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, 2008
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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
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, an 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
Rule 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, 2008 was
approximately $28 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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Outstanding at
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Title of Class
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February 20, 2009
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Common Shares, $1.00 Par Value
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697,825,884
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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
May 7, 2009.
TABLE OF CONTENTS
PART I
Weatherford International Ltd. (NYSE:WFT) is one of the
worlds leading providers of equipment and services used in
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. We
anticipate that, during the first quarter of 2009, we will
complete a transaction in which Weatherford International Ltd.,
the Bermuda exempted company (Weatherford-Bermuda),
will become a wholly-owned subsidiary of Weatherford
International Ltd., a Swiss joint-stock company
(Weatherford-Switzerland), and holders of our common
shares will receive one registered share of
Weatherford-Switzerland for each common share of
Weatherford-Bermuda that they hold.
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, which are located in
nearly all of the oil and natural gas producing regions in the
world. Our operational performance is segmented and reviewed on
a geographic basis, and we 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 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 2008, we finalized the divestiture of
our oil and gas development and production business.
Our principal executive offices are located at 515 Post Oak
Boulevard, Houston, Texas 77027 and our telephone number at that
location is
(713) 693-4000.
We anticipate relocating our principal executive offices to
Switzerland in the first quarter of 2009. However, certain
corporate functions, including our U.S. Investor Relations
department, will remain at the foregoing address and telephone
number. 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 18.
1
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 outside of North America.
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. With the exception of our electrical submersible pumps
business, which we sold to an equity investment partner in
January 2008, we are able to provide all forms of lift,
including progressing cavity pumps, reciprocating rod lift
systems, gas lift systems, hydraulic lift systems, plunger lift
systems and hybrid lift systems. We also offer wellhead systems
and production optimization.
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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 work in wells of depths up
to 12,000 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 6,000 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
18,000 feet with volumes up to 50,000 barrels of oil
per day.
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 17,000 feet and volumes up to
20,000 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 at depths of 19,000 feet and volumes up
to 200 barrels per day.
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 monitoring oil and natural gas
fields, and interpreting the resulting data to inform production
and reservoir management decisions. The ultimate goal is to
assist operators in making better decisions that maximize
profits through improved optimized well production and maximized
reservoir recovery. 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 in response to changes in the reservoir,
artificial-lift equipment or well completion. 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
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 individual well
and field optimization.
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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 of injection gas 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, Controlled
Pressure
Drilling®
(CPD®)
& Well Testing, drilling-with-casing
(DwCtm)
and drilling-with-liner
(DwLtm)
systems and surface logging 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
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®)
Weatherfords CPD offerings are provided
through three techniques: 1) Managed Pressure Drilling,
2) Underbalanced Drilling and 3) Air Drilling.
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Managed Pressure Drilling (MPD) This
technique 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 technique
is used in development, exploration and mature field
applications to minimize formation damage and maximize
productivity. UBD is 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 improving well productivity by
protecting the formation from damage by the drilling fluids.
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Air Drilling This technique 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.
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.
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
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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 and case oil and natural gas wells. Our
DwC and DwL techniques eliminate downhole
complexity, reducing expensive rig modifications and the number
of trips downhole. Consequently, drilling hazards are mitigated,
well construction is simplified, and productivity can be
improved when drilling through the reservoir.
Surface Logging Systems Often referred to as
mud logging, this is a well-site service that uses fluid and gas
samples along with drilling cuttings to evaluate the geology and
geo chemistry of the formation as it is being drilled. The
derived data and interpretation is used to help geologists and
drillers ensure that the well is placed in the most productive
formation to maximize ultimate well productivity.
Well
Construction
This grouping includes the primary services and products
required to construct a well and spans tubular running services,
cementation tools, liner systems, solid tubular expandable
technologies and aluminum alloy tubular products.
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 environments
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 and the
HydraSkintm
System, MetalSkin systems are 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 drilling hazards such as
unwanted fluid loss or influx and as 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. The
HydraSkin system is a hydraulic
bottom-up
expansion system that can be used for increased diameter
efficiency in either planned or contingency operations.
Aluminum Alloy Tubular Products We design and
manufacture aluminum alloy (AA) tubular goods for drilling,
production and completion. Unique physical and mechanical
properties of aluminum alloys provide a number of benefits,
especially superior corrosion resistance in various aggressive
environments and enhanced strength-to-weight ratio, resulting in
better drilling performance. Products range from Aluminum
Alloy Drill Pipe, which is used in most drilling
applications, but especially recommended for ultra deep and
extended reach wells and rigs with limited load capacity, to
drillpipe risers designed for drilling, production and
completion operations. These large diameter products possess
high strength and significant corrosion resistance properties
essential in aggressive environments, such as deepwater wells.
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Drilling
Tools
We design and manufacture patented tools, including our drilling
jars, rotating control devices and other pressure-control
equipment used in drilling oil and natural gas wells. 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 to improve drilling
efficiency without the cost of holding that equipment in
inventory.
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.
Over the past decade, 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 downhole optical and electronic
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.
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Wireline
and Evaluation Services
Wireline and evaluation services, in concert with surface
logging systems and LWD, form a data acquisition and
interpretation capability that enables clients with an
integrated approach to formation evaluation and reservoir
characterization. Open-hole wireline services and logging while
drilling compliment laboratory-derived analysis of core and
reservoir fluid samples. When combined with geosciences
consulting, this integrated capability provides the data and
interpretation to reduce reservoir uncertainty and ultimately
optimize production and maximize recovery.
Wireline 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 associated interpretation services
is divided into four categories: open hole wireline, geoscience
services, cased hole wireline and slickline 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 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 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 formation characteristics are 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 capability,
consisting of geologists, geophysicists, and drilling,
completion, production and reservoir engineers, serves as the
interpretive bridge across diverse data sources to support
client efforts to maximize their oil and gas assets using 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, Latin America and Asia
Pacific, 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 diagnostics and 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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Slickline Services 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 These
services help clients plan the development of new and existing
oil and gas production fields. Specifically, a global network of
laboratories provide support in terms of fluid and reservoir
characterization, specialized core and fluid testing, enhanced
oil recovery, rock strength and characterization, sour richness
and maturity, sorption properties assessment and reservoir flow
studies.
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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.
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.
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 lost
downhole 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.
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.
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 is a stimulation method routinely performed on oil
and natural gas wells in low-permeability reservoirs to increase
productivity and oil and gas recovery.
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.
Our systems operate at depths of 22,000 feet.
Integrated
Drilling
The majority of our land drilling rigs are located outside of
North America. 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
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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 2008, 2007 and 2006,
there was no individual customer who accounted for more than 10%
of consolidated revenues.
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 $193 million in 2008, $169 million
in 2007 and $149 million in 2006.
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 1,182 patents issued and over 413
pending. We have 2,104 patents issued in international
jurisdictions and over 1,310 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 summers of 2005 and 2008, the Gulf of Mexico
suffered an unusually high number of hurricanes 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 2008 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 2009
also will not be material.
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Employees
At December 31, 2008, we employed approximately
50,000 employees. Certain of our operations are subject to
union contracts. These contracts cover approximately 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,
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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Global political, economic and market conditions could affect
projected results. Our operating results and the
forward-looking information we provide are based on our current
assumptions about oil and natural gas supply and demand, oil and
natural gas prices, rig count and other market trends. Our
assumptions on these matters are in turn based on currently
available information, which is subject to change. The oil and
natural gas industry is extremely volatile and subject to change
based on political and economic factors outside our control.
Worldwide drilling activity, as measured by average worldwide
rig counts, increased in each year from 2002 to 2008. However,
activity began declining in the fourth quarter of 2008,
particularly in North America. The current global economic
climate has resulted in lower demand and lower prices for oil
and natural gas, which has reduced drilling and production
activity and may therefore affect our future revenues and
income. We cannot accurately predict how much lower commodity
prices and drilling activity may go, or when they may recover.
Worldwide drilling activity and global demand for oil and
natural gas may also be affected by changes in governmental
policies, laws and regulations related to environmental or
energy security matters, including those addressing alternative
energy sources and the risks of global climate change. We have
assumed global demand will be down slightly in 2009 compared to
2008. In 2009, worldwide demand may be significantly weaker than
we have assumed.
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Our ability to manage our workforce could affect our
projected results. In a climate of decreasing
demand, we are faced with managing our workforce levels to
control costs without impairing our ability to provide service
to our customers. Our forward-looking statements assume we will
be able to do so.
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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 obtain necessary raw
materials or if we are unable to minimize the impact of
increased raw material costs or to realize the benefit of cost
decreases in a timely fashion through our supply chain
initiatives or pricing, 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 improve our products and services through
innovation, to obtain technologically advanced products through
internal research and development
and/or
acquisitions, to protect
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proprietary technology from unauthorized use and to expand the
markets for new technology by leveraging 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, as well as legal protection of
our intellectual property rights.
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Nonrealization of expected benefits from our 2002 corporate
reincorporation could affect our projected
results. We currently are incorporated in Bermuda
and we operate through our various subsidiaries in numerous
countries throughout the world including the United States. We
anticipate that, during the first quarter of 2009, we will
complete a transaction in which our parent Bermuda company will
become a wholly-owned subsidiary of Weatherford International
Ltd., a Swiss joint-stock company, and holders of our common
shares will receive one registered share of the Swiss company in
exchange for each of our common shares that they hold.
Consequently, we are or may become subject to changes in tax
laws, treaties or regulations or the interpretation or
enforcement thereof in the U.S., Bermuda, Switzerland 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 any 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, 2008, we had
approximately $3.5 billion of goodwill. Our estimates of
the value of our goodwill could be reduced in the future as a
result of various factors, including market factors, some of
which are beyond our control. Our forward-looking statements do
not assume any future goodwill impairment. Any reduction in the
fair value of our businesses 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
changes in currency exchange rates.
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Adverse weather conditions in certain regions could adversely
affect our operations. In the summers of 2005 and
2008, 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 quarters of 2007 and 2008, climatic conditions in Canada
were not as favorable to drilling as we anticipated, which
limited our potential results in that region. Similarly,
unfavorable weather in Russia and in the North Sea could reduce
our operations and revenues from that area during the relevant
period. Our forward-looking statements assume weather patterns
in our primary areas of operations will be conducive to our
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
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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 fines and other penalties and sanctions in the tens
and hundreds of millions of dollars. 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 specific
countries or other limitations that decrease our business, 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. Additionally, during 2008, we
incurred $56 million for costs in connection with our exit
from sanctioned countries and $47 million for legal and
professional fees incurred in connection with complying with and
conducting these on-going investigations. We will have
additional charges related to these matters in future periods,
which costs may include labor claims, contractual claims,
penalties assessed by customers, and costs, fines, taxes and
penalties assessed by the local governments, but we cannot
quantify those charges or be certain of the timing of them.
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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 or political disturbances in the countries in which we
conduct business could adversely affect our results of
operations.
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Current turmoil in the credit markets may reduce our access
to capital or reduce the availability of financial
risk-mitigation tools. In recent quarters, the worldwide
credit markets have experienced almost unprecedented turmoil and
uncertainty. Our forward-looking statements assume that the
financial institutions that have committed to extend us credit
will honor their commitments under our credit facilities. If one
or more of those institutions becomes unwilling or unable to
honor its commitments, our access to liquidity could be impaired
and our cost of capital to fund growth could further increase.
We use interest-rate and foreign-exchange swap transactions with
financial institutions to mitigate certain interest-rate and
foreign-exchange risks associated with our capital structure and
our business. Our forward-looking statements assume that those
tools will continue to be available to us. However, the failure
of any swap counter party to honor a swap agreement could reduce
the availability of these financial risk-mitigation tools or
could result in the loss of expected financial benefits. In
response to credit market conditions and the global economic and
business environment, we have undertaken measures to reduce our
use of capital going forward. Our forward-looking statements
assume that we will operate with lower capital expenditures in
2009 than in 2008. However, as the business climate changes and
if attractive opportunities for organic or acquisitive growth
become available, we may spend capital selectively above the
amounts we have budgeted.
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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.
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, the matters
discussed on the foregoing pages under
Business-Forward-Looking Statements, as well as
other information included and incorporated by reference in this
report.
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We have
significant operations that would be adversely impacted in the
event of war, political disruption, civil disturbance, economic
and legal sanctions or changes in global trade
policies.
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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We are
involved in several governmental and internal investigations,
which are costly to conduct, have resulted in a loss of revenue
and may result in substantial financial penalties.
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 and began an orderly discontinuation
and winding down of our existing business in these sanctioned
countries. Effective March 31, 2008, we completed our
withdrawal from these countries.
With the assistance of outside counsel and in connection with
U.S. government investigations and subpoenas, we are
conducting 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. As part of these
investigations, we have also uncovered potential violations of
U.S. law in connection with a joint venture in Angola.
These investigations are 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 investigations, and the results of the
investigations are being 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
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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 fines and other penalties and
sanctions in the tens and hundreds of millions of dollars. Under
trading sanctions laws, the DOJ may also seek to impose
modifications to business practices, including immediate
cessation of all business activities in specific countries or
other limitations that decrease our business, 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. To the
extent we violated U.S. export regulations, fines and other
penalties may be imposed. Because these matters are now pending
before the indicated agencies, there can be no assurance that
actual fines or penalties, if any, will not have a material
adverse affect on our business, financial condition, liquidity
or results of operations.
During 2008, we incurred $56 million for costs incurred in
connection with our exit from sanctioned countries and
$47 million in legal and professional fees incurred in
connection with complying and conducting with these on-going
investigations. We will have additional charges related to these
matters in future periods, which costs may include labor claims,
contractual claims, penalties assessed by customers, and costs,
fines, taxes and penalties assessed by the local governments,
but we cannot quantify those charges or be certain of the timing
of them.
Our
significant operations in foreign countries expose us to
currency fluctuation risks.
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.
Uninsured
claims and litigation could adversely impact our
results.
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 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
maintain insurance coverage adequate for the risks of our
business, our insurance may not be sufficient to cover any
particular loss, or 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, and in the current global economic environment
could increase significantly in the near future. Changes in
coverage, insurance markets and our industry may result in
further increases in our cost and higher deductibles and
retentions.
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
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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.
Customer
credit risks could result in losses.
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. Those countries that rely heavily upon income from
hydrocarbon exports will be hit particularly hard given the drop
in oil prices. 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 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.
The
capital financing necessary to fund growth may not be available
to us at economic rates.
Recent turmoil in the credit markets 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.
A
terrorist attack could have a material and adverse effect on our
business.
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.
Changes
in tax laws could adversely impact our results.
On June 26, 2002, the stockholders and Board of Directors
of Weatherford International, Inc.
(Weatherford-Delaware) approved our corporate
reorganization, and Weatherford International Ltd.
(Weatherford-Bermuda), a newly formed Bermuda
company, became the parent holding company of Weatherford
International, Inc. We anticipate that, during the first quarter
of 2009, we will complete a transaction in which Weatherford
Bermuda company will become a wholly-owned subsidiary of
Weatherford International Ltd., a Swiss joint-stock company
(Weatherford-Switzerland), and holders of our common
shares will receive one registered share of Weatherford
Switzerland for each common share of Weatherford Bermuda that
they hold. We refer to this transaction as the
redomestication. 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.
The
anticipated benefits of moving our principal executive offices
to Switzerland may not be realized, and difficulties in
connection with moving our principal executive offices could
have an adverse effect on us.
In connection with the redomestication, we plan to relocate our
principal executive offices from Houston, Texas to Zug,
Switzerland with a branch office in Geneva, Switzerland. We
expect that most of our executive officers, including our Chief
Executive Officer, and other key decision makers will relocate
to Switzerland. We may face significant challenges in relocating
our executive offices to a different country, including
difficulties in retaining and attracting officers, key personnel
and other employees and challenges in maintaining principal
executive offices in a country different from the country where
other employees, including corporate support staff, are located.
Employees may be uncertain about their future roles within our
organization pending or following the completion of the
redomestication. Management may also be required to devote
substantial time to the
15
redomestication and related matters, which could otherwise be
devoted to focusing on ongoing business operations and other
initiatives and opportunities. In addition, we may not realize
the benefits we anticipate from the redomestication, including
the benefit of moving to a location that is more centrally
located within our area of worldwide operations. Any such
difficulties could have an adverse effect on our business,
results of operations or financial condition.
The
rights of our shareholders will be governed by Swiss law and
documents following the redomestication.
After the redomestication, the rights of our shareholders will
be governed by Swiss law and Weatherford-Switzerlands
articles of association and organizational regulations (the
latter being analogous to bye-laws). The rights of shareholders
under Swiss law may differ from the rights of shareholders of
companies incorporated in other jurisdictions. For example,
directors of Weatherford-Switzerland may be removed by
shareholders with or without cause, but such removal requires
the vote of shareholders holding at least
662/3%
of the voting rights and the absolute majority of the par value
of the registered shares represented at the meeting as well as a
quorum of at least two-thirds of the registered shares recorded
in the share register.
We intend
to hold future shareholder meetings in Switzerland, and our
required quorum for those meetings may be lower.
We intend to hold future shareholders meetings, beginning with
our 2009 annual meeting, in Switzerland, which may make
attendance in person more difficult for some investors. For
shareholders meetings for
Weatherford-Switzerland
for the transaction of any business other than removal of a
director or certain other specified resolutions, a quorum
comprises at least one-third of the registered shares recorded
in the share register and entitled to vote (and at least
two-thirds of the registered shares recorded in the share
register and entitled to vote for the removal of directors and
certain other specified resolutions).
The
market for the Weatherford-Switzerland shares may differ from
the market for the
Weatherford-Bermuda
shares, and Weatherford-Switzerlands shares may be removed
as a component of certain index-based or other funds.
Following the redomestication, the shares of
Weatherford-Switzerland will be listed on the NYSE under the
symbol WFT, the same symbol under which the
Weatherford-Bermuda common shares are currently listed. The
market price, trading volume or volatility of the
Weatherford-Switzerland shares could be different than those of
the Weatherford-Bermuda shares.
Weatherford-Bermudas common shares were a component of the
Standard & Poors 500 Index and other indices
before the redomestication. S&P has considered
Weatherford-Bermuda and a number of other offshore
registered companies domestic companies for purposes of
inclusion in the S&P 500. On February 13, 2009,
S&P announced that it would remove our shares as a
component of the S&P 500. Similar issues could arise with
respect to whether our shares will continue to be included as a
component in other indices or funds that may impose a variety of
qualifications that could be affected by the redomestication.
