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, 2006
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission file number 1-31339
WEATHERFORD INTERNATIONAL
LTD.
(Exact name of registrant as
specified in its charter)
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Bermuda
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98-0371344
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(State or other jurisdiction
of
incorporation or organization)
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(IRS Employer Identification
No.)
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515 Post Oak Boulevard
Suite 600
Houston, Texas
(Address of principal
executive offices)
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77027-3415
(Zip Code)
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Registrants telephone number, including area code:
(713)693-4000
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Name of each exchange on which registered
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Common Shares, $1.00 Par Value
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Note Checking the box above will not relieve
any registrant required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act (Check one):
Large accelerated
filer þ Accelerated
Filer o Non-Accelerated
Filer o
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, 2006 was
approximately $13.3 billion based upon the closing price on
the New York Stock Exchange as of such date.
Indicate the number of shares outstanding of each of the
registrants classes of common shares, as of the latest
practicable date:
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Title of Class
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Outstanding at February 20, 2007
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Common Shares, $1.00 Par Value
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338,159,117
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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 30, 2007.
TABLE OF CONTENTS
PART I
Weatherford International Ltd. (NYSE:WFT) is one of the
worlds leading providers of equipment and services used
for the drilling, evaluation, completion, production and
intervention of oil and natural gas wells. We were originally
incorporated in Delaware in 1972, and as a result of our
corporate reorganization in 2002, are now incorporated in
Bermuda. Many of our businesses, including those of Weatherford
Enterra, have been operating for more than 50 years.
We operate in approximately 100 countries through approximately
800 service, sales and manufacturing locations, which are
located in nearly all of the oil and natural gas producing
regions in the world. We are among the leaders in each of our
primary markets, and our distribution and service network is one
of the most extensive in the industry.
In 2006, we conducted our operations through two principal
operating divisions:
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Evaluation, Drilling & Intervention
Services. This division provides performance
drilling and evaluation services, well construction, drilling
tools and intervention services. In addition, this division
provides light, medium and heavy duty land drilling rigs,
drilling and maintenance crews, supervisory personnel and camp
and catering services.
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Completion & Production Systems. This
division provides conventional and intelligent completion
systems, all forms of artificial lift systems, injection
services, fracturing technologies, production optimization, well
services and pipeline services. In addition, this division
provides a variety of pumping systems for the energy,
industrial, chemical and municipal markets.
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On January 8, 2007, we created the position of Senior Vice
President and Chief Operating Officer. During 2007, in
conjunction with this organizational change, we decided to merge
our two existing divisions, Evaluation, Drilling &
Intervention Services and Completion & Production
Systems, into a single operating group.
Our growth strategy during the past eight years 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. This business has been reflected as a
discontinued operation in our financial statements.
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 divisional basis, depending on the context in which the
statements are made.
Our principal executive offices are located at 515 Post Oak
Boulevard, Suite 600, Houston, Texas 77027. Our telephone
number is
(713) 693-4000,
and our Internet address is www.weatherford.com. General
information about us, including our Corporate Governance
Policies and charters for the committees of our board of
directors, can be found on our Web site. On our Web site we make
available, free of charge, our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file or furnish
them to the SEC.
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The following is a summary of our business strategies and the
markets we serve. We have also included a discussion of our
divisions, including a description of our products and services
offered and our competitors. Divisional and geographic financial
information appears in Item 8. Financial Statements
and Supplementary Data Notes to Consolidated
Financial Statements Note 21.
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.
The majority of worldwide drilling activity, as measured by rig
counts, historically has been concentrated in North America.
Over time, activity in North America has increasingly become
driven by natural gas consumption on the continent, particularly
in the U.S. The percentage of the U.S. rig count
dedicated to natural gas drilling has increased from
approximately 50% in the early 1990s to approximately 84% in
late 2006. Canada has experienced a similar trend, with rigs
drilling for natural gas increasing from less than 40% nine
years ago to over 71% by the end of 2006. A primary reason for
the increasing emphasis on natural gas drilling is that a
growing percentage of North American gas wells tend to have
above average production decline rates, so that significant
numbers of new wells must be drilled over time to maintain
ongoing natural gas production. Changes in the balance of
natural gas supply and demand affect natural gas storage levels,
commodity prices and the volatility of North American drilling
activity. In 2006, the North American rig count reached a new
recent high, averaging 2,118 rigs for the year, 15% above the
previous high in 2005 and 160% above the lowest annual average
of the past 15 years, 816, which occurred in 1992.
Over the past decade, drilling and completion activity has grown
faster in international markets than in North America. In 2006,
approximately 70% of the worldwide drilling and completion
expenditures occurred in markets outside North America
(excluding Russia and China). Drilling activity outside North
America tends to be less volatile. Most contracts span two to
three years as a consequence of the significant investment and
complexity surrounding international projects. Drilling
decisions relating to these projects therefore tend to be
evaluated and monitored with a longer-term perspective in regard
to oil and natural gas pricing. In addition, the international
market is dominated by major oil companies and national oil
companies, which tend to have longer-term objectives than the
typical independent producer in North America. In the past
15 years, the non-North American average annual rig count
has cycled between a high of 915 rigs in 1991 and a low of 588
rigs in 1999. In 2006, the international rig count averaged 910
rigs. Since 1999, the international market has recovered slowly;
however, we
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believe the geological future of the industry is in both
international markets and deep water because of the maturity and
declining quality of North American fields.
In the late 1990s, we began a concerted program to expand our
operations and shift more of our business internationally by
using the strength of Weatherford Enterras international
presence to introduce new and existing products and services
into these markets. Today we operate in approximately 100
countries in the major oil and natural gas producing areas of
North and South America, Europe, Africa, Russia, Commonwealth of
Independent States, China, Southeast Asia and the Middle East.
In 2006, our revenue split was 56% North America and 44%
international.
In 2006, our Evaluation, Drilling & Intervention
Services Division generated approximately 51% of its revenues
outside North America, and our Completion & Production
Systems Division generated approximately 32% of its revenues
internationally. With the increasing importance of international
hydrocarbon production, we continue to focus on growth in
international markets.
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 are among the best in the industry and 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.
Evaluation,
Drilling & Intervention Services Division
Our Evaluation, Drilling & Intervention Services
Division provides products and services used by oil and natural
gas companies, drilling contractors and other service companies
to explore for, drill for, and produce oil and natural gas, as
well as work over wells. The division is a combination of
Weatherfords former Drilling Services division, Precision
Energy Services and Precision Drilling International. As
discussed above, Precision Energy Services and Precision
Drilling International were significant acquisitions in 2005
that strengthened our offering and expertise in directional
drilling, open hole and cased hole wireline services, and
controlled pressure drilling and testing. The acquisition also
added land rigs to our portfolio, primarily in the Eastern
Hemisphere.
Many of the products and services offered by this division are
used in the initial drilling and completion of oil and natural
gas wells. The remainder of the products and services are used
in connection with the production phases of wells, including
maintenance, re-drilling, re-completion and other remediation
and well intervention operations.
The division comprises three primary business units:
1) Performance Drilling & Evaluation Services,
2) Well Construction & Intervention Services, and
3) Integrated Drilling Services.
Performance
Drilling & Evaluation Services
This business unit concentrates on directional drilling
services, drilling-with-casing, Controlled Pressure
Drilling®
(CPD®) &
well testing, wireline services and geoscience services.
Drilling Services These capabilities include
directional drilling and drilling-with-casing
(DwCtm)
and drilling-with-liner
(DwLtm)
systems. Directional drilling involves the personnel, equipment
and engineering required to control the direction of a wellbore.
Directional drilling allows drilling of multiple wells from a
single offshore platform or a land-based pad site. It also
allows drilling of horizontal wells and penetration of multiple
reservoir pay zones from a single wellbore. Directional drilling
services are necessary for the industrys increasing trends
toward deviated wells, multilateral completions, re-entry and
infill drilling. Through the acquisition of Precision Energy
Services in 2005, we now 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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We have three significant market differentiators in this sector:
1) the hostile environment logging
(HELtm)
MWD system, specifically designed for deepwater, deep-well and
high temperature/high pressure environments; 2) the
EMpulsetm
electromagnetic MWD system, which provides drilling data in an
environment where traditional signal transmissions potentially
could not, such as underbalanced drilling; and 3) the
PrecisionLWDtm
system, which represents the latest generation measurement
technology. This system allows some of the fastest logging
speeds and possesses some of the highest temperature and
pressure ratings in the world. In 2005, we logged the
worlds deepest offshore well at over 34,000 feet and
over 29,000 psi, demonstrating that this system can operate
reliably in challenging environments.
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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. A
key differentiator for us is our
Revolution®
point-the-bit
RSS, an automated downhole assembly that provides precise
wellbore steering while maximizing rate of penetration and
providing a high quality wellbore.
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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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The Precision acquisition added the Advantage Engineering
facility, which supports our directional drilling capabilities.
This
state-of-the-art
facility houses many of the industrys most qualified
engineers, scientists and technicians, all focused on developing
technologies for the MWD/LWD and directional drilling markets,
both land based and offshore. We also acquired a portfolio of
patents and patent applications directed at key aspects of
technology in LWD nuclear and resistivity measurements,
electromagnetic telemetry and the Revolution RSS. We also
now hold a worldwide, exclusive license to electromagnetic
telemetry patents and patent applications for use in MWD
services.
