no
longer holds any ownership interest in Universal.
Non-cash
Activities
During the years ended December 31, 2007, 2006 and 2005,
there were non-cash investing activities of $1.3 million,
$0.1 million and $3.2 million, respectively, relating
to capital leases. In addition, during the years ended
December 31, 2007, 2006 and 2005, there were non-cash
investing activities of $20.0 million, $64.0 million
and $12.0 million, respectively, related to the notes
receivable received in exchange for the Companys business
and asset sales.
Supplemental
Cash Flow Information
Cash paid for interest and income taxes, net of refunds, was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Interest paid
|
|
$
|
184,093
|
|
|
$
|
93,288
|
|
|
$
|
68,614
|
|
Income taxes paid, net of refunds
|
|
|
372,025
|
|
|
|
147,973
|
|
|
|
114,198
|
|
Inventories by category are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Raw materials, components and supplies
|
|
$
|
373,383
|
|
|
$
|
330,006
|
|
Work in process
|
|
|
118,407
|
|
|
|
98,920
|
|
Finished goods
|
|
|
1,115,894
|
|
|
|
810,108
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,607,684
|
|
|
$
|
1,239,034
|
|
|
|
|
|
|
|
|
|
|
Work in process and finished goods inventories include the cost
of materials, labor and plant overhead.
Goodwill is evaluated for impairment on at least an annual
basis. The Company performs its annual goodwill impairment test
as of October 1. The Companys 2007 impairment test
indicated goodwill was not impaired. The Company will continue
to test its goodwill annually as of October 1 unless events
occur or circumstances change between annual tests that would
more likely than not reduce the fair value of a reporting unit
below its carrying amount.
In connection with the change in reporting segments (See
Notes 1 and 21), the Company re-evaluated its reporting
units. The Companys four operating segments are North
America, Latin America,
Europe/West
Africa /CIS and Middle East/North Africa/Asia.
The Companys operating segments consist of the following
reporting units:
|
|
|
|
|
North America (i) United States of America and
(ii) Canada
|
56
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
Latin America
|
|
|
|
Europe/West Africa/CIS (i) West Europe,
(ii) Eastern Europe, (iii) West Africa, and
(iv) Russia/ CIS
|
|
|
|
Middle East/North Africa/Asia (i) Middle
East/North Africa and (ii) Asia Pacific
|
The changes in the carrying amount of goodwill for the two years
ended December 31, 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West
|
|
|
Middle East/
|
|
|
|
|
|
|
North
|
|
|
Latin
|
|
|
Africa/
|
|
|
North Africa/
|
|
|
|
|
|
|
America
|
|
|
America
|
|
|
CIS
|
|
|
Asia
|
|
|
Total
|
|
|
As of December 31, 2005
|
|
$
|
1,695,869
|
|
|
$
|
116,302
|
|
|
$
|
412,566
|
|
|
$
|
576,582
|
|
|
$
|
2,801,319
|
|
Goodwill acquired during period
|
|
|
122,936
|
|
|
|
|
|
|
|
1,073
|
|
|
|
11,931
|
|
|
|
135,940
|
|
Disposals
|
|
|
|
|
|
|
|
|
|
|
(1,216
|
)
|
|
|
|
|
|
|
(1,216
|
)
|
Purchase price and other adjustments
|
|
|
(30,310
|
)
|
|
|
24,727
|
|
|
|
50,095
|
|
|
|
3,337
|
|
|
|
47,849
|
|
Impact of foreign currency translation
|
|
|
(29,409
|
)
|
|
|
5,478
|
|
|
|
37,168
|
|
|
|
3,460
|
|
|
|
16,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006
|
|
|
1,759,086
|
|
|
|
146,507
|
|
|
|
499,686
|
|
|
|
595,310
|
|
|
|
3,000,589
|
|
Goodwill acquired during period
|
|
|
33,497
|
|
|
|
1,087
|
|
|
|
161,840
|
|
|
|
3,131
|
|
|
|
199,555
|
|
Disposals
|
|
|
(19,626
|
)
|
|
|
|
|
|
|
(5,523
|
)
|
|
|
|
|
|
|
(25,149
|
)
|
Purchase price and other adjustments
|
|
|
(153
|
)
|
|
|
4,494
|
|
|
|
1,060
|
|
|
|
374
|
|
|
|
5,775
|
|
Impact of foreign currency translation
|
|
|
145,607
|
|
|
|
4,737
|
|
|
|
21,370
|
|
|
|
6,006
|
|
|
|
177,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
$
|
1,918,411
|
|
|
$
|
156,825
|
|
|
$
|
678,433
|
|
|
$
|
604,821
|
|
|
$
|
3,358,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
Other
Intangible Assets, Net
|
The components of intangible assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
December 31, 2006
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Net
|
|
|
Amount
|
|
|
Amortization
|
|
|
Net
|
|
|
|
(In thousands)
|
|
|
Acquired technology
|
|
$
|
344,765
|
|
|
$
|
(52,769
|
)
|
|
$
|
291,996
|
|
|
$
|
311,939
|
|
|
$
|
(26,620
|
)
|
|
$
|
285,319
|
|
Licenses
|
|
|
238,153
|
|
|
|
(75,414
|
)
|
|
|
162,739
|
|
|
|
226,444
|
|
|
|
(60,316
|
)
|
|
|
166,128
|
|
Patents
|
|
|
134,217
|
|
|
|
(50,644
|
)
|
|
|
83,573
|
|
|
|
127,799
|
|
|
|
(42,184
|
)
|
|
|
85,615
|
|
Customer relationships
|
|
|
29,947
|
|
|
|
(6,497
|
)
|
|
|
23,450
|
|
|
|
27,043
|
|
|
|
(3,133
|
)
|
|
|
23,910
|
|
Customer contracts
|
|
|
21,890
|
|
|
|
(6,547
|
)
|
|
|
15,343
|
|
|
|
21,890
|
|
|
|
(4,027
|
)
|
|
|
17,863
|
|
Covenants not to compete
|
|
|
28,330
|
|
|
|
(25,820
|
)
|
|
|
2,510
|
|
|
|
24,831
|
|
|
|
(23,257
|
)
|
|
|
1,574
|
|
Other
|
|
|
15,603
|
|
|
|
(9,616
|
)
|
|
|
5,987
|
|
|
|
15,761
|
|
|
|
(7,743
|
)
|
|
|
8,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finite-lived intangible assets
|
|
|
812,905
|
|
|
|
(227,307
|
)
|
|
|
585,598
|
|
|
|
755,707
|
|
|
|
(167,280
|
)
|
|
|
588,427
|
|
Intangible assets with an indefinite useful life
|
|
|
11,401
|
|
|
|
|
|
|
|
11,401
|
|
|
|
11,401
|
|
|
|
|
|
|
|
11,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
824,306
|
|
|
$
|
(227,307
|
)
|
|
$
|
596,999
|
|
|
$
|
767,108
|
|
|
$
|
(167,280
|
)
|
|
$
|
599,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated fair value of intangible assets obtained through
acquisitions consummated in the preceding twelve months are
based on preliminary information which is subject to change when
final valuations are obtained.
57
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company has trademarks which are considered to have
indefinite lives as the Company has the ability and intent to
renew indefinitely. These trademarks had a carrying value of
$11.4 million as of December 31, 2007 and 2006.
Amortization expense was $53.7 million, $50.4 million
and $31.0 million for the years ended December 31,
2007, 2006 and 2005, respectively. Future estimated amortization
expense for the carrying amount of intangible assets as of
December 31, 2007 is expected to be as follows (in
thousands):
|
|
|
|
|
2008
|
|
$
|
53,450
|
|
2009
|
|
|
52,367
|
|
2010
|
|
|
51,398
|
|
2011
|
|
|
50,538
|
|
2012
|
|
|
49,048
|
|
|
|
11.
|
Short-term
Borrowings and Current Portion of Long-term Debt
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Revolving credit facility
|
|
$
|
491,000
|
|
|
$
|
75,321
|
|
Commercial paper program
|
|
|
191,621
|
|
|
|
490,808
|
|
Short-term bank loans
|
|
|
80,025
|
|
|
|
66,864
|
|
|
|
|
|
|
|
|
|
|
Total Short-term Borrowings
|
|
|
762,646
|
|
|
|
632,993
|
|
Current Portion of Long-term Debt
|
|
|
11,574
|
|
|
|
15,743
|
|
|
|
|
|
|
|
|
|
|
Short-term Borrowings and Current Portion of Long-term Debt
|
|
$
|
774,220
|
|
|
$
|
648,736
|
|
|
|
|
|
|
|
|
|
|
Weighted average interest rate on short-term borrowings
outstanding during the year
|
|
|
5.39
|
%
|
|
|
5.27
|
%
|
The Company maintains a revolving credit agreement with a
syndicate of banks of which JPMorgan Chase Bank is the
Administrative Agent (Revolving Credit Facility).
The aggregate lending commitment of this facility is
$1.5 billion and allows for a combination of borrowings,
support of the Companys commercial paper program and
issuances of letters of credit. There were $68.6 million in
outstanding letters of credit under the Revolving Credit
Facility at December 31, 2007. The weighted average
interest rate on the outstanding borrowings of this facility was
5.2% at December 31, 2007. The Revolving Credit Facility
requires the Company to maintain a debt-to-capitalization ratio
of less than 60% and contains other covenants and
representations customary for an investment-grade commercial
credit. The Company was in compliance with these covenants at
December 31, 2007.
The Company has a $1.5 billion commercial paper program
under which it may from time to time issue short-term unsecured
notes. The commercial paper program is supported by the
Companys Revolving Credit Facility. The weighted average
interest rate related to outstanding commercial paper issuances
at December 31, 2007 was 5.1%.
The Company has short-term borrowings with various domestic and
international institutions pursuant to uncommitted facilities.
At December 31, 2007, the Company had $80.0 million in
short-term borrowings under these arrangements with a weighted
average interest rate of 7.2%. In addition, the Company had
$147.5 million of letters of credit and bid and performance
bonds under these uncommitted facilities.
The Companys short-term borrowings approximate their fair
value as of December 31, 2007 and 2006.
58
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
6.625% Senior Notes due 2011
|
|
$
|
355,619
|
|
|
$
|
356,874
|
|
5.95% Senior Notes due 2012
|
|
|
598,940
|
|
|
|
|
|
4.95% Senior Notes due 2013
|
|
|
254,681
|
|
|
|
255,371
|
|
5.50% Senior Notes due 2016
|
|
|
348,732
|
|
|
|
348,612
|
|
6.35% Senior Notes due 2017
|
|
|
599,539
|
|
|
|
|
|
6.50% Senior Notes due 2036
|
|
|
595,772
|
|
|
|
595,724
|
|
6.80% Senior Notes due 2037
|
|
|
298,150
|
|
|
|
|
|
Foreign bank and other debt denominated in foreign currencies
|
|
|
18,098
|
|
|
|
12,253
|
|
Capital lease obligations
|
|
|
8,378
|
|
|
|
11,241
|
|
Other
|
|
|
|
|
|
|
268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,077,909
|
|
|
|
1,580,343
|
|
Less amounts due in one year
|
|
|
11,574
|
|
|
|
15,743
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
3,066,335
|
|
|
$
|
1,564,600
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of scheduled long-term debt
maturities by year (in thousands):
|
|
|
|
|
2008
|
|
$
|
11,574
|
|
2009
|
|
|
10,881
|
|
2010
|
|
|
7,375
|
|
2011
|
|
|
354,293
|
|
2012
|
|
|
600,995
|
|
Thereafter
|
|
|
2,092,791
|
|
|
|
|
|
|
|
|
$
|
3,077,909
|
|
|
|
|
|
|
On June 18, 2007, the Company completed a $1.5 billion
long-term debt offering comprised of (i) $600 million
of 5.95% senior notes due 2012 (5.95% Senior
Notes), (ii) $600 million of 6.35% senior
notes due 2017 (6.35% Senior Notes) and
(iii) $300 million of 6.80% senior notes due 2037
(6.80% Senior Notes). Net proceeds of
approximately $1.486 billion were used to repay outstanding
borrowings under the Companys commercial paper program and
for general corporate purposes. Interest on these notes are due
payable semi-annually on June 15 and December 15 of each year.
As evidenced by market transactions, the estimated fair value at
December 31, 2007 of the 5.95% Senior Notes, the
6.35% Senior Notes and the 6.80% Senior Notes were
$617.6 million, $623.9 million and
$312.8 million, respectively.
On August 7, 2006, the Company completed an offering of
$600.0 million senior notes at a coupon rate of 6.50%
(6.50% Senior Notes) with a maturity in August
2036. The interest on the notes is payable semi-annually in
arrears on February 1 and August 1 of each year. As evidenced by
market transactions, the estimated fair value of the
6.50% Senior Notes was $597.6 million and
$619.5 million as of December 31, 2007 and 2006,
respectively.
On February 17, 2006, the Company completed an offering of
$350.0 million senior notes at a coupon rate of 5.50%
(5.50% Senior Notes) with a maturity in
February 2016. The interest on the notes is payable
semi-annually in arrears on February 15 and August 15 of each
year. As evidenced by market transactions, the estimated fair
value of the 5.50% Senior Notes was $337.8 million and
$339.9 million as of December 31, 2007 and 2006,
respectively.
59
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On October 7, 2003, the Company completed a public offering
of $250.0 million of 4.95% Senior Notes due 2013
(4.95% Senior Notes). The interest on the notes
is payable semi-annually in arrears on April 15 and October 15
of each year. Net proceeds from the offering were
$247.9 million and were used to repay short-term
borrowings. As evidenced by market transactions, the estimated
fair value of the 4.95% Senior Notes was
$245.0 million and $245.2 million as of
December 31, 2007 and 2006, respectively.
On November 16, 2001, the Company completed a private
placement of $350.0 million of 6.625% Senior Notes due
2011 (6.625% Senior Notes). The interest on the
notes is payable semi-annually in arrears on May 15 and November
15 of each year. As evidenced by market transactions, the
estimated fair value of the 6.625% Senior Notes was
$369.0 million and $368.8 million as of
December 31, 2007 and 2006, respectively.
The following is a recap of the annualized effective rates on
the Companys long-term debt. The effective rate is
determined after giving consideration to all derivative activity
and amortization of original issue discount (See Note 13).
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
6.625% Senior Notes due 2011
|
|
|
6.3
|
%
|
|
|
6.3
|
%
|
5.95% Senior Notes due 2012
|
|
|
6.0
|
%
|
|
|
|
|
4.95% Senior Notes due 2013
|
|
|
4.8
|
%
|
|
|
4.8
|
%
|
5.50% Senior Notes due 2016
|
|
|
5.5
|
%
|
|
|
5.5
|
%
|
6.35% Senior Notes due 2017
|
|
|
6.4
|
%
|
|
|
|
|
6.50% Senior Notes due 2036
|
|
|
6.5
|
%
|
|
|
6.5
|
%
|
6.80% Senior Notes due 2037
|
|
|
6.8
|
%
|
|
|
|
|
|
|
13.
|
Derivative
Instruments
|
Interest
Rate Swaps
The Company uses interest rate swaps to take advantage of
available short-term interest rates. Amounts received upon
termination of the swaps represent the fair value of the
agreements at the time of termination and are recorded as an
adjustment to the carrying value of the related debt. These
amounts are being amortized as a reduction to interest expense
over the remaining term of the debt.
As of December 31, 2007 and 2006, the Company had net
unamortized gains of $12.0 million and $14.3 million,
respectively, associated with interest rate swap terminations.
The Companys interest expense was reduced by
$2.3 million, $4.0 million and $6.8 million for
2007, 2006 and 2005, respectively. There were no interest rate
swaps outstanding as of December 31, 2007 and 2006.
Other
Derivative Instruments
As of December 31, 2007 and 2006, we had several foreign
currency forward contracts and one option contract with notional
amounts aggregating $681.7 million and $271.0 million,
respectively, which were entered into to hedge exposure to
currency fluctuations in various foreign currencies, including,
but not limited to, the British pound sterling, the Canadian
dollar, the euro and the Norwegian krone. The total estimated
fair value of these contracts at December 31, 2007 resulted
in an asset of $2.4 million and at December 31, 2006
resulted in a liability of $1.0 million. These derivative
instruments were not designated as hedges and the changes in
fair value of the contracts are recorded each period in current
earnings.
In addition, after the closing of the acquisition of Precision
Energy Services and Precision Drilling International, the
Company entered into a series of cross-currency swaps between
the U.S. dollar and Canadian dollar to
60
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
hedge certain exposures to the Canadian dollar created as a
result of the acquisition. At December 31, 2007 and 2006,
the Company had notional amounts outstanding of
$364.3 million. The total estimated fair value of these
contracts at December 31, 2007 and 2006 resulted in a
liability of $73.8 million and $11.1 million,
respectively. These derivative instruments were not designated
as hedges and the changes in fair value of the contracts are
recorded each period in current earnings.
|
|
14.
|
Zero
Coupon Convertible Senior Debentures
|
On June 30, 2000, the Company completed the private
placement of $910.0 million face amount of Zero Coupon
Convertible Senior Debentures. These debentures were issued at
$501.6 million, providing the holders with an annual 3%
yield to maturity. On June 30, 2005, certain holders
required the Company to repurchase the Zero Coupon Debentures
for a face value of $11.0 million or an aggregate accreted
value of $7.1 million.
On July 28, 2005, the Company called for redemption on
August 29, 2005 all of the outstanding Zero Coupon
Debentures. At their option, the holders tendered for conversion
an aggregate of $367.4 million principal amount at
maturity. The tendered debentures were converted to
approximately 7.3 million of our Common Shares. The Company
redeemed the remaining $531.6 million aggregate principal
amount at maturity for a cost of $341.8 million. The
Company expensed $4.7 million of unamortized issuance costs
in connection with the redemption. These expenses have been
classified as Debt Redemption Expense on the accompanying
Consolidated Statement of Income.
Authorized
Shares
On May 9, 2006, the Companys shareholders approved an
increase in the authorized share capital from 510,000,000 to
1,010,000,000. The Company is authorized to issue 1,000,000,000
Common Shares and 10,000,000 undesignated preference shares,
$1.00 par value. As of December 31, 2007, no
preference shares have been issued.
Share
Repurchase Program
In December 2005, the Companys Board of Directors approved
a share repurchase program under which up to $1 billion of
the Companys outstanding Commons Shares could be purchased
in open market or privately negotiated transactions. Pursuant to
this program, the Company purchased approximately
5.1 million and 12.5 million Common Shares during the
years ended December 31, 2007 and 2006, respectively, at an
average price per share of $48.16 and $43.79, respectively.
Warrant
On February 28, 2002, the Company issued Shell Technology
Ventures Inc. a warrant to purchase up to 6.5 million
Common Shares at a price of $30.00 per share. Effective
July 12, 2006, this agreement was amended and restated to
reflect, among other things, changes in the Companys
capital structure. The warrant remains exercisable until
February 28, 2012 and is subject to adjustment for changes
in the Companys capital structure or the issuance of
dividends in cash, securities or property. Upon exercise by the
holder, settlement may occur through physical delivery, net
share settlement, net cash settlement or a combination thereof.