Some institutional investors and funds that track the
performance of the S&P 500 or such other indices likely
will sell their shares in Weatherford and may decrease future
investment in our shares, which could adversely affect the price
of our shares. Any such adverse impact on the price of our
shares could be magnified by the current heightened volatility
in the financial markets.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
16
Our operations are conducted in approximately 100 countries and
we have manufacturing facilities and sales, service and
distribution locations throughout the world. The following table
describes the material facilities we owned or leased as of
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility Size
|
|
|
Property
|
|
|
Owned/
|
|
Principal Services and Products
|
Location
|
|
(Sq. Ft.)
|
|
|
Size (Acres)
|
|
|
Leased
|
|
Offered or Manufactured
|
|
North America:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pearland, Texas
|
|
|
335,360
|
|
|
|
60.64
|
|
|
Owned
|
|
Fishing, drilling equipment
|
Schriever, Louisiana
|
|
|
310,520
|
|
|
|
31.83
|
|
|
Owned
|
|
Cementation mfg. plant, well construction services
|
New Brighton, Minnesota
|
|
|
211,600
|
|
|
|
25.75
|
|
|
Owned
|
|
Water well and industrial screens
|
Nisku, Alberta, Canada
|
|
|
207,400
|
|
|
|
15.40
|
|
|
Owned
|
|
Reciprocating rod lift
|
Houston, Texas
|
|
|
173,000
|
|
|
|
18.19
|
|
|
Owned
|
|
Research and development
|
Houma, Louisiana
|
|
|
170,000
|
|
|
|
13.00
|
|
|
Owned
|
|
Cementing products
|
Nisku, Alberta, Canada
|
|
|
150,201
|
|
|
|
24.06
|
|
|
Owned
|
|
Drilling equipment, fishing, wireline, controlled pressure
drilling and testing services
|
Houston, Texas
|
|
|
138,950
|
|
|
|
14.00
|
|
|
Owned
|
|
Sand screens
|
Woodward, Oklahoma
|
|
|
118,000
|
|
|
|
49.58
|
|
|
Leased
|
|
Reciprocating rod and hydraulic lift
|
Houston, Texas
|
|
|
115,649
|
|
|
|
6.88
|
|
|
Owned
|
|
Cased hole and flow control
|
Huntsville, Texas
|
|
|
112,648
|
|
|
|
20.00
|
|
|
Owned
|
|
Liner hangers
|
Kingwood, Texas
|
|
|
112,449
|
|
|
|
10.47
|
|
|
Leased
|
|
Control Systems
|
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
|
Broussard, Louisiana
|
|
|
101,434
|
|
|
|
9.01
|
|
|
Owned
|
|
Tubular running
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aberdeen, Scotland
|
|
|
148,379
|
|
|
|
8.67
|
|
|
Leased
|
|
Expandable slotted tubulars
|
Alberton, South Africa
|
|
|
123,237
|
|
|
|
5.40
|
|
|
Owned
|
|
Conventional screen technologies
|
Stavanger, Norway
|
|
|
113,182
|
|
|
|
4.66
|
|
|
Leased
|
|
Downhole services, well installation services, drilling
equipment, thru tubing, cementing, fishing, re-entry, well
intervention, completion systems
|
Medias, Sibiu, Romania
|
|
|
110,194
|
|
|
|
3.76
|
|
|
Owned
|
|
Wireline services
|
Ploiesti, Prahova, Romania
|
|
|
103,113
|
|
|
|
7.97
|
|
|
Owned
|
|
Wireline services
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility Size
|
|
|
Property
|
|
|
Owned/
|
|
Principal Services and Products
|
Location
|
|
(Sq. Ft.)
|
|
|
Size (Acres)
|
|
|
Leased
|
|
Offered or Manufactured
|
|
Middle East/North Africa/Asia:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deyang, China
|
|
|
264,175
|
|
|
|
20.82
|
|
|
Owned
|
|
Pump jacks and wellhead
|
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
|
|
|
165,980
|
|
|
|
27.67
|
|
|
Leased
|
|
Warehouse and service
|
Batanm Riau, Indonesia
|
|
|
126,584
|
|
|
|
|
|
|
Leased
|
|
Storage yard
|
Egypt, Maadi, Cairo
|
|
|
122,708
|
|
|
|
2.81
|
|
|
Leased
|
|
Machine shop, pipe yard, repair center and warehouse
|
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, Texas
|
|
|
254,224
|
|
|
|
|
|
|
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, which is incorporated by reference into this item.
See Item 1A. Risk Factors We are involved
in several governmental and internal investigations, which are
costly to conduct, have resulted in a loss of revenue and may
result in substantial financial penalties, 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, 2008.
18
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 20, 2009,
there were 2,811 shareholders of record. Additionally,
there were 72 stockholders of Weatherford International, Inc. as
of the same date who had not yet exchanged their shares. The
following table sets forth, for the periods indicated, the range
of high and low sales prices per common share as reported on the
New York Stock Exchange. During 2008, our Board of Directors
approved a two-for-one split of our common shares. All prices
have been restated to reflect this stock split.
|
|
|
|
|
|
|
|
|
|
|
Price
|
|
|
|
High
|
|
|
Low
|
|
|
Year ending December 31, 2008
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
36.82
|
|
|
$
|
25.91
|
|
Second Quarter
|
|
|
49.98
|
|
|
|
34.96
|
|
Third Quarter
|
|
|
49.76
|
|
|
|
22.26
|
|
Fourth Quarter
|
|
|
24.69
|
|
|
|
7.75
|
|
Year ending December 31, 2007
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
23.51
|
|
|
$
|
17.95
|
|
Second Quarter
|
|
|
29.52
|
|
|
|
22.52
|
|
Third Quarter
|
|
|
35.50
|
|
|
|
24.31
|
|
Fourth Quarter
|
|
|
36.11
|
|
|
|
28.18
|
|
On February 20, 2009, the closing sales price of our common
shares as reported by the New York Stock Exchange was $10.01 per
share. We have not declared or paid cash dividends on our common
shares since 1984.
On October 1, 2008 we sold 959,264 of our common shares and
on November 25, 2008 we sold 5,646,772 of our common
shares, both in connection with acquisitions. These shares were
sold to the shareholders of the acquired companies as
consideration for the shares of the acquired companies. These
sales of our common shares were exempt from registration under
the Securities Act of 1933 pursuant to Section 4(2) of that
act and pursuant to Regulation D and Regulation S
promulgated under that act as a non-public sale to accredited
investors
and/or to
non-U.S. persons
outside the United States.
In December 2005, our Board of Directors approved a share
repurchase program under which we can spend up to
$1 billion to repurchase outstanding common shares. 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. As of
December 31, 2008, we have $205 million available
under this authorization to repurchase shares. During the
quarter ended December 31, 2008, no shares were repurchased.
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, 2008, we withheld
common shares to satisfy these tax withholding obligations as
follows:
|
|
|
|
|
|
|
|
|
|
|
No. of
|
|
|
Average
|
|
Period
|
|
Shares
|
|
|
Price
|
|
|
October 1-October 31, 2008
|
|
|
9,959
|
|
|
$
|
20.00
|
|
November 1-November 30, 2008
|
|
|
8,997
|
|
|
|
14.21
|
|
December 1-December 31, 2008
|
|
|
9,184
|
|
|
|
9.60
|
|
19
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 by reference into this Item.
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 & 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, 2003. 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
20
|
|
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 Item 8. Financial Statements and Supplementary
Data, both contained in this report. The following
information may not be indicative of our future operating
results. The information presented has been restated to reflect
our 2008 two-for-one stock split.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005(a)
|
|
|
2004(b)
|
|
|
|
(In thousands, except per share amount)
|
|
|
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
9,600,564
|
|
|
$
|
7,832,062
|
|
|
$
|
6,578,928
|
|
|
$
|
4,333,227
|
|
|
$
|
3,131,774
|
|
Operating Income
|
|
|
1,978,549
|
|
|
|
1,624,336
|
|
|
|
1,354,687
|
|
|
|
570,598
|
|
|
|
402,995
|
|
Income From Continuing Operations
|
|
|
1,366,831
|
|
|
|
1,091,975
|
|
|
|
906,106
|
|
|
|
470,095
|
|
|
|
337,969
|
|
Basic Earnings Per Share From Continuing Operations
|
|
|
2.00
|
|
|
|
1.61
|
|
|
|
1.31
|
|
|
|
0.78
|
|
|
|
0.63
|
|
Diluted Earnings Per Share From Continuing Operations
|
|
|
1.96
|
|
|
|
1.57
|
|
|
|
1.28
|
|
|
|
0.74
|
|
|
|
0.59
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
16,476,513
|
|
|
$
|
13,190,957
|
|
|
$
|
10,139,248
|
|
|
$
|
8,580,304
|
|
|
$
|
5,543,482
|
|
Long-term Debt
|
|
|
4,564,255
|
|
|
|
3,066,335
|
|
|
|
1,564,600
|
|
|
|
632,071
|
|
|
|
1,404,431
|
|
Shareholders Equity
|
|
|
8,285,648
|
|
|
|
7,406,719
|
|
|
|
6,174,799
|
|
|
|
5,666,817
|
|
|
|
3,313,389
|
|
Cash Dividends Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
In August 2005, we acquired Precision Energy Services and
Precision Drilling International for $943 million in cash
and 104 million Weatherford common shares. In connection
with the acquisition we recorded exit and restructuring charges
of $114 million, $79 million, net of tax. In December
2005, we recorded a $115 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 $78 million gain on the sale of
Universal common stock. There was no income tax impact related
to the sale. |
21
|
|
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 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.
Our operational performance is segmented and reviewed on a
geographic basis and we 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.
22
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 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)
|
|
|
2008
|
|
$
|
44.60
|
|
|
$
|
5.62
|
|
|
|
2,143
|
|
|
|
1,175
|
|
2007
|
|
|
95.98
|
|
|
|
7.48
|
|
|
|
2,171
|
|
|
|
1,122
|
|
2006
|
|
|
61.05
|
|
|
|
6.30
|
|
|
|
2,178
|
|
|
|
1,029
|
|
|
|
|
(1) |
|
Price per barrel as of December 31 Source:
Thomson Reuters |
|
(2) |
|
Price per MM/BTU as of December 31 Source:
Thomson Reuters |
|
(3) |
|
Average rig count for December Source: Baker
Hughes Rig Count and other third-party data |
Oil prices decreased during 2008, ranging from a low of $33.87
per barrel in December to a high of $145.29 per barrel early in
July. Natural gas prices also decreased, ranging from a low of
$5.29 MM/BTU near the end of December to a high of
$13.58 MM/BTU in early July. In the fourth quarter of 2008,
oil and natural gas prices experienced significant declines due
to the recent economic downturn reaching $44.60 per barrel and
$5.62 MM/BTU as of December 31, 2008. Factors
influencing oil and natural gas prices during the period include
hydrocarbon inventory levels, realized and expected economic
growth, realized and expected levels of hydrocarbon demand,
levels of spare production capacity within the Organization of
Petroleum Exporting Countries (OPEC), weather and
geopolitical uncertainty.
According to a recent study by Barclays Capital, 2008
international exploration and production expenditures are
estimated to have increased 33% over 2007 levels while
expenditures in North America are estimated to have increased
23% over the same period. Exploration and production
expenditures during 2009 are anticipated to decrease 12%, with
the North America market driving a significant portion of this
decrease. The decrease is in response to the significant decline
in commodity prices, constrained cash flow and tight credit
markets.
Opportunities
and Challenges
The nature of our industry offers many opportunities and
challenges. 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 have
created a long-term strategy aimed at growing our businesses,
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
maximize the benefits from our acquisitions.
Outlook
We believe the long-term outlook for our businesses is
favorable. 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. As decline rates accelerate and reservoir
productivity complexities increase, our clients will face
growing challenges securing desired rates of production growth.
The acceleration of decline rates and the increasing complexity
of the reservoirs increase our customers requirements for
technologies that improve productivity and efficiency and for
our products and services. These phenomena provide us with a
positive outlook over the longer term.
23
Looking into 2009, the near-term outlook is more difficult to
assess given the dramatically weakened picture of the global
economy stemming from a severe dislocation in credit markets and
money flows around the world. Climate, natural gas storage
levels and commodity prices, as well as expectations for the
U.S. economy, will dictate the level of oilfield service
activity in North America for 2009. While these factors are
difficult to predict with any certainty over short periods of
time, we anticipate a significant pull back in North American
average rig activity compared to 2008 levels principally due to
existing natural gas storage levels, lower natural gas prices
and a dampened prognosis for the U.S. economy. We believe
we are prepared for this decline and intend to adjust our cost
structure in North America to be more in-line with the near-term
activity prognosis.
We also expect international rig activity to decrease in 2009 as
compared to 2008. However, we anticipate the decrease to be less
severe than North America given that international spending is
driven by major and national oil companies, which take a
longer-term view and therefore respond less quickly to
short-term changes in commodity prices.
We expect all of our growth in 2009 will come out of the
international markets. While it is difficult to predict exact
growth rates given the current fluid economic conditions and
volatility, we expect our international markets combined growth
rate for 2009 to be in the double digits. We expect North
Africa, Middle East, China and Central Europe to show the
largest
year-on-year
growth in the Eastern Hemisphere. In Latin America, we
anticipate our larger growth improvements stemming from Brazil
and Mexico.
Pricing. During 2008, overall pricing trended
upwards, concurrently with raw material and labor cost
inflation. Pricing in the U.S. and Canada is showing
weakness with rigs, tubulars and stimulation showing the
strongest pressures. With a pull back in activity in North
America, we would expect pricing in general to come under
pressure, with the magnitude dependant upon the extent to which
activity declines. In the international markets, pricing is
softening where and when contractual terms come to renewal time.
Requests by clients to renegotiate existing contracts are
yielding more modest price erosion with significant differences
between international regions.
Overall, the level of improvements for our businesses for 2009
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 businesses. 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.
24
Results
of Operations
The following charts contain selected financial data comparing
our consolidated and segment results from operations for 2008,
2007 and 2006. The information presented has been restated to
reflect our 2008 two-for-one stock split.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except percentages and
|
|
|
|
per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
$
|
4,460,147
|
|
|
$
|
3,937,456
|
|
|
$
|
3,672,630
|
|
Middle East/North Africa/Asia
|
|
|
2,391,520
|
|
|
|
1,823,769
|
|
|
|
1,352,758
|
|
Europe/West Africa/CIS
|
|
|
1,539,190
|
|
|
|
1,188,519
|
|
|
|
827,343
|
|
Latin America
|
|
|
1,209,707
|
|
|
|
882,318
|
|
|
|
726,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,600,564
|
|
|
|
7,832,062
|
|
|
|
6,578,928
|
|
Operating Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
1,125,199
|
|
|
|
1,013,088
|
|
|
|
1,040,647
|
|
Middle East/North Africa/Asia
|
|
|
561,012
|
|
|
|
416,263
|
|
|
|
279,953
|
|
Europe/West Africa/CIS
|
|
|
382,772
|
|
|
|
293,846
|
|
|
|
171,798
|
|
Latin America
|
|
|
277,094
|
|
|
|
203,211
|
|
|
|
133,027
|
|
Research and Development
|
|
|
(192,659
|
)
|
|
|
(169,317
|
)
|
|
|
(149,429
|
)
|
Corporate
|
|
|
(135,012
|
)
|
|
|
(101,968
|
)
|
|
|
(95,106
|
)
|
Exit and Restructuring
|
|
|
(39,857
|
)
|
|
|
(30,787
|
)
|
|
|
(26,203
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,978,549
|
|
|
|
1,624,336
|
|
|
|
1,354,687
|
|
Interest Expense, Net
|
|
|
(243,679
|
)
|
|
|
(171,281
|
)
|
|
|
(102,560
|
)
|
Other, Net
|
|
|
(44,956
|
)
|
|
|
(8,569
|
)
|
|
|
(13,218
|
)
|
Effective Tax Rate
|
|
|
17.1
|
%
|
|
|
23.0
|
%
|
|
|
25.9
|
%
|
Income from Continuing Operations per Diluted Share
|
|
$
|
1.96
|
|
|
$
|
1.57
|
|
|
$
|
1.28
|
|
Loss from Discontinued Operation per Diluted Share
|
|
|
(0.02
|
)
|
|
|
(0.03
|
)
|
|
|
(0.02
|
)
|
Net Income per Diluted Share
|
|
|
1.94
|
|
|
|
1.54
|
|
|
|
1.26
|
|
Depreciation and Amortization
|
|
|
731,808
|
|
|
|
606,226
|
|
|
|
482,948
|
|
Revenues
The following chart contains consolidated revenues by product
line for 2008, 2007 and 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Artificial Lift Systems
|
|
|
17
|
%
|
|
|
18
|
%
|
|
|
18
|
%
|
Drilling Services
|
|
|
16
|
|
|
|
15
|
|
|
|
15
|
|
Well Construction
|
|
|
15
|
|
|
|
16
|
|
|
|
15
|
|
Drilling Tools
|
|
|
11
|
|
|
|
12
|
|
|
|
12
|
|
Completion Systems
|
|
|
10
|
|
|
|
10
|
|
|
|
10
|
|
Wireline
|
|
|
8
|
|
|
|
8
|
|
|
|
10
|
|
Re-entry & Fishing
|
|
|
7
|
|
|
|
8
|
|
|
|
8
|
|
Stimulation & Chemicals
|
|
|
7
|
|
|
|
6
|
|
|
|
6
|
|
Integrated Drilling
|
|
|
6
|
|
|
|
5
|
|
|
|
5
|
|
Pipeline & Specialty Services
|
|
|
3
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Consolidated revenues increased $1,769 million, or 23%, in
2008 as compared to 2007. Our businesses continued to benefit
from increasing market activity and share gains during 2008.
Approximately 70% of our revenue growth was derived from outside
of North America. International revenues increased
$1,246 million, or 32%, in 2008 as compared to 2007, which
outpaced the 8% increase in average international rig count over
the comparable period and is consistent with international
growth trends we experienced in the prior year. Revenues from
our drilling services, well construction, artificial lift
systems and integrated drilling product lines were strong
contributors to the year-over-year increase.
Consolidated revenues increased $1,253 million, or 19%, in
2007 as compared to 2006. Approximately 79% of our revenue
growth was derived from outside of North America. International
revenues increased $988 million, or 34%, 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.
Operating
Income
Consolidated operating income increased $354 million, or
22%, in 2008 as compared to 2007. Our operating segments
contributed $420 million of incremental operating income
during 2008 as compared to 2007. This incremental gain was
partially offset by an increase in corporate and research and
development expenditures of $57 million over 2007 and an
increase in exit and restructuring costs of $9 million. The
increase in corporate and research and development expenses was
primarily attributable to higher employee compensation costs.
Consolidated operating income for 2007 increased
$270 million, or 20%, as compared to 2006. The increase was
primarily the result of a $301 million increase in
operating income from our segments during 2007 as compared to
2006, which was partially offset by an increase in corporate and
research and development expenditures of $27 million over
2006.
We incurred exit and restructuring charges during 2008 of
$40 million, which was comprised of $56 million for
costs incurred in connection with our withdrawal from sanctioned
countries, $47 million incurred in connection with our
on-going investigations by the U.S. government and
$18 million for severance costs incurred associated with
restructuring activities. These charges were partially offset by
an $81 million gain recognized in the second quarter of
2008 as a result of selling our 50% interest in a subsidiary we
control to Qatar Petroleum for cash consideration of
$113 million.
During 2007, we incurred exit and restructuring charges of
$31 million which was comprised of $17 million in
severance charges associated with restructuring activities and
$14 million for legal and professional fees incurred in
connection with our on-going investigations by the
U.S. government. During 2006, we incurred exit and
restructuring charges of $26 million, primarily due to
severance charges related to restructuring activities.
Interest
Expense, Net
Interest expense increased $72 million, or 42%, in 2008
compared to 2007. The increase in interest expense was primarily
attributable to an overall increase in our long-term debt
balance during the periods. We issued $1.5 billion in
senior notes in June 2007 and an additional $1.5 billion of
senior notes in March 2008. This increase was partially offset
by lower weighted average short-term borrowing rates during 2008
as compared to 2007. The incremental borrowings added during the
current year were used to fund capital expenditures and to fund
our current year acquisitions.
Interest expense increased $69 million, or 67%, in 2007 as
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. We issued $0.6 billion in senior notes
in August 2006 and an additional $1.5 billion of senior
notes in June 2007. The incremental borrowings added during 2007
were used to fund capital expenditures, to fund acquisitions and
to fund our acquisition of shares under our share repurchase
program.
26
Other
Expense, Net
Other expense, net increased $36 million, from
$9 million in 2007 to $45 million in 2008. The
increase was almost entirely attributable to foreign currency
exchange losses incurred as the result of the weakening of
foreign currencies against the U.S. dollar, particularly in
the latter half of 2008.
Income
Taxes
Our effective tax rates were 17.1% in 2008, 23.0% in 2007 and
25.9% in 2006. The decrease in our effective tax rate during
2008 and 2007 as compared to 2007 and 2006, respectively, was
due to benefits realized from the refinement of our
international tax structure and changes in our geographic
earnings mix.
During 2008, we recorded a benefit of approximately
$100 million related to foreign taxes paid that will be
used to reduce our future United States tax liability.
Segment
Results
North
America
North America revenues increased $523 million, or 13%, in
2008 as compared to 2007 and outpaced a 7% increase in rig count
over the comparable period. Revenues grew across all product
lines, with artificial lift systems, drilling services and
stimulation & chemicals product lines being the
strongest contributors to the year-over-year increase.
Operating income increased $112 million, or 11%, from
$1,013 million in 2007 to $1,125 million in 2008.
Operating margins declined slightly to 25% in 2008 compared to
26% in 2007.
North America revenues increased $265 million, or 7%, 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 $28 million, or 3%, from
$1,041 million in 2006 to $1,013 million in 2007.
Operating margins were 26% in 2007 compared to 28% 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.