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Drilling-with-casing and drilling-with-liner
systems. These systems allow operators to
simultaneously drill, case and evaluate oil and natural gas
wells. Our DwC and DwL techniques eliminate
downhole complexity, reducing expensive rig modifications and
the number of trips downhole. Consequently, well construction is
simplified, and productivity can be improved when drilling
through the reservoir. Our offerings include
DrillShoetm
systems,
XpandaBittm,
liner drilling systems,
TorkHeadtm
top-drive casing reamer tools and centralizers. As of the end of
2006, we have run a total of more than 600 DwC and DwL
jobs.
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Controlled Pressure Drilling & Well
Testing This business unit helps clients
increase the profitability of their reservoirs assets at
less lifecycle cost by enhancing drilling performance and
reservoir recovery through a portfolio of products and services.
Well testing uses specialized equipment and procedures to obtain
essential information about oil and gas wells after the drilling
process has been completed.
Weatherfords Controlled Pressure Drilling & Well
Testing offerings are provided through three disciplines:
1) Managed Pressure Drilling, 2) Underbalanced
Drilling and 3) Air Drilling.
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Managed Pressure Drilling (MPD) This
discipline provides an advanced form of primary well control,
using a closed, pressurized fluid system that more precisely
controls the wellbore pressure profile than mud weight
adjustments alone. The main objective of MPD is to optimize
drilling processes by decreasing non-productive time and
mitigating drilling hazards.
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Underbalanced Drilling (UBD) This discipline
is used in development, exploration and mature field
applications to minimize formation damage and maximize
productivity. UBD is defined as drilling with bottomhole
pressure that is maintained below reservoir pressure to
intentionally invite fluid influx. This technique permits the
reservoir to flow while drilling takes place, thereby protecting
the formation from damage by the drilling fluids. Traditional
drilling methods, on the other hand, use weighted drilling
fluids that not only prevent the flow of hydrocarbons during
drilling but permeate the formation, sometimes causing
significant formation damage and limiting the production of
hydrocarbons.
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Air Drilling This discipline applies reduced
density fluid systems to drill
sub-hydrostatically.
Air drilling is used primarily in hard rock applications to
reduce drilling costs by increasing the rate of penetration. We
offer a variety of fluids in the forms of air drilling systems,
mist drilling systems, and foam drilling systems, including our
patented
Trans-Foam®
recyclable drilling fluid system and aerated fluid drilling
systems.
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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 offering
unique. Another differentiator is our range of surface
equipment, such as: specifically designed, self-contained mobile
or skid-mounted compression and nitrogen membrane or passive
exhaust gas generation systems; rotating control devices for
controlling well pressure while circulating drilling media
during drilling; skid-mounted separators for separating oil,
natural gas, drilling media and cuttings; choke manifolds; and
solids recovery systems.
In our well testing business, 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 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.
Wireline Services This business unit measures
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;
however, other conveyance methods are also available. In fact,
Weatherford offers the most comprehensive suite of logging tool
conveyance options in the industry. This unmatched flexibility
of options provides opportunities for substantial savings in rig
costs and significant risk reduction during the formation
evaluation process. The provision of wireline services is
divided into three categories: open hole, cased hole and
slickline services.
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Open Hole Logging 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 and tools are used to
determine well lithology and the presence of hydrocarbons.
Formation characteristics such as resistivity, density and
porosity are measured using electrical, nuclear, acoustic,
magnetic and mechanical technologies.
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The log data is then used to characterize the reservoir and
describe it in terms of porosity, permeability, oil, gas or
water content and an estimation of productivity. This
information can be further refined at a later time in one of our
log interpretation centers. 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.
Most of our open hole tools and sensors are proprietary. Our
unique offering is a reliable, cost-effective system known as
the
Compacttm
suite of tools. The systems design, which is smaller,
slimmer and easier to handle, enables acquisition of high
quality logging data more efficiently and in a broader range of
well conditions than possible with the current offerings of our
competitors. As a result, the focus of open hole research and
engineering has been on developing new
and/or
improved downhole sensors for the Compact and standard
logging suites. Compact tools can be conveyed on wireline
or using an array of conveyance alternatives, such as the well
shuttle, tractors or coiled tubing.
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Cased Hole Logging This service is performed
at various times throughout the life of the well and includes
perforating, completion logging, production logging and casing
integrity services. After the wellbore is cased and cemented, we
can provide a number of services. Perforating creates the flow
path between the reservoir and the wellbore. Production logging
can be performed throughout the life of the well
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to measure temperature, fluid type, flow rate, pressure and
other reservoir characteristics. This service helps the operator
analyze and monitor well performance and determine when a well
may need a workover or further stimulation.
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In addition, cased hole services may involve wellbore
remediation, which could include the positioning and
installation of various plugs and packers to maintain production
or repair well problems, and casing inspection for internal or
external abnormalities in the casing string. Some of our cased
hole tools are proprietary.
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Slickline 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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Through the acquisition of Precision Energy Services, we now
have a total of more than 540 wireline units that can be
deployed from our service centers in Canada, the U.S. and other
locations around the world.
GeoScience Services This business unit,
consisting of geologists, geophysicists, and drilling,
completion, production and reservoir engineers, serves as the
interdisciplinary bridge across our diverse product lines to
support client efforts to maximize their oil and gas assets for
the life of the well from well planning through
drilling, evaluation, completion, production, intervention and,
finally, abandonment.
Major computing centers in Calgary and Houston, along with
branches in Europe, the Middle East and South America, use the
latest technology to deliver data to our clients
from real-time (LWD) geosteering for critical well
placement decisions to ongoing reservoir monitoring with
permanent intelligent completion sensors. We provide
advanced reservoir solutions by incorporating open hole, cased
hole and production data.
One of our businesses, Hycal Energy Research Laboratories, Ltd.,
specializes in advanced core and fluid analysis, formation
damage and phase behavior to optimize production. Another
business, our proprietary
SURESM
process, is a systematic evaluation for determining whether
candidate wells are suited for special controlled pressure
drilling and testing and multilateral drilling techniques to
reduce formation damage and improve deliverability before the
prospect is drilled.
The recent addition of OMNI Labs adds several important
components to our multi-disciplined geoscience and engineering
capability, including one of the industrys most
experienced teams of geologists, engineers and technicians. OMNI
is known for pioneering wellsite stabilization procedures for
unconsolidated cores and continues to set the standard for
analysis and evaluation of unconsolidated reservoirs. OMNI also
has been the leader in developing secured client Web access to
core data for faster delivery of analysis results and
intermediate and final reports.
Well
Construction & Intervention Services
This business unit focuses on our more traditional mechanical
capabilities and spans tubular running services, cementation
tools, liner systems, solid tubular expandable technologies,
drilling tools, intervention services and decommissioning.
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 are a significant market leader in tubular
running services worldwide. Offering an integrated package of
total tubular services management, we provide tubular handling,
preparation, inspection and wellsite installation services from
a single source. As the leader in rig mechanization technology
used for the installation of tubing, casing and production
risers, we offer a suite of products and services for improving
rig floor operations by reducing personnel exposure, increasing
operational efficiency and improving safety. We offer
computerized torque monitoring and testing services to ensure
the integrity of tubular connection makeup. We also specialize
in critical-service installations where operating conditions,
such as downhole conditions
and/or
metallurgical characteristics, call for specific handling
technology. Finally, our tubular running services integrate with
other product/service lines, such as high-grade completion
equipment installation services and cementation engineering
services.
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Cementation Tools Cementing operations
comprise one of the most important and expensive phases of well
completion. According to Spears & Associates, we are
the worlds leading producer of 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 detailed recommendations to help optimize cementing
results. Our cementing products group also works closely with
our Completion & Production Systems Division in
designing integrated completion systems. Our cementing product
line includes the following:
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Centralizer placement software Software for
calculating centralizer spacing and type for optimal standoff;
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Centralizers A comprehensive range of products for
varying applications and well conditions;
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LoDRAGtm
and
LoTORQtm
centralizers Mechanical friction-reduction systems
for extended-reach drilling and underpressured conditions, where
differential sticking risk is high;
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Flow enhancement tools Tools that improve cement
placement;
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Float equipment Drillable shoes and collars with
float valves that provide higher flow rates; and
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Other equipment Cement baskets, guide shoes,
retainers, bridge plugs, multiple stage tools and cementing
plugs.
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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. In the Gulf of Mexico alone, Weatherford runs 500 to 600
liner jobs a year, of which approximately 150 are deepwater. Our
inflatable packer product line services liner systems and
includes annulus casing packers, inflatable production packers
and inflatable straddle packer assemblies. We also offer
specialized high-pressure, high-temperature, high-performance
inflatable thru-tubing and completion packers.
Solid Tubular Expandable Technologies
Proprietary expandable tools are being developed for downhole
solid tubular applications in well remediation, well completion
and well construction. Our solid tubular expandable products
include the
MetalSkin®
line, used for well cladding to shut off zones, retro-fit
corroded sections of casing and strengthen existing casing.
Solid expandable systems use fixed-cone expansion technology. We
have commercialized and completed successful jobs in 2006 for
well construction purposes, using MetalSkin open-hole
clad systems for controlling unwanted fluid loss or influx and
slim-bore drilling liners. Slim-bore and, ultimately, monobore
liner systems are designed to allow significant cost reductions
by reducing consumables for drilling and completion of wells,
allowing use of smaller rigs and reducing cuttings removal
needs. The benefits are derived because of the potential of
expandable technologies to significantly reduce or eliminate the
reverse-telescoping architecture inherent in traditional well
construction.