The net cash settlement option upon exercise is at the sole
discretion of the Company. In addition, the amended and restated
warrant no longer contains a conversion feature, which
previously allowed the warrant holder to convert the warrant
into Common Shares. The amendment did not affect the accounting
or classification of the warrant.
61
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
16.
|
Share-Based
Compensation Plans
|
Incentive
Plan
In May 2006, shareholders voted to approve the Weatherford
International Ltd. 2006 Omnibus Incentive Plan (Omnibus
Plan) previously adopted by the Board of Directors in
February 2006. The Omnibus Plan provides for awards of options,
stock appreciation rights, restricted share awards
(RSA), restricted share units (RSU),
performance share awards, performance unit awards, other
share-based awards and cash-based awards to any employee or
non-employee director of the Company or any of its affiliates.
All future issuances of share-based awards will be made from the
Omnibus Plan. The provisions of each award will vary based on
the type of award granted and will be specified by the
Compensation Committee of the Board of Directors. Those awards,
such as options and SARs, that are based on a specific
contractual term will be granted with a term not to exceed ten
years. The terms of the issuances to date under the Omnibus Plan
are consistent with awards previously granted. Under the Omnibus
Plan, there are 10.0 million Common Shares available for
grant. As of December 31, 2007, approximately
7.4 million shares were available for grant under the plan.
To date, only options, restricted shares and restricted share
units have been granted under the Omnibus Plan.
The options granted under the Omnibus Plan are granted with an
exercise price equal to or greater than the fair market value of
the Common Shares at the time the option is granted. The Company
values and recognizes the options and restricted shares and
restricted share units similar to the awards previously granted
under the Companys other share-based payment plans.
Stock
Option Plans
The Company has a number of stock option plans pursuant to which
directors, officers and key employees have been granted options
to purchase Common Shares at the fair market value on the date
of grant.
The Company has in effect a 1991 Employee Stock Option Plan
(1991 ESO Plan), a 1992 Employee Stock Option Plan
(1992 ESO Plan) and a 1998 Employee Stock Option
Plan (1998 ESO Plan). Stock options generally vest
after one to four years following the date of grant and expire
after ten to fourteen years from the date of grant. Subsequent
to the approval of the Companys Omnibus Plan in May 2006,
future grants under these plans have been suspended.
Restricted
Share Plan
The Restricted Share Plan provides for the granting of RSAs or
RSUs, the vesting of which is subject to conditions and
limitations established at the time of the grant. Upon the grant
of an RSA, the participant has the rights of a shareholder,
including but not limited to the right to vote such shares and
the right to receive any dividends paid on such shares.
Recipients of RSU awards will not have the rights of a
shareholder of the Company until such date as the Common Shares
are issued or transferred to the recipient. Key employees,
directors and persons providing material services to the Company
may be eligible for participation in the Restricted Share Plan.
Subsequent to the approval of the Companys Omnibus Plan in
May 2006, future RSA and RSU grants under this plan have been
suspended.
RSAs and RSUs vest based on continued employment, and vesting
generally occurs over a two to four-year period, with an equal
amount of the restricted shares vesting on each anniversary of
the grant date or with 50% of the shares vesting after two years
and the remaining portion vesting in the fourth year.
The fair value of RSAs and RSUs is determined based on the
closing price of the Companys shares on the grant date.
The total fair value is amortized to expense on a straight-line
basis over the vesting period.
62
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Executive
Deferred Compensation Plan
In May 1992, the Companys shareholders approved the
Executive Deferred Compensation Stock Ownership Plan (the
EDC Plan). Under the EDC Plan, a portion of the
compensation for certain key employees of the Company, including
officers and employee directors, can be deferred for payment
after retirement or termination of employment.
The Company has established a grantor trust to fund the benefits
under the EDC Plan. The funds provided to such trust are
invested by a trustee independent of the Company in Common
Shares, which are purchased by the trustee on the open market.
The assets of the trust are available to satisfy the claims of
all general creditors of the Company in the event of bankruptcy
or insolvency. Accordingly, the Common Shares held by the trust
and the liability of the Company under the EDC Plan are included
in the accompanying Consolidated Balance Sheets as Treasury
Shares, Net.
Pro
Forma Compensation Expense
The following illustrates the pro forma effect on net income and
earnings per share if the Company had applied the fair value
recognition provisions of SFAS No. 123 to all
outstanding and unvested awards as of December 31, 2005:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
|
(In thousands, except
|
|
|
|
per share amounts)
|
|
Net Income:
|
|
|
|
|
As reported
|
|
$
|
467,420
|
|
Employee share-based compensation expense included in reported
net income, net of income tax benefit
|
|
|
18,816
|
|
Pro forma compensation expense, determined under fair value
methods for all awards, net of income tax benefit
|
|
|
(29,745
|
)
|
|
|
|
|
|
Pro forma
|
|
$
|
456,491
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
As reported
|
|
$
|
1.56
|
|
Pro forma
|
|
|
1.52
|
|
Diluted earnings per share:
|
|
|
|
|
As reported
|
|
$
|
1.47
|
|
Pro forma
|
|
|
1.44
|
|
Share-Based
Compensation Expense and Activity
The Company recognized $64.9 million, $62.7 million
and $28.9 million in employee share-based compensation
expense during the years ended 2007, 2006 and 2005,
respectively. The related income tax benefit recognized for the
years ended 2007, 2006 and 2005 was $22.7 million,
$22.0 million and $10.1 million, respectively.
The Company uses the Black-Scholes option pricing model to
determine the fair value of each option award on the date of
grant. The estimated fair value of the option is amortized to
expense on a straight-line basis over the vesting period. The
specific assumptions used in determining the fair values for
option grants during the years ended 2007, 2006 and 2005 are
discussed in more detail below and are noted in the following
table.
The expected volatility of options granted in 2007 was
determined using a blended rate based upon implied volatility
calculated on actively traded options on the Companys
common shares and upon the historical volatility of its common
shares. The expected volatility of options granted in 2006 and
2005 was based upon the historical
63
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
volatility of the Companys common stock. The risk-free
interest rate is determined based upon the interest rate on a
U.S. Treasury Bill with a term equal to the expected life
of the option at the time the option was granted. In estimating
the expected lives of the stock options, the Company has relied
primarily on actual experience with previous stock option
grants. The expected life is less than the term of the option as
option holders, in our experience, exercise or forfeit the
options during the term of the option.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Expected volatility
|
|
|
31.0
|
%
|
|
|
36.2
|
%
|
|
|
38.9
|
%
|
Expected dividends
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Expected term (in years)
|
|
|
5.0
|
|
|
|
5.0
|
|
|
|
5.0
|
|
Risk-free rate
|
|
|
4.5
|
%
|
|
|
4.7
|
%
|
|
|
4.4
|
%
|
A summary of option activity under the stock option plans as of
December 31, 2007, and changes during the year then ended
is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
Options
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Outstanding at January 1, 2007
|
|
|
9,914,297
|
|
|
$
|
14.77
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
336,650
|
|
|
|
40.10
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(2,473,343
|
)
|
|
|
13.82
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
|
7,777,604
|
|
|
|
16.16
|
|
|
|
6.94
|
|
|
$
|
407,839
|
|
Vested or Expected to Vest at December 31, 2007
|
|
|
7,777,604
|
|
|
|
16.16
|
|
|
|
6.94
|
|
|
|
407,839
|
|
Exercisable at December 31, 2007
|
|
|
7,101,954
|
|
|
|
13.84
|
|
|
|
6.76
|
|
|
|
388,907
|
|
The weighted-average grant date fair value of options granted
during the years ended December 31, 2007, 2006 and 2005 was
$14.32, $17.56 and $14.20, respectively. The intrinsic value of
options exercised during 2007, 2006 and 2005 was
$110.2 million, $145.9 million and
$278.7 million, respectively. As of December 31, 2007,
there was $7.3 million of total unrecognized compensation
cost related to the Companys unvested stock options and
that cost is expected to be recognized over a weighted-average
period of 2.7 years.
A summary of the status of the Companys non-vested RSAs
and RSUs issued under its Restricted Share Plan and Omnibus Plan
as of December 31, 2007 and changes during the year then
ended, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
RSA
|
|
|
Fair Value
|
|
|
RSU
|
|
|
Fair Value
|
|
|
Non-Vested at January 1, 2007
|
|
|
3,292,580
|
|
|
$
|
33.56
|
|
|
|
2,372,850
|
|
|
$
|
35.90
|
|
Granted
|
|
|
1,071,347
|
|
|
|
48.59
|
|
|
|
739,768
|
|
|
|
54.07
|
|
Vested
|
|
|
(1,637,028
|
)
|
|
|
33.29
|
|
|
|
(955,393
|
)
|
|
|
34.25
|
|
Forfeited
|
|
|
(229,472
|
)
|
|
|
38.21
|
|
|
|
(308,775
|
)
|
|
|
37.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested at December 31, 2007
|
|
|
2,497,427
|
|
|
|
39.03
|
|
|
|
1,848,450
|
|
|
|
42.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant date fair value of RSAs and RSUs
granted during the years ended 2007, 2006 and 2005 was $50.83,
$43.63 and $32.18, respectively. The total fair value of RSAs
and RSUs vested during the years ended 2007, 2006 and 2005 was
$155.8 million, $46.5 million and $15.0 million,
respectively. As of December 31,
64
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
2007, there was $162.2 million of total unrecognized
compensation cost related to non-vested RSAs and RSUs, which is
expected to be recognized over a weighted-average period of
2.0 years.
|
|
17.
|
Retirement
and Employee Benefit Plans
|
The Company has defined contribution plans covering certain
employees. Contribution expenses related to these plans totaled
$28.6 million, $21.9 million and $17.4 million in
2007, 2006 and 2005, respectively.
The Company has defined benefit pension and other
post-retirement benefit plans covering certain U.S. and
international employees. Plan benefits are generally based on
factors such as age, compensation levels and years of service.
Effective August 2003, the Company adopted a SERP to provide
pension benefits to certain executives upon retirement. This
plan is a nonqualified, unfunded retirement plan and in order to
meet its future benefit obligations under the SERP, the Company
maintains life insurance policies on the lives of the
participants. These policies are not included as plan assets nor
in the funded status amounts in the table below. The Company is
the sole owner and beneficiary of such policies.
In September 2006, the FASB issued Statement No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R) (SFAS No. 158).
Among other items, SFAS No. 158 requires recognition of the
overfunded or underfunded status of an entitys defined
benefit or postretirement plan as an asset or liability in the
financial statements, requires the measurement of defined
benefit or postretirement plan assets and obligations as of the
end of the employers fiscal year, and requires recognition
of the previously deferred portion of defined benefit or
postretirement plans in other comprehensive income.
Plan information including the funded status of the plans is
presented below.
The changes in benefit obligations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Benefit obligation at beginning of year
|
|
$
|
94,307
|
|
|
$
|
153,940
|
|
|
$
|
81,865
|
|
|
$
|
124,883
|
|
Service cost
|
|
|
2,642
|
|
|
|
11,308
|
|
|
|
2,301
|
|
|
|
9,694
|
|
Interest cost
|
|
|
5,391
|
|
|
|
8,189
|
|
|
|
4,154
|
|
|
|
6,575
|
|
Plan participants contributions
|
|
|
|
|
|
|
3,436
|
|
|
|
|
|
|
|
2,823
|
|
Business combinations
|
|
|
|
|
|
|
2,483
|
|
|
|
|
|
|
|
795
|
|
Divestiture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,956
|
)
|
Amendments
|
|
|
2,901
|
|
|
|
152
|
|
|
|
3,629
|
|
|
|
111
|
|
Curtailments
|
|
|
(2,010
|
)
|
|
|
|
|
|
|
(2,658
|
)
|
|
|
|
|
Settlements
|
|
|
(8,606
|
)
|
|
|
(42
|
)
|
|
|
(7,484
|
)
|
|
|
(291
|
)
|
Actuarial loss
|
|
|
21,887
|
|
|
|
7,606
|
|
|
|
14,245
|
|
|
|
554
|
|
Currency fluctuations
|
|
|
|
|
|
|
7,325
|
|
|
|
|
|
|
|
14,843
|
|
Benefits paid
|
|
|
(927
|
)
|
|
|
(5,204
|
)
|
|
|
(1,745
|
)
|
|
|
(4,091
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
115,585
|
|
|
$
|
189,193
|
|
|
$
|
94,307
|
|
|
$
|
153,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The changes in plan assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
12,023
|
|
|
$
|
120,447
|
|
|
$
|
12,150
|
|
|
$
|
91,271
|
|
Actual return on plan assets
|
|
|
821
|
|
|
|
7,079
|
|
|
|
1,183
|
|
|
|
10,375
|
|
Employer contribution
|
|
|
1,079
|
|
|
|
11,371
|
|
|
|
435
|
|
|
|
9,145
|
|
Plan participants contributions
|
|
|
|
|
|
|
3,436
|
|
|
|
|
|
|
|
2,823
|
|
Business combinations
|
|
|
|
|
|
|
1,338
|
|
|
|
|
|
|
|
|
|
Divestiture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,240
|
)
|
Settlements
|
|
|
(2,478
|
)
|
|
|
(42
|
)
|
|
|
|
|
|
|
(291
|
)
|
Currency fluctuations
|
|
|
|
|
|
|
4,054
|
|
|
|
|
|
|
|
12,041
|
|
Benefits paid
|
|
|
(927
|
)
|
|
|
(4,764
|
)
|
|
|
(1,745
|
)
|
|
|
(3,677
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
|
10,518
|
|
|
|
142,919
|
|
|
|
12,023
|
|
|
|
120,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
(105,067
|
)
|
|
$
|
(46,274
|
)
|
|
$
|
(82,284
|
)
|
|
$
|
(33,493
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amounts recognized in the Consolidated Balance Sheets are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Noncurrent assets
|
|
$
|
|
|
|
$
|
136
|
|
|
$
|
41
|
|
|
$
|
121
|
|
Current liabilities
|
|
|
(12,075
|
)
|
|
|
|
|
|
|
(6,202
|
)
|
|
|
|
|
Noncurrent liabilities
|
|
|
(92,992
|
)
|
|
|
(46,410
|
)
|
|
|
(76,123
|
)
|
|
|
(33,614
|
)
|
Amounts in accumulated other comprehensive income that have not
yet been recognized as components of net periodic benefit cost
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Net loss
|
|
$
|
53,177
|
|
|
$
|
16,297
|
|
|
$
|
37,269
|
|
|
$
|
7,080
|
|
Net prior service costs (credit)
|
|
|
17,191
|
|
|
|
(1,271
|
)
|
|
|
18,279
|
|
|
|
(1,505
|
)
|
Net transition asset
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive income
|
|
$
|
70,368
|
|
|
$
|
15,001
|
|
|
$
|
55,548
|
|
|
$
|
5,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accumulated benefit obligation for defined benefit pension
plans was $84.0 million and $67.8 million at
December 31, 2007 and 2006, respectively, for the
U.S. plans and $173.2 million and $149.8 million
at December 31, 2007 and 2006, respectively, for the
international plans.
66
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for the pension plans
with projected benefit obligations in excess of plan assets or
accumulated benefit obligations in excess of plan assets as of
December 31, 2007 and 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Plans with projected benefit obligation in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
$
|
115,585
|
|
|
$
|
185,963
|
|
|
$
|
92,017
|
|
|
$
|
150,937
|
|
Fair value of plan assets
|
|
|
10,518
|
|
|
|
139,281
|
|
|
|
9,691
|
|
|
|
117,097
|
|
Plans with accumulated benefit obligation in excess of plan
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
|
84,034
|
|
|
|
151,352
|
|
|
|
65,551
|
|
|
|
136,680
|
|
Fair value of plan assets
|
|
|
10,518
|
|
|
|
117,816
|
|
|
|
9,691
|
|
|
|
103,640
|
|
The components of net periodic benefit cost during the years
ended December 31, 2007, 2006 and 2005 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Service cost
|
|
$
|
2,642
|
|
|
$
|
11,308
|
|
|
$
|
2,301
|
|
|
$
|
9,694
|
|
|
$
|
2,417
|
|
|
$
|
8,573
|
|
Interest cost
|
|
|
5,391
|
|
|
|
8,189
|
|
|
|
4,154
|
|
|
|
6,575
|
|
|
|
3,398
|
|
|
|
4,941
|
|
Expected return on plan assets
|
|
|
(744
|
)
|
|
|
(8,003
|
)
|
|
|
(765
|
)
|
|
|
(6,126
|
)
|
|
|
(802
|
)
|
|
|
(4,018
|
)
|
Amortization of transition asset
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(3
|
)
|
Amortization of prior service cost (credit)
|
|
|
2,108
|
|
|
|
(87
|
)
|
|
|
2,234
|
|
|
|
(104
|
)
|
|
|
2,457
|
|
|
|
323
|
|
Settlements/curtailments
|
|
|
1,548
|
|
|
|
4
|
|
|
|
6,848
|
|
|
|
|
|
|
|
17,432
|
|
|
|
(2,385
|
)
|
Amortization of net loss
|
|
|
4,224
|
|
|
|
208
|
|
|
|
1,807
|
|
|
|
549
|
|
|
|
1,140
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
15,169
|
|
|
$
|
11,615
|
|
|
$
|
16,579
|
|
|
$
|
10,584
|
|
|
$
|
26,042
|
|
|
$
|
7,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other changes in plan assets and benefit obligations recognized
in other comprehensive income during the year ended
December 31, 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
New Activity:
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
$
|
19,799
|
|
|
$
|
8,525
|
|
Net prior service cost for the year
|
|
|
2,901
|
|
|
|
152
|
|
Reclassification Adjustments:
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(3,891
|
)
|
|
|
(212
|
)
|
Prior service credit (cost)
|
|
|
(3,989
|
)
|
|
|
87
|
|
Transition asset
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income:
|
|
$
|
14,820
|
|
|
$
|
8,556
|
|
|
|
|
|
|
|
|
|
|
67
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Amounts in accumulated other comprehensive income expected to be
recognized as components of net periodic benefit cost in 2008
are as follows:
|
|
|
|
|
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Net loss
|
|
$
|
9,478
|
|
|
$
|
392
|
|
Prior service costs (credit)
|
|
|
1,833
|
|
|
|
(84
|
)
|
Transition asset
|
|
|
|
|
|
|
(4
|
)
|
Prior service costs are amortized using an alternative
straight-line method over the average remaining service period
of employees expected to receive plan benefits.
Assumed long-term rates of return on plan assets, discount rates
and rates of compensation increases vary for the different plans
according to the local economic conditions.