Middle
East/North Africa/Asia
Revenues in our Middle East/North Africa/Asia segment increased
$568 million, or 31%, in 2008 as compared to 2007. This
region contributed approximately 32% of our total revenue growth
for 2008 and exceeded the average rig count increase of 6% for
this region over the comparable period. Revenues from our
drilling services and integrated drilling product lines were
among the strongest contributors to the year-over-year increase.
Operating income increased $145 million, or 35%, from
$416 million in 2007 to $561 million in 2008.
Operating margins were 23% in both 2008 and 2007.
Revenues in our Middle East/North Africa/Asia segment increased
$471 million, or 35%, 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 million, or 49%, from
$280 million in 2006 to $416 million in 2007.
Operating margins were 23% in 2007 compared to 21% 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.
27
Europe/West
Africa/CIS
Revenues in our Europe/West Africa/CIS segment increased
$351 million, or 30%, in 2008 as compared to 2007. The
region contributed approximately 20% of our total revenue growth
for 2008 and exceeded the 20% increase in average rig count in
the region over the comparable period. Revenues from our well
construction and drilling services product lines were the
strongest contributors to the year-over-year increase.
Operating income increased $89 million, or 30%, from
$294 million in 2007 to $383 million in 2008.
Operating margins were 25% in both 2008 and 2007.
Revenues in our Europe/West Africa/CIS segment increased
$361 million, or 44%, 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 million, or 71%, from
$172 million in 2006 to $294 million in 2007.
Operating margins were 25% in 2007 compared to 21% 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, 2007
operating results includes our share in earnings from our equity
investment in a Russian joint venture acquired in June 2007.
Latin
America
Revenues in our Latin America segment increased
$327 million, or 37%, in 2008 as compared to 2007. The
region contributed approximately 19% of our total revenue growth
for 2008 and outpaced the 8% increase in Latin American rig
count over the comparable period. Revenues from our drilling
services, completion systems, artificial lift systems and
integrated drilling service lines were the strongest
contributors to the year-over-year increase.
Operating income increased $74 million, or 36%, from
$203 million in 2007 to $277 million in 2008.
Operating margins were 23% in both 2008 and 2007.
Revenues in our Latin America segment increased
$156 million, or 21%, 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 $70 million, or 53%, from
$133 million in 2006 to $203 million in 2007.
Operating margins were 23% in 2007 compared to 18% 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.
Discontinued
Operation
Our discontinued operation consists of our oil and gas
development and production company. We had losses from our
discontinued operation, net of taxes, of $13 million,
$21 million and $10 million for the years ended 2008,
2007 and 2006, respectively.
In June 2007, we approved a plan to sell our oil and gas
development and production business. We finalized the
divestiture of the business in June 2008. The 2008 loss includes
charges of approximately $21 million associated with a
settlement of a legal dispute regarding the business. These
charges were partially offset by an $11 million gain, net
of taxes, recognized upon the finalization of the divestiture.
The 2007 loss includes approximately $17 million, net of
tax, for asset impairment charges related to write-downs of the
operations U.S. properties. In addition, the 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.
28
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. In January 2008, we sold our electrical submersible
pumps product line to PBS and received a combination of cash and
an additional equity investment in PBS in consideration of the
sale. This transaction increased our ownership percentage to
approximately 40%.
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 bank lines of credit. 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 debt and equity securities.
Committed
Borrowing Facilities
We maintain a $1.5 billion revolving credit agreement with
a syndicate of banks. In March 2008, we entered into an
additional $250 million revolving credit facility. These
facilities allow for a combination of borrowings, support for
our commercial paper program and issuances of letters of credit
and both mature in May 2011. In October 2008, we entered into an
additional $550 million in revolving credit facilities.
These facilities allow for a combination of borrowings and
issuances of letter of credits and mature in October 2009. The
weighted average interest rate on outstanding borrowings of
these facilities at December 31, 2008, was 0.9%.
Our committed borrowing facilities require 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. Our debt-to-capitalization ratio was 41% at
December 31, 2008, which is in compliance with these
covenants. The following is a recap of our availability under
our committed borrowing facilities at December 31, 2008 (in
millions):
|
|
|
|
|
Facilities
|
|
$
|
2,300
|
|
Less uses of facility:
|
|
|
|
|
Amount drawn
|
|
|
1,068
|
|
Commercial paper
|
|
|
128
|
|
Letters of credit
|
|
|
53
|
|
|
|
|
|
|
Availability
|
|
$
|
1,051
|
|
|
|
|
|
|
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 our committed
borrowing facilities. The weighted average interest rate related
to outstanding commercial paper issuances at December 31,
2008 was 1.3%.
Cash
Requirements
During 2009, we anticipate our cash requirements will include
working capital needs and capital expenditures and may include
opportunistic business acquisitions. We anticipate funding these
requirements from cash generated from operations and, if
necessary, from availability under our committed borrowing
facilities.
Capital expenditures during the year ended December 31,
2008 were approximately $2.3 billion, net of proceeds from
tools lost down hole. We project our capital expenditures for
2009 will be approximately $1.2 billion. We are projecting
lower capital expenditures for the coming year as we adjust our
spending to reflect slower growth in the current downward cycle
of our industry.
29
From time to time we acquire businesses or technologies or enter
into joint ventures to increase our range of products and
services, expand our geographic scope or otherwise enhance to
our businesses. During the year ended December 31, 2008, we
used approximately $800 million in cash for business and
technology acquisitions. Consideration for 2008 acquisitions
also included the issuance of approximately eight million shares
valued at approximately $130 million. From time to time we
also divest of businesses when we believe they are no longer
core to our long-term growth strategy or when combining those
businesses with a joint venture partner presents a strategic
opportunity to us. In 2008, we generated $297 million in
cash on sales of businesses, including the sale of a 50%
interest in a subsidiary we control to Qatar Petroleum, the sale
of our electrical submersible pumps business to a joint venture
in which we hold an equity interest and divestiture of non-core
businesses.
In December 2005, our Board of Directors approved a share
repurchase program under which we can spend up to
$1.0 billion to repurchase 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. As of December 31, 2008, we have
$205 million remaining availability under this share
repurchase program. During the year ended December 31,
2008, no shares were repurchased.
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
|
|
|
|
|
|
|
2010 and
|
|
|
2012 and
|
|
|
|
|
|
|
|
Obligations and Commitments
|
|
2009
|
|
|
2011
|
|
|
2013
|
|
|
Thereafter
|
|
|
Total
|
|
|
|
(In millions)
|
|
|
Short-term debt
|
|
$
|
1,240
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,240
|
|
Long-term debt(a)
|
|
|
11
|
|
|
|
359
|
|
|
|
1,352
|
|
|
|
2,852
|
|
|
|
4,574
|
|
Interest on long-term debt
|
|
|
279
|
|
|
|
555
|
|
|
|
433
|
|
|
|
2,505
|
|
|
|
3,772
|
|
Noncancellable operating leases
|
|
|
111
|
|
|
|
84
|
|
|
|
42
|
|
|
|
115
|
|
|
|
352
|
|
Purchase obligations
|
|
|
327
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
1,968
|
|
|
$
|
999
|
|
|
$
|
1,827
|
|
|
$
|
5,472
|
|
|
$
|
10,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 our unrecognized tax benefits at
December 31, 2008, 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 $59 million
have been excluded from the contractual obligations table above.
We have defined benefit pension plans covering certain of our
U.S. and international employees that provide various
pension benefits. During 2008, we contributed $15 million
towards those plans, and for 2009, we anticipate funding
approximately $10 million through cash flows from operating
activities.
Senior
Notes
In January 2009, we completed a $1.25 billion long-term
debt offering comprised of (i) $1 billion of
9.625% Senior Notes due in 2019 (9.625% Senior
Notes) and (ii) $250 million of
9.875% Senior Notes due in 2039 (9.875% Senior
Notes). Net proceeds of $1.23 billion were used to
repay short-term borrowings and for general corporate purposes.
Interest on the notes is due semi-annually on March 1 and
September 1 of each year. As the interest rates on the
9.625% Senior Notes and 9.875% Senior Notes are higher
than the rates of the short-term borrowings that we repaid, we
anticipate that our interest expense in 2009 will be
significantly higher than in 2008.
In March 2008, we completed a $1.5 billion long-term debt
offering comprised of (i) $500 million of
5.15% Senior Notes due in 2013 (5.15% Senior
Notes), (ii) $500 million of 6.00% Senior
Notes due 2018
30
(6.00% Senior Notes) and
(iii) $500 million of 7.00% Senior Notes due 2038
(7.00% Senior Notes). Net proceeds of
$1.47 billion were used to repay short-term borrowings and
for general corporate purposes, including capital expenditures
and business acquisitions. Interest on these notes is due
semi-annually on March 15 and September 15 of each year.
In June 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 $1.49 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.
In August 2006, we completed an offering of $600 million
senior notes at a coupon rate of 6.50% (6.50% Senior
Notes) with a maturity in August 2036. Net proceeds of
approximately $590 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.
In May 2006, the stated maturity date, we repaid in full the
outstanding $200 million of 7.25% Senior Notes plus
all accrued interest.
In February 2006, we completed an offering of $350 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 approximately $345 million and were
used to reduce borrowings on our commercial paper program.
Interest
Rate Swaps
Upon completion of the long-term debt offering in March 2008,
the Company entered into interest rate swap agreements on an
aggregate notional amount of $500 million against its
5.15% Senior Notes. These agreements were terminated in
December 2008. As a result of these terminations, we received
cash proceeds, net of accrued interest, of $12 million. The
gain associated with this interest rate swap termination has
been deferred and will be amortized over the remaining term of
the 5.15% Senior Notes. As of December 31, 2008 and
2007, we had net unamortized gains of $21 million and
$12 million, respectively, associated with our interest
rate swap terminations.
Other
Derivative Instruments
As of December 31, 2008 and 2007, we had several foreign
currency forward contracts with notional amounts aggregating
$503 million and $682 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, 2008 resulted in a liability of
approximately $2 million and at December 31, 2007
resulted in an asset of approximately $2 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, 2008 and 2007, we had notional amounts
outstanding of $280 million and $364 million,
respectively. The total estimated fair value of these contracts
at December 31, 2008 and 2007 resulted in an asset of
$1 million and a liability of $74 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 12.9 million common shares
at a price of $15.00 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,
31
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.
Off
Balance Sheet Arrangements
Guarantees
The following obligations of Weatherford International, Inc.
(Issuer) were guaranteed by Weatherford
International Ltd. (Parent) as of December 31,
2008: (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, 2008: (i) the revolving
credit facilities, (ii) the 4.95% Senior Notes,
(iii) the 5.50% Senior Notes, (iv) the
6.50% Senior Notes, (v) the 5.15% Senior Notes,
(vi) the 6.00% Senior Notes, (vii) the
7.00% Senior Notes and (viii) 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, 2008, we had
$273 million of letters of credit and bid and performance
bonds outstanding, consisting of $220 million outstanding
under various uncommitted credit facilities and $53 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. In addition, we
updated our goodwill impairment test in December 2008 as a
result of a decline in our share price experienced during the
fourth quarter. Our goodwill impairment test involves a
comparison of the fair value of each of our reporting units with
their carrying value. Our reporting units are based on our
regional structure and consist of the United States, Canada,
Latin America, Europe, West Africa, Russia/CIS, Middle
East/North Africa and Asia Pacific. 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 using a
discount rate adjusted for the credit risk of the regional
reporting unit tested. Certain estimates and judgments are
required in the application of these fair value models.
32
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 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
Share-Based Compensation
Statement of Financial Accounting Standards (SFAS)
No. 123 (Revised 2004) Share-Based Payment
(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
SFAS No. 123R, companies account for share-based
compensation transactions using a fair-value method and
recognize the expense in the consolidated statement of income.
The fair value of options 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.
33
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. There were no
stock options granted in 2008.
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Expected volatility
|
|
|
31.0
|
%
|
|
|
36.2
|
%
|
Expected dividends
|
|
|
|
|
|
|
|
|
Expected term (in years)
|
|
|
5.0
|
|
|
|
5.0
|
|
Risk-free rate
|
|
|
4.5
|
%
|
|
|
4.7
|
%
|
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
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) 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 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
|
|
$
|
(1.4
|
)
|
|
$
|
1.4
|
|
Expected long-term rate of return
|
|
|
(0.4
|
)
|
|
|
0.4
|
|
Percentage
of Completion
Revenue from long-term contracts, primarily for our integrated
project management services, is reported on the
percentage-of-completion method of accounting. This method of
accounting requires us to calculate contract
34
profit to be recognized in each reporting period for each
contract based upon our projections of future outcomes, which
include:
|
|
|
|
|
estimates of the total cost to complete the project;
|
|
|
|
estimates of project schedule and completion date;
|
|
|
|
estimates of the extent of progress toward completion; and
|
|
|
|
amounts of any change orders or claims included in revenue.
|
Measurements of progress are generally output based related to
physical progress. At the outset of each contract, we prepare a
detailed analysis of our estimated cost to complete the project.
Risks related to service delivery, usage, productivity, and
other factors are considered in the estimation process. Our
personnel periodically evaluate the estimated costs, claims,
change orders, and percentage of completion at the contract
level. The recording of profits and losses on long-term
contracts requires an estimate of the total profit or loss over
the life of each contract. This estimate requires consideration
of total contract value, change orders, and claims, less costs
incurred and estimated costs to complete. There are many factors
that impact future costs, including but not limited to weather,
inflation, labor and community disruptions, timely availability
of materials, productivity, and other factors as outlined in our
Risk Factors. Anticipated losses on contracts are
recorded in full in the period in which they become evident.
Profits are recorded based upon the total estimated contract
profit times the current percentage complete for the contract.
At least quarterly, significant contracts are reviewed in detail
by senior management.
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 2008,
2007 and 2006 were 17.1%, 23.0% and 25.9%, respectively.
Effective January 1, 2007, we 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.
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
35
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 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, 2008, our net deferred tax assets were
$133 million before a related valuation allowance of
$69 million. As of December 31, 2007, our net deferred
tax assets were $66 million before a related valuation
allowance of $62 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 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.
Effective January 1, 2008, we adopted
SFAS No. 157 as it relates to financial assets and
financial liabilities. In February 2008, the FASB issued FASB
Staff Position
No. FAS 157-2,
Effective Date of FASB Statement No. 157, which
delayed the effective date of SFAS No. 157 for all
nonfinancial assets and nonfinancial liabilities, except those
that are recognized or disclosed at fair value in the financial
statements on at least an annual basis, until January 1,
2009 for calendar year-end entities. Accordingly, we will defer
the adoption of SFAS No. 157 for is nonfinancial
assets and nonfinancial liabilities until January 1, 2009.
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.
36
In March 2008, the FASB issued Statement No. 161,
Disclosures about Derivative Instruments and Hedging
Activities (SFAS No. 161).
SFAS No. 161 requires enhanced disclosures about an
entitys derivative and hedging activity. Entities are
required to provide enhanced disclosures about how and why they
use derivative instruments, how derivative instruments and
related hedged items are accounted for under
SFAS No. 133 and how derivative instruments and
related hedged items affect an entitys financial position,
financial performance and cash flows. This statement is
effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008.
|
|
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 $683 million adjustment to
decrease our equity account for the year ended December 31,
2008 to reflect the net impact of the strengthening of the
U.S. dollar against various foreign currencies.
As of December 31, 2008 and 2007, we had several foreign
currency forward contracts with notional amounts aggregating
$503 million and $682 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, 2008 resulted in a liability of
approximately $2 million and at December 31, 2007,
resulted in an asset of approximately $2 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, 2008 and 2007, we had notional amounts
outstanding of $280 million and $364 million,
respectively. The estimated fair value of these contracts at
December 31, 2008 and 2007 resulted in an asset of
$1 million and a liability of $74 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
37
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.
Our long-term borrowings that were outstanding at
December 31, 2008 subject to interest rate risk consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
|
(In millions)
|
|
|
6.625% Senior Notes due 2011
|
|
$
|
354
|
|
|
$
|
330
|
|
|
$
|
356
|
|
|
$
|
369
|
|
5.95% Senior Notes due 2012
|
|
|
599
|
|
|
|
585
|
|
|
|
599
|
|
|
|
618
|
|
5.15% Senior Notes due 2012
|
|
|
511
|
|
|
|
463
|
|
|
|
|
|
|
|
|
|
4.95% Senior Notes due 2013
|
|
|
254
|
|
|
|
213
|
|
|
|
255
|
|
|
|
245
|
|
5.50% Senior Notes due 2016
|
|
|
349
|
|
|
|
306
|
|
|
|
349
|
|
|
|
338
|
|
6.35% Senior Notes due 2017
|
|
|
600
|
|
|
|
513
|
|
|
|
600
|
|
|
|
624
|
|
6.00% Senior Notes due 2018
|
|
|
498
|
|
|
|
456
|
|
|
|
|
|
|
|
|
|
6.50% Senior Notes due 2036
|
|
|
596
|
|
|
|
495
|
|
|
|
596
|
|
|
|
598
|
|
6.80% Senior Notes due 2037
|
|
|
298
|
|
|
|
227
|
|
|
|
298
|
|
|
|
313
|
|
7.00% Senior Notes due 2038
|
|
|
498
|
|
|
|
394
|
|
|
|
|
|
|
|
|
|
We have various other long-term debt instruments of
$24 million at December 31, 2008, but believe the
impact of changes in interest rates in the near term will not be
material to these instruments. Short-term borrowings of
$1.2 billion at December 31, 2008 approximate fair
value.
As it relates to our variable rate debt, if market interest
rates average 1% more in 2009 than the rates as of
December 31, 2008, interest expense for 2009 would increase
by $13 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 and Derivatives
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 use 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.
Upon completion of the long-term debt offering in March 2008, we
entered into interest rate swap agreements on an aggregate
notional amount of $500 million against our
5.15% Senior Notes. These agreements were terminated in
December 2008. As a result of these terminations, we received
cash proceeds, net of accrued interest, of $12 million. The
gain associated with this interest rate swap termination has
been deferred and will be amortized over the remaining term of
the 5.15% Senior Notes.
As of December 31, 2008 and 2007, we had net unamortized
gains of $21 million and $12 million, respectively,
associated with interest rate swap terminations. Our interest
expense was reduced by $3 million and $2 million for
the years ended December 31, 2008 and 2007, respectively.
38
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
INDEX TO
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
|
|
|
|
|
|
|
Page
|
|
Managements Report on Internal Control Over Financial
Reporting
|
|
|
40
|
|
Report of Independent Registered Public Accounting Firm on
Internal Control over Financial Reporting
|
|
|
41
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
42
|
|
Consolidated Balance Sheets as of December 31, 2008 and 2007
|
|
|
43
|
|
Consolidated Statements of Income for each of the three years in
the period ended December 31, 2008
|
|
|
44
|
|
Consolidated Statements of Shareholders Equity for each of
the three years in the period ended December 31, 2008
|
|
|
45
|
|
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 2008
|
|
|
46
|
|
Notes to Consolidated Financial Statements
|
|
|
47
|
|
Financial Statement Schedule II:
|
|
|
|
|
Valuation and Qualifying Accounts and Allowances
|
|
|
94
|
|
39
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, 2008. 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, 2008 the
Companys internal control over financial reporting is
effective.
The effectiveness of the Companys internal control over
financial reporting as of December 31, 2008, has been
audited by Ernst & Young LLP, an independent
registered public accounting firm, as stated in their report
which appears herein.