Drilling Tools We design and manufacture
patented tools, including our drilling jars, rotating control
devices and other pressure-control equipment. We also offer a
broad selection of in-house or third-party manufactured
equipment for the drilling, completion and workover of oil and
natural gas wells. We offer these proprietary and nonproprietary
drilling tools to our clients primarily operators
and drilling contractors on a rental basis, allowing
the clients to use unique equipment without the cost of holding
that equipment in inventory.
The rental of our proprietary and nonproprietary tools permits
more efficient use of the equipment and allows us to receive
value-added returns on the equipment. The breadth of our
operations and locations allows us to manage and re-deploy our
equipment to locations where it is most needed. 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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Fishing and downhole tools such as milling tools, casing
cutters, fishing jars, spears and overshots, stabilizers, power
swivels and bottomhole assemblies;
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7
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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.
|
Intervention Services Our intervention
services help clients repair wells that have mechanical problems
or that need work to prolong production of oil and natural gas
reserves. Our intervention products and services span the
spectrum of fishing services, re-entry services, and thru-tubing
products and services.
Fishing Services Fishing services are
provided through teams of experienced fishing tool supervisors
and a comprehensive line of fishing and milling tools, including
several proprietary technologies. Our teams provide conventional
fishing services, such as removing wellbore obstructions,
including stuck or dropped equipment, tools, drillstring
components and other debris, that have been left behind
unintentionally during the drilling, completion or workover of
new and old wells. Specialty fishing tools required in these
activities include fishing jars, milling tools, casing cutters,
overshots and spears. Our Fishing Services business unit also
provides well patches and extensive
plug-and-abandonment
products. Proprietary technologies include our
PowerStroketm
milling system. The PowerStroke system helps operators
remediate wells using existing wellbore infrastructure, a
benefit that can reduce customer cost by up to 70% compared to
the cost of drilling a new well.
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. An example is
Weatherfords
QuickCuttm
single-trip casing exit system, which mills windows in half the
conventional time and reduces drilling time in
difficult-to-drill
formations. As of December 2006, we had run more than 1,700
QuickCut systems around the world. In addition, advanced
multilateral systems, including selective re-entry systems
(SRS),
StarBursttm
and
MillThrutm
Level 4 patented technology and advanced multilateral
junction solutions, allow numerous sidetracks from parent
wellbores.
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.
Decommissioning Decommissioning is the
process of safely sealing and abandoning wellbores. In 2006, we
completed the worlds first hydromechanical (non-explosive)
wellhead removal program in the North Sea. Using this
non-explosive technique resulted in significant reductions in
health, safety and environmental risks compared to traditional
decommissioning techniques.
Integrated
Drilling Services
In 2006, our land drilling business was owned and operated under
the name Precision Drilling International. This business
consists of a total of 42 rigs; of these, 21 are heavy-duty land
rigs and 21 are
light-and-medium
drilling rigs. The majority of our rigs are located in the
Eastern Hemisphere. We have the ability to offer project
management services to our customers, whereby we would provide a
number of products and services needed to drill and complete a
well, including the rig.
Competition
We provide our Evaluation, Drilling & Intervention
Services Divisions products and services worldwide, and we
compete in a variety of distinct segments with a number of
competitors. Our major competitors are Baker Hughes,
Halliburton, Schlumberger, Smith International and BJ Services.
We also compete with 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. We
believe we are the industry leader in a number of the
Evaluation, Drilling and Intervention Divisions product
and service offerings, including Controlled Pressure Drilling
(CPD). We currently do not have a high share of the global
market in our directional drilling and wireline offerings. We
do, however, have
8
strong shares in the markets where the technology of these
product lines was originally developed, and we believe our
global market shares for these product lines will increase as we
introduce them into new geographic markets.
Completion &
Production Systems Division
Our Completion & Production Systems Division provides
conventional and intelligent completion systems, all forms of
artificial-lift systems, reservoir stimulation, production
optimization and pipeline services. In addition, this division
provides a variety of pumping systems for the energy,
industrial, chemical and municipal markets.
Completion
Systems
We offer our clients a comprehensive line of completion products
as well as engineered and integrated completion systems for oil
and natural gas fields. These products and services include the
following:
Cased Hole Completion Systems These systems
are incorporated into the tubing string used to transport
hydrocarbons from the reservoir to the surface. We offer a wide
range of devices for enhancing the safety and functionality of
the production string, including permanent and retrievable
packer systems, subsurface safety systems, flow controls and
tool string, specialized downhole isolation valves and
associated servicing equipment. During the past 10 years,
we have evolved our portfolio from one of basic cased-hole
commodity products to one that focuses more heavily on premium
offerings for deepwater and high-pressure/high-temperature
environments.
Sand Screens Sand production often results in
premature failure of artificial-lift and other downhole and
surface equipment and can obstruct the flow of oil and natural
gas. Conventional sand screen 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, acquired in 2001. Served markets include water
well, petrochemical, wastewater treatment and surface water
intake, mining and general industrial applications.
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. In 2006, we
commercialized our
ERCtm
expandable reservoir completion system, which encompasses the
ESS system and the
EZItm
expandable zonal isolation system, a product evolved from our
MetalSkin solid expandable technology, to apply
expandable reservoir completions to multizone factors, combining
open-hole productivity with cased-hole functionality. At the end
of 2006, we had installed 450 expandable completions, which
equates to more than 270,000 installed feet.
Industrial Pumps In todays
industrial markets there exists an endless variety of
applications and special product needs. With a proven history of
providing cost-effective pumping solutions for optimal
performance and operating efficiencies, we are uniquely
positioned to address and enhance specific service and product
requirements in a number of industrial applications. Our
technical expertise, experience and capabilities plus proven
products support our ability to provide clients with pumps
designed for a wide variety of conditions and applications.
Weatherfords comprehensive line of industrial products
includes specialty and multiplex pumps, progressing cavity pumps
and horizontal surface pumping units, each offering an array of
capabilities that cover pumping applications across the major
industries.
9
Artificial
Lift Systems
Artificial lift systems are installed in oil wells and, to a
lesser extent, natural gas wells that do not have sufficient
reservoir pressure to raise the produced hydrocarbon to the
surface. These systems supplement the natural reservoir
pressures to produce oil or natural gas from the well. There are
six principal types of artificial lift technologies used in the
industry. We are the leading producer of artificial lift systems
and the only company in the world able to provide all forms of
lift, including progressing cavity pumps, reciprocating rod
systems, gas lift systems, electrical submersible pumps,
hydraulic lift systems, plunger lift systems and hybrid lift
systems. We are always looking to develop new and innovative
lift systems.
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 among the most operationally efficient
and are designed to work in wells of depths up to
6,000 feet with production between 10 and
4,500 barrels of oil per day. We are also developing PCP
solutions for higher temperatures and special applications. PCPs
have had particular success in heavy-oil-producing basins around
the world.
Reciprocating Rod Lift Systems A
reciprocating rod lift system is an artificial lift pumping
system that uses an above-ground mechanical unit connected to a
sucker rod and a downhole pump. It uses an
up-and-down
suction process to lift the oil from the reservoir.
Reciprocating rod lift is used primarily for the production of
oil from wells of depths up to 14,000 feet and production
rates from 20 to 8,000 barrels per day. Reciprocating
rod-lift systems are generally more expensive to install than
other systems but less costly to operate. We offer a complete
package of products for rod-lift applications ranging from
traditional pump jacks to the
state-of-the-art
Rotaflex®
long-stroke pumping unit, as well as all downhole components,
including the
COROD®
continuous rod, traditional sucker rods and tubing anchors.
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 gas injected into
the system is either produced from and re-injected into the
well, or is injected from gas produced from nearby wells. The
injected gas acts as the lifting agent for the oil. Gas lift
systems are used primarily for offshore wells (including
deepwater and ultra-deepwater) and for wells that have a high
component of gas in the produced fluid or have a gas supply near
the well. Gas lift systems are designed to operate at depths up
to 15,000 feet with volumes up to 20,000 barrels of oil per
day.
Electric Submersible Pumps An electric
submersible pump (ESP) is an electrically powered downhole
pumping system that is typically landed near the perforations of
the producing reservoir. To lift fluid to the surface, the
system converts electrical power to centrifugal motion via the
rotating motor and pump shafts. Electrical power is transmitted
downhole through a power cable that runs the length of the
production tubing. Power is provided by a surface supply system
and controlled by either surface electrical switchgear or a
variable frequency drive. ESPs are designed to operate at depths
of up to 13,500 feet with produced fluid volumes ranging
from 100 to 60,000 barrels per day. Before 1999, we did not
provide ESPs to the oil industry. In 2002, we began
manufacturing and distributing our own proprietary line of ESP
systems.
Hydraulic Lift Systems A hydraulic lift oil
pumping system uses an above-ground surface power unit to
operate a downhole hydraulic pump (jet or piston) to lift oil
from the reservoir. These systems are designed for wells of
depths up to 20,000 feet and volumes up to
15,000 barrels per day. Hydraulic pumps are well suited for
wells with high volumes and low solids.