The weighted average assumption rates used for benefit
obligations are as follows:
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2007
|
|
2006
|
|
Discount rate:
|
|
|
|
|
United States plans
|
|
5.00 - 6.00%
|
|
5.00 - 5.50%
|
International plans
|
|
1.94 - 8.10
|
|
1.90 - 5.80
|
Rate of compensation increase:
|
|
|
|
|
United States plans
|
|
8.00
|
|
8.00
|
International plans
|
|
2.00 - 6.50
|
|
2.00 - 5.34
|
The weighted average assumption rates used for net periodic
benefit costs are as follows:
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2007
|
|
2006
|
|
2005
|
|
Discount rate:
|
|
|
|
|
|
|
United States plans
|
|
5.00 - 5.50%
|
|
5.00 - 5.50%
|
|
5.25% - 5.75%
|
International plans
|
|
1.90 - 6.60
|
|
2.00 - 5.80
|
|
1.80 - 6.00
|
Expected return on plan assets:
|
|
|
|
|
|
|
United States plans
|
|
5.00 - 7.00
|
|
5.00 - 7.00
|
|
8.00
|
International plans
|
|
4.00 - 6.82
|
|
4.00 - 7.50
|
|
4.00 - 7.00
|
Rate of compensation increase:
|
|
|
|
|
|
|
United States plans
|
|
8.00
|
|
6.00
|
|
4.00
|
International plans
|
|
2.00 - 6.50
|
|
2.00 - 6.08
|
|
2.25 - 6.85
|
In determining the overall expected long-term rate of return for
plan assets, the Company takes into consideration the historical
experience as well as future expectations of the asset mix
involved. As different investments yield different returns, each
asset category must be reviewed individually and then weighted
for significance in relation to the total portfolio.
68
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The weighted average asset allocations at December 31, 2007
and 2006, by asset category are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
|
United
|
|
|
|
United
|
|
|
|
|
States
|
|
International
|
|
States
|
|
International
|
|
Equity
|
|
|
59
|
%
|
|
|
73
|
%
|
|
|
61
|
%
|
|
|
73
|
%
|
Debt securities
|
|
|
40
|
|
|
|
18
|
|
|
|
38
|
|
|
|
18
|
|
Other
|
|
|
1
|
|
|
|
9
|
|
|
|
1
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the U.S., the Companys investment strategy includes a
balanced approach with target allocation percentages of 60%
equity investments and 40% fixed income investments. For the
international plans, the assets are invested primarily in equity
investments as they are expected to provide a higher long-term
rate of return. The Companys pension investment strategy
worldwide prohibits a direct investment in its own stock.
In 2008, the Company expects to contribute $0.7 million in
the U.S. and $12.5 million internationally to its
pension and other postretirement benefit plans. In addition, the
following benefit payments, which reflect expected future
service and anticipated settlements, as appropriate, are
expected to be paid (in thousands):
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
International
|
|
2008
|
|
$
|
13,304
|
|
|
$
|
2,450
|
|
2009
|
|
|
2,723
|
|
|
|
2,581
|
|
2010
|
|
|
2,761
|
|
|
|
1,919
|
|
2011
|
|
|
3,144
|
|
|
|
4,453
|
|
2012
|
|
|
3,495
|
|
|
|
3,654
|
|
2013 - 2017
|
|
|
22,893
|
|
|
|
40,275
|
|
The components of Income from Continuing Operations Before
Income Taxes and Minority Interest were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Domestic
|
|
$
|
512,275
|
|
|
$
|
536,440
|
|
|
$
|
98,426
|
|
Foreign
|
|
|
932,211
|
|
|
|
702,469
|
|
|
|
533,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,444,486
|
|
|
$
|
1,238,909
|
|
|
$
|
632,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Companys income tax benefit (provision) from
continuing operations consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal and state income taxes
|
|
$
|
(132,182
|
)
|
|
$
|
(82,177
|
)
|
|
$
|
605
|
|
Foreign
|
|
|
(171,705
|
)
|
|
|
(190,883
|
)
|
|
|
(130,994
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
(303,887
|
)
|
|
|
(273,060
|
)
|
|
|
(130,389
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
(47,990
|
)
|
|
|
(78,819
|
)
|
|
|
(50,504
|
)
|
Foreign
|
|
|
19,117
|
|
|
|
30,406
|
|
|
|
19,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(28,873
|
)
|
|
|
(48,413
|
)
|
|
|
(30,816
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(332,760
|
)
|
|
$
|
(321,473
|
)
|
|
$
|
(161,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The difference between the tax (provision) benefit at the
statutory federal income tax rate and the tax (provision)
benefit attributable to Income from Continuing Operations Before
Income Taxes and Minority Interest for the three years ended
December 31, 2006 is analyzed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Statutory federal income tax rate
|
|
$
|
(505,571
|
)
|
|
$
|
(433,618
|
)
|
|
$
|
(221,241
|
)
|
Effect of state income tax, net and alternative minimum tax
|
|
|
(8,957
|
)
|
|
|
(1,910
|
)
|
|
|
(191
|
)
|
Effect of domestic non-deductible expenses
|
|
|
(5,295
|
)
|
|
|
2,397
|
|
|
|
6,031
|
|
Change in valuation allowance
|
|
|
(6,662
|
)
|
|
|
(8,395
|
)
|
|
|
(17,223
|
)
|
Effect of foreign income tax, net
|
|
|
204,470
|
|
|
|
99,291
|
|
|
|
67,455
|
|
Change in income tax reserve
|
|
|
(5,425
|
)
|
|
|
7,500
|
|
|
|
8,744
|
|
Other
|
|
|
(5,320
|
)
|
|
|
13,262
|
|
|
|
(4,780
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(332,760
|
)
|
|
$
|
(321,473
|
)
|
|
$
|
(161,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the fourth quarter of 2006, the Company recorded a
benefit of $26.4 million related to the favorable
settlement of certain foreign income tax exposures. This
adjustment is presented in Effect of foreign income tax, net.
During the fourth quarter of 2006, the Company completed an
analysis of book and tax basis differences in its major tax
paying jurisdictions and, as a result, recorded a tax benefit of
$12.9 million, of which, $5.1 million is presented in
Effect of foreign income tax, net and $7.8 million is
presented in Other. In addition, during the fourth quarter of
2006, the Company recorded $10.8 million of benefits
related to certain prior year foreign income tax returns. This
adjustment is presented in Effect of foreign income tax, net.
The Company recorded a $19.8 million benefit related to its
prior year domestic income tax returns during the third quarter
of 2006. Of this benefit, $14.7 million is presented in
Effect of foreign income tax, net and $5.1 million is
presented in Other. The Company assessed these adjustments and
concluded that these adjustments were immaterial, individually
and in the aggregate, to the Companys prior years
results of operations.
Deferred tax assets and liabilities are recognized for the
estimated future tax effects of temporary differences between
the tax basis of an asset or liability and its reported amount
in the financial statements. The measurement of
70
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
deferred tax assets and liabilities is based on enacted tax laws
and rates currently in effect in each of the jurisdictions in
which the Company has operations.
Deferred tax assets and liabilities are classified as current or
non-current according to the classification of the related asset
or liability for financial reporting. The components of the net
deferred tax asset (liability) attributable to continuing
operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Domestic and foreign operating losses
|
|
$
|
109,898
|
|
|
$
|
103,607
|
|
Accrued liabilities and reserves
|
|
|
173,855
|
|
|
|
158,690
|
|
Tax credits
|
|
|
34,343
|
|
|
|
26,277
|
|
Other differences between financial and tax basis
|
|
|
63,626
|
|
|
|
59,733
|
|
Differences between financial and tax basis inventory
|
|
|
51,590
|
|
|
|
25,375
|
|
Valuation allowance
|
|
|
(61,626
|
)
|
|
|
(51,808
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
371,686
|
|
|
|
321,874
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
(156,073
|
)
|
|
|
(113,916
|
)
|
Goodwill and other intangibles
|
|
|
(181,626
|
)
|
|
|
(164,539
|
)
|
Unremitted foreign earnings
|
|
|
(18,787
|
)
|
|
|
|
|
Other differences between financial and tax basis
|
|
|
(10,555
|
)
|
|
|
(5,227
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(367,041
|
)
|
|
|
(283,682
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
4,645
|
|
|
$
|
38,192
|
|
|
|
|
|
|
|
|
|
|
In connection with the acquisition of the Precision divisions,
certain of Precisions operations were integrated with the
Companys operations resulting in a charge of
$23.9 million in 2005. The integration required recognition
of certain gains that had previously been deferred for tax
purposes and also required a valuation allowance to be placed on
a portion of the Companys tax credits. The integration and
restructuring should enable the Company to more effectively
realize tax credits.
The overall increase in the valuation allowance in 2007 is
primarily attributable to the establishment of a valuation
allowance against net operating losses (NOLs) in
various jurisdictions. Managements assessment is that the
character and nature of future taxable income may not allow the
Company to realize the tax benefits of the NOLs and tax credits
within the allowable carryforward period. Therefore, an
appropriate valuation allowance has been made.
The Company has provided additional taxes for the anticipated
repatriation of earnings of its foreign subsidiaries where
Management has determined that the foreign subsidiaries earnings
are not indefinitely reinvested. For foreign subsidiaries whose
earnings are indefinitely reinvested, no provision for
U.S. federal and state income taxes has been provided. If
the earnings were not indefinitely reinvested, the estimated tax
benefit would be approximately $84.8 million after
application of available foreign tax credits.
At December 31, 2007, the Company had approximately
$388.5 million of NOLs, $94.4 million of which were
generated by certain domestic subsidiaries prior to their
acquisition by the Company. The use of these acquired domestic
NOLs is subject to limitations imposed by the Internal Revenue
Code and is also restricted to the taxable income of the
subsidiaries generating these losses. Loss carryforwards, if not
utilized, will expire at various dates from 2008 through 2025.
71
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At December 31, 2007, the Company had approximately
$25.6 million of foreign tax credits available to offset
future payments of federal income taxes. The foreign tax credits
expire in varying amounts through 2017.
The Company adopted the provisions of FIN No. 48 on
January 1, 2007. The total amount of unrecognized tax
benefits as of the date of adoption was $33.9 million. As a
result of the implementation of FIN No. 48, the
Company recognized a $1.1 million increase in the liability
for unrecognized tax benefits accounted for as a
$0.3 million increase to retained earnings (cumulative
effect) and a $1.4 million increase to goodwill.
A tabular reconciliation of the total amounts of unrecognized
tax benefits at the beginning and end of the period is as
follows (in thousands):
|
|
|
|
|
Balance at January 1, 2007
|
|
$
|
33,891
|
|
Additions as a result of tax positions taken during a prior
period
|
|
|
9,451
|
|
Reductions as a result of tax positions taken during a prior
period
|
|
|
(3,076
|
)
|
Additions as a result of tax positions taken during the current
period
|
|
|
|
|
Reductions relating to tax settlements with taxing authorities
|
|
|
(2,080
|
)
|
Reductions as a result of a lapse of the applicable statute of
limitations
|
|
|
(381
|
)
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
37,805
|
|
|
|
|
|
|
Included in the balance of unrecognized benefits at
December 31, 2007, are $30.6 million of tax benefits
that, if recognized in future periods, would impact the
Companys effective tax rate. Also included in the balance
of unrecognized tax benefits at December 31, 2007 are
$7.2 million of tax benefits that, if recognized, would
result in a decrease to goodwill in purchase business
combinations.
To the extent penalties and interest would be assessed on any
underpayment of income tax, such amounts have been accrued and
classified as a component of income tax expense in the financial
statements. This is an accounting policy election made by the
Company that is a continuation of the Companys historical
policy and will continue to be consistently applied in the
future. The Company recognized $2.7 million of expense
relating to interest for the period ended December 31,
2007. The Companys expense recognized relating to
penalties for the period ended December 31, 2007 was
immaterial. As of December 31, 2007, the Company has
accrued $9.4 million of interest and $3.2 million of
penalties related to unrecognized tax benefits.
The Company is subject to income tax in many of the
approximately 100 countries where it operates including major
operations in the United States, the United Kingdom, and Canada.
Many of the Companys subsidiaries are open to examination
in the United Kingdom and Canada dating from 1998 and 1999,
respectively through December 31, 2007. The Company is open
to examination in the United States for tax years ended
December 31, 2004 through December 31, 2007.
The Company does not anticipate a significant change in the
balance of unrecognized tax benefits within the next
12 months.
|
|
19.
|
Disputes,
Litigation and Contingencies
|
U.S.
Government and Internal Investigations
We are currently involved in government and internal
investigations involving various of our operations. We
participated in the United Nations oil-for-food program
governing sales of goods and services into Iraq. The SEC has
subpoenaed certain documents in connection with an investigation
into our participation in the oil-for-food program. The
U.S. Department of Justice is also conducting an
investigation of our participation in the oil-for-food program.
We are cooperating fully with these investigations. We have
retained legal counsel, reporting to our audit committee, to
investigate this matter. These investigations are ongoing, and
we cannot anticipate the timing, outcome or possible impact of
these investigations, financial or otherwise.
72
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The U.S. Department of Commerce, Bureau of
Industry & Security and the U.S. Department of
Justice are investigating allegations of improper sales of
products and services by us and our subsidiaries in sanctioned
countries. We are cooperating fully with this investigation. We
have retained legal counsel, reporting to our audit committee,
to investigate this matter. This investigation is ongoing, and
we cannot anticipate the timing, outcome or possible impact of
the investigation, financial or otherwise.
In light of this investigation and of the current U.S. and
foreign policy environment and the inherent uncertainties
surrounding these countries, we decided in September 2007 to
direct our foreign subsidiaries to discontinue doing business in
countries that are subject to U.S. economic and trade
sanctions, including Cuba, Iran, Sudan and Syria. Effective
September 2007, we ceased entering into any new contracts
relating to these countries. We have begun an orderly
discontinuation and winding down of our existing business in
these sanctioned countries.
With the assistance of outside counsel and in connection with
the U.S. government investigations, we are conducting
internal investigations regarding the embezzlement of
approximately $175,000 at a European subsidiary and the possible
improper use of these funds, including possible payments to
government officials in Europe, during the period from 2000 to
2004, and the Companys compliance with the Foreign Corrupt
Practices Act and other laws worldwide. These internal
investigations are preliminary and ongoing, and we cannot
anticipate the timing, outcome or possible impact, if any, of
the investigations, financial or otherwise. We have informed the
SEC and the DOJ of these internal investigations, and the
results of the internal investigations will be provided to the
SEC and DOJ.
The DOJ, the SEC and other agencies and authorities have a broad
range of civil and criminal penalties they may seek to impose
against corporations and individuals for violations of trading
sanctions laws, the Foreign Corrupt Practices Act and other
federal statutes including, but not limited to, injunctive
relief, disgorgement, fines, penalties and modifications to
business practices and compliance programs. In recent years,
these agencies and authorities have entered into agreements
with, and obtained a range of penalties against, several public
corporations and individuals in similar investigations, under
which civil and criminal penalties were imposed, including in
some cases multi-million dollar fines and other penalties and
sanctions. Under trading sanctions laws, the DOJ may also seek
to impose modifications to business practices, including
immediate cessation of all business activities in sanctioned
countries, and modifications to compliance programs, which may
increase compliance costs. In addition, our activities in
sanctioned countries, such as Sudan and Iran, could result in
certain investors, such as government sponsored pension funds,
divesting or not investing in our common shares. Based on
available information, we cannot predict what, if any, actions
the DOJ, SEC or other authorities may take in our situation or
the effect any such actions may have on our consolidated
financial position or results of operations.
We have incurred costs of approximately $13 million through
December 31, 2007 in connection with complying with these
ongoing investigations and certain exit costs associated with
sanctioned countries. We will have additional charges related to
these matters in future periods, but we cannot quantify those
charges or be certain of the timing of them.
Other
Litigation and Disputes
The Company is aware of various disputes and potential claims
and is a party in various litigation involving claims against
the Company, some of which are covered by insurance. Based on
facts currently known, the Company believes that the ultimate
liability, if any, which may result from known claims, disputes
and pending litigation, would not have a material adverse effect
on the Companys consolidated financial position, results
of operations or cash flows.
73
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Operating
Leases
The Company is committed under various operating lease
agreements primarily related to office space and equipment.
Generally, these leases include renewal provisions and rental
payments, which may be adjusted for taxes, insurance and
maintenance related to the property. Future minimum rental
commitments under noncancelable operating leases are as follows
(in thousands):
|
|
|
|
|
2008
|
|
$
|
71,809
|
|
2009
|
|
|
52,348
|
|
2010
|
|
|
39,116
|
|
2011
|
|
|
30,855
|
|
2012
|
|
|
21,130
|
|
Thereafter
|
|
|
130,455
|
|
|
|
|
|
|
|
|
$
|
345,713
|
|
|
|
|
|
|
Total rent expense incurred under operating leases was
approximately $129.6 million, $90.3 million and
$69.8 million for the years ended December 31, 2007,
2006 and 2005, respectively.
Reporting
Segments
The Company reviewed the presentation of its reporting segments
during the first quarter of 2007. Based on this review, the
Company determined that its operational performance is segmented
and reviewed on a geographic basis. As a result, the Company
realigned its financial reporting segments and now report the
following regions as separate, distinct reporting segments:
(1) North America, (2) Latin America,
(3) Europe/West Africa/CIS and (4) Middle East/North
Africa/Asia. The Companys historical segment data
previously reported under the Evaluation, Drilling &
Intervention Services and Completion & Production
Systems divisions have been restated for all periods to conform
to the new presentation.
Financial information by segment for each of the three years
ended December 31, 2007 is summarized below. Revenues are
attributable to countries based on the ultimate destination of
the sale of products or performance of services. The total
assets and capital expenditures for the years ended
December 31, 2007, 2006 and 2005 do not include the assets
or activity of the Companys discontinued operations. The
accounting policies of the segments are the same as those
described in the summary of significant accounting policies.