40
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of
Weatherford International Ltd. and subsidiaries
We have audited Weatherford International Ltd.s internal
control over financial reporting as of December 31, 2008,
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 Ltd.s 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. and subsidiaries
maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2008 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, 2008 and 2007, and the
related consolidated statements of income, shareholders
equity, and cash flows for each of the three years in the period
ended December 31, 2008, and our report dated
February 24, 2009 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Houston, Texas
February 24, 2009
41
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, 2008 and 2007, and the related consolidated
statements of income, shareholders equity, and cash flows
for each of the three years in the period ended
December 31, 2008. 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, 2008 and 2007, and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended
December 31, 2008, 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 15, 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, 2008, 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 24, 2009
expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Houston, Texas
February 24, 2009
42
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except par value)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
238,398
|
|
|
$
|
170,714
|
|
Accounts Receivable, Net of Allowance for Uncollectible Accounts
of $16,425 in 2008 and $13,760 in 2007
|
|
|
2,442,848
|
|
|
|
1,961,854
|
|
Inventories
|
|
|
2,088,342
|
|
|
|
1,607,684
|
|
Current Deferred Tax Assets
|
|
|
270,252
|
|
|
|
165,508
|
|
Other Current Assets
|
|
|
530,442
|
|
|
|
566,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,570,282
|
|
|
|
4,471,769
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, at Cost:
|
|
|
|
|
|
|
|
|
Land, Buildings and Leasehold Improvements
|
|
|
756,416
|
|
|
|
557,081
|
|
Rental and Service Equipment
|
|
|
6,246,278
|
|
|
|
4,497,113
|
|
Machinery and Other
|
|
|
1,610,474
|
|
|
|
1,499,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,613,168
|
|
|
|
6,553,907
|
|
Less: Accumulated Depreciation
|
|
|
2,690,996
|
|
|
|
2,400,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,922,172
|
|
|
|
4,153,845
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
3,530,915
|
|
|
|
3,358,490
|
|
Other Intangible Assets, Net
|
|
|
701,483
|
|
|
|
596,999
|
|
Equity Investments
|
|
|
515,770
|
|
|
|
368,618
|
|
Other Assets
|
|
|
235,891
|
|
|
|
241,236
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,476,513
|
|
|
$
|
13,190,957
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Short-term Borrowings and Current Portion of Long-term Debt
|
|
$
|
1,255,947
|
|
|
$
|
774,220
|
|
Accounts Payable
|
|
|
886,104
|
|
|
|
612,775
|
|
Accrued Salaries and Benefits
|
|
|
257,016
|
|
|
|
239,870
|
|
Income Taxes Payable
|
|
|
82,489
|
|
|
|
97,482
|
|
Other Current Liabilities
|
|
|
540,537
|
|
|
|
478,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,022,093
|
|
|
|
2,202,365
|
|
Long-term Debt
|
|
|
4,564,255
|
|
|
|
3,066,335
|
|
Deferred Tax Liabilities
|
|
|
228,576
|
|
|
|
197,494
|
|
Other Liabilities
|
|
|
295,540
|
|
|
|
284,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,110,464
|
|
|
|
5,750,911
|
|
|
|
|
|
|
|
|
|
|
Minority Interest in Consolidated Subsidiaries
|
|
|
80,401
|
|
|
|
33,327
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity:
|
|
|
|
|
|
|
|
|
Common Shares, $1 Par Value, Authorized
1,000,000 Shares, Issued 728,689 and 727,204 Shares,
Respectively
|
|
|
728,689
|
|
|
|
727,204
|
|
Capital in Excess of Par Value
|
|
|
4,059,112
|
|
|
|
3,995,747
|
|
Treasury Shares, Net
|
|
|
(759,477
|
)
|
|
|
(924,202
|
)
|
Retained Earnings
|
|
|
4,524,085
|
|
|
|
3,170,182
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
(266,761
|
)
|
|
|
437,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,285,648
|
|
|
|
7,406,719
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,476,513
|
|
|
$
|
13,190,957
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
43
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
3,564,636
|
|
|
$
|
2,983,427
|
|
|
$
|
2,490,059
|
|
Services
|
|
|
6,035,928
|
|
|
|
4,848,635
|
|
|
|
4,088,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,600,564
|
|
|
|
7,832,062
|
|
|
|
6,578,928
|
|
Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Products
|
|
|
2,555,965
|
|
|
|
2,087,296
|
|
|
|
1,731,373
|
|
Cost of Services
|
|
|
3,686,495
|
|
|
|
2,970,314
|
|
|
|
2,481,460
|
|
Research and Development
|
|
|
192,659
|
|
|
|
169,317
|
|
|
|
149,429
|
|
Selling, General and Administrative Attributable to Segments
|
|
|
1,081,165
|
|
|
|
850,359
|
|
|
|
746,386
|
|
Corporate General and Administrative
|
|
|
187,075
|
|
|
|
130,440
|
|
|
|
115,593
|
|
Gain on Sale of Subsidiary
|
|
|
(81,344
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,622,015
|
|
|
|
6,207,726
|
|
|
|
5,224,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
1,978,549
|
|
|
|
1,624,336
|
|
|
|
1,354,687
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net
|
|
|
(243,679
|
)
|
|
|
(171,281
|
)
|
|
|
(102,560
|
)
|
Other, Net
|
|
|
(44,956
|
)
|
|
|
(8,569
|
)
|
|
|
(13,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Before Income Taxes and
Minority Interest
|
|
|
1,689,914
|
|
|
|
1,444,486
|
|
|
|
1,238,909
|
|
Provision for Income Taxes
|
|
|
(288,811
|
)
|
|
|
(332,760
|
)
|
|
|
(321,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Before Minority Interest
|
|
|
1,401,103
|
|
|
|
1,111,726
|
|
|
|
917,436
|
|
Minority Interest, Net of Taxes
|
|
|
(34,272
|
)
|
|
|
(19,751
|
)
|
|
|
(11,330
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
1,366,831
|
|
|
|
1,091,975
|
|
|
|
906,106
|
|
Loss from Discontinued Operation, Net of Taxes
|
|
|
(12,928
|
)
|
|
|
(21,369
|
)
|
|
|
(9,737
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
1,353,903
|
|
|
$
|
1,070,606
|
|
|
$
|
896,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
$
|
2.00
|
|
|
$
|
1.61
|
|
|
$
|
1.31
|
|
Loss from Discontinued Operation
|
|
|
(0.02
|
)
|
|
|
(0.03
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
1.98
|
|
|
$
|
1.58
|
|
|
$
|
1.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
$
|
1.96
|
|
|
$
|
1.57
|
|
|
$
|
1.28
|
|
Loss from Discontinued Operation
|
|
|
(0.02
|
)
|
|
|
(0.03
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
1.94
|
|
|
$
|
1.54
|
|
|
$
|
1.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
682,704
|
|
|
|
677,032
|
|
|
|
692,246
|
|
Diluted
|
|
|
698,178
|
|
|
|
695,516
|
|
|
|
709,664
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
44
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, 2005
|
|
$
|
717,946
|
|
|
$
|
3,805,392
|
|
|
$
|
1,202,938
|
|
|
$
|
92,652
|
|
|
|
(23,718
|
)
|
|
$
|
(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
|
|
Other, 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25,050
|
)
|
|
|
(548,575
|
)
|
|
|
|
|
|
|
(548,575
|
)
|
Equity Awards Granted, Vested and Exercised
|
|
|
5,896
|
|
|
|
84,139
|
|
|
|
|
|
|
|
|
|
|
|
4,226
|
|
|
|
18,176
|
|
|
|
|
|
|
|
108,211
|
|
Excess Tax Benefit of Share-Based Compensation Plans
|
|
|
|
|
|
|
14,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,121
|
|
Other
|
|
|
|
|
|
|
4,625
|
|
|
|
|
|
|
|
|
|
|
|
278
|
|
|
|
1,535
|
|
|
|
(141
|
)
|
|
|
6,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
723,842
|
|
|
|
3,913,613
|
|
|
|
2,099,307
|
|
|
|
119,153
|
|
|
|
(44,264
|
)
|
|
|
(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
|
)
|
Other, Net of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
1,070,606
|
|
|
|
318,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,389,241
|
|
Purchase of Treasury Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,224
|
)
|
|
|
(246,190
|
)
|
|
|
|
|
|
|
(246,190
|
)
|
Equity Awards Granted, Vested and Exercised
|
|
|
3,362
|
|
|
|
52,031
|
|
|
|
|
|
|
|
|
|
|
|
5,502
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
|
|
(2,886
|
)
|
|
|
3,257
|
|
|
|
1,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
727,204
|
|
|
|
3,995,747
|
|
|
|
3,170,182
|
|
|
|
437,788
|
|
|
|
(49,018
|
)
|
|
|
(945,242
|
)
|
|
|
21,040
|
|
|
|
7,406,719
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
1,353,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,353,903
|
|
Foreign Currency Translation Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(682,669
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(682,669
|
)
|
Deferred Loss on Derivative Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,576
|
)
|
Defined Benefit Pension Plans, Net of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,788
|
)
|
Other, Net of Tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
1,353,903
|
|
|
|
(704,549
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
649,354
|
|
Shares Issued in Acquisition
|
|
|
|
|
|
|
(38,683
|
)
|
|
|
|
|
|
|
|
|
|
|
7,709
|
|
|
|
168,817
|
|
|
|
|
|
|
|
130,134
|
|
Equity Awards Granted, Vested and Exercised
|
|
|
1,433
|
|
|
|
102,019
|
|
|
|
|
|
|
|
|
|
|
|
924
|
|
|
|
(2,331
|
)
|
|
|
|
|
|
|
101,121
|
|
Excess Tax Benefit of Share-Based Compensation Plans
|
|
|
|
|
|
|
10,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,032
|
|
Other
|
|
|
52
|
|
|
|
(10,003
|
)
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
(4,104
|
)
|
|
|
2,343
|
|
|
|
(11,712
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
728,689
|
|
|
$
|
4,059,112
|
|
|
$
|
4,524,085
|
|
|
$
|
(266,761
|
)
|
|
|
(40,367
|
)
|
|
$
|
(782,860
|
)
|
|
$
|
23,383
|
|
|
$
|
8,285,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
45
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
1,353,903
|
|
|
$
|
1,070,606
|
|
|
$
|
896,369
|
|
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
731,808
|
|
|
|
606,226
|
|
|
|
482,948
|
|
Gain on Sale of Assets and Businesses, Net
|
|
|
(110,326
|
)
|
|
|
(41,185
|
)
|
|
|
(42,232
|
)
|
Loss from Discontinued Operation
|
|
|
12,928
|
|
|
|
21,369
|
|
|
|
9,737
|
|
Employee Stock-Based Compensation Expense
|
|
|
101,416
|
|
|
|
64,901
|
|
|
|
62,739
|
|
Excess Tax Benefits from Share-Based Compensation
|
|
|
(10,032
|
)
|
|
|
(28,895
|
)
|
|
|
(14,121
|
)
|
Minority Interest
|
|
|
34,272
|
|
|
|
19,751
|
|
|
|
11,330
|
|
Deferred Income Tax Provision (Benefit)
|
|
|
(41,442
|
)
|
|
|
28,873
|
|
|
|
48,413
|
|
Other, Net
|
|
|
(12,587
|
)
|
|
|
4,608
|
|
|
|
5,760
|
|
Change in Operating Assets and Liabilities, Net of Effect of
Businesses Acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
|
(461,239
|
)
|
|
|
(296,120
|
)
|
|
|
(299,335
|
)
|
Inventories
|
|
|
(581,981
|
)
|
|
|
(417,305
|
)
|
|
|
(338,323
|
)
|
Other Current Assets
|
|
|
(168,140
|
)
|
|
|
(45,794
|
)
|
|
|
(66,561
|
)
|
Accounts Payable
|
|
|
230,596
|
|
|
|
74,815
|
|
|
|
27,018
|
|
Accrued Current Liabilities
|
|
|
62,715
|
|
|
|
(108,362
|
)
|
|
|
255,009
|
|
Other, Net
|
|
|
(31,104
|
)
|
|
|
(70,833
|
)
|
|
|
55,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities-Continuing Operations
|
|
|
1,110,787
|
|
|
|
882,655
|
|
|
|
1,093,906
|
|
Net Cash Used by Operating Activities-Discontinued Operation
|
|
|
(6,219
|
)
|
|
|
(10,149
|
)
|
|
|
(6,887
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
1,104,568
|
|
|
|
872,506
|
|
|
|
1,087,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of Businesses, Net of Cash Acquired
|
|
|
(798,530
|
)
|
|
|
(275,149
|
)
|
|
|
(194,314
|
)
|
Capital Expenditures for Property, Plant and Equipment for
Continuing Operations
|
|
|
(2,484,163
|
)
|
|
|
(1,635,041
|
)
|
|
|
(1,051,100
|
)
|
Acquisition of Intellectual Property
|
|
|
(24,079
|
)
|
|
|
(23,035
|
)
|
|
|
(31,201
|
)
|
(Purchase) Sale of Equity Investments in Unconsolidated
Affiliates
|
|
|
(11,568
|
)
|
|
|
(335,220
|
)
|
|
|
14,240
|
|
Proceeds from Sale of Assets and Businesses, Net
|
|
|
297,285
|
|
|
|
84,476
|
|
|
|
39,860
|
|
Other Investing Activities
|
|
|
|
|
|
|
(38,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used by Investing Activities-Continuing Operations
|
|
|
(3,021,055
|
)
|
|
|
(2,222,469
|
)
|
|
|
(1,222,515
|
)
|
Net Cash Used by Investing Activities-Discontinued Operation
|
|
|
11,000
|
|
|
|
(10,579
|
)
|
|
|
(19,984
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used by Investing Activities
|
|
|
(3,010,055
|
)
|
|
|
(2,233,048
|
)
|
|
|
(1,242,499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of (Repayments on) Short-term Debt, Net
|
|
|
477,821
|
|
|
|
117,865
|
|
|
|
(109,490
|
)
|
Borrowings of Long-term Debt
|
|
|
1,498,874
|
|
|
|
1,488,934
|
|
|
|
947,820
|
|
Repayments on Long-term Debt
|
|
|
(20,541
|
)
|
|
|
(18,171
|
)
|
|
|
(215,805
|
)
|
Purchase of Treasury Shares
|
|
|
|
|
|
|
(246,190
|
)
|
|
|
(548,575
|
)
|
Proceeds from Exercise of Stock Options
|
|
|
9,942
|
|
|
|
34,192
|
|
|
|
55,438
|
|
Excess Tax Benefits from Share-Based Compensation
|
|
|
10,032
|
|
|
|
28,895
|
|
|
|
14,121
|
|
Other Financing Activities, Net
|
|
|
1,403
|
|
|
|
(3,896
|
)
|
|
|
1,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities-Continuing Operations
|
|
|
1,977,531
|
|
|
|
1,401,629
|
|
|
|
145,112
|
|
Net Cash Provided by Financing Activities-Discontinued Operation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
1,977,531
|
|
|
|
1,401,629
|
|
|
|
145,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
(4,360
|
)
|
|
|
3,340
|
|
|
|
2,410
|
|
Net Increase (Decrease) in Cash and Cash Equivalents
|
|
|
67,684
|
|
|
|
44,427
|
|
|
|
(7,958
|
)
|
Cash and Cash Equivalents at Beginning of Year
|
|
|
170,714
|
|
|
|
126,287
|
|
|
|
134,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year
|
|
$
|
238,398
|
|
|
$
|
170,714
|
|
|
$
|
126,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
46
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. Beginning in 2008, the Companys Qatar
operations are conducted through a variable interest entity, in
which the Company believes it is the primary beneficiary.
Accordingly, the Company consolidates this entity and reflects a
minority interest.
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 our fixed asset and
minority interest classifications to conform prior year
financial information to the current period presentation.
Discontinued
Operation
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 were included in Other
Current Assets and Other Current Liabilities, respectively, in
the Consolidated Balance Sheets at December 31, 2007. The
Company finalized the divestiture of the business in 2008.
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 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,
percentage-of-completion accounting for long-term contracts,
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.
47
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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
2008, 2007 and 2006, there was no individual customer who
accounted for more than 10% of consolidated revenues.
Inventories
The Company values inventories at lower of cost or market using
either the
first-in,
first-out (FIFO) or average cost methods. Cost
represents third-party invoice or production cost. Production
cost includes material, labor and manufacturing overhead.
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, 2008, 2007 and
2006 was $669 million, $553 million and
$433 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
|
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 are evaluated and established based upon
appraisal concurrent with acquisition. No changes in the
estimated useful lives have occurred since acquisition date.
48
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 using a
discount rate adjusted for the credit risk of the regional
reporting unit tested. 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
acquired technology licenses, patents, customer relationships
and other identifiable intangible assets. Intangible assets are
amortized on a straight-line basis over their estimated economic
lives generally 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.
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, 2008 and 2007, 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 development expenditures are expensed as incurred.
49
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
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
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 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.
Employee
Share-Based Compensation
The Company accounts for all share-based payment awards,
including shares issued under employee stock purchase plans,
stock options, restricted stock and stock appreciation rights
under SFAS No. 123 (Revised 2004) Share-Based
Payment (SFAS No. 123R). Under
SFAS No. 123R, the fair value of employee stock-based
awards granted is measured at the grant date and is recognized
as an expense over the service period, which is usually the
vesting period.
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.
50
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
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) in 2007.
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 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.
Percentage of Completion Revenue from
long-term contracts, primarily for the Companys integrated
project management services, is reported on the
percentage-of-completion method of accounting. This method of
accounting requires the Company to calculate contract profit to
be recognized in each reporting period for each contract based
upon its projections of future outcomes, which include:
|
|
|
|
|
estimates of the total cost to complete the project;
|
|
|
|
estimates of project schedule and completion date;
|
|
|
|
estimates of the extent of progress toward completion; and
|
|
|
|
amounts of any change orders or claims included in revenue.
|
Measurements of progress are generally output based related to
physical progress. At the outset of each contract, the Company
prepares a detailed analysis of its estimated cost to complete
the project. Risks related to service delivery, usage,
productivity, and other factors are considered in the estimation
process. The Companys personnel periodically evaluate the
estimated costs, claims, change orders, and percentage of
completion at the contract level. The recording of profits and
losses on long-term contracts requires an estimate of the
51
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
total profit or loss over the life of each contract. This
estimate requires consideration of total contract value, change
orders, and claims, less costs incurred and estimated costs to
complete. Anticipated losses on contracts are recorded in full
in the period in which they become evident. Profits are recorded
based upon the total estimated contract profit times the current
percentage complete for the contract.
Earnings
per Share
The basic earning 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
Share) outstanding during the period. Diluted earning 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 and warrant. The diluted
earnings per share calculation excludes 6 million potential
shares for the year ended December 31, 2008, due to their
antidilutive effect. Antidilutive potential shares were not
significant for the years ended December 31, 2007 and 2006.
The Companys Board of Directors approved a two-for-one
share split of its Common Shares effected through a share
dividend. Shareholders of record on May 9, 2008 were
entitled to the dividend, which was distributed on May 23,
2008. All share and option amounts included in the accompanying
consolidated financial statements and related notes reflect the
effect of the share split.
The following reconciles basic and diluted weighted average
number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Basic weighted average shares outstanding
|
|
|
682,704
|
|
|
|
677,032
|
|
|
|
692,246
|
|
Dilutive effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
|
|
|
5,720
|
|
|
|
5,570
|
|
|
|
4,410
|
|
Stock option and restricted share plans
|
|
|
9,754
|
|
|
|
12,914
|
|
|
|
13,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
698,178
|
|
|
|
695,516
|
|
|
|
709,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Accounting Pronouncements
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
In March 2008, the FASB issued Statement No. 161,
Disclosures about Derivative Instruments and Hedging
Activities (SFAS No. 161).
SFAS No. 161 requires enhanced disclosures about an
entitys derivative and hedging activity. Entities are
required to provide enhanced disclosures about how and why they
use derivative instruments,
52
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
how derivative instruments and related hedged items are
accounted for under SFAS No. 133 and how derivative
instruments and related hedged items affect an entitys
financial position, financial performance and cash flows. This
statement is effective for financial statements issued for
fiscal years and interim periods beginning after
November 15, 2008.
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. The excess of the
purchase price over the net assets was recorded as goodwill.
Final valuations of assets and liabilities are obtained and
recorded within one year from the date of the acquisition.
In November 2008, the Company acquired a group of affiliated
companies in Latin America, which provide project management
services, drilling fluids, contract drilling and environmental
services in Latin America. Consideration for the transaction
totaled approximately $160 million, which was comprised of
approximately six million shares valued at approximately
$65 million, non-cash consideration of approximately
$75 million and cash of approximately $20 million. An
additional $65 million in cash consideration for this
acquisition is contingent on the occurrence of future events and
circumstances and will be recorded by the Company when and if
these events occur. The total purchase price was allocated based
upon preliminary, estimated fair values which are subject to
change once final valuations of the assets and liabilities are
completed.
In August 2008, the Company acquired International Logging, Inc.