Plunger Lift Systems Plunger lift is the only
artificial lift method that requires no assistance from outside
energy sources. The typical system consists of a plunger (or
piston), top and bottom bumper springs, a lubricator and a
surface controller. The plunger cycles between the top and
bottom bumper springs. As it travels to the surface, it creates
a solid interface between the lifted gas below and produced
fluid above to maximize lift energy. The travel cycle is
controlled by a surface controller. 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.
10
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. As the leading supplier of lift
systems, we are continuously looking for and developing new and
innovative means of lifting conventional and unconventional
hydrocarbons.
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.
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:
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
We formed our capillary technology group by combining our
in-depth artificial-lift experience with our oilfield production
chemical expertise to provide safer and more effective
production enhancement. Capillary technology maximizes well
production while protecting tubular goods. With systems easily
installed in live wells in just three to four hours, reservoir
production is not interrupted. Our specialists are trained in
all aspects of injection services and chemical handling to
provide each worksite with expedient service in the safest
environment possible.
Fracturing Technologies Hydraulic reservoir
fracturing (fracturing) is a stimulation method
routinely performed on oil and natural gas wells in
low-permeability reservoirs to increase productivity and oil and
gas recovery. Current operations are located in most major
fracturing markets within the U.S. Our three
differentiators are: 1) cutting-edge equipment standardized
to control inventory, maintenance and training costs;
2) robust chemical product portfolio with a focused
research and development approach; and 3) a premier
workforce with a shared focus on providing the most efficient
and effective operations.
In 2006, we also added the
FracMaptm
reservoir management and characterization tool for helping to
determine whether a stimulation is staying in the productive
zone. Our capabilities use multiple technologies to produce
real-time, three-dimensional videos of fractures as they occur.
Production
Optimization
Production optimization is the process of increasing production,
reducing production costs, or both, of oil and natural gas
fields. The ultimate goal is to assist operators in making
better decisions that maximize profits through improved well
productivity management. One of the major benefits of production
optimization is that more production can be achieved through the
existing infrastructure, deferring capital spending on the
de-bottlenecking processes.
We were one of the first companies to provide complete
artificial-lift well optimization services and products. We now
offer proprietary software that works with artificial-lift and
intelligent completion systems to remotely monitor and control
wells, as well as optimize field production, from a central
location. Our systems are used in more than 40,000 wells
worldwide.
Well Optimization By providing intelligence
at the wellsite and intelligence at the desktop, we provide the
operator with a unique solution for optimizing each well
individually. For wellsite intelligence, we offer specific
controllers for each type of artificial lift. These controllers
contain computers with specific logic to control the well during
changes in the reservoir, artificial-lift equipment or well
components. The operational changes are based on the parameters
set by the well operator, either at the wellsite or at a desktop
computer. The desktop software
11
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.
Flow Metering Weatherfords Production
Optimization group develops metering and software solutions to
supply real-time production information to the operator,
allowing accurate production measurements as a part of asset
optimization. The family of new products includes the
revolutionary Red
Eye®
2G watercut meter, which delivers superior accuracy across the
full range (1% to 99%) of water cuts. The Red
Eye®
multiphase metering systems (REMMS) are well-testing skids that
allow the operator to perform well tests on demand without the
errors and long purge times of traditional three-phase test
separators. In 2006, Weatherford began offering electronic flow
measurement (EFM) solutions to accurately measure flowing wells.
The EFM devices are used mainly for natural gas and coalbed
methane wells.
Reservoir Optimization Our intelligent
completion technology (ICT) uses optical sensing to allow
operators to remotely monitor the downhole pressure,
temperature, flow rate, phase fraction and seismic activity of
each well and the surrounding reservoir. This advanced
monitoring capability allows the operator to monitor the
reaction of the reservoir to the production of the well.
Combining this monitoring with multiple-zone downhole flow
control allows field pressure management and shutoff of unwanted
flows of water or gas.
Optical Sensing In 2006, the use of optical
sensing technology continued to expand in the market. Downhole
optical flowmeter and seismic technologies were deployed on a
more widespread basis. Overall, installations increased by 60%,
and the number of optical pressure/temperature (P/T) gauges
installed was up 76% from 2005. Cumulative optical sensing
system operation has now exceeded 1.8 million hours, with
almost 1.5 million feet of optical cable installed. This
represents about 4.5 million feet of fiber deployed in oil
and gas wells. It also represents more than 300 optical sensors,
including P/T gauges, distributed temperature sensors,
flowmeters and seismic stations.
Life of Well Information Software (LOWIS) We
provide tools for optimizing workflow. These software tools
assist the operator in tracking the operations needed for
optimal field management. Tasks such as chemical injection, well
workovers and injection allocation can easily generate
unnecessary expenses by inefficient prioritization of tasks,
poor recordkeeping and lack of analysis of the effectiveness of
the total field operations. The combination of our experienced
consultants and advanced software tools help the operator
optimize operations for entire fields.
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. We maintain the
largest global fleet of onsite generated membrane nitrogen
equipment, which provides the safe production of a continuous
supply of nitrogen at a lower cost with no cryogenic hazards.
Competition
In our Completion & Production Systems Division, our
principal competitors include Baker Hughes, Halliburton,
Schlumberger and BJ Services. We also compete with various
smaller providers of completion equipment. In the area of
intelligent wells, our main competitors are Schlumberger, Baker
Hughes and WellDynamics. Robbins & Myers, Harbison
Fischer, Lufkin, National Oilwell Varco and Dover Corporation
are competitors exclusive to our artificial-lift products.
Competition in hydraulic reservoir fracturing includes principal
competitors noted above and several regional companies. The
principal methods of competition are performance, quality of
products and services, reliability, price, technological
innovation and industry reputation. According to
Spears & Associates, we are a leading provider of
completion equipment in the world and the worlds largest
provider of progressing cavity pumps, reciprocating rod-lift
pump systems and hydraulic-lift systems and are the only fully
integrated provider of all lift systems.
12
Properties
Our operations are conducted in approximately 100 countries. We
currently have 90 manufacturing facilities and approximately 730
sales, service and distribution locations throughout the world.
The following table describes the material facilities we owned
or leased as of December 31, 2006:
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|
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|
|
|
|
|
|
|
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Facility Size
|
|
|
Property
|
|
|
|
|
Principal Services and Products
|
Location
|
|
(Sq. Ft.)
|
|
|
Size (Acres)
|
|
|
Tenure
|
|
Offered or Manufactured
|
|
Evaluation, Drilling &
Intervention Services:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pearland, Texas
|
|
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261,927
|
|
|
|
60.64
|
|
|
Owned
|
|
Fishing, drilling equipment
|
Hassi Messaoud, Algeria
|
|
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200,229
|
|
|
|
19.99
|
|
|
Owned
|
|
Fishing, liner hangers, controlled
pressure drilling and testing services
|
Houma, Louisiana
|
|
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175,000
|
|
|
|
13.00
|
|
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Owned
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Cementing products
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Houston,
Texas(1)
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173,000
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|
|
|
18.19
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|
|
Owned
|
|
Research and development
|
Awjila,
Libya(1)
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|
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150,910
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|
|
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27.67
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|
|
Leased
|
|
Warehouse and service
|
Nisku, Alberta, Canada
|
|
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149,193
|
|
|
|
27.79
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|
|
Owned
|
|
Drilling equipment, fishing,
wireline, controlled pressure drilling and testing services
|
Perth,
Australia(1)
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|
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120,878
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|
|
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2.77
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|
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Leased
|
|
Well installation services,
fishing, drilling equipment, completion systems
|
Forus,
Norway(1)
|
|
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113,182
|
|
|
|
4.66
|
|
|
Leased
|
|
Downhole services, well
installation services, drilling equipment, thru tubing,
cementing, fishing, re-entry, well intervention, completion
systems
|
Huntsville, Texas
|
|
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112,648
|
|
|
|
20.00
|
|
|
Owned
|
|
Liner hangers
|
Neuquen,
Argentina(1)
|
|
|
107,639
|
|
|
|
3.70
|
|
|
Leased
|
|
Well installation services,
downhole and controlled pressure drilling and testing services,
fishing, cementing, drilling equipment
|
Broussard, Louisiana
|
|
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101,434
|
|
|
|
9.01
|
|
|
Owned
|
|
Tubular running
|
Benbrook, Texas
|
|
|
95,000
|
|
|
|
3.89
|
|
|
Owned
|
|
Product development
|
El Yopal, Colombia
|
|
|
85,078
|
|
|
|
2.61
|
|
|
Owned
|
|
Cementing, drilling equipment,
fishing, tubulars
|
Houston, Texas
|
|
|
84,439
|
|
|
|
|
|
|
Leased
|
|
Operations center
|
Ventura, California
|
|
|
81,355
|
|
|
|
4.53
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|
|
Leased
|
|
Power tong equipment, well service
work-over equipment
|
Hadhramout, Yemen
|
|
|
80,000
|
|
|
|
8.20
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|
|
Leased
|
|
Liner hangers, downhole services,
controlled pressure drilling and testing services
|
Corpus Christi, Texas
|
|
|
78,262
|
|
|
|
8.20
|
|
|
Owned
|
|
Fishing, drilling equipment,
rotating control heads
|
Langenhagen,
Germany(1)
|
|
|
71,834
|
|
|
|
3.41
|
|
|
Leased
|
|
Power and mechanized equipment,
control systems, cementing products, completion systems,
research and development
|
Darwin,
Australia(1)
|
|
|
71,688
|
|
|
|
1.65
|
|
|
Leased
|
|
Well installation services,
fishing, drilling equipment, completion systems
|
New Iberia, Louisiana
|
|
|
69,804
|
|
|
|
18.80
|
|
|
Owned
|
|
Liner hangers
|
Edmonton, Alberta, Canada
|
|
|
69,336
|
|
|
|
2.80
|
|
|
Leased
|
|
Wireline services
|
Macaé,
Brazil(1)
|
|
|
66,908
|
|
|
|
11.68
|
|
|
Owned
|
|
Well installation, downhole and
controlled pressure drilling and testing services and cementing,
completion and artificial lift products
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility Size
|
|
|
Property
|
|
|
|
|
Principal Services and Products
|
Location
|
|
(Sq. Ft.)