74
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2007
|
|
|
|
|
|
|
Net
|
|
|
Income
|
|
|
Depreciation
|
|
|
|
|
|
Total Assets at
|
|
|
|
Operating
|
|
|
From
|
|
|
and
|
|
|
Capital
|
|
|
December 31,
|
|
|
|
Revenues
|
|
|
Operations
|
|
|
Amortization
|
|
|
Expenditures
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
North America
|
|
$
|
3,937,456
|
|
|
$
|
1,012,402
|
|
|
$
|
277,222
|
|
|
$
|
722,277
|
|
|
$
|
6,265,186
|
|
Latin America
|
|
|
882,318
|
|
|
|
201,810
|
|
|
|
74,089
|
|
|
|
198,321
|
|
|
|
1,209,846
|
|
Europe/West Africa/CIS
|
|
|
1,188,519
|
|
|
|
293,823
|
|
|
|
86,768
|
|
|
|
230,990
|
|
|
|
2,005,391
|
|
Middle East/North Africa/Asia
|
|
|
1,823,769
|
|
|
|
416,058
|
|
|
|
158,321
|
|
|
|
446,215
|
|
|
|
3,027,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,832,062
|
|
|
|
1,924,093
|
|
|
|
596,400
|
|
|
|
1,597,803
|
|
|
|
12,507,879
|
|
Corporate and Other(a)
|
|
|
|
|
|
|
(299,757
|
)
|
|
|
9,826
|
|
|
|
37,238
|
|
|
|
656,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,832,062
|
|
|
$
|
1,624,336
|
|
|
$
|
606,226
|
|
|
$
|
1,635,041
|
|
|
$
|
13,164,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
|
|
|
|
|
|
|
Net
|
|
|
Income
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
From
|
|
|
and
|
|
|
Capital
|
|
|
Total Assets at
|
|
|
|
Revenues
|
|
|
Operations
|
|
|
Amortization
|
|
|
Expenditures
|
|
|
December 31, 2006
|
|
|
|
(In thousands)
|
|
|
North America
|
|
$
|
3,672,630
|
|
|
$
|
1,035,804
|
|
|
$
|
223,895
|
|
|
$
|
525,248
|
|
|
$
|
5,290,389
|
|
Latin America
|
|
|
726,197
|
|
|
|
132,616
|
|
|
|
64,864
|
|
|
|
85,393
|
|
|
|
959,141
|
|
Europe/West Africa/CIS
|
|
|
827,343
|
|
|
|
171,437
|
|
|
|
65,540
|
|
|
|
102,259
|
|
|
|
1,272,906
|
|
Middle East/North Africa/Asia
|
|
|
1,352,758
|
|
|
|
279,852
|
|
|
|
117,599
|
|
|
|
304,553
|
|
|
|
2,330,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,578,928
|
|
|
|
1,619,709
|
|
|
|
471,898
|
|
|
|
1,017,453
|
|
|
|
9,853,347
|
|
Corporate and Other(a)
|
|
|
|
|
|
|
(265,022
|
)
|
|
|
11,050
|
|
|
|
33,647
|
|
|
|
252,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,578,928
|
|
|
$
|
1,354,687
|
|
|
$
|
482,948
|
|
|
$
|
1,051,100
|
|
|
$
|
10,105,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005
|
|
|
|
|
|
|
Net
|
|
|
Income
|
|
|
Depreciation
|
|
|
|
|
|
Total Assets at
|
|
|
|
Operating
|
|
|
From
|
|
|
and
|
|
|
Capital
|
|
|
December 31,
|
|
|
|
Revenues
|
|
|
Operations(b)
|
|
|
Amortization
|
|
|
Expenditures
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
North America
|
|
$
|
2,400,705
|
|
|
$
|
460,880
|
|
|
$
|
161,336
|
|
|
$
|
249,430
|
|
|
$
|
4,471,451
|
|
Latin America
|
|
|
423,974
|
|
|
|
58,463
|
|
|
|
38,981
|
|
|
|
48,076
|
|
|
|
783,869
|
|
Europe/West Africa/CIS
|
|
|
659,308
|
|
|
|
117,489
|
|
|
|
55,679
|
|
|
|
56,236
|
|
|
|
1,073,728
|
|
Middle East/North Africa/Asia
|
|
|
849,240
|
|
|
|
151,018
|
|
|
|
70,396
|
|
|
|
149,758
|
|
|
|
1,818,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,333,227
|
|
|
|
787,850
|
|
|
|
326,392
|
|
|
|
503,500
|
|
|
|
8,147,282
|
|
Corporate and Other(a)
|
|
|
|
|
|
|
(217,252
|
)
|
|
|
7,938
|
|
|
|
19,341
|
|
|
|
420,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,333,227
|
|
|
$
|
570,598
|
|
|
$
|
334,330
|
|
|
$
|
522,841
|
|
|
$
|
8,567,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes research and development expenses which are not
allocated geographically. |
|
(b) |
|
Includes exit costs and restructuring charges of approximately
$59 million, $4 million, $9 million,
$9 million and $33 million in North America, Latin
America, Europe/West Africa/CIS, Middle East/North Africa/Asia
and Corporate, respectively. |
75
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Products
and Services
The Company is a diversified international energy service and
manufacturing company that provides a variety of services and
equipment to the exploration, production and transmission
sectors of the oil and natural gas industry. The Company
operates in virtually every oil and natural gas exploration and
production region in the world. The composition of the
Companys consolidated revenues by product line is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Artificial Lift Systems
|
|
|
18
|
%
|
|
|
18
|
%
|
|
|
21
|
%
|
Well Construction
|
|
|
16
|
|
|
|
15
|
|
|
|
17
|
|
Drilling Services
|
|
|
15
|
|
|
|
15
|
|
|
|
12
|
|
Drilling Tools
|
|
|
12
|
|
|
|
12
|
|
|
|
13
|
|
Completion Systems
|
|
|
10
|
|
|
|
10
|
|
|
|
13
|
|
Wireline
|
|
|
8
|
|
|
|
10
|
|
|
|
7
|
|
Re-entry & Fishing
|
|
|
8
|
|
|
|
8
|
|
|
|
7
|
|
Stimulation & Chemicals
|
|
|
6
|
|
|
|
6
|
|
|
|
6
|
|
Integrated Drilling
|
|
|
5
|
|
|
|
5
|
|
|
|
2
|
|
Pipeline & Specialty Services
|
|
|
2
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic
Areas
Financial information by geographic area for each of the three
years ended December 31, 2007, is summarized below.
Long-lived assets are long-term assets excluding deferred tax
assets of $46.0 million, $34.0 million and
$47.1 million at December 31, 2007, 2006 and 2005,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from Unaffiliated Customers
|
|
|
Long-Lived Assets
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
United States
|
|
$
|
2,955,108
|
|
|
$
|
2,512,840
|
|
|
$
|
1,609,209
|
|
|
$
|
3,612,886
|
|
|
$
|
2,925,719
|
|
|
$
|
1,294,118
|
|
Canada
|
|
|
982,348
|
|
|
|
1,159,790
|
|
|
|
791,496
|
|
|
|
1,259,620
|
|
|
|
1,290,986
|
|
|
|
1,515,343
|
|
Other Countries
|
|
|
3,894,606
|
|
|
|
2,906,298
|
|
|
|
1,932,522
|
|
|
|
3,800,718
|
|
|
|
2,496,787
|
|
|
|
3,072,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,832,062
|
|
|
$
|
6,578,928
|
|
|
$
|
4,333,227
|
|
|
$
|
8,673,224
|
|
|
$
|
6,713,492
|
|
|
$
|
5,881,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
22.
|
Quarterly
Financial Data (Unaudited)
|
The following tabulation sets forth unaudited quarterly
financial data for 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st Qtr.
|
|
|
2nd Qtr.
|
|
|
3rd Qtr.
|
|
|
4th Qtr.
|
|
|
Total
|
|
|
|
(In thousands, except per share amounts)
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,852,285
|
|
|
$
|
1,815,945
|
|
|
$
|
1,971,991
|
|
|
$
|
2,191,841
|
|
|
$
|
7,832,062
|
|
Gross Profit
|
|
|
687,929
|
|
|
|
623,477
|
|
|
|
698,744
|
|
|
|
764,302
|
|
|
|
2,774,452
|
|
Income from Continuing Operations
|
|
|
283,819
|
|
|
|
176,480
|
|
|
|
294,924
|
|
|
|
336,752
|
|
|
|
1,091,975
|
|
Loss from Discontinued Operations
|
|
|
(2,247
|
)
|
|
|
(11,170
|
)
|
|
|
(2,211
|
)
|
|
|
(5,741
|
)
|
|
|
(21,369
|
)
|
Net Income
|
|
|
281,572
|
|
|
|
165,310
|
|
|
|
292,713
|
|
|
|
331,011
|
|
|
|
1,070,606
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
0.84
|
|
|
$
|
0.52
|
|
|
$
|
0.87
|
|
|
$
|
0.99
|
|
|
$
|
3.23
|
|
Discontinued Operation
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
0.83
|
|
|
$
|
0.49
|
|
|
$
|
0.87
|
|
|
$
|
0.98
|
|
|
$
|
3.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
0.82
|
|
|
$
|
0.51
|
|
|
$
|
0.85
|
|
|
$
|
0.97
|
|
|
$
|
3.14
|
|
Discontinued Operation
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
0.81
|
|
|
$
|
0.48
|
|
|
$
|
0.84
|
|
|
$
|
0.95
|
|
|
$
|
3.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,536,011
|
|
|
$
|
1,538,576
|
|
|
$
|
1,696,753
|
|
|
$
|
1,807,588
|
|
|
$
|
6,578,928
|
|
Gross Profit
|
|
|
551,649
|
|
|
|
540,304
|
|
|
|
618,907
|
|
|
|
655,235
|
|
|
|
2,366,095
|
|
Income from Continuing Operations
|
|
|
206,524
|
|
|
|
188,495
|
|
|
|
236,142
|
|
|
|
274,945
|
|
|
|
906,106
|
|
Loss from Discontinued Operations
|
|
|
(3,207
|
)
|
|
|
(1,648
|
)
|
|
|
(1,939
|
)
|
|
|
(2,943
|
)
|
|
|
(9,737
|
)
|
Net Income
|
|
|
203,317
|
|
|
|
186,847
|
|
|
|
234,203
|
|
|
|
272,002
|
|
|
|
896,369
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
0.59
|
|
|
$
|
0.54
|
|
|
$
|
0.68
|
|
|
$
|
0.81
|
|
|
$
|
2.62
|
|
Discontinued Operation
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
0.58
|
|
|
$
|
0.54
|
|
|
$
|
0.68
|
|
|
$
|
0.80
|
|
|
$
|
2.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
0.58
|
|
|
$
|
0.53
|
|
|
$
|
0.67
|
|
|
$
|
0.79
|
|
|
$
|
2.55
|
|
Discontinued Operation
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
0.57
|
|
|
$
|
0.52
|
|
|
$
|
0.66
|
|
|
$
|
0.78
|
|
|
$
|
2.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company sold its electrical submersible pumps product line
to PBS in January of 2008. The assets and liabilities of this
product line have been classified as held for sale at
December 31, 2007 and are included in Other Current Assets
and Other Current Liabilities in the Consolidated Balance Sheet.
In addition, the Company agreed in January 2008 to enter into a
long-term joint venture with Qatar Petroleum Company with
respect to the Companys directional, wireline, tubular
running services and re-entry & fishing product lines
in Qatar.
77
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
24.
|
Consolidating
Financial Statements
|
Effective June 26, 2002, Weatherford Limited became the
parent holding company of Weatherford International, Inc.
following a corporate reorganization. Weatherford International,
Inc. continues to exist as an indirect, wholly owned subsidiary
of Weatherford Limited. Weatherford Limited and its subsidiaries
continue to conduct the business previously conducted by
Weatherford International, Inc. and its subsidiaries. The
reorganization has been accounted for as a reorganization of
entities under common control, and accordingly, did not result
in any changes to the consolidated amounts of assets,
liabilities or shareholders equity. As part of the
reorganization, Weatherford Limited (Parent) and
Weatherford International, Inc. (Issuer) each
guaranteed, on a full and unconditional basis, certain
indebtedness of the Company.
The following obligations of the Issuer were guaranteed by the
Parent as of December 31, 2007: (i) the
6.625% Senior Notes, (ii) the 5.95% Senior Notes,
(iii) the 6.35% Senior Notes and (iv) the
6.80% Senior Notes. As of December 31, 2006, the
6.625% Senior Notes of the Issuer were guaranteed by the
Parent.
The following obligations of the Parent were guaranteed by the
Issuer as of December 31, 2007 and 2006: (i) the
Revolving Credit Facility, (ii) the 4.95% Senior
Notes, (iii) the 5.50% Senior Notes, (iv) the
6.50% Senior Notes and (v) issuances of notes under
the commercial paper program.
As a result of these guarantee arrangements, the Company is
required to present the following condensed consolidating
financial information. The accompanying guarantor financial
information is presented on the equity method of accounting for
all periods presented. Under this method, investments in
subsidiaries are recorded at cost and adjusted for the
Companys share in the subsidiaries cumulative
results of operations, capital contributions and distributions
and other changes in equity. Elimination entries relate
primarily to the elimination of investments in subsidiaries and
associated intercompany balances and transactions.
78
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Balance Sheet
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
228
|
|
|
$
|
1,489
|
|
|
$
|
168,997
|
|
|
$
|
|
|
|
$
|
170,714
|
|
Other Current Assets
|
|
|
13,591
|
|
|
|
2,537
|
|
|
|
4,284,927
|
|
|
|
|
|
|
|
4,301,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,819
|
|
|
|
4,026
|
|
|
|
4,453,924
|
|
|
|
|
|
|
|
4,471,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Investments in Affiliates
|
|
|
12,008,907
|
|
|
|
4,696,938
|
|
|
|
13,600,365
|
|
|
|
(30,306,210
|
)
|
|
|
|
|
Shares Held in Parent
|
|
|
|
|
|
|
129,428
|
|
|
|
794,774
|
|
|
|
(924,202
|
)
|
|
|
|
|
Intercompany Receivables, Net
|
|
|
(127,594
|
)
|
|
|
1,233,846
|
|
|
|
|
|
|
|
(1,106,252
|
)
|
|
|
|
|
Other Assets
|
|
|
52,031
|
|
|
|
34,186
|
|
|
|
8,632,971
|
|
|
|
|
|
|
|
8,719,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,947,163
|
|
|
$
|
6,098,424
|
|
|
$
|
27,482,034
|
|
|
$
|
(32,336,664
|
)
|
|
$
|
13,190,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Borrowings and Current Portion of Long-term Debt
|
|
$
|
582,389
|
|
|
$
|
24,854
|
|
|
$
|
166,977
|
|
|
$
|
|
|
|
$
|
774,220
|
|
Accounts Payable and Other Current Liabilities
|
|
|
47,574
|
|
|
|
7,959
|
|
|
|
1,372,612
|
|
|
|
|
|
|
|
1,428,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
629,963
|
|
|
|
32,813
|
|
|
|
1,539,589
|
|
|
|
|
|
|
|
2,202,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Debt
|
|
|
1,198,418
|
|
|
|
1,850,594
|
|
|
|
17,323
|
|
|
|
|
|
|
|
3,066,335
|
|
Intercompany Payables, Net
|
|
|
|
|
|
|
|
|
|
|
1,106,252
|
|
|
|
(1,106,252
|
)
|
|
|
|
|
Other Long-term Liabilities
|
|
|
91,392
|
|
|
|
22,556
|
|
|
|
401,590
|
|
|
|
|
|
|
|
515,538
|
|
Shareholders Equity
|
|
|
10,027,390
|
|
|
|
4,192,461
|
|
|
|
24,417,280
|
|
|
|
(31,230,412
|
)
|
|
|
7,406,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,947,163
|
|
|
$
|
6,098,424
|
|
|
$
|
27,482,034
|
|
|
$
|
(32,336,664
|
)
|
|
$
|
13,190,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Balance Sheet
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
35
|
|
|
$
|
2,271
|
|
|
$
|
123,981
|
|
|
$
|
|
|
|
$
|
126,287
|
|
Other Current Assets
|
|
|
131
|
|
|
|
3,739
|
|
|
|
3,261,618
|
|
|
|
|
|
|
|
3,265,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166
|
|
|
|
6,010
|
|
|
|
3,385,599
|
|
|
|
|
|
|
|
3,391,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Investments in Affiliates
|
|
|
10,009,855
|
|
|
|
3,502,589
|
|
|
|
12,935,625
|
|
|
|
(26,448,069
|
)
|
|
|
|
|
Shares Held in Parent
|
|
|
|
|
|
|
132,541
|
|
|
|
548,575
|
|
|
|
(681,116
|
)
|
|
|
|
|
Intercompany Receivables, Net
|
|
|
329,237
|
|
|
|
1,333,181
|
|
|
|
|
|
|
|
(1,662,418
|
)
|
|
|
|
|
Other Assets
|
|
|
40,897
|
|
|
|
8,517
|
|
|
|
6,698,059
|
|
|
|
|
|
|
|
6,747,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,380,155
|
|
|
$
|
4,982,838
|
|
|
$
|
23,567,858
|
|
|
$
|
(28,791,603
|
)
|
|
$
|
10,139,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Borrowings and Current Portion of Long-term Debt
|
|
$
|
491,542
|
|
|
$
|
9,272
|
|
|
$
|
147,922
|
|
|
$
|
|
|
|
$
|
648,736
|
|
Accounts Payable and Other Current Liabilities
|
|
|
33,788
|
|
|
|
3,887
|
|
|
|
1,356,734
|
|
|
|
|
|
|
|
1,394,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
525,330
|
|
|
|
13,159
|
|
|
|
1,504,656
|
|
|
|
|
|
|
|
2,043,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Debt
|
|
|
1,198,973
|
|
|
|
355,318
|
|
|
|
10,309
|
|
|
|
|
|
|
|
1,564,600
|
|
Intercompany Payables, Net
|
|
|
|
|
|
|
|
|
|
|
1,662,418
|
|
|
|
(1,662,418
|
)
|
|
|
|
|
Other Long-term Liabilities
|
|
|
72,789
|
|
|
|
57,119
|
|
|
|
226,796
|
|
|
|
|
|
|
|
356,704
|
|
Shareholders Equity
|
|
|
8,583,063
|
|
|
|
4,557,242
|
|
|
|
20,163,679
|
|
|
|
(27,129,185
|
)
|
|
|
6,174,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,380,155
|
|
|
$
|
4,982,838
|
|
|
$
|
23,567,858
|
|
|
$
|
(28,791,603
|
)
|
|
$
|
10,139,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Operations
Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7,832,062
|
|
|
$
|
|
|
|
$
|
7,832,062
|
|
Costs and Expenses
|
|
|
(15,400
|
)
|
|
|
(3,641
|
)
|
|
|
(6,188,685
|
)
|
|
|
|
|
|
|
(6,207,726
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
(15,400
|
)
|
|
|
(3,641
|
)
|
|
|
1,643,377
|
|
|
|
|
|
|
|
1,624,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net
|
|
|
(95,568
|
)
|
|
|
(73,428
|
)
|
|
|
(2,285
|
)
|
|
|
|
|
|
|
(171,281
|
)
|
Intercompany Charges, Net
|
|
|
(100,538
|
)
|
|
|
206,371
|
|
|
|
(105,833
|
)
|
|
|
|
|
|
|
|
|
Equity in Subsidiary Income
|
|
|
1,262,288
|
|
|
|
1,177,140
|
|
|
|
|
|
|
|
(2,439,428
|
)
|
|
|
|
|
Other, Net
|
|
|
7,709
|
|
|
|
1,101
|
|
|
|
(17,379
|
)
|
|
|
|
|
|
|
(8,569
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations Before Income Taxes and
Minority Interest
|
|
|
1,058,491
|
|
|
|
1,307,543
|
|
|
|
1,517,880
|
|
|
|
(2,439,428
|
)
|
|
|
1,444,486
|
|
Provision for Income Taxes
|
|
|
|
|
|
|
(45,255
|
)
|
|
|
(287,505
|
)
|
|
|
|
|
|
|
(332,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations Before Minority Interest
|
|
|
1,058,491
|
|
|
|
1,262,288
|
|
|
|
1,230,375
|
|
|
|
(2,439,428
|
)
|
|
|
1,111,726
|
|
Minority Interest, Net
|
|
|
|
|
|
|
|
|
|
|
(19,751
|
)
|
|
|
|
|
|
|
(19,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
|
1,058,491
|
|
|
|
1,262,288
|
|
|