(ILI), a provider of surface logging and formation
and evaluation and drilling related services for approximately
$400 million. The total purchase price was allocated to
ILIs net tangible and identifiable intangible assets based
on their preliminary, estimated fair values. The Company
allocated approximately $140 million of the purchase price
to intangible assets (See Note 8). The excess of the
purchase price over the net assets was recorded as goodwill.
In association with a prior acquisition, the Company identified
pre-acquisition contingencies related to duties and taxes
associated with the importation of certain equipment assets to
foreign jurisdictions. At December 31, 2008, the Company
has a liability of approximately $9 million for this
matter. If the Company used the high end of the range, the
aggregate potential liability would be approximately
$10 million higher.
The Company also acquired various other businesses during the
years ended December 31, 2008, 2007 and 2006 for cash
consideration of approximately $380 million,
$253 million and $187 million, respectively. In
addition, other 2008 acquisitions included the issuance of
approximately two million shares valued at approximately
$65 million.
|
|
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. In January 2008, the Company sold its
electrical submersible pumps (ESP) product line to
PBS and received a combination of cash and an additional equity
investment in PBS in consideration of the sale. This transaction
increased the Companys ownership percentage to
approximately 40%. The Companys investment in PBS is
included in Equity Investments in the accompanying Condensed
Consolidated Balance Sheets at December 31, 2008 and 2007.
The assets and liabilities of the ESP product line were
classified as held for sale at December 31, 2007 and
included in Other Current Assets and Other Current Liabilities
in the Condensed Consolidated Balance Sheet.
53
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
4.
|
Discontinued
Operation
|
In June 2007, the Companys management approved a plan to
sell its oil and gas development and production business. The
Company finalized the divestiture of the business in June 2008.
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.
Operating results of the oil and gas development and production
business were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Revenues
|
|
$
|
556
|
|
|
$
|
2,299
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Before Income Taxes
|
|
$
|
25,811
|
|
|
$
|
30,303
|
|
|
$
|
14,686
|
|
Benefit for Income Taxes
|
|
|
12,883
|
|
|
|
8,934
|
|
|
|
4,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Discontinued Operation, Net of Taxes
|
|
$
|
12,928
|
|
|
$
|
21,369
|
|
|
$
|
9,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 2008 loss includes charges of approximately $21 million
associated with a settlement of a legal dispute regarding the
business. These charges were partially offset by an
$11 million gain, net of taxes, recognized upon the
finalization of the divestiture. The 2007 loss includes
approximately $17 million, net of tax, for asset impairment
charges related to write-downs of the operations
U.S. properties. 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.
Gain
on Sales of Assets and Businesses, Net
Gain on sales of assets and businesses, net for the year ended
December 31, 2008 of $110 million includes a
$19 million write-off of fixed assets resulting from the
Companys exit from sanctioned countries, an
$81 million gain recognized in connection with the sale of
a 50% interest in a subsidiary the Company controls to Qatar
Petroleum and $48 million in gains related to the
Companys divestiture of other assets and businesses.
Non-cash
Activities
The Company issued approximately eight million shares valued at
approximately $130 million in connection with acquisitions
during the year ended December 31, 2008. There were no
shares issued in connection with acquisitions during 2007 or
2006.
During the year ended December 31, 2008, there were
non-cash investing activities of approximately $75 million
related to the Companys consideration for an acquisition.
During the years ended December 31, 2007 and 2006, there
were non-cash investing activities of $20 million and
$64 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,
|
|
|
2008
|
|
2007
|
|
2006
|
|
|
(In thousands)
|
|
Interest paid, net of capitalized interest
|
|
$
|
233,468
|
|
|
$
|
184,093
|
|
|
$
|
93,288
|
|
Income taxes paid, net of refunds
|
|
|
271,418
|
|
|
|
372,025
|
|
|
|
147,973
|
|
54
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Inventories by category were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Raw materials, components and supplies
|
|
$
|
430,352
|
|
|
$
|
373,383
|
|
Work in process
|
|
|
152,864
|
|
|
|
118,407
|
|
Finished goods
|
|
|
1,505,126
|
|
|
|
1,115,894
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,088,342
|
|
|
$
|
1,607,684
|
|
|
|
|
|
|
|
|
|
|
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. In addition, the Company updated its
goodwill impairment test in December 2008 as a result of the
decline in its Common Share price during the fourth quarter of
2008. The Companys 2008 impairment tests 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.
The Companys operating segments consist of the following
reporting units:
|
|
|
|
|
North America (i) United States and (ii) Canada
|
|
|
|
Latin America
|
|
|
|
Europe/West Africa/CIS (i) Europe, (ii) West Africa
and (iii) 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, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle East/
|
|
|
Europe/
|
|
|
|
|
|
|
|
|
|
North
|
|
|
North Africa/
|
|
|
West Africa/
|
|
|
Latin
|
|
|
|
|
|
|
America
|
|
|
Asia
|
|
|
CIS
|
|
|
America
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
As of December 31, 2006
|
|
$
|
1,759,086
|
|
|
$
|
595,310
|
|
|
$
|
499,686
|
|
|
$
|
146,507
|
|
|
$
|
3,000,589
|
|
Acquisitions
|
|
|
33,497
|
|
|
|
3,131
|
|
|
|
161,840
|
|
|
|
1,087
|
|
|
|
199,555
|
|
Disposals
|
|
|
(19,626
|
)
|
|
|
|
|
|
|
(5,523
|
)
|
|
|
|
|
|
|
(25,149
|
)
|
Purchase price and other adjustments
|
|
|
(153
|
)
|
|
|
374
|
|
|
|
1,060
|
|
|
|
4,494
|
|
|
|
5,775
|
|
Foreign currency translation
|
|
|
145,607
|
|
|
|
6,006
|
|
|
|
21,370
|
|
|
|
4,737
|
|
|
|
177,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
|
|
|
1,918,411
|
|
|
|
604,821
|
|
|
|
678,433
|
|
|
|
156,825
|
|
|
|
3,358,490
|
|
Acquisitions
|
|
|
86,037
|
|
|
|
99,456
|
|
|
|
169,941
|
|
|
|
155,098
|
|
|
|
510,532
|
|
Disposals
|
|
|
(4,380
|
)
|
|
|
|
|
|
|
(1,435
|
)
|
|
|
(27
|
)
|
|
|
(5,842
|
)
|
Purchase price and other adjustments
|
|
|
5,299
|
|
|
|
(15,847
|
)
|
|
|
5,950
|
|
|
|
7,766
|
|
|
|
3,168
|
|
Foreign currency translation
|
|
|
(191,657
|
)
|
|
|
(12,872
|
)
|
|
|
(117,959
|
)
|
|
|
(12,945
|
)
|
|
|
(335,433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008
|
|
$
|
1,813,710
|
|
|
$
|
675,558
|
|
|
$
|
734,930
|
|
|
$
|
306,717
|
|
|
$
|
3,530,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
8.
|
Other
Intangible Assets, Net
|
The components of intangible assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Net
|
|
|
Amount
|
|
|
Amortization
|
|
|
Net
|
|
|
|
(In thousands)
|
|
|
Acquired technology
|
|
$
|
377,393
|
|
|
$
|
(67,281
|
)
|
|
$
|
310,112
|
|
|
$
|
344,765
|
|
|
$
|
(52,769
|
)
|
|
$
|
291,996
|
|
Licenses
|
|
|
243,741
|
|
|
|
(87,624
|
)
|
|
|
156,117
|
|
|
|
238,153
|
|
|
|
(75,414
|
)
|
|
|
162,739
|
|
Patents
|
|
|
172,754
|
|
|
|
(58,410
|
)
|
|
|
114,344
|
|
|
|
134,217
|
|
|
|
(50,644
|
)
|
|
|
83,573
|
|
Customer relationships and contracts
|
|
|
98,428
|
|
|
|
(19,614
|
)
|
|
|
78,814
|
|
|
|
51,837
|
|
|
|
(13,044
|
)
|
|
|
38,793
|
|
Other
|
|
|
78,024
|
|
|
|
(35,928
|
)
|
|
|
42,096
|
|
|
|
55,334
|
|
|
|
(35,436
|
)
|
|
|
19,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
970,340
|
|
|
$
|
(268,857
|
)
|
|
$
|
701,483
|
|
|
$
|
824,306
|
|
|
$
|
(227,307
|
)
|
|
$
|
596,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles obtained through acquisitions are initially recorded
at estimated fair value based on preliminary information. Final
evaluations are obtained within one year from the date of
acquisition. During 2008, the Company allocated value to the
intangible assets acquired in the acquisition of ILI based on a
valuation performed by a third party. The Company allocated
approximately $100 million to acquired technology and
approximately $40 million to customer relationships. The
acquired technology and customer relationships are being
amortized over estimated useful lives of 3-15 years.
The Company has trademarks that are considered to have
indefinite lives as the Company has the ability and intent to
renew indefinitely. These trademarks had a carrying value of
$16 million and $11 million as of December 31,
2008 and December 31, 2007, respectively, and are included
in the Other caption in the table above.
Amortization expense was $63 million, $54 million and
$50 million for the years ended December 31, 2008,
2007 and 2006, respectively. Future estimated amortization
expense for the carrying amount of intangible assets as of
December 31, 2008 is expected to be as follows (in
thousands):
|
|
|
|
|
2009
|
|
$
|
71,993
|
|
2010
|
|
|
70,626
|
|
2011
|
|
|
68,808
|
|
2012
|
|
|
67,265
|
|
2013
|
|
|
65,966
|
|
|
|
9.
|
Short-term
Borrowings and Current Portion of Long-term Debt
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Revolving credit facility
|
|
$
|
1,068,000
|
|
|
$
|
491,000
|
|
Commercial paper program
|
|
|
127,884
|
|
|
|
191,621
|
|
Other short-term bank loans
|
|
|
44,205
|
|
|
|
80,025
|
|
|
|
|
|
|
|
|
|
|
Total short-term borrowings
|
|
|
1,240,089
|
|
|
|
762,646
|
|
Current portion of long-term debt
|
|
|
15,858
|
|
|
|
11,574
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings and current portion of long-term debt
|
|
$
|
1,255,947
|
|
|
$
|
774,220
|
|
|
|
|
|
|
|
|
|
|
Weighted average interest rate on short-term borrowings
outstanding at end of year
|
|
|
1.07
|
%
|
|
|
5.39
|
%
|
56
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company maintains a $1.5 billion revolving credit
agreement with a syndicate of banks. In March 2008, the Company
entered into an additional $250 million revolving credit
facility. These lending facilities allow for a combination of
borrowings, support of the Companys commercial paper
program and issuances of letters of credit and both mature in
May 2011. In October 2008, the Company entered into an
additional $550 million in revolving credit facilities.
These facilities allow for a combination of borrowings and
issuances of letters of credit and mature in October 2009. The
weighted average interest rate on outstanding borrowings of
these facilities at December 31, 2008 was 0.9%. There were
$53 million in outstanding letters of credit under these
facilities at December 31, 2008.
These borrowing facilities require the Company to maintain a
debt-to-capitalization ratio of less than 60% and contain other
covenants and representations customary for an investment-grade
commercial credit. The Company was in compliance with these
covenants at December 31, 2008.
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 facilities. The weighted average
interest rate related to outstanding commercial paper issuances
at December 31, 2008 was 1.3%.
The Company has short-term borrowings with various domestic and
international institutions pursuant to uncommitted facilities.
At December 31, 2008, the Company had $44 million in
short-term borrowings under these arrangements with a weighted
average interest rate of 4.2%. In addition, the Company had
$220 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, 2008 and 2007.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
6.625% Senior Notes due 2011
|
|
$
|
354,286
|
|
|
$
|
355,619
|
|
5.95% Senior Notes due 2012
|
|
|
599,153
|
|
|
|
598,940
|
|
5.15% Senior Notes due 2013
|
|
|
510,833
|
|
|
|
|
|
4.95% Senior Notes due 2013
|
|
|
253,959
|
|
|
|
254,681
|
|
5.50% Senior Notes due 2016
|
|
|
348,859
|
|
|
|
348,732
|
|
6.35% Senior Notes due 2017
|
|
|
599,576
|
|
|
|
599,539
|
|
6.00% Senior Notes due 2018
|
|
|
497,512
|
|
|
|
|
|
6.50% Senior Notes due 2036
|
|
|
595,824
|
|
|
|
595,772
|
|
6.80% Senior Notes due 2037
|
|
|
298,171
|
|
|
|
298,150
|
|
7.00% Senior Notes due 2038
|
|
|
498,318
|
|
|
|
|
|
Foreign bank and other debt denominated in foreign currencies
|
|
|
16,046
|
|
|
|
18,098
|
|
Capital lease obligations
|
|
|
6,012
|
|
|
|
8,378
|
|
Other
|
|
|
1,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,580,113
|
|
|
|
3,077,909
|
|
Less amounts due in one year
|
|
|
15,858
|
|
|
|
11,574
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
4,564,255
|
|
|
$
|
3,066,335
|
|
|
|
|
|
|
|
|
|
|
57
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following is a summary of scheduled long-term debt
maturities by year (in thousands):
|
|
|
|
|
|
2009
|
|
$
|
15,858
|
|
2010
|
|
|
10,806
|
|
2011
|
|
|
358,256
|
|
2012
|
|
|
605,009
|
|
2013
|
|
|
750,533
|
|
Thereafter
|
|
|
2,839,651
|
|
|
|
|
|
|
|
|
$
|
4,580,113
|
|
|
|
|
|
|
In March 2008, the Company completed a $1.5 billion
long-term debt offering comprised of (i) $500 million
of 5.15% Senior Notes due in 2013 (5.15% Senior
Notes), (ii) $500 million of 6.00% Senior
Notes due 2018 (6.00% Senior Notes) and
(iii) $500 million of 7.00% Senior Notes due 2038
(7.00% Senior Notes). Interest on these notes
is due semi-annually on March 15 and September 15 of each year.
The estimated fair value at December 31, 2008 of the
5.15% Senior Notes, the 6.00% Senior Notes, and the
7.00% Senior Notes was $463 million, $456 million
and $394 million, respectively.
In June 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). Interest on these notes
are due payable semi-annually on June 15 and December 15 of each
year. The estimated fair value at December 31, 2008 of the
5.95% Senior Notes, the 6.35% Senior Notes and the
6.80% Senior Notes was $585 million, $513 million
and $227 million, respectively.
In August 2006, the Company completed an offering of
$600 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. The estimated
fair value of the 6.50% Senior Notes was $495 million
as of December 31, 2008.
In February 2006, the Company completed an offering of
$350 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 $306 million as of
December 31, 2008.
In October 2003, the Company completed a public offering of
$250 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. The estimated fair value of the 4.95% Senior
Notes was $213 million as of December 31, 2008.
In November 2001, the Company completed a private placement of
$350 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. The estimated fair value of the
6.625% Senior Notes was $330 million as of
December 31, 2008.
58
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 11).
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
6.625% Senior Notes due 2011
|
|
|
6.2
|
%
|
|
|
6.3
|
%
|
5.95% Senior Notes due 2012
|
|
|
6.0
|
%
|
|
|
6.0
|
%
|
4.95% Senior Notes due 2013
|
|
|
4.8
|
%
|
|
|
4.8
|
%
|
5.15% Senior Notes due 2013
|
|
|
5.1
|
%
|
|
|
|
|
5.50% Senior Notes due 2016
|
|
|
5.5
|
%
|
|
|
5.5
|
%
|
6.35% Senior Notes due 2017
|
|
|
6.4
|
%
|
|
|
6.4
|
%
|
6.00% Senior Notes due 2018
|
|
|
6.0
|
%
|
|
|
|
|
6.50% Senior Notes due 2036
|
|
|
6.5
|
%
|
|
|
6.5
|
%
|
6.80% Senior Notes due 2037
|
|
|
6.8
|
%
|
|
|
6.8
|
%
|
7.00% Senior Notes due 2038
|
|
|
7.1
|
%
|
|
|
|
|
|
|
11.
|
Derivative
Instruments
|
Interest
Rate Swaps
The Company uses interest rate swaps to help mitigate exposures
related to 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.
Upon completion of the long-term debt offering in March 2008,
the Company entered into interest rate swap agreements on an
aggregate notional amount of $500 million against its
5.15% Senior Notes. These agreements were terminated in
December 2008. As a result of these terminations, the Company
received cash proceeds, net of accrued interest, of
$12 million. The gain associated with these interest rate
swap terminations has been deferred and will be amortized over
the remaining term of the 5.15% Senior Notes. As of
December 31, 2008 and 2007, the Company had net unamortized
gains of $21 million and $12 million, respectively,
associated with interest rate swap terminations.
Cash
Flow Hedges
In March 2008, the Company entered into interest rate derivative
instruments for a notional amount of $500 million to hedge
projected exposures to interest rates in anticipation of the
7.00% Senior Notes issued in March 2008. Those hedges were
terminated at the time of the issuance. The Company paid a cash
settlement of $13 million at termination, and the loss on
these hedges is being amortized to interest expense over the
life of the 7.00% Senior Notes.
Other
Derivative Instruments
As of December 31, 2008 and 2007, we had several foreign
currency forward contracts with notional amounts aggregating
$503 million and $682 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, 2008 resulted in a liability of
approximately $2 million and at December 31, 2007,
resulted in an asset of approximately
59
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$2 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 hedge certain
exposures to the Canadian dollar created as a result of the
acquisition. At December 31, 2008 and 2007, the Company had
notional amounts outstanding of $280 million and
$364 million, respectively. The total estimated fair value
of these contracts at December 31, 2008 and 2007 resulted
in an asset of $1 million and a liability of
$74 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.
Effective January 1, 2008, the Company adopted
SFAS No. 159. SFAS No. 159 The Fair Value
Option for Financial Assets and Financial Liabilities
(SFAS No. 159) permits entities to
choose to measure many financial instruments and certain other
assets and liabilities at fair value on an
instrument-by-instrument
basis (the fair value option) with changes in fair value
reported in earnings. The Company already recorded derivative
contracts and hedging activities at fair value in accordance
with SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended. The adoption
of SFAS No. 159 had no impact on the financial
statements as the Company did not elect the fair value option
for any other financial instruments or certain other assets and
liabilities.
Effective January 1, 2008, the Company adopted
SFAS No. 157, as it relates to financial assets and
financial liabilities. In February 2008, the FASB issued FASB
Staff Position
No. FAS 157-2,
Effective Date of FASB Statement No. 157, which
delayed the effective date of SFAS No. 157 for all
nonfinancial assets and nonfinancial liabilities, except those
that are recognized or disclosed at fair value in the financial
statements on at least an annual basis, until January 1,
2009 for calendar year-end entities. Accordingly, the Company
will defer the adoption of SFAS No. 157 for its
nonfinancial assets and nonfinancial liabilities until
January 1, 2009.
SFAS No. 157 defines fair value, establishes a
framework for measuring fair value under generally accepted
accounting principals and expands disclosures about fair value
measurements. The provisions of this standard apply to other
accounting pronouncements that require or permit fair value
measurements. The adoption of SFAS No. 157, as it
relates to financial assets, had no impact on the Companys
consolidated financial position, results of operations and cash
flows. The Company is currently evaluating the potential impact
of SFAS No. 157, as it relates to nonfinancial assets
and nonfinancial liabilities, on its consolidated financial
position, results of operations and cash flows.
SFAS No. 157 defines fair value as the price that
would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants
at the measurement date. SFAS No. 157 establishes a
fair value hierarchy that distinguishes between market
participant assumptions developed based on market data obtained
from independent sources (observable inputs) and an
entitys own assumptions about market participant
assumptions developed based on the best information available in
the circumstances (unobservable inputs). The fair value
hierarchy consists of three broad levels, which gives the
highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1) and the
lowest priority to unobservable inputs (Level 3). The three
levels of the fair value hierarchy under SFAS No. 157
are described below:
Level 1 Unadjusted quoted prices in active
markets that are accessible at the measurement date for
identical, unrestricted assets or liabilities.
Level 2 Inputs other than quoted prices included
within Level 1 that are observable for the asset or
liability, either directly or indirectly, including quoted
prices for similar assets or liabilities in active markets;
quoted prices for identical or similar assets or liabilities in
markets that are not active; inputs other than quoted prices
that are observable for the asset or liability (e.g., interest
rates); and inputs that are derived principally from or
corroborated by observable market data by correlation or other
means.