|
|
|
Size (Acres)
|
|
|
Tenure
|
|
Offered or Manufactured
|
|
Completion &
Production Systems:
|
|
|
|
|
|
|
|
|
|
|
|
|
New Brighton, Minnesota
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|
|
211,600
|
|
|
|
25.75
|
|
|
Owned
|
|
Water well and industrial screens
|
Nisku, Alberta, Canada
|
|
|
206,400
|
|
|
|
15.40
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|
|
Owned
|
|
Reciprocating rod lift
|
Dubnica nad Vahom, Slovakia
|
|
|
163,396
|
|
|
|
5.75
|
|
|
Owned
|
|
Electric submersible pumping
|
Aberdeen, Scotland
|
|
|
148,379
|
|
|
|
8.67
|
|
|
Leased
|
|
Expandable slotted tubulars
|
Houston, Texas
|
|
|
130,000
|
|
|
|
14.00
|
|
|
Owned
|
|
Sand screens
|
Woodward, Oklahoma
|
|
|
118,000
|
|
|
|
49.58
|
|
|
Leased
|
|
Reciprocating rod and hydraulic
lift
|
Houston, Texas
|
|
|
115,649
|
|
|
|
2.65
|
|
|
Owned
|
|
Cased hole and flow control
|
Edmonton, Alberta, Canada
|
|
|
108,797
|
|
|
|
11.34
|
|
|
Owned
|
|
Reciprocating rod lift,
progressing cavity pumps
|
Greenville, Texas
|
|
|
108,300
|
|
|
|
26.43
|
|
|
Owned
|
|
Reciprocating rod lift, electric
submersible pumps
|
Sao Leopoldo, Brazil
|
|
|
103,490
|
|
|
|
9.46
|
|
|
Owned
|
|
Progressing cavity pumps
|
Brisbane, Australia
|
|
|
98,658
|
|
|
|
4.04
|
|
|
Leased
|
|
Water well and industrial screens
|
Colorado Springs, Colorado
|
|
|
94,000
|
|
|
|
60.62
|
|
|
Owned
|
|
Reciprocating rod lift, electrical
submersible pumps
|
Leetsdale, Pennsylvania
|
|
|
92,559
|
|
|
|
4.00
|
|
|
Leased
|
|
Drilling fluids, completion
chemicals
|
Caxias do Sul,
Brazil(1)
|
|
|
88,899
|
|
|
|
17.26
|
|
|
Owned
|
|
Packers, liner hangers
|
Kingwood, Texas
|
|
|
85,250
|
|
|
|
10.47
|
|
|
Leased
|
|
Well optimization equipment
|
Availles-en-Chatellerault, France
|
|
|
79,793
|
|
|
|
11.58
|
|
|
Leased
|
|
Screen fabrication
|
Scott, Louisiana
|
|
|
79,713
|
|
|
|
15.59
|
|
|
Owned
|
|
Tools for flow control, cased
hole, safety valves
|
Longview, Texas
|
|
|
79,086
|
|
|
|
17.63
|
|
|
Owned
|
|
Reciprocating rod lift
|
Lloydminster, Alberta, Canada
|
|
|
77,700
|
|
|
|
6.81
|
|
|
Owned
|
|
Progressing cavity pumps
|
Rio Tercero, Argentina
|
|
|
77,611
|
|
|
|
7.11
|
|
|
Owned
|
|
Reciprocating rod and gas lift
|
Beeville, Texas
|
|
|
72,300
|
|
|
|
10.00
|
|
|
Owned
|
|
PVC extrusion
|
Newcastle, Australia
|
|
|
67,576
|
|
|
|
4.35
|
|
|
Owned
|
|
Mining and urethane screens
|
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, Texas
|
|
|
254,438
|
|
|
|
|
|
|
Leased
|
|
Corporate offices
|
|
|
|
(1) |
|
Facility is shared by both our Evaluation, Drilling &
Intervention Services and Completion & Production
Systems Divisions. |
14
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; however, the loss of one or more of our
suppliers in our Completion & Production Systems
Division could disrupt production.
Customers
and Backlog
Our principal customers consist of major and independent oil and
natural gas producing companies. During 2006, 2005 and 2004,
none of our customers individually accounted for more than 10%
of consolidated revenues.
Our backlog consists of customer orders for which a purchase
order has been received, satisfactory credit arrangements exist
and delivery is scheduled. The respective sales backlog was
approximately $349 million as of December 31, 2006 and
approximately $294 million for the comparable period in the
prior year. All backlog is expected to be shipped during 2007.
Research
and Development and Patents
We maintain world-class technology and training centers
throughout the world. Our 29 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 $149.4 million in 2006,
$107.4 million in 2005 and $83.6 million in 2004.
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 965 patents issued and over 450 pending.
We have 1,485 patents issued in international jurisdictions and
over 1,590 pending. We amortize patents over the years expected
to be benefited, ranging from 3 to 20 years.
Many of our patents provide us with competitive advantages in
our markets. Important patented products and technologies
include:
(1) LWD and MWD systems, such as our MFR
multi-frequency resistivity logging tool, our density- neutron
combination logging tool, and our electro-magnetic telemetry
tool;
(2) our controlled pressure drilling and testing drilling
products and services, including our Virtual Riser
offshore pressure control system, Williams high pressure
rotating heads, internal riser rotating control heads for
deepwater drilling, and our Clearwater chemicals and foam
technology;
(3) new generation wireline magnetic casing inspection tool
and wireline oil-based borehole imager;
(4) our expandable slotted and solid tubular products, such
as our ESS expandable sand screens, many of such
products are sold pursuant to a license from Shell;
(5) tubular running systems, including our
PowerScope tong positioning system and our
StabMaster tubular positioning system;
(6) casing exit systems, including our QuickCut
casing window milling system;
(7) drilling with casing equipment and services including
the DrillShoe and ReamerShoe casing
shoes, and our new suite of drilling hazard mitigation services;
(8) sensing systems for intelligent completion systems,
such as our fiber optic flow meter, our Clarion
fiber optic seismic sensing system, and our Red Eye
water/oil ratio meter; and
(9) wellbore completion products, such as our
Optimax subsurface safety valve and
FracGuard composite bridge plug.
15
Although in the aggregate our patents are of considerable
importance to the manufacturing and marketing of many of our
products, we do not believe that the loss of any one of our
patents would have a material adverse effect on our business.
Seasonality
Weather and natural phenomena can temporarily affect level of
demand for our products and services. Spring months in Canada
and winter months in the North Sea tend to negatively affect
operations. In the summer of 2005, the Gulf of Mexico suffered
an unusually high number of hurricanes with unusual intensity
that adversely impacted our operations. The widespread
geographical locations of our operations serve to mitigate the
impact of the seasonal nature of our business.
Insurance
We currently carry a variety of insurance for our operations. We
are partially self-insured for certain claims in amounts we
believe to be customary and reasonable.
Although we believe we currently maintain insurance coverage
adequate for the risks involved, there is always a risk our
insurance may not be sufficient to cover any particular loss or
that our insurance may not cover all losses. For example, while
we maintain product liability insurance, this type of insurance
is limited in coverage and it is possible an adverse claim could
arise in excess of our coverage. Finally, insurance rates have
in the past been subject to wide fluctuation. Changes in
coverage, insurance markets and our industry may result in
further increases in our cost and higher deductibles and
retentions.
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. While we are not currently aware of
any situation involving an environmental claim that would likely
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 that could have a
material adverse effect.
In October 2002, we were notified by a third party that we may
be a potentially responsible party to the Force Road Oil and
Vacuum Truck Company Superfund site in Brazoria County, Texas.
This matter is in the preliminary stages, and based on the
information provided, if we are named as a party by the Texas
Commission on Environmental Quality (TCEQ), it
appears we will be a de minimus party. In January 2003, a
subsidiary of Precision Energy Services was notified by the
U.S. Environmental Protection Agency (EPA) that
they were a potentially responsible party to the Gulf Nuclear
Superfund Sites in Odessa, Tavenor and Webster, Texas. Based
upon the information provided, it appears they will be
classified as a de minimus party. In August 2004, we were
notified by the U.S. Environmental Protection Agency
(EPA) that we were a potentially responsible party
to the Malone Services Co. Superfund Site in Texas City, Texas.
We were classified as a de minimus party and paid a
settlement payment of approximately $28,000. We are currently
awaiting the EPAs acceptance of our settlement payment.
Our 2006 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 2007
also will not be material.