|
1,210,624
|
|
|
|
(2,439,428
|
)
|
|
|
1,091,975
|
|
Income (Loss) from Discontinued Operation, Net of Taxes
|
|
|
12,115
|
|
|
|
|
|
|
|
(33,484
|
)
|
|
|
|
|
|
|
(21,369
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
1,070,606
|
|
|
$
|
1,262,288
|
|
|
$
|
1,177,140
|
|
|
$
|
(2,439,428
|
)
|
|
$
|
1,070,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Operations
Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,578,928
|
|
|
$
|
|
|
|
$
|
6,578,928
|
|
Costs and Expenses
|
|
|
(16,872
|
)
|
|
|
(1,013
|
)
|
|
|
(5,206,356
|
)
|
|
|
|
|
|
|
(5,224,241
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
(16,872
|
)
|
|
|
(1,013
|
)
|
|
|
1,372,572
|
|
|
|
|
|
|
|
1,354,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net
|
|
|
(74,669
|
)
|
|
|
(26,337
|
)
|
|
|
(1,554
|
)
|
|
|
|
|
|
|
(102,560
|
)
|
Intercompany Charges, Net
|
|
|
(42,732
|
)
|
|
|
67,923
|
|
|
|
(25,191
|
)
|
|
|
|
|
|
|
|
|
Equity in Subsidiary Income
|
|
|
1,030,970
|
|
|
|
1,006,190
|
|
|
|
|
|
|
|
(2,037,160
|
)
|
|
|
|
|
Other, Net
|
|
|
(325
|
)
|
|
|
(864
|
)
|
|
|
(12,029
|
)
|
|
|
|
|
|
|
(13,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations Before Income Taxes and
Minority Interest
|
|
|
896,372
|
|
|
|
1,045,899
|
|
|
|
1,333,798
|
|
|
|
(2,037,160
|
)
|
|
|
1,238,909
|
|
Provision for Income Taxes
|
|
|
(3
|
)
|
|
|
(14,929
|
)
|
|
|
(306,541
|
)
|
|
|
|
|
|
|
(321,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations Before Minority Interest
|
|
|
896,369
|
|
|
|
1,030,970
|
|
|
|
1,027,257
|
|
|
|
(2,037,160
|
)
|
|
|
917,436
|
|
Minority Interest, Net
|
|
|
|
|
|
|
|
|
|
|
(11,330
|
)
|
|
|
|
|
|
|
(11,330
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
|
896,369
|
|
|
|
1,030,970
|
|
|
|
1,015,927
|
|
|
|
(2,037,160
|
)
|
|
|
906,106
|
|
Loss from Discontinued Operation, Net of Taxes
|
|
|
|
|
|
|
|
|
|
|
(9,737
|
)
|
|
|
|
|
|
|
(9,737
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
896,369
|
|
|
$
|
1,030,970
|
|
|
$
|
1,006,190
|
|
|
$
|
(2,037,160
|
)
|
|
$
|
896,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Operations
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,333,227
|
|
|
$
|
|
|
|
$
|
4,333,227
|
|
Costs and Expenses
|
|
|
(16,524
|
)
|
|
|
(912
|
)
|
|
|
(3,745,193
|
)
|
|
|
|
|
|
|
(3,762,629
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
(16,524
|
)
|
|
|
(912
|
)
|
|
|
588,034
|
|
|
|
|
|
|
|
570,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on Sale of Universal Common Stock
|
|
|
115,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,456
|
|
Debt Redemption Expense
|
|
|
|
|
|
|
(4,733
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,733
|
)
|
Interest Expense, Net
|
|
|
(22,953
|
)
|
|
|
(43,324
|
)
|
|
|
(2,704
|
)
|
|
|
|
|
|
|
(68,981
|
)
|
Intercompany Charges, Net
|
|
|
(35,500
|
)
|
|
|
104,146
|
|
|
|
(68,646
|
)
|
|
|
|
|
|
|
|
|
Equity in Subsidiary Income
|
|
|
411,695
|
|
|
|
376,282
|
|
|
|
|
|
|
|
(787,977
|
)
|
|
|
|
|
Other, Net
|
|
|
15,598
|
|
|
|
(315
|
)
|
|
|
4,494
|
|
|
|
|
|
|
|
19,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations Before Income Taxes and
Minority Interest
|
|
|
467,772
|
|
|
|
431,144
|
|
|
|
521,178
|
|
|
|
(787,977
|
)
|
|
|
632,117
|
|
Provision for Income Taxes
|
|
|
(352
|
)
|
|
|
(19,449
|
)
|
|
|
(141,404
|
)
|
|
|
|
|
|
|
(161,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations Before Minority Interest
|
|
|
467,420
|
|
|
|
411,695
|
|
|
|
379,774
|
|
|
|
(787,977
|
)
|
|
|
470,912
|
|
Minority Interest, Net
|
|
|
|
|
|
|
|
|
|
|
(817
|
)
|
|
|
|
|
|
|
(817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
|
467,420
|
|
|
|
411,695
|
|
|
|
378,957
|
|
|
|
(787,977
|
)
|
|
|
470,095
|
|
Loss from Discontinued Operation, Net of Taxes
|
|
|
|
|
|
|
|
|
|
|
(2,675
|
)
|
|
|
|
|
|
|
(2,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
467,420
|
|
|
$
|
411,695
|
|
|
$
|
376,282
|
|
|
$
|
(787,977
|
)
|
|
$
|
467,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Cash Flows
Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
1,070,606
|
|
|
$
|
1,262,288
|
|
|
$
|
1,177,140
|
|
|
$
|
(2,439,428
|
)
|
|
$
|
1,070,606
|
|
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided
(Used) by Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges from Parent or Subsidiary
|
|
|
100,538
|
|
|
|
(206,371
|
)
|
|
|
105,833
|
|
|
|
|
|
|
|
|
|
(Income) Loss from Discontinued Operations
|
|
|
(12,115
|
)
|
|
|
|
|
|
|
33,484
|
|
|
|
|
|
|
|
21,369
|
|
Equity in (Earnings) Loss of Affiliates
|
|
|
(1,262,288
|
)
|
|
|
(1,177,140
|
)
|
|
|
|
|
|
|
2,439,428
|
|
|
|
|
|
Deferred Income Tax Provision (Benefit)
|
|
|
|
|
|
|
(16,788
|
)
|
|
|
45,661
|
|
|
|
|
|
|
|
28,873
|
|
Other Adjustments
|
|
|
413,899
|
|
|
|
(115,003
|
)
|
|
|
(537,089
|
)
|
|
|
|
|
|
|
(238,193
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Operating Activities
Continuing Operations
|
|
|
310,640
|
|
|
|
(253,014
|
)
|
|
|
825,029
|
|
|
|
|
|
|
|
882,655
|
|
Net Cash Used by Operating Activities Discontinued
Operation
|
|
|
|
|
|
|
|
|
|
|
(10,149
|
)
|
|
|
|
|
|
|
(10,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Operating Activities
|
|
|
310,640
|
|
|
|
(253,014
|
)
|
|
|
814,880
|
|
|
|
|
|
|
|
872,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of Businesses, Net of Cash Acquired
|
|
|
|
|
|
|
|
|
|
|
(275,149
|
)
|
|
|
|
|
|
|
(275,149
|
)
|
Purchase of Equity Investments in Unconsolidated Affiliates
|
|
|
|
|
|
|
|
|
|
|
(335,220
|
)
|
|
|
|
|
|
|
(335,220
|
)
|
Capital Expenditures for Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
(1,635,041
|
)
|
|
|
|
|
|
|
(1,635,041
|
)
|
Acquisition of Intellectual Property
|
|
|
|
|
|
|
|
|
|
|
(23,035
|
)
|
|
|
|
|
|
|
(23,035
|
)
|
Proceeds from Sale of Assets and Businesses, Net
|
|
|
|
|
|
|
|
|
|
|
84,476
|
|
|
|
|
|
|
|
84,476
|
|
Capital Contribution to Subsidiary
|
|
|
(736,748
|
)
|
|
|
(36,147
|
)
|
|
|
|
|
|
|
772,895
|
|
|
|
|
|
Distribution of Earnings from Subsidiary
|
|
|
|
|
|
|
(1,486,365
|
)
|
|
|
1,486,365
|
|
|
|
|
|
|
|
|
|
Other Investing Activities
|
|
|
|
|
|
|
|
|
|
|
(38,500
|
)
|
|
|
|
|
|
|
(38,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Investing Activities
Continuing Operations
|
|
|
(736,748
|
)
|
|
|
(1,522,512
|
)
|
|
|
(736,104
|
)
|
|
|
772,895
|
|
|
|
(2,222,469
|
)
|
Net Cash Used by Investing Activities Discontinued
Operation
|
|
|
|
|
|
|
|
|
|
|
(10,579
|
)
|
|
|
|
|
|
|
(10,579
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Investing Activities
|
|
|
(736,748
|
)
|
|
|
(1,522,512
|
)
|
|
|
(746,683
|
)
|
|
|
772,895
|
|
|
|
(2,233,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of (Repayments on) Short-term Debt, Net
|
|
|
(299,187
|
)
|
|
|
16,361
|
|
|
|
400,691
|
|
|
|
|
|
|
|
117,865
|
|
Borrowings of (Repayments on) Long-term Debt, Net
|
|
|
|
|
|
|
1,485,497
|
|
|
|
(14,734
|
)
|
|
|
|
|
|
|
1,470,763
|
|
Borrowings (Repayments) Between Subsidiaries, Net
|
|
|
725,488
|
|
|
|
213,695
|
|
|
|
(939,183
|
)
|
|
|
|
|
|
|
|
|
Purchase of Treasury Shares
|
|
|
|
|
|
|
|
|
|
|
(246,190
|
)
|
|
|
|
|
|
|
(246,190
|
)
|
Proceeds from Exercise of Stock Options
|
|
|
|
|
|
|
34,192
|
|
|
|
|
|
|
|
|
|
|
|
34,192
|
|
Proceeds from Capital Contribution
|
|
|
|
|
|
|
|
|
|
|
772,895
|
|
|
|
(772,895
|
)
|
|
|
|
|
Other, Net
|
|
|
|
|
|
|
24,999
|
|
|
|
|
|
|
|
|
|
|
|
24,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Financing Activities
Continuing Operations
|
|
|
426,301
|
|
|
|
1,774,744
|
|
|
|
(26,521
|
)
|
|
|
(772,895
|
)
|
|
|
1,401,629
|
|
Net Cash Provided by Financing Activities
Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Financing Activities
|
|
|
426,301
|
|
|
|
1,774,744
|
|
|
|
(26,521
|
)
|
|
|
(772,895
|
)
|
|
|
1,401,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
|
|
|
|
|
|
|
|
3,340
|
|
|
|
|
|
|
|
3,340
|
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
|
|
193
|
|
|
|
(782
|
)
|
|
|
45,016
|
|
|
|
|
|
|
|
44,427
|
|
Cash and Cash Equivalents at Beginning of Year
|
|
|
35
|
|
|
|
2,271
|
|
|
|
123,981
|
|
|
|
|
|
|
|
126,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year
|
|
$
|
228
|
|
|
$
|
1,489
|
|
|
$
|
168,997
|
|
|
$
|
|
|
|
$
|
170,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Cash Flows
Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
896,369
|
|
|
$
|
1,030,970
|
|
|
$
|
1,006,190
|
|
|
$
|
(2,037,160
|
)
|
|
$
|
896,369
|
|
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided
(Used) by Operating Activities Loss from Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
9,737
|
|
|
|
|
|
|
|
9,737
|
|
Equity in (Earnings) Loss of Affiliates
|
|
|
(1,030,970
|
)
|
|
|
(1,006,190
|
)
|
|
|
|
|
|
|
2,037,160
|
|
|
|
|
|
Charges from Parent or Subsidiary
|
|
|
42,732
|
|
|
|
(67,923
|
)
|
|
|
25,191
|
|
|
|
|
|
|
|
|
|
Deferred Income Tax Provision (Benefit)
|
|
|
|
|
|
|
(22,662
|
)
|
|
|
71,075
|
|
|
|
|
|
|
|
48,413
|
|
Other Adjustments
|
|
|
95,020
|
|
|
|
22,774
|
|
|
|
21,593
|
|
|
|
|
|
|
|
139,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Operating Activities-Continuing
Operations
|
|
|
3,151
|
|
|
|
(43,031
|
)
|
|
|
1,133,786
|
|
|
|
|
|
|
|
1,093,906
|
|
Net Cash Used by Operating Activities- Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
(6,887
|
)
|
|
|
|
|
|
|
(6,887
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Operating Activities
|
|
|
3,151
|
|
|
|
(43,031
|
)
|
|
|
1,126,899
|
|
|
|
|
|
|
|
1,087,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of Businesses, Net of Cash Acquired
|
|
|
|
|
|
|
|
|
|
|
(194,314
|
)
|
|
|
|
|
|
|
(194,314
|
)
|
Capital Expenditures for Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
(1,051,100
|
)
|
|
|
|
|
|
|
(1,051,100
|
)
|
Acquisition of Intellectual Property
|
|
|
|
|
|
|
|
|
|
|
(31,201
|
)
|
|
|
|
|
|
|
(31,201
|
)
|
Proceeds from Sale of Assets and Business, Net
|
|
|
|
|
|
|
|
|
|
|
39,860
|
|
|
|
|
|
|
|
39,860
|
|
Capital Contribution to Subsidiary
|
|
|
(942,765
|
)
|
|
|
(23,015
|
)
|
|
|
|
|
|
|
965,780
|
|
|
|
|
|
Other, Net
|
|
|
|
|
|
|
|
|
|
|
14,240
|
|
|
|
|
|
|
|
14,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Investing Activities-Continuing
Operations
|
|
|
(942,765
|
)
|
|
|
(23,015
|
)
|
|
|
(1,222,515
|
)
|
|
|
965,780
|
|
|
|
(1,222,515
|
)
|
Net Cash Used by Investing Activities- Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
(19,984
|
)
|
|
|
|
|
|
|
(19,984
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Investing Activities
|
|
|
(942,765
|
)
|
|
|
(23,015
|
)
|
|
|
(1,242,499
|
)
|
|
|
965,780
|
|
|
|
(1,242,499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of (Repayments on) Short-term Debt, Net
|
|
|
(226,119
|
)
|
|
|
4,954
|
|
|
|
111,675
|
|
|
|
|
|
|
|
(109,490
|
)
|
Borrowings of (Repayments on) Long-term Debt, Net
|
|
|
944,216
|
|
|
|
(200,860
|
)
|
|
|
(11,341
|
)
|
|
|
|
|
|
|
732,015
|
|
Purchase of Treasury Shares
|
|
|
|
|
|
|
|
|
|
|
(548,575
|
)
|
|
|
|
|
|
|
(548,575
|
)
|
Proceeds from Exercise of Stock Options
|
|
|
|
|
|
|
55,438
|
|
|
|
|
|
|
|
|
|
|
|
55,438
|
|
Borrowings (Repayments) Between Subsidiaries, Net
|
|
|
221,479
|
|
|
|
189,838
|
|
|
|
(411,317
|
)
|
|
|
|
|
|
|
|
|
Proceeds from Capital Contribution
|
|
|
|
|
|
|
|
|
|
|
965,780
|
|
|
|
(965,780
|
)
|
|
|
|
|
Other, Net
|
|
|
(51
|
)
|
|
|
15,775
|
|
|
|
|
|
|
|
|
|
|
|
15,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Financing Activities-Continuing
Operations
|
|
|
939,525
|
|
|
|
65,145
|
|
|
|
106,222
|
|
|
|
(965,780
|
)
|
|
|
145,112
|
|
Net Cash Provided by Financing Activities- Discontinued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Financing Activities
|
|
|
939,525
|
|
|
|
65,145
|
|
|
|
106,222
|
|
|
|
(965,780
|
)
|
|
|
145,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
|
|
|
|
|
|
|
|
2,410
|
|
|
|
|
|
|
|
2,410
|
|
Net Decrease in Cash and Cash Equivalents
|
|
|
(89
|
)
|
|
|
(901
|
)
|
|
|
(6,968
|
)
|
|
|
|
|
|
|
(7,958
|
)
|
Cash and Cash Equivalents at Beginning of Year
|
|
|
124
|
|
|
|
3,172
|
|
|
|
130,949
|
|
|
|
|
|
|
|
134,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year
|
|
$
|
35
|
|
|
$
|
2,271
|
|
|
$
|
123,981
|
|
|
$
|
|
|
|
$
|
126,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Cash Flows
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
467,420
|
|
|
$
|
411,695
|
|
|
$
|
376,282
|
|
|
$
|
(787,977
|
)
|
|
$
|
467,420
|
|
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided
(Used) by Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
2,675
|
|
|
|
|
|
|
|
2,675
|
|
Gain on Sale of Universal Common Stock
|
|
|
(115,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(115,456
|
)
|
Non-cash Portion of Exit Costs and Restructuring Charges
|
|
|
8,191
|
|
|
|
|
|
|
|
57,009
|
|
|
|
|
|
|
|
65,200
|
|
Charges from Parent or Subsidiary
|
|
|
35,500
|
|
|
|
(104,146
|
)
|
|
|
68,646
|
|
|
|
|
|
|
|
|
|
Equity in (Earnings) Loss of Affiliates
|
|
|
(411,695
|
)
|
|
|
(376,282
|
)
|
|
|
|
|
|
|
787,977
|
|
|
|
|
|
Deferred Income Tax Provision
|
|
|
|
|
|
|
19,839
|
|
|
|
10,977
|
|
|
|
|
|
|
|
30,816
|
|
Other Adjustments
|
|
|
(172,771
|
)
|
|
|
(177,042
|
)
|
|
|
406,680
|
|
|
|
|
|
|
|
56,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Operating Activities-Continuing
Operations
|
|
|
(188,811
|
)
|
|
|
(225,936
|
)
|
|
|
922,269
|
|
|
|
|
|
|
|
507,522
|
|
Net Cash Used by Operating Activities- Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
(4,428
|
)
|
|
|
|
|
|
|
(4,428
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Operating Activities
|
|
|
(188,811
|
)
|
|
|
(225,936
|
)
|
|
|
917,841
|
|
|
|
|
|
|
|
503,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of Businesses, Net of Cash Acquired
|
|
|
|
|
|
|
|
|
|
|
(991,067
|
)
|
|
|
|
|
|
|
(991,067
|
)
|
Capital Expenditures for Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
(522,841
|
)
|
|
|
|
|
|
|
(522,841
|
)
|
Acquisition of Intellectual Property
|
|
|
|
|
|
|
|
|
|
|
(13,423
|
)
|
|
|
|
|
|
|
(13,423
|
)
|
Proceeds from Sale of Universal Common Stock
|
|
|
276,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
276,750
|
|
Proceeds from Sale of Assets and Businesses, Net
|
|
|
|
|
|
|
|
|
|
|
15,874
|
|
|
|
|
|
|
|
15,874
|
|
Other, Net
|
|
|
|
|
|
|
|
|
|
|
(16,424
|
)
|
|
|
|
|
|
|
(16,424
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Investing Activities-Continuing
Operations
|
|
|
276,750
|
|
|
|
|
|
|
|
(1,527,881
|
)
|
|
|
|
|
|
|
(1,251,131
|
)
|
Net Cash Used by Investing Activities Discontinued
Operations
|
|
|
|
|
|
|
|
|
|
|
(3,777
|
)
|
|
|
|
|
|
|
(3,777
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Investing Activities
|
|
|
276,750
|
|
|
|
|
|
|
|
(1,531,658
|
)
|
|
|
|
|
|
|
(1,254,908
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of Short-term Debt, Net
|
|
|
716,927
|
|
|
|
1,885
|
|
|
|
12,320
|
|
|
|
|
|
|
|
731,132
|
|
Borrowings of (Repayments on) Long-term Debt, Net
|
|
|
|
|
|
|
1,736
|
|
|
|
(4,110
|
)
|
|
|
|
|
|
|
(2,374
|
)
|
Redemption of Convertible Debentures
|
|
|
|
|
|
|
(348,816
|
)
|
|
|
|
|
|
|
|
|
|
|
(348,816
|
)
|
Proceeds from Exercise of Stock Options
|
|
|
|
|
|
|
191,127
|
|
|
|
|
|
|
|
|
|
|
|
191,127
|
|
Borrowings (Repayments) Between Subsidiaries, Net
|
|
|
(943,721
|
)
|
|
|
309,596
|
|
|
|
634,125
|
|
|
|
|
|
|
|
|
|
Other, Net
|
|
|
|
|
|
|
(473
|
)
|
|
|
(487
|
)
|
|
|
|
|
|
|
(960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Financing Activities-Continuing
Operations
|
|
|
(226,794
|
)
|
|
|
155,055
|
|
|
|
641,848
|
|
|
|
|
|
|
|
570,109
|
|
Net Cash Provided by Financing Activities- Discontinued
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Financing Activities
|
|
|
(226,794
|
)
|
|
|
155,055
|
|
|
|
641,848
|
|
|
|
|
|
|
|
570,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
|
|
|
|
|
|
|
|
(1,489
|
)
|
|
|
|
|
|
|
(1,489
|
)
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
|
|
(138,855
|
)
|
|
|
(70,881
|
)
|
|
|
26,542
|
|
|
|
|
|
|
|
(183,194
|
)
|
Cash and Cash Equivalents at Beginning of Year
|
|
|
138,979
|
|
|
|
74,053
|
|
|
|
104,407
|
|
|
|
|
|
|
|
317,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year
|
|
$
|
124
|
|
|
$
|
3,172
|
|
|
$
|
130,949
|
|
|
$
|
|
|
|
$
|
134,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
|
|
Item 9.
|
Changes
in and Disagreement with Accountants on Accounting and Financial
Disclosure
|
None.
|
|
Item 9A.
|
Controls
and Procedures
|
Evaluation
of disclosure controls and procedures.