Level 3 Inputs that are both significant to the
fair value measurement and unobservable.
60
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In accordance with SFAS No. 157, the following table
presents the Companys assets and liabilities that are
measured and recognized at fair value on a recurring basis
classified under the appropriate level of the fair value
hierarchy as of December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts
|
|
$
|
|
|
|
$
|
1,455
|
|
|
$
|
|
|
|
$
|
1,455
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts
|
|
|
|
|
|
|
2,233
|
|
|
|
|
|
|
|
2,233
|
|
Authorized
Shares
The Company is authorized to issue 1,000,000,000 Common Shares
and 10,000,000 undesignated preferred shares, $1.00 par
value. As of December 31, 2008, no preferred shares have
been issued.
Share
Repurchase Program
In December 2005, the Companys Board of Directors approved
a share repurchase program under which the Company can spend up
to $1 billion to repurchase Companys outstanding
Common Shares. Pursuant to this program, the Company purchased
approximately 10 million and 25 million Common Shares
during the years ended December 31, 2007 and 2006, at an
average price per share of $24.08 and $21.90, respectively. No
shares were repurchased during the year ended December 31,
2008. As of December 31, 2008, the Company had
$205 million available under this authorization to
repurchase shares.
Warrant
On February 28, 2002, the Company issued Shell Technology
Ventures Inc. a warrant to purchase up to 12.9 million
Common Shares at a price of $15.00 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.
|
|
13.
|
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
61
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Omnibus Plan, there are 20 million Common Shares available
for grant. As of December 31, 2008, approximately eight
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 five-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, less assumed forfeitures, is amortized to
expense on a straight-line basis over the vesting period.
Executive
Deferred Compensation Plan
Under the Companys Executive Deferred Compensation Stock
Ownership Plan (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. Effective
December 31, 2008, the Company suspended the EDC Plan.
While the plan is suspended, no new participants may join the
plan and no further deferrals of compensation or matching
contributions will be made under the plan unless and until the
Companys Board of Directors determines otherwise.
62
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Share-Based
Compensation Expense and Activity
The Company recognized the following employee share-based
compensation expense during the years ended December 31,
2008, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Share-based compensation
|
|
$
|
101,416
|
|
|
$
|
64,901
|
|
|
$
|
62,739
|
|
Related tax benefit
|
|
|
35,496
|
|
|
|
22,715
|
|
|
|
21,959
|
|
The Company uses the Black-Scholes option pricing model to
determine the fair value of options award on the date of grant.
The estimated fair value of the options is amortized to expense
on a straight-line basis over their vesting period. The specific
assumptions used in determining the fair values for option
grants during the years ended 2007 and 2006 are discussed in
more detail below and are noted in the following table. There
were no stock options granted in 2008.
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 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
|
|
|
Expected volatility
|
|
|
31.0
|
%
|
|
|
36.2
|
%
|
Expected dividends
|
|
|
|
|
|
|
|
|
Expected term (in years)
|
|
|
5.0
|
|
|
|
5.0
|
|
Risk-free rate
|
|
|
4.5
|
%
|
|
|
4.7
|
%
|
A summary of option activity under the stock option plans as of
December 31, 2008, 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 years)
|
|
|
(In thousands)
|
|
|
Outstanding at January 1, 2008
|
|
|
15,555,208
|
|
|
$
|
8.08
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,487,939
|
)
|
|
|
6.71
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(72,000
|
)
|
|
|
25.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008
|
|
|
13,995,269
|
|
|
|
8.14
|
|
|
|
5.91
|
|
|
$
|
49,559
|
|
Vested or Expected to Vest at December 31, 2008
|
|
|
13,995,269
|
|
|
|
8.14
|
|
|
|
5.91
|
|
|
|
49,559
|
|
Exercisable at December 31, 2008
|
|
|
13,118,969
|
|
|
|
7.32
|
|
|
|
5.81
|
|
|
|
49,559
|
|
63
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The weighted-average grant date fair value of options granted
during the years ended December 31, 2007 and 2006 was $7.16
and $8.78, respectively. There were no options granted during
2008. The intrinsic value of options exercised during 2008, 2007
and 2006 was $46 million, $110 million and
$146 million, respectively. As of December 31, 2008,
there was $4 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 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, 2008 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, 2008
|
|
|
4,994,854
|
|
|
$
|
19.52
|
|
|
|
3,696,900
|
|
|
$
|
21.25
|
|
Granted
|
|
|
3,619,970
|
|
|
|
32.95
|
|
|
|
3,493,204
|
|
|
|
32.13
|
|
Vested
|
|
|
(788,327
|
)
|
|
|
14.94
|
|
|
|
(453,282
|
)
|
|
|
17.61
|
|
Forfeited
|
|
|
(447,649
|
)
|
|
|
24.86
|
|
|
|
(623,948
|
)
|
|
|
22.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested at December 31, 2008
|
|
|
7,378,848
|
|
|
|
26.16
|
|
|
|
6,112,874
|
|
|
|
27.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant date fair value of RSAs and RSUs
granted during the years ended 2008, 2007 and 2006 was $32.55,
$25.42 and $21.82, respectively. The total fair value of RSAs
and RSUs vested during the years ended 2008, 2007 and 2006 was
$40 million, $156 million and $47 million,
respectively. As of December 31, 2008, there was
$247 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 years.
|
|
14.
|
Retirement
and Employee Benefit Plans
|
The Company has defined contribution plans covering certain
employees. Contribution expenses related to these plans totaled
$32 million, $29 million and $22 million in 2008,
2007 and 2006, 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.
The Company has a SERP which provides 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.
Effective December 31, 2006, the Company adopted 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), which 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.
64
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The changes in benefit obligations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Benefit obligation at beginning of year
|
|
$
|
115,585
|
|
|
$
|
189,193
|
|
|
$
|
94,307
|
|
|
$
|
153,940
|
|
Service cost
|
|
|
2,879
|
|
|
|
13,557
|
|
|
|
2,642
|
|
|
|
11,308
|
|
Interest cost
|
|
|
6,017
|
|
|
|
9,905
|
|
|
|
5,391
|
|
|
|
8,189
|
|
Plan participants contributions
|
|
|
|
|
|
|
3,547
|
|
|
|
|
|
|
|
3,436
|
|
Business combinations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,483
|
|
Amendments
|
|
|
|
|
|
|
(553
|
)
|
|
|
2,901
|
|
|
|
152
|
|
Curtailments
|
|
|
|
|
|
|
|
|
|
|
(2,010
|
)
|
|
|
|
|
Settlements
|
|
|
(12,001
|
)
|
|
|
(2,116
|
)
|
|
|
(8,606
|
)
|
|
|
(42
|
)
|
Actuarial (gain)/loss
|
|
|
10,691
|
|
|
|
(22,099
|
)
|
|
|
21,887
|
|
|
|
7,606
|
|
Currency fluctuations
|
|
|
|
|
|
|
(43,060
|
)
|
|
|
|
|
|
|
7,325
|
|
Benefits paid
|
|
|
(1,249
|
)
|
|
|
(4,966
|
)
|
|
|
(927
|
)
|
|
|
(5,204
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
121,922
|
|
|
$
|
143,408
|
|
|
$
|
115,585
|
|
|
$
|
189,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The changes in plan assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
10,518
|
|
|
$
|
142,919
|
|
|
$
|
12,023
|
|
|
$
|
120,447
|
|
Actual return on plan assets
|
|
|
(2,816
|
)
|
|
|
(23,760
|
)
|
|
|
821
|
|
|
|
7,079
|
|
Employer contribution
|
|
|
535
|
|
|
|
14,408
|
|
|
|
1,079
|
|
|
|
11,371
|
|
Plan participants contributions
|
|
|
|
|
|
|
3,547
|
|
|
|
|
|
|
|
3,436
|
|
Business combinations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,338
|
|
Settlements
|
|
|
|
|
|
|
(1,984
|
)
|
|
|
(2,478
|
)
|
|
|
(42
|
)
|
Currency fluctuations
|
|
|
|
|
|
|
(34,123
|
)
|
|
|
|
|
|
|
4,054
|
|
Benefits paid
|
|
|
(1,141
|
)
|
|
|
(4,414
|
)
|
|
|
(927
|
)
|
|
|
(4,764
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
|
7,096
|
|
|
|
96,593
|
|
|
|
10,518
|
|
|
|
142,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
(114,826
|
)
|
|
$
|
(46,815
|
)
|
|
$
|
(105,067
|
)
|
|
$
|
(46,274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amounts recognized in the Consolidated Balance Sheets were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Noncurrent assets
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
136
|
|
Current liabilities
|
|
|
(8,671
|
)
|
|
|
(494
|
)
|
|
|
(12,075
|
)
|
|
|
|
|
Noncurrent liabilities
|
|
|
(106,155
|
)
|
|
|
(46,321
|
)
|
|
|
(92,992
|
)
|
|
|
(46,410
|
)
|
65
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Amounts in accumulated other comprehensive income that have not
yet been recognized as components of net periodic benefit cost
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Net loss
|
|
$
|
57,888
|
|
|
$
|
20,796
|
|
|
$
|
53,177
|
|
|
$
|
16,297
|
|
Net prior service costs (credit)
|
|
|
15,358
|
|
|
|
(755
|
)
|
|
|
17,191
|
|
|
|
(1,271
|
)
|
Net transition asset
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive income
|
|
$
|
73,246
|
|
|
$
|
20,021
|
|
|
$
|
70,368
|
|
|
$
|
15,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accumulated benefit obligation for defined benefit pension
plans was $79 million and $84 million at
December 31, 2008 and 2007, respectively, for the
U.S. plans and $129 million and $173 million at
December 31, 2008 and 2007, respectively, for the
international plans.
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, 2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Plans with projected benefit obligation in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
$
|
121,922
|
|
|
$
|
143,156
|
|
|
$
|
115,585
|
|
|
$
|
185,963
|
|
Fair value of plan assets
|
|
|
7,096
|
|
|
|
96,162
|
|
|
|
10,518
|
|
|
|
139,281
|
|
Plans with accumulated benefit obligation in excess of plan
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
|
78,727
|
|
|
|
128,474
|
|
|
|
84,034
|
|
|
|
151,352
|
|
Fair value of plan assets
|
|
|
7,096
|
|
|
|
96,162
|
|
|
|
10,518
|
|
|
|
117,816
|
|
The components of net periodic benefit cost during the years
ended December 31, 2008, 2007 and 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Service cost
|
|
$
|
2,879
|
|
|
$
|
13,557
|
|
|
$
|
2,642
|
|
|
$
|
11,308
|
|
|
$
|
2,301
|
|
|
$
|
9,694
|
|
Interest cost
|
|
|
6,017
|
|
|
|
9,905
|
|
|
|
5,391
|
|
|
|
8,189
|
|
|
|
4,154
|
|
|
|
6,575
|
|
Expected return on plan assets
|
|
|
(687
|
)
|
|
|
(8,700
|
)
|
|
|
(744
|
)
|
|
|
(8,003
|
)
|
|
|
(765
|
)
|
|
|
(6,126
|
)
|
Amortization of transition asset
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(4
|
)
|
Amortization of prior service cost (credit)
|
|
|
1,833
|
|
|
|
(47
|
)
|
|
|
2,108
|
|
|
|
(87
|
)
|
|
|
2,234
|
|
|
|
(104
|
)
|
Settlements/curtailments
|
|
|
5,621
|
|
|
|
(126
|
)
|
|
|
1,548
|
|
|
|
4
|
|
|
|
6,848
|
|
|
|
|
|
Amortization of net loss
|
|
|
3,862
|
|
|
|
319
|
|
|
|
4,224
|
|
|
|
208
|
|
|
|
1,807
|
|
|
|
549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
19,525
|
|
|
$
|
14,904
|
|
|
$
|
15,169
|
|
|
$
|
11,615
|
|
|
$
|
16,579
|
|
|
$
|
10,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other changes in plan assets and benefit obligations recognized
in other comprehensive income during the years ended
December 31, 2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
New Activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
$
|
14,194
|
|
|
$
|
10,747
|
|
|
$
|
19,799
|
|
|
$
|
8,525
|
|
Net prior service cost for the year
|
|
|
|
|
|
|
90
|
|
|
|
2,901
|
|
|
|
152
|
|
Reclassification Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(9,483
|
)
|
|
|
(193
|
)
|
|
|
(3,891
|
)
|
|
|
(212
|
)
|
Prior service credit (cost)
|
|
|
(1,833
|
)
|
|
|
47
|
|
|
|
(3,989
|
)
|
|
|
87
|
|
Transition asset
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income:
|
|
$
|
2,878
|
|
|
$
|
10,695
|
|
|
$
|
14,820
|
|
|
$
|
8,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in accumulated other comprehensive income expected to be
recognized as components of net periodic benefit cost in 2009
are as follows:
|
|
|
|
|
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Net loss
|
|
$
|
4,312
|
|
|
$
|
602
|
|
Prior service costs (credit)
|
|
|
1,833
|
|
|
|
(40
|
)
|
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 were as follows:
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2008
|
|
2007
|
|
Discount rate:
|
|
|
|
|
United States plans
|
|
5.75 - 6.25%
|
|
5.00 - 6.00%
|
International plans
|
|
2.10 - 6.00
|
|
1.94 - 8.10
|
Rate of compensation increase:
|
|
|
|
|
United States plans
|
|
8.00
|
|
8.00
|
International plans
|
|
2.00 - 5.15
|
|
2.00 - 6.50
|
67
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The weighted average assumption rates used for net periodic
benefit costs were as follows:
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2008
|
|
2007
|
|
2006
|
|
Discount rate:
|
|
|
|
|
|
|
United States plans
|
|
5.75 - 6.00%
|
|
5.00 - 5.50%
|
|
5.00 - 5.50%
|
International plans
|
|
1.94 - 5.60
|
|
1.90 - 6.60
|
|
2.00 - 5.80
|
Expected return on plan assets:
|
|
|
|
|
|
|
United States plans
|
|
7.00
|
|
5.00 - 7.00
|
|
5.00 - 7.00
|
International plans
|
|
4.20 - 7.34
|
|
4.00 - 6.82
|
|
4.00 - 7.50
|
Rate of compensation increase:
|
|
|
|
|
|
|
United States plans
|
|
8.00
|
|
8.00
|
|
6.00
|
International plans
|
|
2.00 - 4.77
|
|
2.00 - 6.50
|
|
2.00 - 6.08
|
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.
The weighted average asset allocations at December 31, 2008
and 2007, by asset category were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
Equity
|
|
|
58
|
%
|
|
|
62
|
%
|
|
|
59
|
%
|
|
|
73
|
%
|
Debt securities
|
|
|
42
|
|
|
|
23
|
|
|
|
40
|
|
|
|
18
|
|
Other
|
|
|
|
|
|
|
15
|
|
|
|
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 2009, the Company expects to contribute less than
$1 million in the U.S. and $10 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
|
|
|
2009
|
|
$
|
9,736
|
|
|
$
|
2,407
|
|
2010
|
|
|
9,102
|
|
|
|
1,559
|
|
2011
|
|
|
9,338
|
|
|
|
3,253
|
|
2012
|
|
|
9,159
|
|
|
|
2,854
|
|
2013
|
|
|
12,388
|
|
|
|
3,183
|
|
2014 - 2018
|
|
|
70,712
|
|
|
|
31,331
|
|
68
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The components of Income from Continuing Operations Before
Income Taxes and Minority Interest were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Domestic
|
|
$
|
533,942
|
|
|
$
|
512,275
|
|
|
$
|
536,440
|
|
Foreign
|
|
|
1,155,972
|
|
|
|
932,211
|
|
|
|
702,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,689,914
|
|
|
$
|
1,444,486
|
|
|
$
|
1,238,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys income tax benefit (provision) from
continuing operations consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal and state income taxes
|
|
$
|
(96,549
|
)
|
|
$
|
(132,182
|
)
|
|
$
|
(82,177
|
)
|
Foreign
|
|
|
(233,704
|
)
|
|
|
(171,705
|
)
|
|
|
(190,883
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
(330,253
|
)
|
|
|
(303,887
|
)
|
|
|
(273,060
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
37,045
|
|
|
|
(47,990
|
)
|
|
|
(78,819
|
)
|
Foreign
|
|
|
4,397
|
|
|
|
19,117
|
|
|
|
30,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
41,442
|
|
|
|
(28,873
|
)
|
|
|
(48,413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(288,811
|
)
|
|
$
|
(332,760
|
)
|
|
$
|
(321,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2008 is analyzed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Statutory federal income tax rate
|
|
$
|
(591,470
|
)
|
|
$
|
(505,571
|
)
|
|
$
|
(433,618
|
)
|
Effect of state income tax, net and alternative minimum tax
|
|
|
(11,177
|
)
|
|
|
(8,957
|
)
|
|
|
(1,910
|
)
|
Effect of domestic non-deductible expenses
|
|
|
(2,510
|
)
|
|
|
(5,295
|
)
|
|
|
2,397
|
|
Change in valuation allowance
|
|
|
(4,574
|
)
|
|
|
(6,662
|
)
|
|
|
(8,395
|
)
|
Effect of foreign income tax, net
|
|
|
332,332
|
|
|
|
204,470
|
|
|
|
99,291
|
|
Change in income tax reserve
|
|
|
(9,302
|
)
|
|
|
(5,425
|
)
|
|
|
7,500
|
|
Other
|
|
|
(2,110
|
)
|
|
|
(5,320
|
)
|
|
|
13,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(288,811
|
)
|
|
$
|
(332,760
|
)
|
|
$
|
(321,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2008, the Company recorded a benefit of approximately
$100 million related to foreign taxes paid that will be
used to reduce its future United States tax liability. This
adjustment is presented in effect of foreign income tax, net.
During 2006, the Company recorded a benefit of $26 million
related to the favorable settlement of certain foreign income
tax exposures. This adjustment is presented in effect of foreign
income tax, net.
69
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During 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 $13 million, of which,
$5 million is presented in effect of foreign income tax,
net and $8 million is presented in other. In addition,
during 2006, the Company recorded $11 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 $20 million benefit related to its
prior year domestic income tax returns during 2006. Of this
benefit, $15 million is presented in effect of foreign
income tax, net and $5 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 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,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Domestic and foreign operating losses
|
|
$
|
118,519
|
|
|
$
|
109,898
|
|
Accrued liabilities and reserves
|
|
|
180,476
|
|
|
|
173,855
|
|
Tax credits
|
|
|
127,331
|
|
|
|
34,343
|
|
Other differences between financial and tax basis
|
|
|
76,519
|
|
|
|
63,626
|
|
Differences between financial and tax basis inventory
|
|
|
32,596
|
|
|
|
51,590
|
|
Valuation allowance
|
|
|
(68,853
|
)
|
|
|
(61,626
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
466,588
|
|
|
|
371,686
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
(180,852
|
)
|
|
|
(156,073
|
)
|
Goodwill and other intangibles
|
|
|
(188,883
|
)
|
|
|
(181,626
|
)
|
Unremitted foreign earnings
|
|
|
(1,046
|
)
|
|
|
(18,787
|
)
|
Other differences between financial and tax basis
|
|
|
(31,201
|
)
|
|
|
(10,555
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(401,982
|
)
|
|
|
(367,041
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
64,606
|
|
|
$
|
4,645
|
|
|
|
|
|
|
|
|
|
|
The overall increase in the valuation allowance in 2008 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 $57 million after
application of available foreign tax credits.
70
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At December 31, 2008, the Company had approximately
$392 million of NOLs, $71 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 2028.
At December 31, 2008, the Company had approximately
$113 million of foreign tax credits available to offset
future payments of federal income taxes. The foreign tax credits
expire in varying amounts through 2018.
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 $34 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, 2008
|
|
$
|
37,805
|
|
Additions as a result of tax positions taken during a prior
period
|
|
|
8,904
|
|
Reductions as a result of tax positions taken during a prior
period
|
|
|
(71
|
)
|
Additions as a result of tax positions taken during the current
period
|
|
|
1,391
|
|
Reductions relating to settlements with taxing authorities
|
|
|
(2,767
|
)
|
Reductions as a result of a lapse of the applicable statute of
limitations
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
45,262
|
|
|
|
|
|
|
Included in the balance of unrecognized benefits at
December 31, 2008, are $38 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, 2008 are
$7 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 million of expense
relating to interest for the period ended December 31,
2008. The Companys expense recognized relating to
penalties for the period ended December 31, 2008 was
immaterial. As of December 31, 2008, the Company has
accrued $11 million of interest and $3 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 1997 and 1998,
respectively through December 31, 2008. 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.