Employees
We currently employ approximately 33,000 employees. Certain of
our operations are subject to union contracts. These contracts,
however, cover less than one 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
16
and business trends. We believe these statements constitute
Forward-Looking Statements as defined in the Private
Securities Litigation Reform Act of 1995.
From time to time, we update the various factors we consider in
making our forward-looking statements and the assumptions we use
in those statements. However, we undertake no obligation to
publicly update or revise any forward-looking events or
circumstances that may arise after the date of this report. The
following sets forth the various assumptions we use in our
forward-looking statements, as well as risks and uncertainties
relating to those statements. Certain of the risks and
uncertainties may cause actual results to be materially
different from projected results contained in forward-looking
statements in this report and in our other disclosures. These
risks and uncertainties include, but are not limited to, the
following:
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A downturn in market conditions could affect projected
results. Any material changes in oil and natural gas supply
and demand, oil and natural gas prices, rig count or other
market trends would affect our results and would likely affect
the forward-looking information we provide. The oil and natural
gas industry is extremely volatile and subject to change based
on political and economic factors outside our control. During
2004, 2005 and 2006, worldwide drilling activity increased;
however, if an extended regional
and/or
worldwide recession were to occur, it would result in lower
demand and lower prices for oil and natural gas, which would
adversely affect drilling and production activity and therefore
would affect our revenues and income. We have assumed increases
in worldwide demand will continue throughout 2007.
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Availability of a skilled workforce could affect our
projected results. Due to the high activity in
the exploration and production and oilfield service industries
there is an increasing shortage of available skilled labor. Our
forward-looking statements assume we will be able to recruit and
maintain a sufficient skilled workforce for activity levels.
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Increases in the prices and availability of our raw materials
could affect our results of operations. We use
large amounts of raw materials for manufacturing our products.
The price of these raw materials has a significant impact on our
cost of producing products for sale or producing fixed assets
used in our business. We have assumed that the prices of our raw
materials will remain within a manageable range and will be
readily available. If we are unable to attain necessary raw
materials or if we are unable to minimize the impact of
increased raw materials costs through our supply chain
initiatives or by passing through these increases to our
customers, our margins and results of operations could be
adversely affected.
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|
Our long-term growth depends upon technological innovation
and commercialization. Our ability to deliver our
long-term growth strategy depends in part on the
commercialization of new technology. A central aspect of our
growth strategy is to innovate our products and services, to
obtain technologically advanced products through internal
research and development
and/or
acquisitions, to protect proprietary technology from
unauthorized use and to expand the markets for new technology
through leverage of our worldwide infrastructure. The key to our
success will be our ability to commercialize the technology that
we have acquired and demonstrate the enhanced value our
technology brings to our customers operations. Our major
technological advances include, but are not limited to, those
related to controlled pressure drilling and testing systems,
expandable solid tubulars, expandable sand screens and
intelligent well completion. Our forward-looking statements have
assumed successful commercialization of, and above-average
growth from, these new products and services.
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|
Nonrealization of expected benefits from our 2002 corporate
reincorporation could affect our projected
results. We are incorporated in Bermuda and we
operate through our various subsidiaries in numerous countries
throughout the world including the United States. Consequently,
we are subject to changes in tax laws, treaties or regulations
or the interpretation or enforcement thereof in the U.S.,
Bermuda or jurisdictions in which we or any of our subsidiaries
operates or is resident. Our income tax expense is based upon
our interpretation of the tax laws in effect in various
countries at the time that the expense was incurred. If the
U.S. Internal Revenue Service or other taxing authorities
do not agree with our assessment of the effects of such laws,
treaties and regulations, this could have a material adverse
effect on us including the imposition of a higher effective tax
rate on our worldwide earnings or a reclassification of the tax
impact of our significant corporate restructuring transactions.
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17
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|
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|
Nonrealization of expected benefits from our 2005 acquisition
of Precision Energy Services and Precision Drilling
International could affect our projected
results. We expect to gain certain business,
financial and strategic advantages as a result of this
acquisition, including synergies and operating efficiencies. Our
integration of this acquisition was completed in 2006. Our
forward-looking statements assume that we will realize the
benefits of this integration throughout 2007. An inability to
realize expected strategic advantages as a result of the
acquisition would negatively affect the anticipated benefits of
the acquisition.
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|
The cyclical nature of or a prolonged downturn in our
industry could affect the carrying value of our
goodwill. As of December 31, 2006, we had
approximately $3.0 billion of goodwill. Our estimates of
the value of our goodwill could be reduced in the future as a
result of various factors, some of which are beyond our control.
Any reduction in the value of our goodwill may result in an
impairment charge and therefore adversely affect our results.
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|
Currency fluctuations could have a material adverse financial
impact on our business. A material change in
currency rates in our markets could affect our future results as
well as affect the carrying values of our assets. World
currencies have been subject to much volatility. Our
forward-looking statements assume no material impact from future
changes in currency exchange rates.
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|
Adverse weather conditions in certain regions could aversely
affect our operations. In the summer of 2005, the
Gulf of Mexico suffered several significant hurricanes. These
hurricanes and associated hurricane threats reduced the number
of days on which we and our customers could operate, which
resulted in lower revenues than we otherwise would have
achieved. In the last three quarters of 2006, climatic
conditions in Canada were not as favorable to drilling as we
anticipated, which limited our potential results in that region.
Similarly, unusually rough weather 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 not deviate
significantly from historical patterns.
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Political disturbances, war, or terrorist attacks and changes
in global trade policies could adversely impact our
operations. We have assumed there will be no
material political disturbances or terrorist attacks and there
will be no material changes in global trade policies. Any
further military action undertaken by the U.S. or other
countries could adversely affect our results of operations.
|
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. We will
generally update our assumptions in our filings as circumstances
require.
An investment in our common shares involves various risks. When
considering an investment in our company, you should consider
carefully all of the risk factors described below, as well as
other information included and incorporated by reference in this
report.
We
conduct significant foreign operations that subject us to
numerous risks
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. We
participated in the United Nations
oil-for-food
program governing sales of goods and services into Iraq. The SEC
has asked us to provide them copies of certain documents
relating to our participation in that program in connection with
a fact-finding inquiry related to that program. We are complying
with that request. Our operations may be restricted or
prohibited in any country in which the foregoing risks occur.
18
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.
|
Currency
Exposure
Approximately 38.9% 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 U.S. dollar denominated, whereas our revenues are
partially local currency based. In those cases, a devaluation of
the local currency would adversely impact our operating margins.
Litigation
and Environmental Exposure
In the ordinary course of business, we become the subject of
various claims and litigation. We maintain insurance to cover
many of our potential losses and we are subject to various
self-retentions and deductibles with respect to our insurance.
Although we are subject to various ongoing items of litigation,
we do not believe any of our current items of litigation will
result in any material uninsured losses to us. However, it is
possible an unexpected judgment could be rendered against us in
cases in which we could be uninsured and beyond the amounts we
currently have reserved or anticipate incurring.
We are also subject to various federal, state and local laws and
regulations relating to the energy industry in general and the
environment in particular. Environmental laws have in recent
years become more stringent and have generally sought to impose
greater liability on a larger number of potentially responsible
parties. While we are not currently aware of any situation
involving an environmental claim that would be likely to have a
material adverse effect on our business, it is always possible
that an environmental claim with respect to one or more of our
current businesses or a business or property that one of our
predecessors owned or used could arise and could involve
material expenditures.
Industry
Exposure
The concentration of our customers in the energy industry may
impact our overall exposure to credit risk as customers may be
similarly affected by prolonged changes in economic and industry
conditions. Further, laws in some jurisdictions in which we
operate could make collection difficult or time consuming. We
perform ongoing credit evaluations of our customers and do not
generally require collateral in support of our trade
receivables. While 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.
Terrorism
Exposure
The terrorist attacks that took place in the U.S. on
September 11, 2001 and the subsequent ongoing war on terror
have created many global economic and political uncertainties.
The potential for future terrorist attacks, the
19
national and international responses to terrorist attacks, and
other acts of war or hostility have created many economic and
political uncertainties that could adversely affect our
businesses.
Tax
Exposure
On June 26, 2002, the stockholders and Board of Directors
of Weatherford International, Inc. (Weatherford
Inc.) approved our corporate reorganization, and
Weatherford International Ltd. (Weatherford
Limited), a newly formed Bermuda company, became the
parent holding company of Weatherford International, Inc. The
realization of the tax benefit of this reorganization could be
impacted by changes in tax laws, tax treaties or tax regulations
or the interpretation or enforcement thereof or differing
interpretation or enforcement of applicable law by the
U.S. Internal Revenue Service or other taxing
jurisdictions. The inability to realize this benefit could have
a material impact on our financial statements.
Acquisition
Exposure
In August of 2005, we acquired Precision Energy Services and
Precision Drilling International. In association with the
acquisition, we identified pre-acquisition contingencies related
to duties and taxes associated with the importation of certain
equipment assets to foreign jurisdictions. We calculated a range
of reasonable estimates of the costs associated with these
duties. As no amount within the range appeared to be a better
estimate than any other, we used the amount that is the low end
of the range in accordance with Statement of Financial
Accounting Standards No. 5, Accounting for
Contingencies, and its interpretations. At December 31,
2006, we have recorded a liability in the amount of
approximately $20 million for this matter. If we used the
high end of the range, the aggregate potential liability would
be approximately $27 million higher. It is reasonably
possible that the actual amount paid to settle these items could
be materially different from our estimate and could have a
material adverse effect on our consolidated financial statements.