At the end of the period covered by this Annual Report on
Form 10-K,
the Company carried out an evaluation, under the supervision and
with the participation of management, including the Chief
Executive Officer (CEO) and the Chief Financial
Officer (CFO), of the effectiveness of the
Companys disclosure controls and procedures (as defined in
Rules 13a-15
(e) and
15d-15
(e) under the Exchange Act). Based upon that evaluation,
the Companys CEO and CFO have concluded the Companys
disclosure controls and procedures are effective as of the end
of the period covered by this report to ensure that information
required to be disclosed by the Company in the reports it files
or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and forms and
that information relating to the Company (including its
consolidated subsidiaries) required to be disclosed is
accumulated and communicated to management, including the CEO
and CFO, to allow timely decisions regarding required disclosure.
Changes
in internal controls.
The Companys management, including the CEO and CFO,
identified no change in the Companys internal control over
financial reporting that occurred during the Companys
fiscal quarter ended December 31, 2007, that has materially
affected, or is reasonably likely to materially affect, the
Companys internal controls over financial reporting.
Internal
controls over financial reporting.
Managements report on our internal controls over financial
reporting can be found in Item 8 of this report.
|
|
Item 9B.
|
Other
Information
|
None
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
Pursuant to General Instructions G(3), information on
directors and executive officers of the Registrant will be filed
in an amendment to this Annual Report on
Form 10-K
or incorporated by reference from the Companys Definitive
Proxy Statement for the annual meeting to be held on
June 2, 2008.
Our board of directors has adopted a code of ethics entitled
Code of Conduct, which applies to all our employees,
officers and directors and has also adopted a separate
Supplemental Code of Business Conduct for our senior
officers. Copies of these codes can also be found at
www.weatherford.com.
|
|
Item 11.
|
Executive
Compensation
|
Pursuant to General Instructions G(3), information on
executive compensation will be filed in an amendment to this
Annual Report on
Form 10-K
or incorporated by reference from the Companys Definitive
Proxy Statement for the annual meeting to be held on
June 2, 2008.
|
|
Item 12(a).
|
Security
Ownership of Certain Beneficial Owners.
|
Pursuant to General Instructions G(3), information on
security ownership of certain beneficial owners will be filed in
an amendment to this Annual Report on
Form 10-K
or incorporated by reference from the Companys Definitive
Proxy Statement for the annual meeting to be held on
June 2, 2008.
87
|
|
Item 12(b).
|
Security
Ownership of Management.
|
Pursuant to General Instructions G(3), information on
security ownership of management will be filed in an amendment
to this Annual Report on
Form 10-K
or incorporated by reference from the Companys Definitive
Proxy Statement for the annual meeting to be held on
June 2, 2008.
|
|
Item 12(d).
|
Securities
Authorized for Issuance Under Equity Compensation
Plans.
|
The following table provides information as of December 31,
2007 about the number of shares to be issued upon vesting or
exercise of equity awards including options, restricted shares,
warrants and deferred stock units as well as the number of
shares remaining available for issuance under our equity
compensation plans .
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
Remaining Available
|
|
|
Number of Shares
|
|
|
|
for Future Issuance
|
|
|
to be Issued Upon
|
|
Weighted Average
|
|
Under Equity
|
|
|
Exercise of
|
|
Exercise Price of
|
|
Compensation Plans
|
|
|
Outstanding
|
|
Outstanding
|
|
(Excluding Shares
|
|
|
Options, Warrants
|
|
Options, Warrants
|
|
Reflected in the
|
|
|
and Rights
|
|
and Rights
|
|
First Column)
|
|
|
(In thousands, except share prices)
|
|
Plan Category:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by shareholders
|
|
|
2,406
|
|
|
$
|
48.81
|
|
|
|
7,430
|
|
Equity compensation plans not approved by shareholders(a)
|
|
|
16,353
|
|
|
|
23.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
18,759
|
|
|
|
26.46
|
|
|
|
7,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The Weatherford International, Inc. 1998 Employee Stock Option
Plan, as amended (the Plan), is administered by the
Compensation Committee of the Board of Directors, and all
employees are eligible to receive options under the Plan. The
Plan provides for the grant of nonqualified options to purchase
Common Shares of Weatherford International Ltd. The price at
which shares may be purchased is based on the market price of
the shares and cannot be less than the aggregate par value of
the shares on the date the option was granted. Unless otherwise
provided in an option agreement, no option may be exercised
after one day less than 10 years from the date of vesting.
Options generally become fully exercisable after three to four
years from the date of grant, subject to earlier vesting in the
event of the death, disability or retirement of the employee or
in the event of a change of control of the Company. The Plan
provided for the grant of options to purchase up to
44,000,000 shares. As of December 31, 2007, there were
options to purchase an aggregate of 5,523,262 Common Shares
outstanding under this Plan, of which options to purchase an
aggregate of 5,423,262 Common Shares were vested. Subsequent to
the shareholder approval of the Companys Omnibus Plan in
May 2006, future grants under this plan have been suspended. |
|
|
|
On September 8, 1998, July 5, 2000, and
September 26, 2001, the Company granted to each of its
directors other than Mr. Duroc-Danner an option or warrant
to purchase 187,264, 120,000 and 120,000 Common Shares,
respectively, at a purchase price per share equal to $5.8075,
$18.375 and $11.885, respectively, which was the fair market
value of our Common Shares as of the day we granted the options
or warrant. The options and warrants were issued under
agreements between us and the directors. Each option or warrant
is exercisable for a period of ten years from the date which it
becomes fully exercisable. The options and warrant granted on
September 8, 1998 and July 5, 2000 become fully
exercisable three years from the date of grant, and the options
and warrant granted on September 26, 2001 become fully
exercisable four years from the date of grant, in each case
subject to earlier vesting in the event of the death, disability
or retirement of the optionee or warrantholder or a change of
control of the Company. Under these agreements there were
options and warrants to purchase an aggregate of 1,672,992
Common Shares outstanding as of December 31, 2007, all of
which are fully vested. |
|
|
|
Under our Non-Employee Director Deferred Compensation Plan, each
non-employee director may elect to defer up to 7.5% of any fees
paid by the Company. The deferred fees are converted into
non-monetary units representing Common Shares that could have
been purchased with the deferred fees based on the market price
of the Common Shares on the last day of the month in which fees
were deferred. If a non-employee director |
88
|
|
|
|
|
elects to defer at least 5% of his fees, the Company will make
an additional contribution to the directors account equal
to the sum of (1) 7.5% of the directors fees plus
(2) the amount of fees deferred by the director. The
non-employee directors are fully vested at all times. The
Companys directors may generally determine when
distributions will be made from the plan. The amount of the
distribution will be a number of Common Shares equal to the
number of units at the time of distribution. Distributions are
made in Common Shares. As of December 31, 2007, there were
64,480 deferred units outstanding under this plan. |
|
|
|
The Company established its Foreign Executive Deferred
Compensation Stock Ownership Plan for key foreign employees.
Under the Companys Foreign Executive Deferred Compensation
Stock Ownership Plan, the Company contributes 15% of each
participants total salary, bonus and commission
compensation each year. The Companys contributions vest
over a five-year period on the basis of 20% per year for each
year of service. Under the Foreign Executive Deferred
Compensation Stock Ownership Plan, the Companys
contributions are converted into non-monetary units equal to the
number of Common Shares that could have been purchased with the
amounts contributed based on the average closing price of the
Common Shares for each day of the month in which contributions
are made. Distributions are made under the Foreign Executive
Deferred Compensation Stock Ownership Plan after a participant
retires, becomes disabled or dies or after his employment is
terminated. Distributions under the Foreign Executive Deferred
Compensation Stock Ownership Plan are made in a number of Common
Shares equal to the number of units allocated to the
participants account at the time of distribution. As of
December 31, 2007, there were 97,036 deferred units
outstanding under this plan. |
|
|
|
On February 28, 2002, the Company issued Shell Technology
Ventures Inc. a warrant to purchase up to 6,464,428 Common
Shares at a price of $30.00 per share. The warrant has a
nine-year exercisable life beginning one year after the issue
date. The warrant holder may exercise the warrant and settlement
may occur through physical delivery, net share settlement, net
cash settlement or a combination thereof. |
|
|
|
In 2003, the Companys Board of Directors approved a
restricted share plan that allows for the grant of up to
7,670,000 of our Common Shares to key employees and directors of
the Company. Restricted shares are subject to forfeiture
restrictions that generally lapse after a specified period from
the date of grant and are subject to earlier vesting in the
event of death, retirement or a change in control. As of
December 31, 2007, there were 6,602,123 shares granted
under this plan, of which 4,071,184 shares are vested.
Subsequent to the shareholder approval of the Companys
Omnibus Plan in May 2006, future grants under this plan have
been suspended. |
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
Pursuant to General Instruction G(3), information on
certain relationships and related transactions will be filed in
an amendment to this Annual Report on
Form 10-K
or incorporated by reference from the Companys Definitive
Proxy Statement for the annual meeting to be held on
June 2, 2008.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
Pursuant to General Instruction G(3), information on
principal accountant fees and services will be filed in an
amendment to this Annual Report on
Form 10-K
or incorporated by reference from the Companys Definitive
Proxy Statement for the annual meeting to be held on
June 2, 2008.
PART IV
|
|
Item 15.
|
Exhibits,
Financial Statement Schedules
|
(a) The following documents are filed as part of this
report or incorporated herein by reference:
1. The consolidated financial statements of the Company
listed on page 38 of this report.
2. The financial statement schedule on page 95 of this
report.
3. The exhibits of the Company listed below under
Item 15(b).
89
(b) Exhibits:
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
1
|
.1
|
|
Purchase Agreement, dated June 13, 2007, among Weatherford
International Ltd., Weatherford International, Inc., and Morgan
Stanley & Co. Incorporated, Deutsche Bank Securities
Inc. and UBS Securities LLC (incorporated by reference to
Exhibit 1.1 to the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed on June 18, 2007)
|
|
2
|
.1
|
|
Stock Purchase Agreement dated June 6, 2005 by and between
Precision Drilling Corporation and Weatherford International
Ltd. (incorporated by reference to Exhibit 2.1 to Amendment
No. 1 to the Registrants Current Report on
Form 8-K
dated June 6, 2005 on
Form 8-K/A
(File
No. 1-31339)
filed June 9, 2005).
|
|
2
|
.2
|
|
Agreement and Plan of Merger dated May 8, 2002, among
Weatherford International, Inc., Weatherford Merger, Inc.,
Weatherford International Ltd. and Weatherford U.S. Holdings LLC
(incorporated by reference to Exhibit 2.1 to Amendment
No. 1 to the Registration Statement on
Form S-4
(Reg.
No. 333-85644)
filed on May 22, 2002).
|
|
3
|
.1
|
|
Memorandum of Association of Weatherford International Ltd.
(incorporated by reference to Annex II to the proxy
statement/prospectus included in Amendment No. 1 to the
Registration Statement on
Form S-4
(Reg.
No. 333-85644)
filed on May 22, 2002).
|
|
3
|
.2
|
|
Memorandum of Increase of Share Capital of Weatherford
International Ltd. (incorporated by reference to Annex II
to the proxy statement/prospectus included in Amendment
No. 1 to the Registration Statement on
Form S-4
(Reg.
No. 333-85644)
filed on May 22, 2002).
|
|
3
|
.3
|
|
Bye-laws of Weatherford International Ltd. (incorporated by
reference to Annex III to the proxy statement/prospectus
included in Amendment No. 1 to the Registration Statement
on
Form S-4
(Reg.
No. 333-85644)
filed on May 22, 2002).
|
|
4
|
.1
|
|
See Exhibits 3.1, 3.2 and 3.3 for provisions of the
Memorandum of Association and Bye-laws of Weatherford
International Ltd. defining the rights of holders of common
shares.
|
|
4
|
.2
|
|
Guarantee, dated as of October 25, 2005, of Weatherford
International, Inc. for the benefit of holders of any notes
issued by Weatherford International Ltd., from time to time
pursuant to the Issuing and Paying Agent Agreement, dated as of
October 25, 2005, between Weatherford International Ltd.,
Weatherford International, Inc. and JPMorgan Chase Bank,
National Association (incorporated by reference to
Exhibit 4.1 to the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 31, 2005).
|
|
4
|
.3
|
|
Second Amended and Restated Credit Agreement dated as of
May 2, 2006, among Weatherford International Ltd.,
Weatherford International, Inc., Weatherford Liquidity
Management Hungary Limited Liability Company, JPMorgan Chase
Bank as Administrative Agent, and the other Lenders party
thereto (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed May 5, 2006).
|
|
4
|
.4
|
|
Indenture, dated October 1, 2003, among Weatherford
International Ltd., Weatherford International, Inc., and
Deutsche Bank Trust Company Americas (incorporated by
reference to Exhibit 4.1 to the Registrants Current
Report on
Form 8-K
(File
No. 1-31339)
filed October 2, 2003).
|
|
4
|
.5
|
|
Indenture dated May 17, 1996, between Weatherford Enterra,
Inc. and Bank of Montreal Trust Company, as Trustee
(incorporated by reference to Exhibit 4.1 to Weatherford
Enterra, Inc.s Current Report on
Form 8-K
(File
No. 1-7867)
filed May 31, 1996).
|
|
4
|
.6
|
|
Third Supplemental Indenture dated November 16, 2001,
between Weatherford International, Inc. and The Bank of New
York, as Trustee (incorporated by reference to Exhibit 4.11
to the Registration Statement on
Form S-3
(Reg.
No. 333-73770)
filed November 20, 2001).
|
|
4
|
.7
|
|
Fourth Supplemental Indenture dated June 26, 2002, among
Weatherford International, Inc., Weatherford International Ltd.
and The Bank of New York (as successor in interest to Bank of
Montreal Trust Company) (incorporated by reference to
Exhibit 4.7 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2002 (File
No. 1-13086)
filed August 14, 2002).
|
|
4
|
.8
|
|
Form of global note for 4.95% Senior Notes due 2013
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 7, 2003).
|
|
4
|
.9
|
|
Form of global note for 5.50% Senior Notes due 2016
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File
No. 001-31339)
filed February 17, 2006).
|
|
4
|
.10
|
|
Officers Certificate dated as of February 17, 2006
(incorporated by reference to Exhibit 4.2 to the
Registrants Current Report on
Form 8-K
(File
No. 001-31339)
filed February 17, 2006).
|
90
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
4
|
.11
|
|
Certificate of Assistant Secretary as to the adoption of a
resolution increasing authorized share capital (incorporated by
reference to Exhibit 4.1 to the Registrants Current
Report on
Form 8-K
(File
No. 1-31339)
filed May 15, 2006).
|
|
4
|
.12
|
|
Amended and Restated Warrant Agreement, dated effective as of
July 12, 2006, by and among Weatherford International,
Ltd., Weatherford International, Inc. and Shell Technology
Ventures, Inc. (incorporated by reference to Exhibit 4.1 to
the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed July 14, 2006).
|
|
4
|
.13
|
|
Officers Certificate, dated August 7, 2006,
establishing the series of 6.50% Senior Notes due 2036
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed August 7, 2006).
|
|
4
|
.14
|
|
Form of $500,000 Global note for 6.50% Senior Notes due
2036 (incorporated by reference to Exhibit 4.2 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed August 7, 2006).
|
|
4
|
.15
|
|
Form of $100,000 Global note for 6.50% Senior Notes due
2036 (incorporated by reference to Exhibit 4.3 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed August 7, 2006).
|
|
4
|
.16
|
|
Notice of Commitment Increase dated as of November 14,
2006, among Weatherford International Ltd., Weatherford
International, Inc., Weatherford Liquidity Management Hungary
Limited Liability Company, JPMorgan Chase Bank as Administrative
Agent, and the other Lenders party thereto (incorporated by
reference to Exhibit 4.1 to the Registrants Current
Report on
Form 8-K
(File
No. 1-31339)
filed November 16, 2006.
|
|
4
|
.17
|
|
Indenture, dated June 18, 2007, among the Weatherford
Delaware, as issuer, Weatherford Bermuda, as guarantor, and
Deutsche Bank Trust Company Americas, as trustee,
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed on June 18, 2007).
|
|
4
|
.18
|
|
First Supplemental Indenture, dated June 18, 2007, among
the Weatherford Delaware, as issuer, Weatherford Bermuda, as
guarantor, and Deutsche Bank Trust Company Americas, as
trustee (including forms of notes) (incorporated by reference to
Exhibit 4.2 to the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed on June 18, 2007).
|
|
4
|
.19
|
|
Registration Rights Agreement, dated June 18, 2007, among
Weatherford International Ltd., Weatherford International, Inc.,
and Morgan Stanley & Co. Incorporated, Deutsche Bank
Securities Inc. and UBS Securities LLC (incorporated by
reference to Exhibit 4.3 to the Registrants Current
Report on
Form 8-K
(File
No. 1-31339)
filed on June 18, 2007).
|
|
10
|
.1
|
|
Issuing and Paying Agent Agreement, dated as of October 25,
2005, among Weatherford International Ltd., Weatherford
International, Inc. and JPMorgan Chase Bank, National
Association (incorporated by reference to Exhibit 10.1 to
the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 31, 2005).
|
|
10
|
.2
|
|
Commercial Paper Dealer Agreement, dated as of October 25,
2005, among Weatherford International Ltd., Weatherford
International, Inc. and J.P. Morgan Securities Inc.
(incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 31, 2005).
|
|
10
|
.3
|
|
Commercial Paper Dealer Agreement, dated as of October 25,
2005, among Weatherford International Ltd., Weatherford
International, Inc. and Goldman, Sachs & Co.
(incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 31, 2005).
|
|
10
|
.4
|
|
Commercial Paper Dealer Agreement, dated as of October 25,
2005, among Weatherford International Ltd., Weatherford
International, Inc. and Merrill Lynch Money Markets Inc. (for
notes with maturities up to 270 days) and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, (for notes with
maturities over 270 days up to 397 days) (incorporated
by reference to Exhibit 10.4 to the Registrants
Current Report on
Form 8-K
(File
No. 1-31339)
filed October 31, 2005).
|
|
10
|
.5
|
|
Amendment to Preferred Supplier Agreement dated April 14,
2003 (incorporated by reference to Exhibit 10.1 to the
Grant Prideco Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2003 (File
No. 1-15423),
filed May 15, 2003)
|
|
*10
|
.6
|
|
Weatherford Enterra, Inc. 1991 Stock Option Plan, as amended and
restated (incorporated by reference to Exhibit 10.4 to
Weatherford Enterra, Inc.s Annual Report on
Form 10-K
for the year ended December 31, 1996 (File 1-7867) filed
March 23, 1997).
|
|
*10
|
.7
|
|
2004 Weatherford Variable Compensation Plan, Including Form of
Award Letter (incorporated by reference to Exhibit 10.1 to
the Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2004 (File
No. 1-31339)
filed November 9, 2004).
|
|
*10
|
.8
|
|
Weatherford Variable Compensation Plan (incorporated by
reference to Exhibit 10.1 to the Registrants Current
Report on
Form 8-K
(File
No. 1-31339)
filed January 25, 2005).
|
91
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.9
|
|
Weatherford International Ltd. Restricted Share Plan, including
form of agreement for officers and non-officers (incorporated by
reference to Exhibit 10.2 to Amendment No. 1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2004 on
Form 10-Q/A
(File
No. 1-31339)
filed September 15, 2004).
|
|
*10
|
.10
|
|
Weatherford International, Inc. Executive Deferred Compensation
Stock Ownership Plan and Related Trust Agreement
(incorporated by reference to Exhibit 10.5 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File
No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.11
|
|
Amended and Restated Weatherford International Ltd. Nonqualified
Executive Retirement Plan (incorporated by reference to
Exhibit 10.11 to the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2006 (File
No. 1-31339)
filed February 23, 2007).
|
|
*10
|
.12
|
|
Weatherford International, Inc. Foreign Executive Deferred
Compensation Stock Plan (incorporated by reference to
Exhibit 10.4 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File
No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.13
|
|
Weatherford International Incorporated Non-Employee Director
Retirement Plan (incorporated by reference to Exhibit 10.12
to the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2004 (File
No. 1-13086)
filed March 11, 2005.)
|
|
*10
|
.14
|
|
Weatherford International, Inc. Non-Employee Director Deferred
Compensation Plan (incorporated by reference to
Exhibit 10.5 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2000 (File
No. 1-13086)
filed May 15, 2000).
|
|
*10
|
.15
|
|
Trust under Weatherford International Ltd. Nonqualified
Executive Retirement Plan dated March 23, 2004
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2004 (File
No. 1-31339)
filed May 6, 2004).
|
|
*10
|
.16
|
|
Energy Ventures, Inc. 1991 Non-Employee Director Stock Option
Plan and Form of Agreement (incorporated by reference to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 1991 (File
No. 1-13086)
filed August 8, 1991).
|
|
*10
|
.17
|
|
Energy Ventures, Inc. 1992 Employee Stock Option Plan, as
amended (incorporated by reference to Exhibit 4.7 to the
Registration Statement on
Form S-8
(Reg.
No. 333-13531)
filed October 4, 1997).
|
|
*10
|
.18
|
|
Amended and Restated Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 1995 (File
No. 1-13086)
filed August 12, 1995).
|
|
*10
|
.19
|
|
General Amendment of Employee Stock Option Programs of
Weatherford International, Inc. dated May 9, 2003
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File
No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.20
|
|
General Amendment of Directors Stock Option Plans and
Agreements dated May 9, 2003 (incorporated by reference to
Exhibit 10.2 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File
No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.21
|
|
Weatherford International, Inc. 1998 Employee Stock Option Plan,
as amended, including form of agreement for officers
(incorporated by reference to Exhibit 10.18 to the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 2003 (File
No. 1-13086)
filed March 24, 2004).
|
|
*10
|
.22
|
|
Amendment to Stock Option Programs (incorporated by reference to
Exhibit 4.19 to the Registrants Registration
Statement on
Form S-8
(Reg.
No. 333-36598)
filed May 19, 2000).
|
|
*10
|
.23
|
|
Employment Agreement, dated as of December 1, 2005, between
Weatherford International Ltd. and Hazel A. Brown (incorporated
by reference to Exhibit 10.2 to the Registrants
Current Report on
Form 8-K
(File
No. 1-31339)
filed December 2, 2005).
|
|
*10
|
.24
|
|
Employment Agreement, dated as of September 29, 2005,
between Weatherford International Ltd. and Andrew P. Becnel
(incorporated by reference to Exhibit 10.4 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 5, 2005).
|
|
*10
|
.25
|
|
Employment Agreement, dated as of September 1, 2005,
between Weatherford International Ltd. and John R. King
(incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed September 7, 2005).
|
|
*10
|
.26
|
|
Employment Agreement, dated as of September 1, 2005,
between Weatherford International Ltd. and Ian E. Kelly
(incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed September 7, 2005).
|
92
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.27
|
|
Employment Agreements dated August 1, 2003, between
Weatherford International Ltd. and each of M. David Colley, E.
Lee Colley III, Bernard J. Duroc-Danner, Stuart E. Ferguson,
Burt M. Martin, and Keith R. Morley (incorporated by
reference to Exhibit 10.2 to the Registrants
Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2003 (File
No. 1-31339)
filed November 6, 2003).
|
|
*10
|
.28
|
|
Indemnification Agreement, dated as of December 1, 2005,
between Weatherford International Ltd. and Hazel A. Brown
(incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed December 2, 2005).
|
|
*10
|
.29
|
|
Indemnification Agreement, dated as of September 29, 2005,
between Weatherford International Ltd. and John R. King
(incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 5, 2005).
|
|
*10
|
.30
|
|
Indemnification Agreement, dated as of September 29, 2005,
between Weatherford International Ltd. and Ian E. Kelly
(incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 5, 2005).
|
|
*10
|
.31
|
|
Indemnification Agreement, dated as of September 29, 2005,
between Weatherford International Ltd. and Andrew P. Becnel
(incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 5, 2005).
|
|
*10
|
.32
|
|
Indemnification Agreements with Robert K. Moses, Jr.
(incorporated by reference to Exhibit 10.10 to Weatherford
Enterra, Inc.s Annual Report on
Form 10-K
for the year ended December 31, 1987 (File
No. 1-7867));
and William E. Macaulay (incorporated by reference to
Exhibit 10.2 to Weatherford Enterra, Inc.s Quarterly
Report on
Form 10-Q
for the quarter ended September 30, 1995 (File
No. 1-7867)).
|
|
*10
|
.33
|
|
Indemnification Agreements with each of Bernard J. Duroc-Danner,
Gary L. Warren, Burt M. Martin, E. Lee Colley III, Stuart E.
Ferguson, David J. Butters, Robert A. Rayne, Robert K. Moses,
Jr., Robert B. Millard, William E. Macaulay and Sheldon B. Lubar
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2002 (File
No. 1-13086)
filed November 13, 2002).
|
|
*10
|
.34
|
|
Form of Stock Option Agreement for Non-Employee Directors dated
September 8, 1998 (incorporated by reference to
Exhibit 10.23 to the Registrants Annual Report on
Form 10-K
for the year ended December 31, 1998 (File
No. 1-13086)
filed March 31, 1999).
|
|
*10
|
.35
|
|
Form of Amendment to Stock Option Agreements dated
September 8, 1998 for Non-Employee Directors (incorporated
by reference to Exhibit 4.17 to the Registration Statement
on
Form S-8
(Reg.
No. 333-36598)
filed May 9, 2000).
|
|
*10
|
.36
|
|
Form of Stock Option Agreement for Non-employee Directors dated
July 5, 2000 (incorporated by reference to
Exhibit 4.16 to the Registration Statement on
Form S-8
(Reg.
No. 333-48322)
filed October 20, 2000).
|
|
*10
|
.37
|
|
Form of Stock Option Agreement for Non-employee Directors dated
September 26, 2001 (incorporated by reference to
Exhibit 4.19 to the Registration Statement on
Form S-8
(Reg.
No. 333-81678)
filed January 30, 2002).
|
|
*10
|
.38
|
|
Assumption and General Amendment of Directors Stock Option
and Benefit Programs and General Amendment of Employee Stock
Option and Benefit Programs of Weatherford International, Inc.
dated June 26, 2002 (incorporated by reference to
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2002 (File
No. 1-13086)
filed August 14, 2002).
|
|
10
|
.39
|
|
License Agreement among Shell Technology Ventures Inc.,
Weatherford/Lamb, Inc. and Weatherford International, Inc. dated
March 1, 2002, as amended on April 29, 2002
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2002 (File
No. 1-13086)
filed May 15, 2002).
|
|
10
|
.40
|
|
Framework Agreement between Shell Technology Ventures Limited
and Weatherford International, Inc. dated March 1, 2002, as
amended on April 19, 2002 (incorporated by reference to
Exhibit 10.2 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2002 (File
No. 1-13086)
filed May 15, 2002).
|
|
10
|
.41
|
|
Agreement dated August 31, 2005, between Weatherford
International Ltd. and Precision Drilling Corporation
(incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed September 7, 2005).
|
|
*10
|
.42
|
|
Employment Agreement dated October 27, 2006, between
Weatherford International Ltd. and Andrew P. Becnel
(incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 27, 2006).
|
93
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.43
|
|
Employment Agreement dated October 27, 2006, between
Weatherford International Ltd. and Jessica Abarca (incorporated
by reference to Exhibit 10.2 to the Registrants
Current Report on
Form 8-K
(File
No. 1-31339)
filed October 27, 2006).
|
|
*10
|
.44
|
|
Indemnification Agreement dated October 27, 2006, between
Weatherford International Ltd. and Jessica Abarca (incorporated
by reference to Exhibit 10.3 to the Registrants
Current Report on
Form 8-K
(File
No. 1-31339)
filed October 27, 2006).
|
|
*10
|
.45
|
|
Form of Restricted Share Unit Award Agreement for Officers
pursuant to Weatherford International Ltd. 2006 Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.45
to the Registrants Annual Report on
Form 10-K
for the year ended December 31,2006 (File
No. 1-31339)
filed February 23, 2007).
|
|
*10
|
.46
|
|
Form of Stock Option Award Agreement for Officers pursuant to
Weatherford International Ltd. 2006 Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.46 to the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 2006 (File
No. 1-31339)
filed February 23, 2007).
|
|
*10
|
.47
|
|
Form of Restricted Share Award Agreement for Non-employee
Directors pursuant to Weatherford International Ltd. 2006
Omnibus Incentive Plan (incorporated by reference to
Exhibit 10.47 to the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2006 (File
No. 1-31339
filed February 23, 2007).
|
|
*10
|
.48
|
|
Form of Restricted Share Award Agreement for Officers pursuant
to Weatherford International Ltd. 2006 Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.48 to the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 2006 (File
No. 1-31339)
filed February 23, 2007).
|
|
*10
|
.49
|
|
Form of Stock Option Award Agreement for Non-Employee Directors
pursuant to Weatherford International Ltd. 2006 Omnibus Plan
(incorporated by reference to Exhibit 10.49 to the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 2006 (File
No. 1-31339)
filed February 23, 2007).
|
|
*10
|
.50
|
|
Employment Agreement, dated as of June 11,2007, between
Weatherford International Ltd and Keith R. Morley (incorporated
by reference to Exhibit 10.1 to the Registrants
Current Report on
Form 8-K
(File
No. 1-31339)
filed June 11, 2007).
|
|
*10
|
.51
|
|
Indemnification Agreement, dated as of June 11, 2007,
between Weatherford International Ltd. and Keith R. Morley
(incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed June 11, 2007).
|
|
*10
|
.52
|
|
Amendment dated February 6, 2008, to the Weatherford
International Ltd. Nonqualified Executive Retirement Plan, as
amended and restated as of February 22, 2007. (incorporated
by reference to Exhibit 10.1 to the Registrants
Current Report on
Form 8-K
(File
No. 1-31339)
filed February 6, 2008)
|
|
21
|
.1
|
|
Subsidiaries of Weatherford International Ltd.
|
|
23
|
.1
|
|
Consent of Ernst & Young LLP.
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Management contract or compensatory plan or arrangement. |
|
|
|
Filed herewith. |
As permitted by Item 601(b)(4)(iii)(A) of
Regulation S-K,
the Company has not filed with this Annual Report on
Form 10-K
certain instruments defining the rights of holders of long-term
debt of the Company and its subsidiaries because the total
amount of securities authorized under any of such instruments
does not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. The Company agrees to
furnish a copy of any of such instruments to the Securities and
Exchange Commission upon request.
We agree to furnish to any requesting stockholder a copy of any
of the above named exhibits upon the payment of our reasonable
expenses of obtaining, duplicating and mailing the requested
exhibits. All requests for copies of exhibits should be made in
writing to our Investor Relations Department at 515 Post Oak
Blvd., Suite 600, Houston, TX 77027.
(c) Financial Statement Schedules
1. Valuation and qualifying accounts and allowances.
94
SCHEDULE II
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
FOR THE THREE YEARS ENDED DECEMBER 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged to
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
|
Beginning
|
|
|
Costs and
|
|
|
|
|
|
|
|
|
End of
|
|
Description
|
|
of Period
|
|
|
Expenses
|
|
|
Collections
|
|
|
Deductions
|
|
|
Period
|
|
|
|
(In thousands)
|
|
|
Year Ended December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for uncollectible accounts receivable
|
|
$
|
13,452
|
|
|
$
|
6,984
|
|
|
$
|
523
|
|
|
$
|
(7,199
|
)
|
|
$
|
13,760
|
|
Year Ended December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for uncollectible accounts receivable
|
|
$
|
12,210
|
|
|
$
|
6,242
|
|
|
$
|
881
|
|
|
$
|
(5,881
|
)
|
|
$
|
13,452
|
|
Year Ended December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for uncollectible accounts receivable
|
|
$
|
15,910
|
|
|
$
|
3,291
|
|
|
$
|
824
|
|
|
$
|
(7,815
|
)
|
|
$
|
12,210
|
|
All other schedules are omitted because they are not required or
because the information is included in the financial statements
or notes thereto.
95
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Houston, State of
Texas, on February 21, 2008.
WEATHERFORD INTERNATIONAL LTD.
|
|
|
|
By:
|
/s/ Bernard
J. Duroc-Danner
|
Bernard J. Duroc-Danner
President, Chief Executive Officer,
Chairman of the Board and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Bernard
J. Duroc-Danner
Bernard
J. Duroc-Danner
|
|
President, Chief Executive Officer, Chairman of the Board and
Director (Principal Executive Officer)
|
|
February 21, 2008
|
|
|
|
|
|
/s/ Andrew
P. Becnel
Andrew
P. Becnel
|
|
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
February 21, 2008
|
|
|
|
|
|
/s/ Jessica
Abarca
Jessica
Abarca
|
|
Vice President Accounting and
Chief Accounting Officer
(Principal Accounting Officer)
|
|
February 21, 2008
|
|
|
|
|
|
/s/ Nicholas
F. Brady
Nicholas
F. Brady
|
|
Director
|
|
February 21, 2008
|
|
|
|
|
|
/s/ David
J. Butters
David
J. Butters
|
|
Director
|
|
February 21, 2008
|
|
|
|
|
|
/s/ Sheldon
B. Lubar
Sheldon
B. Lubar
|
|
Director
|
|
February 21, 2008
|
|
|
|
|
|
/s/ William
E. Macaulay
William
E. Macaulay
|
|
Director
|
|
February 21, 2008
|
|
|
|
|
|
/s/ Robert
B. Millard
Robert
B. Millard
|
|
Director
|
|
February 21, 2008
|
|
|
|
|
|
/s/ Robert
K. Moses, Jr.
Robert
K. Moses, Jr.
|
|
Director
|
|
February 21, 2008
|
|
|
|
|
|
/s/ Robert
A. Rayne
Robert
A. Rayne
|
|
Director
|
|
February 21, 2008
|
96
EXHIBIT
INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
1
|
.1
|
|
Purchase Agreement, dated June 13, 2007, among Weatherford
International Ltd., Weatherford International, Inc., and Morgan
Stanley & Co. Incorporated, Deutsche Bank Securities
Inc. and UBS Securities LLC (incorporated by reference to
Exhibit 1.1 to the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed on June 18, 2007)
|
|
2
|
.1
|
|
Stock Purchase Agreement dated June 6, 2005 by and between
Precision Drilling Corporation and Weatherford International
Ltd. (incorporated by reference to Exhibit 2.1 to Amendment
No. 1 to the Registrants Current Report on
Form 8-K
dated June 6, 2005 on
Form 8-K/A
(File
No. 1-31339)
filed June 9, 2005).
|
|
2
|
.2
|
|
Agreement and Plan of Merger dated May 8, 2002, among
Weatherford International, Inc., Weatherford Merger, Inc.,
Weatherford International Ltd. and Weatherford U.S. Holdings LLC
(incorporated by reference to Exhibit 2.1 to Amendment
No. 1 to the Registration Statement on
Form S-4
(Reg.
No. 333-85644)
filed on May 22, 2002).
|
|
3
|
.1
|
|
Memorandum of Association of Weatherford International Ltd.
(incorporated by reference to Annex II to the proxy
statement/prospectus included in Amendment No. 1 to the
Registration Statement on
Form S-4
(Reg.
No. 333-85644)
filed on May 22, 2002).
|
|
3
|
.2
|
|
Memorandum of Increase of Share Capital of Weatherford
International Ltd. (incorporated by reference to Annex II
to the proxy statement/prospectus included in Amendment
No. 1 to the Registration Statement on
Form S-4
(Reg.