71
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
16.
|
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.
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 and began an orderly discontinuation
and winding down of our existing business in these sanctioned
countries. Effective March 31, 2008, we completed our
withdrawal from these countries.
With the assistance of outside counsel and in connection with
U.S. government investigations and subpoenas, we are
conducting 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. As part of these
investigations, we have also uncovered potential violations of
U.S. law in connection with a joint venture in Angola.
These investigations are 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 investigations, and the results of the
investigations are being 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 fines and other penalties and sanctions in the tens
and hundreds of millions of dollars. Under trading sanctions
laws, the DOJ may also seek to impose modifications to business
practices, including immediate cessation of all business
activities in specific countries or other limitations that
decrease our business, 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. To the extent we
violated U.S. export regulations, fines and other penalties
may be imposed. Because these matters are now pending before the
indicated agencies, there can be no assurance that actual fines
or penalties, if any, will not have a material adverse affect on
our business, financial condition, liquidity or results of
operations.
72
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During 2008, we incurred $56 million for costs incurred in
connection with our exit from sanctioned countries and
$47 million in legal and professional fees incurred in
connection with complying and conducting with these on-going
investigations. We will have additional charges related to these
matters in future periods, which costs may include labor claims,
contractual claims, penalties assessed by customers, and costs,
fines, taxes and penalties assessed by the local governments,
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.
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):
|
|
|
|
|
|
2009
|
|
$
|
111,107
|
|
2010
|
|
|
48,780
|
|
2011
|
|
|
35,580
|
|
2012
|
|
|
23,862
|
|
2013
|
|
|
17,890
|
|
Thereafter
|
|
|
115,040
|
|
|
|
|
|
|
|
|
$
|
352,259
|
|
|
|
|
|
|
Total rent expense incurred under operating leases was
approximately $188 million, $130 million and
$90 million for the years ended December 31, 2008,
2007 and 2006, respectively.
Reporting
Segments
The Company realigned its financial reporting segments during
2007 and now reports 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.
Financial information by segment for each of the three years
ended December 31, 2008 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, 2008, 2007 and 2006 do not include the assets
or activity of the Companys discontinued operation. The
accounting policies of the segments are the same as those
described in the summary of significant accounting policies.
73
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2008
|
|
|
|
|
|
|
Net
|
|
|
Income
|
|
|
Depreciation
|
|
|
|
|
|
Total Assets at
|
|
|
|
Operating
|
|
|
from
|
|
|
and
|
|
|
Capital
|
|
|
December 31,
|
|
|
|
Revenues
|
|
|
Operations
|
|
|
Amortization
|
|
|
Expenditures
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
North America
|
|
$
|
4,460,147
|
|
|
$
|
1,125,199
|
|
|
$
|
310,054
|
|
|
$
|
602,876
|
|
|
$
|
6,541,697
|
|
Middle East/North Africa/Asia
|
|
|
2,391,520
|
|
|
|
561,012
|
|
|
|
196,443
|
|
|
|
1,123,751
|
|
|
|
4,320,875
|
|
Europe/West Africa/CIS
|
|
|
1,539,190
|
|
|
|
382,772
|
|
|
|
119,957
|
|
|
|
393,532
|
|
|
|
2,641,687
|
|
Latin America
|
|
|
1,209,707
|
|
|
|
277,094
|
|
|
|
93,942
|
|
|
|
312,382
|
|
|
|
2,010,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,600,564
|
|
|
|
2,346,077
|
|
|
|
720,396
|
|
|
|
2,432,541
|
|
|
|
15,514,572
|
|
Corporate and Research and Development
|
|
|
|
|
|
|
(327,671
|
)
|
|
|
11,412
|
|
|
|
51,622
|
|
|
|
961,941
|
|
Other(a)
|
|
|
|
|
|
|
(39,857
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,600,564
|
|
|
$
|
1,978,549
|
|
|
$
|
731,808
|
|
|
$
|
2,484,163
|
|
|
$
|
16,476,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
$
|
1,013,088
|
|
|
$
|
277,222
|
|
|
$
|
722,277
|
|
|
$
|
6,265,186
|
|
Middle East/North Africa/Asia
|
|
|
1,823,769
|
|
|
|
416,263
|
|
|
|
158,321
|
|
|
|
446,215
|
|
|
|
3,027,456
|
|
Europe/West Africa/CIS
|
|
|
1,188,519
|
|
|
|
293,846
|
|
|
|
86,768
|
|
|
|
230,990
|
|
|
|
2,005,391
|
|
Latin America
|
|
|
882,318
|
|
|
|
203,211
|
|
|
|
74,089
|
|
|
|
198,321
|
|
|
|
1,209,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,832,062
|
|
|
|
1,926,408
|
|
|
|
596,400
|
|
|
|
1,597,803
|
|
|
|
12,507,879
|
|
Corporate and Research and Development
|
|
|
|
|
|
|
(271,285
|
)
|
|
|
9,826
|
|
|
|
37,238
|
|
|
|
656,876
|
|
Other(b)
|
|
|
|
|
|
|
(30,787
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,832,062
|
|
|
$
|
1,624,336
|
|
|
$
|
606,226
|
|
|
$
|
1,635,041
|
|
|
$
|
13,164,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
|
|
|
|
|
|
|
Net
|
|
|
Income
|
|
|
Depreciation
|
|
|
|
|
|
Total Assets at
|
|
|
|
Operating
|
|
|
from
|
|
|
and
|
|
|
Capital
|
|
|
December 31,
|
|
|
|
Revenues
|
|
|
Operations
|
|
|
Amortization
|
|
|
Expenditures
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
North America
|
|
$
|
3,672,630
|
|
|
$
|
1,040,647
|
|
|
$
|
223,895
|
|
|
$
|
525,248
|
|
|
$
|
5,290,389
|
|
Middle East/North Africa/Asia
|
|
|
1,352,758
|
|
|
|
279,953
|
|
|
|
117,599
|
|
|
|
304,553
|
|
|
|
2,330,911
|
|
Europe/West Africa/CIS
|
|
|
827,343
|
|
|
|
171,798
|
|
|
|
65,540
|
|
|
|
102,259
|
|
|
|
1,272,906
|
|
Latin America
|
|
|
726,197
|
|
|
|
133,027
|
|
|
|
64,864
|
|
|
|
85,393
|
|
|
|
959,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,578,928
|
|
|
|
1,625,425
|
|
|
|
471,898
|
|
|
|
1,017,453
|
|
|
|
9,853,347
|
|
Corporate and Research and Development
|
|
|
|
|
|
|
(244,535
|
)
|
|
|
11,050
|
|
|
|
33,647
|
|
|
|
252,408
|
|
Other(c)
|
|
|
|
|
|
|
(26,203
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,578,928
|
|
|
$
|
1,354,687
|
|
|
$
|
482,948
|
|
|
$
|
1,051,100
|
|
|
$
|
10,105,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The year ended December 31, 2008 is comprised of
$56 million for costs incurred in connection with the
Companys withdrawal from sanctioned countries,
$47 million in legal and professional fees incurred in
connection with the Companys on-going investigations by
the U.S. government and $18 million for severance |
74
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
costs incurred for restructuring activities. These charges were
partially offset by an $81 million gain recognized as a
result of the Company selling its 50% interest in a subsidiary
it controlled to Qatar Petroleum for cash consideration of
$113 million. |
|
(b) |
|
The year ended December 31, 2007 is comprised of
$17 million in severance charges associated with
restructuring activities and $14 million in legal and
professional fees incurred in connection with the Companys
on-going investigations by the U.S. government. |
|
(c) |
|
The year ended December 31, 2006 includes charges of
$26 million, which are primarily due to severance charges
incurred in connection with restructuring activities. |
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,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Artificial Lift Systems
|
|
|
17
|
%
|
|
|
18
|
%
|
|
|
18
|
%
|
Drilling Services
|
|
|
16
|
|
|
|
15
|
|
|
|
15
|
|
Well Construction
|
|
|
15
|
|
|
|
16
|
|
|
|
15
|
|
Drilling Tools
|
|
|
11
|
|
|
|
12
|
|
|
|
12
|
|
Completion Systems
|
|
|
10
|
|
|
|
10
|
|
|
|
10
|
|
Wireline
|
|
|
8
|
|
|
|
8
|
|
|
|
10
|
|
Re-entry & Fishing
|
|
|
7
|
|
|
|
8
|
|
|
|
8
|
|
Stimulation & Chemicals
|
|
|
7
|
|
|
|
6
|
|
|
|
6
|
|
Integrated Drilling
|
|
|
6
|
|
|
|
5
|
|
|
|
5
|
|
Pipeline & Specialty Services
|
|
|
3
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic
Areas
Financial information by geographic area for each of the three
years ended December 31, 2008, is summarized below.
Long-lived assets are long-term assets excluding deferred tax
assets of $36 million, $46 million and
$34 million at December 31, 2008, 2007 and 2006,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from Unaffiliated Customers
|
|
|
Long-Lived Assets
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
United States
|
|
$
|
3,392,945
|
|
|
$
|
2,955,108
|
|
|
$
|
2,512,840
|
|
|
$
|
4,156,196
|
|
|
$
|
3,612,886
|
|
|
$
|
2,925,719
|
|
Canada
|
|
|
1,067,202
|
|
|
|
982,348
|
|
|
|
1,159,790
|
|
|
|
1,039,899
|
|
|
|
1,259,620
|
|
|
|
1,290,986
|
|
Other Countries
|
|
|
5,140,417
|
|
|
|
3,894,606
|
|
|
|
2,906,298
|
|
|
|
5,674,493
|
|
|
|
3,800,718
|
|
|
|
2,496,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,600,564
|
|
|
$
|
7,832,062
|
|
|
$
|
6,578,928
|
|
|
$
|
10,870,588
|
|
|
$
|
8,673,224
|
|
|
$
|
6,713,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
19.
|
Quarterly
Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Total
|
|
|
|
(In thousands, except per share amounts)
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,195,892
|
|
|
$
|
2,229,250
|
|
|
$
|
2,540,796
|
|
|
$
|
2,634,626
|
|
|
$
|
9,600,564
|
|
Gross Profit
|
|
|
746,214
|
|
|
|
775,096
|
|
|
|
899,873
|
|
|
|
936,923
|
|
|
|
3,358,106
|
|
Income from Continuing Operations
|
|
|
284,069
|
|
|
|
364,044
|
|
|
|
370,600
|
|
|
|
348,118
|
|
|
|
1,366,831
|
|
Gain (Loss) from Discontinued Operation, Net of Tax
|
|
|
(19,868
|
)
|
|
|
6,940
|
|
|
|
|
|
|
|
|
|
|
|
(12,928
|
)
|
Net Income
|
|
|
264,201
|
|
|
|
370,984
|
|
|
|
370,600
|
|
|
|
348,118
|
|
|
|
1,353,903
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
0.42
|
|
|
$
|
0.53
|
|
|
$
|
0.54
|
|
|
$
|
0.51
|
|
|
$
|
2.00
|
|
Discontinued Operation
|
|
|
(0.03
|
)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
0.39
|
|
|
$
|
0.54
|
|
|
$
|
0.54
|
|
|
$
|
0.51
|
|
|
$
|
1.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
0.41
|
|
|
$
|
0.52
|
|
|
$
|
0.53
|
|
|
$
|
0.50
|
|
|
$
|
1.96
|
|
Discontinued Operation
|
|
|
(0.03
|
)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
0.38
|
|
|
$
|
0.53
|
|
|
$
|
0.53
|
|
|
$
|
0.50
|
|
|
$
|
1.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Operation, Net of Tax
|
|
|
(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
|
|
$
|
0.42
|
|
|
$
|
0.26
|
|
|
$
|
0.44
|
|
|
$
|
0.50
|
|
|
$
|
1.61
|
|
Discontinued Operation
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
( 0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
0.42
|
|
|
$
|
0.24
|
|
|
$
|
0.43
|
|
|
$
|
0.49
|
|
|
$
|
1.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
0.41
|
|
|
$
|
0.25
|
|
|
$
|
0.42
|
|
|
$
|
0.48
|
|
|
$
|
1.57
|
|
Discontinued Operation
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
( 0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
0.41
|
|
|
$
|
0.24
|
|
|
$
|
0.42
|
|
|
$
|
0.47
|
|
|
$
|
1.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In January 2009, the Company completed a $1.25 billion
long-term debt offering comprised of (i) $1 billion of
9.625% Senior Notes due in 2019 (9.625% Senior
Notes) and (ii) $250 million of
9.875% Senior Notes due in 2039 (9.875% Senior
Notes). Net proceeds of $1.23 billion were used to
repay short-term borrowings with maturities of less than one
month and for general corporate purposes. Interest on these
notes is due semi-annually on March 1 and September 1 of each
year.
76
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company anticipates that, during the first quarter of 2009,
it will complete a transaction in which Weatherford Limited will
become a wholly-owned subsidiary of Weatherford International
Ltd., a Swiss joint-stock company
(Weatherford-Switzerland), and holders of its common
shares will receive one registered share of Weatherford
Switzerland for each common share of Weatherford Limited that
they hold.
|
|
21.
|
Consolidating
Financial Statements
|
The following obligations of Weatherford International, Inc.
(Issuer) were guaranteed by Weatherford
International Ltd. (Parent) as of December 31,
2008 and 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 at December 31, 2008: (i) the revolving credit
facilities, (ii) the 4.95% Senior Notes,
(iii) the 5.50% Senior Notes, (iv) the
6.50% Senior Notes, (v) the 5.15% Senior Notes,
(vi) the 6.00% Senior Notes, (vii) the
7.00% Senior Notes and (viii) 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. Certain prior
year amounts have been reclassified to conform to the current
year presentation.
77
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Balance Sheet
December 31, 2008
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
24
|
|
|
$
|
50
|
|
|
$
|
238,324
|
|
|
$
|
|
|
|
$
|
238,398
|
|
Other Current Assets
|
|
|
11,547
|
|
|
|
90,626
|
|
|
|
5,229,711
|
|
|
|
|
|
|
|
5,331,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,571
|
|
|
|
90,676
|
|
|
|
5,468,035
|
|
|
|
|
|
|
|
5,570,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Investments in Affiliates
|
|
|
14,335,661
|
|
|
|
6,231,144
|
|
|
|
12,611,943
|
|
|
|
(33,178,748
|
)
|
|
|
|
|
Shares Held in Parent
|
|
|
|
|
|
|
133,519
|
|
|
|
625,958
|
|
|
|
(759,477
|
)
|
|
|
|
|
Intercompany Receivables, Net
|
|
|
1,289,507
|
|
|
|
906,534
|
|
|
|
|
|
|
|
(2,196,041
|
)
|
|
|
|
|
Other Assets
|
|
|
59,325
|
|
|
|
184,869
|
|
|
|
10,662,037
|
|
|
|
|
|
|
|
10,906,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,696,064
|
|
|
$
|
7,546,742
|
|
|
$
|
29,367,973
|
|
|
$
|
(36,134,266
|
)
|
|
$
|
16,476,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Borrowings and Current Portion of Long-term Debt
|
|
$
|
781,443
|
|
|
$
|
1,758
|
|
|
$
|
472,746
|
|
|
$
|
|
|
|
$
|
1,255,947
|
|
Accounts Payable and Other Current Liabilities
|
|
|
59,534
|
|
|
|
39,764
|
|
|
|
1,666,848
|
|
|
|
|
|
|
|
1,766,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
840,977
|
|
|
|
41,522
|
|
|
|
2,139,594
|
|
|
|
|
|
|
|
3,022,093
|
|
Long-term Debt
|
|
|
2,701,747
|
|
|
|
1,849,428
|
|
|
|
13,080
|
|
|
|
|
|
|
|
4,564,255
|
|
Intercompany Payables, Net
|
|
|
|
|
|
|
|
|
|
|
2,196,041
|
|
|
|
(2,196,041
|
)
|
|
|
|
|
Other Long-term Liabilities
|
|
|
110,627
|
|
|
|
2,502
|
|
|
|
410,987
|
|
|
|
|
|
|
|
524,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,653,351
|
|
|
|
1,893,452
|
|
|
|
4,759,702
|
|
|
|
(2,196,041
|
)
|
|
|
8,110,464
|
|
Minority Interest in Consolidated Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
80,401
|
|
|
|
|
|
|
|
80,401
|
|
Shareholders Equity
|
|
|
12,042,713
|
|
|
|
5,653,290
|
|
|
|
24,527,870
|
|
|
|
(33,938,225
|
)
|
|
|
8,285,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,696,064
|
|
|
$
|
7,546,742
|
|
|
$
|
29,367,973
|
|
|
$
|
(36,134,266
|
)
|
|
$
|
16,476,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Balance Sheet
December 31, 2007
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
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
|
|
|
|
368,263
|
|
|
|
|
|
|
|
482,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,919,773
|
|
|
|
1,905,963
|
|
|
|
3,031,427
|
|
|
|
(1,106,252
|
)
|
|
|
5,750,911
|
|
Minority Interest In Consolidated Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
33,327
|
|
|
|
|
|
|
|
33,327
|
|
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 Statement of Operations
Year Ended December 31, 2008
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,600,564
|
|
|
$
|
|
|
|
$
|
9,600,564
|
|
Costs and Expenses
|
|
|
(35,899
|
)
|
|
|
(1,684
|
)
|
|
|
(7,584,432
|
)
|
|
|
|
|
|
|
(7,622,015
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
(35,899
|
)
|
|
|
(1,684
|
)
|
|
|
2,016,132
|
|
|
|
|
|
|
|
1,978,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net
|
|
|
(127,684
|
)
|
|
|
(115,721
|
)
|
|
|
(274
|
)
|
|
|
|
|
|
|
(243,679
|
)
|
Intercompany Charges, Net
|
|
|
128,198
|
|
|
|
|
|
|
|
(128,198
|
)
|
|
|
|
|
|
|
|
|
Equity in Subsidiary Income
|
|
|
1,393,964
|
|
|
|
1,478,574
|
|
|
|
|
|
|
|
(2,872,538
|
)
|
|
|
|
|
Other, Net
|
|
|
(6,676
|
)
|
|
|
(1,783
|
)
|
|
|
(36,497
|
)
|
|
|
|
|
|
|
(44,956
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations Before Income Taxes and
Minority Interest
|
|
|
1,351,903
|
|
|
|
1,359,386
|
|
|
|
1,851,163
|
|
|
|
(2,872,538
|
)
|
|
|
1,689,914
|
|
Provision for Income Taxes
|
|
|
|
|
|
|
34,578
|
|
|
|
(323,389
|
)
|
|
|
|
|
|
|
(288,811
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations Before Minority Interest
|
|
|
1,351,903
|
|
|
|
1,393,964
|
|
|
|
1,527,774
|
|
|
|
(2,872,538
|
)
|
|
|
1,401,103
|
|
Minority Interest, Net of Taxes
|
|
|
|
|
|
|
|
|
|
|
(34,272
|
)
|
|
|
|
|
|
|
(34,272
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
|
1,351,903
|
|
|
|
1,393,964
|
|
|
|
1,493,502
|
|
|
|
(2,872,538
|
)
|
|
|
1,366,831
|
|
Income (Loss) from Discontinued Operation, Net of Taxes
|
|
|
2,000
|
|
|
|
|
|
|
|
(14,928
|
)
|
|
|
|
|
|
|
(12,928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
1,353,903
|
|
|
$
|
1,393,964
|
|
|
$
|
1,478,574
|
|
|
$
|
(2,872,538
|
)
|
|
$
|
1,353,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Operations
Year Ended December 31, 2007
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
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 of Taxes
|
|
|
|
|
|
|
|
|
|
|
(19,751
|
)
|
|
|
|
|
|
|
(19,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing Operations
|
|
|
1,058,491
|
|
|
|
1,262,288
|
|
|
|
1,210,624
|
|
|
|
(2,439,428
|
)
|
|
|
1,091,975
|
|
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
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Other Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
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 of Taxes
|
|
|
|
|
|
|
|
|
|
|
(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 Cash Flows
Year Ended December 31, 2008
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
1,353,903
|
|
|
$
|
1,393,964
|
|
|
$
|
1,478,574
|
|
|
$
|
(2,872,538
|
)
|
|
$
|
1,353,903
|
|
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided
(Used) by Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges from Parent or Subsidiary
|
|
|
(128,198
|
)
|
|
|
|
|
|
|
128,198
|
|
|
|
|
|
|
|
|
|
(Gain) Loss from Discontinued Operations
|
|
|
(2,000
|
)
|
|
|
|
|
|
|
14,928
|
|
|
|
|
|
|
|
12,928
|
|
Equity in (Earnings) Loss of Affiliates
|
|
|
(1,393,964
|
)
|
|
|
(1,478,574
|
)
|
|
|
|
|
|
|
2,872,538
|
|
|
|
|
|
Deferred Income Tax Provision (Benefit)
|
|
|
|
|
|
|
(15,687
|
)
|
|
|
(25,755
|
)
|
|
|
|
|
|
|
(41,442
|
)
|
Other Adjustments
|
|
|
(21,284
|
)
|
|
|
(120,321
|
)
|
|
|
(72,997
|
)
|
|
|
|
|
|
|
(214,602
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Operating Activities
Continuing Operations
|
|
|
(191,543
|
)
|
|
|
(220,618
|
)
|
|
|
1,522,948
|
|
|
|
|
|
|
|
1,110,787
|
|
Net Cash Used by Operating Activities Discontinued
Operations
|
|
|
|
|
|
|
|
|
|
|
(6,219
|
)
|
|
|
|
|
|
|
(6,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Operating Activities
|
|
|
(191,543
|
)
|
|
|
(220,618
|
)
|
|
|
1,516,729
|
|
|
|
|
|
|
|
1,104,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of Businesses, Net of Cash Acquired
|
|
|
|
|
|
|
|
|
|
|
(798,530
|
)
|
|
|
|
|
|
|
(798,530
|
)
|
Capital Expenditures for Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
(2,484,163
|
)
|
|
|
|
|
|
|
(2,484,163
|
)
|
Acquisition of Intellectual Property
|
|
|
|
|
|
|
|
|
|
|
(24,079
|
)
|
|
|
|
|
|
|
(24,079
|
)
|
Purchase of Equity Investment in Unconsolidated Affiliate
|
|
|
|
|
|
|
|
|
|
|
(11,568
|
)
|
|
|
|
|
|
|
(11,568
|
)
|
Proceeds from Sale of Assets and Businesses, Net
|
|
|
|
|
|
|
|
|
|
|
297,285
|
|
|
|
|
|
|
|
297,285
|
|
Capital Contribution to Subsidiary
|
|
|
(350,966
|
)
|
|
|
(5,050
|
)
|
|
|
|
|
|