Bermuda
Governance Risks
We are a Bermuda exempt company, and it may be difficult for you
to enforce judgments against us or our directors and executive
officers. The rights of holders of our shares will be governed
by Bermuda law and our memorandum of association and bye-laws.
The rights of shareholders under Bermuda law may differ from the
rights of shareholders of companies incorporated in other
jurisdictions. One of our directors is not a resident of the
U.S., and a substantial portion of our assets are located
outside the U.S. As a result, it may be difficult for
investors to effect service of process on those persons in the
U.S. or to enforce in the U.S. judgments obtained in
U.S. courts against us or those persons based on the civil
liability provisions of the U.S. securities laws.
Uncertainty exists as to whether courts in Bermuda will enforce
judgments obtained in other jurisdictions, including the U.S.,
against us or our directors or officers under the securities
laws of those jurisdictions or entertain actions in Bermuda
against us or our directors or officers under the securities
laws of other jurisdictions.
Our bye-laws restrict shareholders from bringing legal action
against our officers and directors.
Our bye-laws contain a broad waiver by our shareholders of any
claim or right of action, both individually and on our behalf,
against any of our officers or directors. The waiver applies to
any action taken by an officer or director, or the failure of an
officer or director to take any action, in the performance of
his or her duties, except with respect to any matter involving
any fraud or dishonesty on the part of the officer or director.
This waiver limits the right of shareholders to assert claims
against our officers and directors unless the act or failure to
act involves fraud or dishonesty.
Our bye-laws have anti-takeover provisions that may discourage a
change of control. These anti-takeover provisions could result
in a lower market price for our shares and may limit a
shareholders ability to obtain a premium for our shares.
Our bye-laws contain provisions that could make it more
difficult for a third party to acquire us without the consent of
our board of directors, even if the third partys offer may
be considered beneficial by many shareholders.
20
As a result, shareholders may be limited in their ability to
obtain a premium for their shares and this may cause the market
price of our shares to decrease significantly. These provisions
also provide for:
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directors to be removed only for cause;
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restrictions on the time period in which directors may be
nominated; and
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the board of directors to determine the powers, preferences and
rights and the qualifications, limitations and restrictions of
our preference shares and to issue the preference shares without
shareholder approval.
|
Our board of directors may issue preference shares and determine
their powers, preferences and rights and their qualifications,
limitations and restrictions. The issuance of preference shares
may delay, defer or prevent a merger, amalgamation, tender offer
or proxy contest involving us.
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|
Item 1B.
|
Unresolved
SEC Comments
|
None.
See Item 1. Business Properties on
page 13 of this report, which is incorporated by reference
into this item.
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|
Item 3.
|
Legal
Proceedings
|
In the ordinary course of business, we become the subject of
various claims and litigation. We maintain insurance to cover
many of our potential losses, and we are subject to various
self-retention limits and deductibles with respect to our
insurance.
See Item 1. Business Other Business
Data Federal Regulation and Environmental
Matters on page 16 of this report, which is
incorporated by reference into this item.
Although we are subject to various ongoing items of litigation,
we do not believe any of the items of litigation to which we are
currently subject will result in any material uninsured losses
to us. It is possible, however, an unexpected judgment could be
rendered against us in the cases in which we are involved that
could be uninsured and beyond the amounts we currently have
reserved.
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|
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, 2006.
21
PART II
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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, 2007,
there were 2,099 shareholders of record. Additionally,
there were 278 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. In 2005, our Board of Directors
approved a
two-for-one
split of our common shares. As a result, all prices have been
restated to reflect the
two-for-one
share split.
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Price
|
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High
|
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Low
|
|
|
Year ending December 31, 2006
|
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First Quarter
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$
|
46.19
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$
|
36.50
|
|
Second Quarter
|
|
|
58.73
|
|
|
|
44.04
|
|
Third Quarter
|
|
|
51.70
|
|
|
|
37.08
|
|
Fourth Quarter
|
|
|
47.05
|
|
|
|
38.25
|
|
Year ending December 31, 2005
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
30.66
|
|
|
$
|
24.25
|
|
Second Quarter
|
|
|
30.23
|
|
|
|
23.82
|
|
Third Quarter
|
|
|
35.68
|
|
|
|
28.55
|
|
Fourth Quarter
|
|
|
37.94
|
|
|
|
28.50
|
|
On February 20, 2007, the closing sales price of our common
shares as reported by the New York Stock Exchange was
$39.24 per share. We have not declared or paid cash
dividends on our common shares since 1984.
In December 2005, our Board of Directors approved a share
repurchase program under which up to $1 billion of our
outstanding common shares could be purchased. Future purchases
of our shares can be made in the open market or privately
negotiated transactions, at the discretion of management and as
market conditions warrant. During the quarter ended
December 31, 2006, we purchased our common shares in the
following amounts at the following average prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number
|
|
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased as
|
|
|
Maximum Number (or
|
|
|
|
|
|
|
|
|
|
Part of
|
|
|
Approximate Dollar
|
|
|
|
|
|
|
|
|
|
Publicly
|
|
|
Value) of Shares
|
|
|
|
Total Number
|
|
|
Average
|
|
|
Announced
|
|
|
that May Yet Be
|
|
|
|
of Shares
|
|
|
Price Paid
|
|
|
Plans or
|
|
|
Purchased Under the
|
|
Period
|
|
Purchased
|
|
|
per Share
|
|
|
Programs
|
|
|
Plans or Programs
|
|
|
October 1-October 31,
2006
|
|
|
606,000
|
|
|
$
|
39.44
|
|
|
|
606,000
|
|
|
$
|
468,451,250
|
|
November 1-November 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
468,451,250
|
|
December
1-December 31,
2006
|
|
|
400,000
|
|
|
|
42.57
|
|
|
|
400,000
|
|
|
|
451,424,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,006,000
|
|
|
|
40.69
|
|
|
|
1,006,000
|
|
|
|
451,424,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
22
During the quarter ended December 31, 2006, we withheld
common shares to satisfy these tax withholding obligations as
follows:
|
|
|
|
|
|
|
|
|
|
|
No. of
|
|
|
Average
|
|
Period
|
|
Shares
|
|
|
Price
|
|
|
October 1-October 31, 2006
|
|
|
|
|
|
$
|
|
|
November 1-November 30, 2006
|
|
|
44,652
|
|
|
|
42.00
|
|
December
1-December 31,
2006
|
|
|
345
|
|
|
|
44.72
|
|
On February 28, 2002, we issued a warrant to purchase up to
6.5 million of our common shares at $30.00 per share
as part of the consideration given to obtain a worldwide license
to Shell Technology Ventures Inc.s expandable technology.
Effective July 12, 2006, we and Shell Technology Ventures
Inc. amended and restated this warrant. The amendments reflect,
among other things, changes in our capital and organizational
structure since the original warrant was issued in February
2002. The warrant is exercisable until February 28, 2012
and is subject to adjustment for changes in our capital
structure or our issuance of dividends in cash, securities or
property. To the extent that the amendment and restatement of
the warrant constitutes the issuance of a new security, that new
security was issued solely in exchange for the original warrant.
There were no cash proceeds from the exchange. That new security
was an exempted security not subject to registration as provided
by Section 3(a)(9) of the Securities Act of 1933.
On August 31, 2005, in connection with our acquisition of
Precision Energy Services and Precision Drilling International,
we issued 52.0 million of our common shares to Precision
Drilling Corporation in a private placement exempt from
registration under Section 4(2) of the Securities Act of
1933, as amended.
Information concerning securities authorized for issuance under
equity compensation plans is set forth in Part III of this
report under Item 12. Security Ownership of Certain
Beneficial Owners and Management Equity Compensation
Plan Information, which is incorporated herein by
reference.
|
|
Item 6.