No. 333-85644)
filed on May 22, 2002).
|
|
3
|
.3
|
|
Bye-laws of Weatherford International Ltd. (incorporated by
reference to Annex III to the proxy statement/prospectus
included in Amendment No. 1 to the Registration Statement
on
Form S-4
(Reg.
No. 333-85644)
filed on May 22, 2002).
|
|
4
|
.1
|
|
See Exhibits 3.1, 3.2 and 3.3 for provisions of the
Memorandum of Association and Bye-laws of Weatherford
International Ltd. defining the rights of holders of common
shares.
|
|
4
|
.2
|
|
Guarantee, dated as of October 25, 2005, of Weatherford
International, Inc. for the benefit of holders of any notes
issued by Weatherford International Ltd., from time to time
pursuant to the Issuing and Paying Agent Agreement, dated as of
October 25, 2005, between Weatherford International Ltd.,
Weatherford International, Inc. and JPMorgan Chase Bank,
National Association (incorporated by reference to
Exhibit 4.1 to the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 31, 2005).
|
|
4
|
.3
|
|
Second Amended and Restated Credit Agreement dated as of
May 2, 2006, among Weatherford International Ltd.,
Weatherford International, Inc., Weatherford Liquidity
Management Hungary Limited Liability Company, JPMorgan Chase
Bank as Administrative Agent, and the other Lenders party
thereto (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed May 5, 2006).
|
|
4
|
.4
|
|
Indenture, dated October 1, 2003, among Weatherford
International Ltd., Weatherford International, Inc., and
Deutsche Bank Trust Company Americas (incorporated by
reference to Exhibit 4.1 to the Registrants Current
Report on
Form 8-K
(File
No. 1-31339)
filed October 2, 2003).
|
|
4
|
.5
|
|
Indenture dated May 17, 1996, between Weatherford Enterra,
Inc. and Bank of Montreal Trust Company, as Trustee
(incorporated by reference to Exhibit 4.1 to Weatherford
Enterra, Inc.s Current Report on
Form 8-K
(File
No. 1-7867)
filed May 31, 1996).
|
|
4
|
.6
|
|
Third Supplemental Indenture dated November 16, 2001,
between Weatherford International, Inc. and The Bank of New
York, as Trustee (incorporated by reference to Exhibit 4.11
to the Registration Statement on
Form S-3
(Reg.
No. 333-73770)
filed November 20, 2001).
|
|
4
|
.7
|
|
Fourth Supplemental Indenture dated June 26, 2002, among
Weatherford International, Inc., Weatherford International Ltd.
and The Bank of New York (as successor in interest to Bank of
Montreal Trust Company) (incorporated by reference to
Exhibit 4.7 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2002 (File
No. 1-13086)
filed August 14, 2002).
|
|
4
|
.8
|
|
Form of global note for 4.95% Senior Notes due 2013
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 7, 2003).
|
|
4
|
.9
|
|
Form of global note for 5.50% Senior Notes due 2016
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File
No. 001-31339)
filed February 17, 2006).
|
|
4
|
.10
|
|
Officers Certificate dated as of February 17, 2006
(incorporated by reference to Exhibit 4.2 to the
Registrants Current Report on
Form 8-K
(File
No. 001-31339)
filed February 17, 2006).
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
4
|
.11
|
|
Certificate of Assistant Secretary as to the adoption of a
resolution increasing authorized share capital (incorporated by
reference to Exhibit 4.1 to the Registrants Current
Report on
Form 8-K
(File
No. 1-31339)
filed May 15, 2006).
|
|
4
|
.12
|
|
Amended and Restated Warrant Agreement, dated effective as of
July 12, 2006, by and among Weatherford International,
Ltd., Weatherford International, Inc. and Shell Technology
Ventures, Inc. (incorporated by reference to Exhibit 4.1 to
the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed July 14, 2006).
|
|
4
|
.13
|
|
Officers Certificate, dated August 7, 2006,
establishing the series of 6.50% Senior Notes due 2036
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed August 7, 2006).
|
|
4
|
.14
|
|
Form of $500,000 Global note for 6.50% Senior Notes due
2036 (incorporated by reference to Exhibit 4.2 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed August 7, 2006).
|
|
4
|
.15
|
|
Form of $100,000 Global note for 6.50% Senior Notes due
2036 (incorporated by reference to Exhibit 4.3 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed August 7, 2006).
|
|
4
|
.16
|
|
Notice of Commitment Increase dated as of November 14,
2006, among Weatherford International Ltd., Weatherford
International, Inc., Weatherford Liquidity Management Hungary
Limited Liability Company, JPMorgan Chase Bank as Administrative
Agent, and the other Lenders party thereto (incorporated by
reference to Exhibit 4.1 to the Registrants Current
Report on
Form 8-K
(File
No. 1-31339)
filed November 16, 2006.
|
|
4
|
.17
|
|
Indenture, dated June 18, 2007, among the Weatherford
Delaware, as issuer, Weatherford Bermuda, as guarantor, and
Deutsche Bank Trust Company Americas, as trustee,
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed on June 18, 2007).
|
|
4
|
.18
|
|
First Supplemental Indenture, dated June 18, 2007, among
the Weatherford Delaware, as issuer, Weatherford Bermuda, as
guarantor, and Deutsche Bank Trust Company Americas, as
trustee (including forms of notes) (incorporated by reference to
Exhibit 4.2 to the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed on June 18, 2007).
|
|
4
|
.19
|
|
Registration Rights Agreement, dated June 18, 2007, among
Weatherford International Ltd., Weatherford International, Inc.,
and Morgan Stanley & Co. Incorporated, Deutsche Bank
Securities Inc. and UBS Securities LLC (incorporated by
reference to Exhibit 4.3 to the Registrants Current
Report on
Form 8-K
(File
No. 1-31339)
filed on June 18, 2007).
|
|
10
|
.1
|
|
Issuing and Paying Agent Agreement, dated as of October 25,
2005, among Weatherford International Ltd., Weatherford
International, Inc. and JPMorgan Chase Bank, National
Association (incorporated by reference to Exhibit 10.1 to
the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 31, 2005).
|
|
10
|
.2
|
|
Commercial Paper Dealer Agreement, dated as of October 25,
2005, among Weatherford International Ltd., Weatherford
International, Inc. and J.P. Morgan Securities Inc.
(incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 31, 2005).
|
|
10
|
.3
|
|
Commercial Paper Dealer Agreement, dated as of October 25,
2005, among Weatherford International Ltd., Weatherford
International, Inc. and Goldman, Sachs & Co.
(incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 31, 2005).
|
|
10
|
.4
|
|
Commercial Paper Dealer Agreement, dated as of October 25,
2005, among Weatherford International Ltd., Weatherford
International, Inc. and Merrill Lynch Money Markets Inc. (for
notes with maturities up to 270 days) and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, (for notes with
maturities over 270 days up to 397 days) (incorporated
by reference to Exhibit 10.4 to the Registrants
Current Report on
Form 8-K
(File
No. 1-31339)
filed October 31, 2005).
|
|
10
|
.5
|
|
Amendment to Preferred Supplier Agreement dated April 14,
2003 (incorporated by reference to Exhibit 10.1 to the
Grant Prideco Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2003 (File
No. 1-15423),
filed May 15, 2003)
|
|
*10
|
.6
|
|
Weatherford Enterra, Inc. 1991 Stock Option Plan, as amended and
restated (incorporated by reference to Exhibit 10.4 to
Weatherford Enterra, Inc.s Annual Report on
Form 10-K
for the year ended December 31, 1996 (File 1-7867) filed
March 23, 1997).
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.7
|
|
2004 Weatherford Variable Compensation Plan, Including Form of
Award Letter (incorporated by reference to Exhibit 10.1 to
the Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2004 (File
No. 1-31339)
filed November 9, 2004).
|
|
*10
|
.8
|
|
Weatherford Variable Compensation Plan (incorporated by
reference to Exhibit 10.1 to the Registrants Current
Report on
Form 8-K
(File
No. 1-31339)
filed January 25, 2005).
|
|
*10
|
.9
|
|
Weatherford International Ltd. Restricted Share Plan, including
form of agreement for officers and non-officers (incorporated by
reference to Exhibit 10.2 to Amendment No. 1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2004 on
Form 10-Q/A
(File
No. 1-31339)
filed September 15, 2004).
|
|
*10
|
.10
|
|
Weatherford International, Inc. Executive Deferred Compensation
Stock Ownership Plan and Related Trust Agreement
(incorporated by reference to Exhibit 10.5 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File
No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.11
|
|
Amended and Restated Weatherford International Ltd. Nonqualified
Executive Retirement Plan (incorporated by reference to
Exhibit 10.11 to the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2006 (File
No. 1-31339)
filed February 23, 2007).
|
|
*10
|
.12
|
|
Weatherford International, Inc. Foreign Executive Deferred
Compensation Stock Plan (incorporated by reference to
Exhibit 10.4 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File
No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.13
|
|
Weatherford International Incorporated Non-Employee Director
Retirement Plan (incorporated by reference to Exhibit 10.12
to the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2004 (File
No. 1-13086)
filed March 11, 2005.)
|
|
*10
|
.14
|
|
Weatherford International, Inc. Non-Employee Director Deferred
Compensation Plan (incorporated by reference to
Exhibit 10.5 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2000 (File
No. 1-13086)
filed May 15, 2000).
|
|
*10
|
.15
|
|
Trust under Weatherford International Ltd. Nonqualified
Executive Retirement Plan dated March 23, 2004
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2004 (File
No. 1-31339)
filed May 6, 2004).
|
|
*10
|
.16
|
|
Energy Ventures, Inc. 1991 Non-Employee Director Stock Option
Plan and Form of Agreement (incorporated by reference to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 1991 (File
No. 1-13086)
filed August 8, 1991).
|
|
*10
|
.17
|
|
Energy Ventures, Inc. 1992 Employee Stock Option Plan, as
amended (incorporated by reference to Exhibit 4.7 to the
Registration Statement on
Form S-8
(Reg.
No. 333-13531)
filed October 4, 1997).
|
|
*10
|
.18
|
|
Amended and Restated Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 1995 (File
No. 1-13086)
filed August 12, 1995).
|
|
*10
|
.19
|
|
General Amendment of Employee Stock Option Programs of
Weatherford International, Inc. dated May 9, 2003
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File
No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.20
|
|
General Amendment of Directors Stock Option Plans and
Agreements dated May 9, 2003 (incorporated by reference to
Exhibit 10.2 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File
No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.21
|
|
Weatherford International, Inc. 1998 Employee Stock Option Plan,
as amended, including form of agreement for officers
(incorporated by reference to Exhibit 10.18 to the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 2003 (File
No. 1-13086)
filed March 24, 2004).
|
|
*10
|
.22
|
|
Amendment to Stock Option Programs (incorporated by reference to
Exhibit 4.19 to the Registrants Registration
Statement on
Form S-8
(Reg.
No. 333-36598)
filed May 19, 2000).
|
|
*10
|
.23
|
|
Employment Agreement, dated as of December 1, 2005, between
Weatherford International Ltd. and Hazel A. Brown (incorporated
by reference to Exhibit 10.2 to the Registrants
Current Report on
Form 8-K
(File
No. 1-31339)
filed December 2, 2005).
|
|
*10
|
.24
|
|
Employment Agreement, dated as of September 29, 2005,
between Weatherford International Ltd. and Andrew P. Becnel
(incorporated by reference to Exhibit 10.4 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 5, 2005).
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.25
|
|
Employment Agreement, dated as of September 1, 2005,
between Weatherford International Ltd. and John R. King
(incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed September 7, 2005).
|
|
*10
|
.26
|
|
Employment Agreement, dated as of September 1, 2005,
between Weatherford International Ltd. and Ian E. Kelly
(incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed September 7, 2005).
|
|
*10
|
.27
|
|
Employment Agreements dated August 1, 2003, between
Weatherford International Ltd. and each of M. David Colley, E.
Lee Colley III, Bernard J. Duroc-Danner, Stuart E. Ferguson,
Burt M. Martin, and Keith R. Morley (incorporated by
reference to Exhibit 10.2 to the Registrants
Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2003 (File
No. 1-31339)
filed November 6, 2003).
|
|
*10
|
.28
|
|
Indemnification Agreement, dated as of December 1, 2005,
between Weatherford International Ltd. and Hazel A. Brown
(incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed December 2, 2005).
|
|
*10
|
.29
|
|
Indemnification Agreement, dated as of September 29, 2005,
between Weatherford International Ltd. and John R. King
(incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 5, 2005).
|
|
*10
|
.30
|
|
Indemnification Agreement, dated as of September 29, 2005,
between Weatherford International Ltd. and Ian E. Kelly
(incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 5, 2005).
|
|
*10
|
.31
|
|
Indemnification Agreement, dated as of September 29, 2005,
between Weatherford International Ltd. and Andrew P. Becnel
(incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 5, 2005).
|
|
*10
|
.32
|
|
Indemnification Agreements with Robert K. Moses, Jr.
(incorporated by reference to Exhibit 10.10 to Weatherford
Enterra, Inc.s Annual Report on
Form 10-K
for the year ended December 31, 1987 (File
No. 1-7867));
and William E. Macaulay (incorporated by reference to
Exhibit 10.2 to Weatherford Enterra, Inc.s Quarterly
Report on
Form 10-Q
for the quarter ended September 30, 1995 (File
No. 1-7867)).
|
|
*10
|
.33
|
|
Indemnification Agreements with each of Bernard J. Duroc-Danner,
Gary L. Warren, Burt M. Martin, E. Lee Colley III, Stuart E.
Ferguson, David J. Butters, Robert A. Rayne, Robert K. Moses,
Jr., Robert B. Millard, William E. Macaulay and Sheldon B. Lubar
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2002 (File
No. 1-13086)
filed November 13, 2002).
|
|
*10
|
.34
|
|
Form of Stock Option Agreement for Non-Employee Directors dated
September 8, 1998 (incorporated by reference to
Exhibit 10.23 to the Registrants Annual Report on
Form 10-K
for the year ended December 31, 1998 (File
No. 1-13086)
filed March 31, 1999).
|
|
*10
|
.35
|
|
Form of Amendment to Stock Option Agreements dated
September 8, 1998 for Non-Employee Directors (incorporated
by reference to Exhibit 4.17 to the Registration Statement
on
Form S-8
(Reg.
No. 333-36598)
filed May 9, 2000).
|
|
*10
|
.36
|
|
Form of Stock Option Agreement for Non-employee Directors dated
July 5, 2000 (incorporated by reference to
Exhibit 4.16 to the Registration Statement on
Form S-8
(Reg.
No. 333-48322)
filed October 20, 2000).
|
|
*10
|
.37
|
|
Form of Stock Option Agreement for Non-employee Directors dated
September 26, 2001 (incorporated by reference to
Exhibit 4.19 to the Registration Statement on
Form S-8
(Reg.
No. 333-81678)
filed January 30, 2002).
|
|
*10
|
.38
|
|
Assumption and General Amendment of Directors Stock Option
and Benefit Programs and General Amendment of Employee Stock
Option and Benefit Programs of Weatherford International, Inc.
dated June 26, 2002 (incorporated by reference to
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2002 (File
No. 1-13086)
filed August 14, 2002).
|
|
10
|
.39
|
|
License Agreement among Shell Technology Ventures Inc.,
Weatherford/Lamb, Inc. and Weatherford International, Inc. dated
March 1, 2002, as amended on April 29, 2002
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2002 (File
No. 1-13086)
filed May 15, 2002).
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.40
|
|
Framework Agreement between Shell Technology Ventures Limited
and Weatherford International, Inc. dated March 1, 2002, as
amended on April 19, 2002 (incorporated by reference to
Exhibit 10.2 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2002 (File
No. 1-13086)
filed May 15, 2002).
|
|
10
|
.41
|
|
Agreement dated August 31, 2005, between Weatherford
International Ltd. and Precision Drilling Corporation
(incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed September 7, 2005).
|
|
*10
|
.42
|
|
Employment Agreement dated October 27, 2006, between
Weatherford International Ltd. and Andrew P. Becnel
(incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 27, 2006).
|
|
*10
|
.43
|
|
Employment Agreement dated October 27, 2006, between
Weatherford International Ltd. and Jessica Abarca (incorporated
by reference to Exhibit 10.2 to the Registrants
Current Report on
Form 8-K
(File
No. 1-31339)
filed October 27, 2006).
|
|
*10
|
.44
|
|
Indemnification Agreement dated October 27, 2006, between
Weatherford International Ltd. and Jessica Abarca
(incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed October 27, 2006).
|
|
*10
|
.45
|
|
Form of Restricted Share Unit Award Agreement for Officers
pursuant to Weatherford International Ltd. 2006 Omnibus
Incentive Plan (incorporated by reference to Exhibit 10.45
to the Registrants Annual Report on
Form 10-K
for the year ended December 31,2006 (File
No. 1-31339)
filed February 23, 2007).
|
|
*10
|
.46
|
|
Form of Stock Option Award Agreement for Officers pursuant to
Weatherford International Ltd. 2006 Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.46 to the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 2006 (File
No. 1-31339)
filed February 23, 2007).
|
|
*10
|
.47
|
|
Form of Restricted Share Award Agreement for Non-employee
Directors pursuant to Weatherford International Ltd. 2006
Omnibus Incentive Plan (incorporated by reference to
Exhibit 10.47 to the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2006 (File
No. 1-31339
filed February 23, 2007).
|
|
*10
|
.48
|
|
Form of Restricted Share Award Agreement for Officers pursuant
to Weatherford International Ltd. 2006 Omnibus Incentive Plan
(incorporated by reference to Exhibit 10.48 to the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 2006 (File
No. 1-31339)
filed February 23, 2007).
|
|
*10
|
.49
|
|
Form of Stock Option Award Agreement for Non-Employee Directors
pursuant to Weatherford International Ltd. 2006 Omnibus Plan
(incorporated by reference to Exhibit 10.49 to the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 2006 (File
No. 1-31339)
filed February 23, 2007).
|
|
*10
|
.50
|
|
Employment Agreement, dated as of June 11,2007, between
Weatherford International Ltd and Keith R. Morley (incorporated
by reference to Exhibit 10.1 to the Registrants
Current Report on
Form 8-K
(File
No. 1-31339)
filed June 11, 2007).
|
|
*10
|
.51
|
|
Indemnification Agreement, dated as of June 11, 2007,
between Weatherford International Ltd. and Keith R. Morley
(incorporated by reference to Exhibit 10.2 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed June 11, 2007).
|
|
*10
|
.52
|
|
Amendment dated February 6, 2008, to the Weatherford
International Ltd. Nonqualified Executive Retirement Plan, as
amended and restated as of February 22, 2007. (incorporated
by reference to Exhibit 10.1 to the Registrants
Current Report on
Form 8-K
(File
No. 1-31339)
filed February 6, 2008)
|
|
21
|
.1
|
|
Subsidiaries of Weatherford International Ltd.
|
|
23
|
.1
|
|
Consent of Ernst & Young LLP.
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.2
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Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
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Management contract or compensatory plan or arrangement. |
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Filed herewith. |