|
356,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Investing Activities
Continuing Operations
|
|
|
(350,966
|
)
|
|
|
(5,050
|
)
|
|
|
(3,021,055
|
)
|
|
|
356,016
|
|
|
|
(3,021,055
|
)
|
Net Cash Provided by Investing Activities
Discontinued Operations
|
|
|
11,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Investing Activities
|
|
|
(339,966
|
)
|
|
|
(5,050
|
)
|
|
|
(3,021,055
|
)
|
|
|
356,016
|
|
|
|
(3,010,055
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of (Repayments on) Short-term Debt, Net
|
|
|
199,054
|
|
|
|
(23,096
|
)
|
|
|
301,863
|
|
|
|
|
|
|
|
477,821
|
|
Borrowings of (Repayments on) Long-term Debt, Net
|
|
|
1,483,931
|
|
|
|
(1,166
|
)
|
|
|
(4,432
|
)
|
|
|
|
|
|
|
1,478,333
|
|
Proceeds from Exercise of Stock Options
|
|
|
|
|
|
|
9,942
|
|
|
|
|
|
|
|
|
|
|
|
9,942
|
|
Borrowings (Repayments) Between Subsidiaries, Net
|
|
|
(1,151,147
|
)
|
|
|
226,581
|
|
|
|
924,566
|
|
|
|
|
|
|
|
|
|
Proceeds from Capital Contribution
|
|
|
|
|
|
|
|
|
|
|
356,016
|
|
|
|
(356,016
|
)
|
|
|
|
|
Other, Net
|
|
|
(533
|
)
|
|
|
11,968
|
|
|
|
|
|
|
|
|
|
|
|
11,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Financing Activities
Continuing Operations
|
|
|
531,305
|
|
|
|
224,229
|
|
|
|
1,578,013
|
|
|
|
(356,016
|
)
|
|
|
1,977,531
|
|
Net Cash Provided (Used) by Financing Activities
Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by Financing Activities
|
|
|
531,305
|
|
|
|
224,229
|
|
|
|
1,578,013
|
|
|
|
(356,016
|
)
|
|
|
1,977,531
|
|
Effect of Exchange Changes on Cash and Cash Equivalents
|
|
|
|
|
|
|
|
|
|
|
(4,360
|
)
|
|
|
|
|
|
|
(4,360
|
)
|
Net Decrease in Cash and Cash Equivalents
|
|
|
(204
|
)
|
|
|
(1,439
|
)
|
|
|
69,327
|
|
|
|
|
|
|
|
67,684
|
|
Cash and Cash Equivalents at Beginning of Year
|
|
|
228
|
|
|
|
1,489
|
|
|
|
168,997
|
|
|
|
|
|
|
|
170,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year
|
|
$
|
24
|
|
|
$
|
50
|
|
|
$
|
238,324
|
|
|
$
|
|
|
|
$
|
238,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
WEATHERFORD
INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Cash Flows
Year Ended December 31, 2007
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
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 Operation
|
|
|
(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 Operation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
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 Operation
|
|
|
|
|
|
|
|
|
|
|
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 Operation
|
|
|
3,151
|
|
|
|
(43,031
|
)
|
|
|
1,133,786
|
|
|
|
|
|
|
|
1,093,906
|
|
Net Cash Used by Operating Activities Discontinued
Operation
|
|
|
|
|
|
|
|
|
|
|
(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
Operation
|
|
|
|
|
|
|
|
|
|
|
(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 Operation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
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, 2008, 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 May 7,
2009.
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 May 7,
2009.
|
|
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 May 7,
2009.
86
|
|
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 May 7,
2009.
|
|
Item 12(d).
|
Securities
Authorized for Issuance Under Equity Compensation
Plans.
|
The following table provides information as of December 31,
2008 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
|
|
|
10,855
|
|
|
$
|
29.43
|
|
|
|
8,462
|
|
|
|
|
|
Equity compensation plans not approved by shareholders(a)
|
|
|
29,837
|
|
|
|
11.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
40,692
|
|
|
|
16.51
|
|
|
|
8,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. The Plan
provides for the grant of nonqualified options to purchase
Common Shares of Weatherford International Ltd to all of our
employees or its affiliates, as determined by the Compensation
Committee. 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 88,000,000 shares. As of
December 31, 2008, there were options to purchase an
aggregate of 9,812,985 Common Shares outstanding under this
Plan, all of which are vested. Subsequent to the shareholder
approval of the Companys Omnibus Plan in May 2006, awards
are no longer granted under the Plan. |
|
|
|
On September 8, 1998, July 5, 2000, and
September 26, 2001, we granted to each of our directors
other than Mr. Duroc-Danner options to purchase 374,528,
240,000 and 240,000 Common Shares, respectively, at a purchase
price per share equal to $2.90, $9.19 and $5.94, respectively,
which was the fair market value of our Common Shares as of the
day we granted the options. The options were issued under
agreements between us and the directors. Each option is
exercisable for a period of ten years from the date which it
becomes fully exercisable. The options granted on
September 8, 1998 and July 5, 2000 became fully
exercisable three years from the date of grant, and the options
granted on September 26, 2001 became 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
Weatherford. Under these agreements, there were options to
purchase an aggregate of 3,105,984 Common Shares outstanding as
of December 31, 2008, all of which are fully vested. |
|
|
|
Under our Non-Employee Director Deferred Compensation Plan (the
DDC 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 elects to defer at least 5% of his fees, we will make
an additional contribution to the |
87
|
|
|
|
|
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. Our directors may generally determine when
distributions will be made from the plan, but in any event all
benefits under the DDC Plan will be distributed no later than
January 1, 2017. 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, 2008, there were 121,226 deferred units
outstanding under this plan. Effective December 31, 2008,
we suspended the DDC Plan. While the plan is suspended, no new
participants may join the plan and no further deferrals of fees
or matching contributions will be made under the plan unless and
until our Board of Directors determines otherwise. |
|
|
|
We established our Foreign Executive Deferred Compensation Stock
Ownership Plan for key foreign employees. Under our Foreign
Executive Deferred Compensation Stock Ownership Plan (FEDC
Plan), we contribute 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 FEDC
Plan, our 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
FEDC Plan after a participant retires, becomes disabled or dies
or after his employment is terminated, but in any event all
benefits under the FEDC Plan will be distributed no later than
January 1, 2017. Distributions under the FEDC 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, 2008, there were 154,828
deferred units outstanding under this plan. |
|
|
|
On February 28, 2002, the Company issued to Shell
Technology Ventures Inc. a warrant to purchase up to 12,928,856
Common Shares at a price of $15.00 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. The net cash
settlement option upon exercise is at our sole discretion. |
|
|
|
In 2003, our Board of Directors approved a restricted share plan
that allows for the grant of up to 15,340,000 of our Common
Shares to our key employees and directors. 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, 2008, there were
12,763,285 shares granted under this plan, of which
9,049,859 shares are vested. Subsequent to the shareholder
approval of our Omnibus Plan in May 2006, awards are no longer
made under this plan. |
|
|
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 May 7,
2009.
|
|
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 May 7,
2009.
PART IV
|
|
Item 15.
|
Exhibits,
Financial Statement Schedules
|
(a) The following documents are filed as part of this
report or incorporated by reference:
1. The consolidated financial statements of the Company
listed on page 39 of this report.
2. The financial statement schedule on page 94 of this
report.
88
3. The exhibits of the Company listed below under
Item 15(b).
(b) Exhibits:
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
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).
|
|
2
|
.3
|
|
Share Exchange Agreement dated as of December 10, 2008,
among Weatherford International, Ltd., a Bermuda exempted
company, and Weatherford International Ltd., a Swiss company
(incorporated by reference to Exhibit 2.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed December 10, 2008).
|
|
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
|
|
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
|
.3
|
|
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
|
.4
|
|
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
|
.5
|
|
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
|
.6
|
|
Omnibus Consent and Amendment to Second Amended and Restated
Credit Agreement dated January 9, 2009 (incorporated by
reference to Exhibit 4.1 to the Registrants Current
Report on
Form 8-K
(File
No. 1-31339)
filed January 15, 2009).
|
|
4
|
.7
|
|
Credit Agreement, dated March 19, 2008, among Weatherford
International Ltd, as borrower, Weatherford International, Inc.
as guarantor, and Deutsche Bank AG Cayman Islands Branch as
administrative agent, and the other lenders party thereto
(incorporated by reference to Exhibit 4.6 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed March 25, 2008).
|
|
4
|
.8
|
|
Omnibus Consent and Amendment to Credit Agreement dated
January 9, 2009 (incorporated by reference to
Exhibit 4.2 to the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed January 15, 2009).
|
89
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
4
|
.9
|
|
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
|
.10
|
|
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
|
.11
|
|
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
|
.12
|
|
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
|
.13
|
|
Officers Certificate dated as of February 17, 2006,
establishing the series of 5.50% Senior Notes due 2016
(incorporated by reference to Exhibit 4.2 to the
Registrants Current Report on
Form 8-K
(File
No. 001-31339)
filed February 17, 2006).
|
|
4
|
.14
|
|
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
|
.15
|
|
First Supplemental Indenture, dated March 25, 2008 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 March 25, 2008).
|
|
4
|
.16
|
|
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
|
.17
|
|
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
|
.18
|
|
Second Supplemental Indenture, dated as of January 8, 2009,
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 January 8, 2009).
|
|
4
|
.19
|
|
Form of global note for 5.95% Senior Notes due 2012
(incorporated by reference to Exhibit 4.15 to the
Registrants Registration Statement on
Form S-4
(Registration
No. 333-146695)
filed November 8, 2007).
|
|
4
|
.20
|
|
Form of global note for 5.15% Senior Notes due 2013
(incorporated by reference to Exhibit 4.2 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed March 25, 2008).
|
|
4
|
.21
|
|
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
|
.22
|
|
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
|
.23
|
|
Form of global note for 6.00% Senior Notes due 2018
(incorporated by reference to Exhibit 4.3 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed March 25, 2008).
|
|
4
|
.24
|
|
Form of global note for 9.625% Senior Notes due 2019
(incorporated by reference to Exhibit 4.2 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed January 8, 2009).
|
|
4
|
.25
|
|
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
|
.26
|
|
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
|
.27
|
|
Form of global note for 6.80% Senior Notes due 2037
(incorporated by reference to Exhibit 4.17 to the
Registrants Registration Statement on
Form S-4
(Registration
No. 333-146695)
filed November 8, 2007).
|
|
4
|
.28
|
|
Form of global note for 7.00% Senior Notes due 2038
(incorporated by reference to Exhibit 4.4 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed March 25, 2008).
|
90
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
4
|
.29
|
|
Form of global note for 9.875% Senior Notes due 2039
(incorporated by reference to Exhibit 4.3 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed January 8, 2009).
|
|
4
|
.30
|
|
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).
|
|
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
|
|
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
|
.6
|
|
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
|
.7
|
|
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
|
.8
|
|
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
|
.9
|
|
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
|
.10
|
|
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
|
.11
|
|
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
|
.12
|
|
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
|
.13
|
|
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
|
.14
|
|
Indemnification Agreements with each of Bernard J. Duroc-Danner,
Burt M. Martin, Stuart E. Ferguson, David J. Butters, Robert A.
Rayne, Robert K. Moses, Jr., Robert B. Millard, and William E.
Macaulay (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).
|
91
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.15
|
|
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
|
.16
|
|
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
|
.17
|
|
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
|
.18
|
|
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
|
.19
|
|
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
|
.20
|
|
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
|
.21
|
|
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
|
.22
|
|
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
|
.23
|
|
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
|
.24
|
|
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
|
.25
|
|
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
|
.26
|
|
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
|
.27
|
|
Amended and Restated Employment Agreements dated
December 31, 2008, between Weatherford International Ltd.
and each of Jessica Abarca, Andrew P. Becnel, M. David Colley,
Bernard J. Duroc-Danner, Stuart E. Ferguson, Burt M. Martin 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 December 31, 2008).
|
|
*10
|
.28
|
|
Employment Agreements effective as of January 1, 2009,
between Weatherford International, Inc. and each of Jessica
Abarca, Andrew P. Becnel, M. David Colley, Bernard J.
Duroc-Danner, Stuart E. Ferguson, Burt M. Martin 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 December 31, 2008).
|
|
*10
|
.29
|
|
Weatherford International, Inc. Executive Deferred Compensation
Stock Ownership Plan, as amended and restated as of
December 31, 2008 (incorporated by reference to
Exhibit 10.3 to the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed December 31, 2008).
|
|
*10
|
.30
|
|
Weatherford International, Inc. Foreign Executive Deferred
Compensation Stock Plan, as amended and restated as of
December 31, 2008 (incorporated by reference to
Exhibit 10.4 to the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed December 31, 2008).
|
92
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.31
|
|
Weatherford International Ltd. Non-Employee Director Deferred
Compensation, as amended and restated as of December 31,
2008 (incorporated by reference to Exhibit 10.5 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed December 31, 2008).
|
|
*10
|
.32
|
|
Weatherford International Ltd. Non-Employee Director Retirement
Plan, as amended and restated as of December 31, 2008
(incorporated by reference to Exhibit 10.6 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed December 31, 2008).
|
|
*10
|
.33
|
|
Weatherford Management Incentive Plan, including Form of Award
Letter, as amended and restated as of December 31, 2008
(incorporated by reference to Exhibit 10.7 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed December 31, 2008).
|
|
*10
|
.34
|
|
Amended and Restated Weatherford International Ltd. Nonqualified
Executive Retirement Plan (incorporated by reference to
Exhibit 10.8 to the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed December 31, 2008).
|
|
*10
|
.35
|
|
Weatherford International, Inc. Supplemental Retirement Plan
(incorporated by reference to Exhibit 10.9 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed December 31, 2008).
|
|
*10
|
.36
|
|
Weatherford International Ltd. 2006 Omnibus Incentive Plan, as
amended (incorporated by reference to Exhibit 10.10 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed December 31, 2008).
|
|
*10
|
.37
|
|
Amendment to Weatherford International, Inc. 1998 Employee Stock
Option Plan (incorporated by reference to Exhibit 10.11 to
the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed December 31, 2008).
|
|
*10
|
.38
|
|
Amendment to Weatherford International Ltd. Non-Employee
Director Stock Option Agreements (incorporated by reference to
Exhibit 10.12 to the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed December 31, 2008).
|
|
*10
|
.39
|
|
Amended and Restated Employment Agreement, dated
December 31, 2008, between Weatherford International Ltd.
and Carel W. Hoyer.
|
|
*10
|
.40
|
|
Employment Agreement, dated February 2, 2009, between
Weatherford International, Inc. and Carel W. Hoyer.
|
|
*10
|
.41
|
|
Indemnification Agreement, dated as of February 9, 2009,
between Weatherford International Ltd. and Carel W. Hoyer.
|
|
*10
|
.42
|
|
Indemnification Agreement, dated as of February 9, 2009,
between Weatherford International, Inc. and Carel W. Hoyer.
|
|
*10
|
.43
|
|
Amended and Restated Employment Agreement, dated
December 31, 2008 between Weatherford International Ltd.
and James M. Hudgins.
|
|
*10
|
.44
|
|
Employment Agreement, dated February 9, 2009, between
Weatherford International, Inc. and James M. Hudgins.
|
|
*10
|
.45
|
|
Indemnification Agreement, dated as of September 4, 2002,
between Weatherford International Ltd. and James M. Hudgins.
|
|
*10
|
.46
|
|
Indemnification Agreement, dated as of September 4, 2002,
between Weatherford International, Inc. and James M. Hudgins.
|
|
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.
93
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 U.S. Investor Relations Department at 515
Post Oak Blvd., Houston, TX 77027.
(c) Financial Statement Schedules
1. Valuation and qualifying accounts and allowances.
SCHEDULE II
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
FOR THE THREE YEARS ENDED DECEMBER 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for uncollectible accounts receivable
|
|
$
|
13,760
|
|
|
$
|
5,970
|
|
|
$
|
4,975
|
|
|
$
|
(8,280
|
)
|
|
$
|
16,425
|
|
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
|
|
All other schedules are omitted because they are not required or
because the information is included in the financial statements
or the related notes.
94
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 24, 2009.
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 24, 2009
|
|
|
|
|
|
/s/ Andrew
P. Becnel
Andrew
P. Becnel
|
|
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
February 24, 2009
|
|
|
|
|
|
/s/ Jessica
Abarca
Jessica
Abarca
|
|
Vice President Accounting and Chief
Accounting Officer
(Principal Accounting Officer)
|
|
February 24, 2009
|
|
|
|
|
|
/s/ Nicholas
F. Brady
Nicholas
F. Brady
|
|
Director
|
|
February 24, 2009
|
|
|
|
|
|
/s/ David
J. Butters
David
J. Butters
|
|
Director
|
|
February 24, 2009
|
|
|
|
|
|
/s/ William
E. Macaulay
William
E. Macaulay
|
|
Director
|
|
February 24, 2009
|
|
|
|
|
|
/s/ Robert
B. Millard
Robert
B. Millard
|
|
Director
|
|
February 24, 2009
|
|
|
|
|
|
/s/ Robert
K. Moses, Jr.
Robert
K. Moses, Jr.
|
|
Director
|
|
February 24, 2009
|
|
|
|
|
|
/s/ Robert
A. Rayne
Robert
A. Rayne
|
|
Director
|
|
February 24, 2009
|
95