|
Selected
Financial Data
|
The following table sets forth certain selected historical
consolidated financial data and should be read in conjunction
with Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations
and the Consolidated Financial Statements and Notes thereto
included elsewhere herein. The following information may not be
deemed indicative of our future operating results. The
information presented has been restated to reflect our fourth
quarter 2005
two-for-one
share split, and the years ended December 31, 2003 and 2002
have been restated to reflect Gas Services International
compression fabrication business as a discontinued operation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005(a)
|
|
|
2004(b)
|
|
|
2003(c)
|
|
|
2002(d)
|
|
|
|
(In thousands, except per share amount)
|
|
|
Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
6,578,928
|
|
|
$
|
4,333,227
|
|
|
$
|
3,131,774
|
|
|
$
|
2,562,034
|
|
|
$
|
2,288,424
|
|
Operating Income
|
|
|
1,340,209
|
|
|
|
564,842
|
|
|
|
402,265
|
|
|
|
279,365
|
|
|
|
274,684
|
|
Income (Loss) From Continuing
Operations
|
|
|
896,369
|
|
|
|
466,209
|
|
|
|
337,299
|
|
|
|
147,243
|
|
|
|
(6,959
|
)
|
Basic Earnings (Loss) Per Share
From Continuing Operations
|
|
|
2.59
|
|
|
|
1.55
|
|
|
|
1.26
|
|
|
|
0.58
|
|
|
|
(0.03
|
)
|
Diluted Earnings (Loss) Per Share
From Continuing Operations
|
|
|
2.53
|
|
|
|
1.47
|
|
|
|
1.17
|
|
|
|
0.56
|
|
|
|
(0.03
|
)
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
10,139,248
|
|
|
$
|
8,580,304
|
|
|
$
|
5,543,482
|
|
|
$
|
4,994,324
|
|
|
$
|
4,494,989
|
|
Long-term Debt
|
|
|
1,564,600
|
|
|
|
632,071
|
|
|
|
1,404,431
|
|
|
|
1,379,611
|
|
|
|
1,513,907
|
|
Shareholders Equity
|
|
|
6,174,799
|
|
|
|
5,666,817
|
|
|
|
3,313,389
|
|
|
|
2,708,068
|
|
|
|
1,974,496
|
|
Cash Dividends Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
(a) |
|
In August 2005, we acquired Precision Energy Services and
Precision Drilling International for $942.7 million in cash
and 52.0 million Weatherford common shares. In connection
with the acquisition we recorded exit and restructuring charges
of $114.2 million, $78.7 million net of tax. In August
2005, we settled our Zero Coupon Convertible Senior Debentures
and expensed $4.7 million, $3.3 million net of tax, of
unamortized issuance costs. In December 2005, we recorded a
$115.5 million gain on the sale of our remaining shares of
Universal common stock with no related income tax impact. |
|
(b) |
|
In 2004, we recorded a $77.6 million gain on the sale of
Universal common stock. There was no income tax impact related
to the sale. |
|
(c) |
|
In August 2003, we incurred $20.9 million,
$13.6 million net of taxes, of debt redemption expenses
related to the early extinguishment of our Convertible Preferred
Debentures. |
|
(d) |
|
In 2002, we recorded a $217.1 million non-cash write down
of our investment in Universal and a $15.4 million
restructuring and asset impairment charge related to a
rationalization of our businesses in light of industry
conditions. The net after tax impact of these charges was
$156.2 million. |
|
|
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 2007
and 2008. Next, we analyze the results of our operations for the
last three years, including the trends in our business and a
summary of our severance, restructuring and asset impairment
charges. 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
Weatherford provides 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 and evaluation services, including
directional drilling, measurement while drilling and logging
while drilling, well installation services, fishing and
intervention services, drilling equipment including land rigs,
completion systems, production optimization and all forms of
artificial lift. We operate under two segments: Evaluation,
Drilling & Intervention Services and
Completion & Production Systems.
In July 2005, we sold our Gas Services International compression
fabrication business. Results of this business were formerly
reported within our Completion & Production Systems
business segment and have been reclassified as a discontinued
operation for all periods presented.
Industry
Trends
Changes in the current price and expected future prices of oil
and natural gas influence the level of energy industry spending.
Changes in expenditures result in an increased or decreased
demand for our products and services. Rig count is an indicator
of the level of spending for the exploration for and production
of oil and natural gas reserves.
24
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)
|
|
|
2006
|
|
$
|
61.05
|
|
|
$
|
6.30
|
|
|
|
2,178
|
|
|
|
1,029
|
|
2005
|
|
|
61.04
|
|
|
|
11.23
|
|
|
|
2,046
|
|
|
|
948
|
|
2004
|
|
|
43.45
|
|
|
|
6.15
|
|
|
|
1,686
|
|
|
|
869
|
|
|
|
|
(1) |
|
Price per barrel as of December 31
Source: Applied Reasoning, Inc. |
|
(2) |
|
Price per MM/BTU as of December 31
Source: Oil World |
|
(3) |
|
Average rig count for December
Source: Baker Hughes Rig Count and other third-party
data
for Iran and Sudan
|
Although oil and natural gas prices have continued to fluctuate
over the last several years, the average annual price of oil and
natural gas has continued to increase. Oil prices ranged from a
high of $77.03 per barrel in July of 2006 to a low of
$17.97 per barrel in January of 2002. Natural gas prices
ranged from a high of $15.42 per MM/BTU in December of 2005
to a low of $1.91 per MM/BTU in January of 2002. Factors
influencing oil and natural gas prices during the three-year
period include persistent hydrocarbon inventory levels, realized
and expected economic growth, levels of spare production
capacity within the Organization of Petroleum Exporting
Countries (OPEC), weather and geopolitical
uncertainty, including the uncertainty of Iraqi oil production.
Historically, the majority of worldwide drilling activity has
been concentrated in North America. From mid-1999 through
mid-2001, North American rig count improved steadily, peaking in
the first quarter of 2001 at a quarterly average of 1,636 rigs.
The level of drilling and completion spending in North America
also improved steadily for this same time period with an overall
improvement greater than 100%. During the latter part of 2001,
the rig count started to decline, and the decline continued
through mid-2002. Since mid-2002, the North American rig count
has improved to a fourth quarter 2006 rig count average of 2,160
rigs. Traditionally, the international rig count has not been as
volatile as the North American rig count. The international
market experienced a 10% improvement in the 2006 average annual
rig count as compared to the previous year and 20% improvement
as compared to 2004.
During 2006, drilling and completion spending has continued to
increase in both North America and the international markets.
According to Spears & Associates, 2006 drilling and
completion spending increased 42% in North America and 24% in
international markets as compared to 2005 levels. Drilling and
completion spending growth during 2007 is anticipated to be
driven by the international markets. According to
Spears & Associates, drilling and completion spending
during 2007 is anticipated to increase approximately 16% in
international markets while declining approximately 3% in North
America markets as compared to 2006 levels.
Opportunities
and Challenges
The nature of our industry offers many opportunities and
challenges. We have created a long-term strategy aimed at
growing our business, servicing our customers, and most
importantly, creating value for our shareholders. The success of
our long-term strategy will be determined by our ability to
manage effectively any industry cyclicality, respond to industry
demands and successfully maximize the benefits from our
acquisitions.
The cyclicality of the energy industry impacts the demand for
our products and services. Certain of our products and services,
such as our drilling and evaluation services, well installation
services and well completion services, depend on the level of
exploration and development activity and the completion phase of
the well life cycle. Other products and services, such as our
production optimization and artificial lift systems, are
dependent on production activity. We believe that decline rates,
a measure of the fall in production from a well over time, are
accelerating. We also believe that there has been, and will
continue to be, a deterioration in the quality of incremental
hydrocarbon formations that our customers develop and that these
formations will require more of our products and services than
higher quality formations. The market for oilfield services will
grow year on year relative to the decline rates and the implicit
rate of demand growth. We are aggressively, but methodically,
expanding our people, manufacturing and equipment capacity to
meet the demands of the industry.
25
In the third quarter of 2005, we acquired Precision Energy
Services and Precision Drilling International. This acquisition
significantly strengthens and expands our service offering.
Opportunities exist to accelerate the market penetration of the
acquired products in the Eastern Hemisphere by utilizing our
established infrastructure and to increase pull through sales
with our expanded portfolio of technologies.
2007
and 2008 Outlook
We believe the outlook for our businesses is favorable. As
decline rates accelerate and reservoir productivity complexities
increase, our clients will face growing challenges securing
desired rates of production growth. Assuming the demand for
hydrocarbons does not weaken, these phenomena provide us with a
robust outlook. The acceleration of decline rates and the
increasing complexity of the reservoirs increase our
customers requirements for technologies that improve
productivity.
In particular, the international markets are experiencing a
multi-year expansion, with the Eastern Hemisphere standing out
as the strongest market. The dynamics in North America are
different. Near term, the climate will dictate activity in North
America. Weather-related activity decreases were experienced in
North America during the fourth quarter of 2006, particularly in
Canada. Aside from seasonal swings, further declines in the 2007
Canadian market are likely. High natural gas storage levels
could also impact near-term activity; however we believe any
activity declines would be short lived, if they were to occur.
Looking into 2007 and 2008, we expect average worldwide rig
activity to grow as compared to fourth quarter 2006 levels, and
we expect our business to continue to grow at a faster rate than
the underlying rig count. We expect the Eastern Hemisphere to be
our highest growth market during 2007, followed by the Latin
America market. We expect our growth in 2007 and 2008 to be
broad based, with all of our product and service lines
continuing to build on 2006 achievements. These improvements
should be driven by the strength of our technology and our
global infrastructure. We expect our newer technologies to
continue to gain traction across a wider breadth of geographic
markets, similar to our performance in 2006.
Geographic Markets. Climate, natural gas
storage levels and commodity prices will dictate the rate of
oilfield service activity growth in North America during 2007
and 2008. While these factors are difficult to predict with any
certainty over short periods of time, we believe that the North
American market has positive secular growth attributes over the
longer term. Over the next 12 to 18 months, North America
activity is likely to remain at or around current levels, on
average. We expect most of our growth in 2007 and 2008 will come
out of the international markets. Eastern Hemisphere growth will
be driven by year over year increases in the Middle East, North
Africa, West Africa, China, Russia and Central Europe. In
addition, we expect volume increases in Latin America with
improvements stemming from Brazil, Mexico and Argentina. The
North Sea is expected to show modest growth throughout 2007. In
the course of 2007, we anticipate the Eastern Hemisphere will
surpass the U.S. market as our largest market.
Pricing. The overall pricing outlook is
positive. Pricing is trending upwards, concurrently with raw
material and labor cost inflation. We expect pricing to remain
positive throughout 2007, net of cost increases. Price
improvements are being realized on a
contract-by-contract
basis and are occurring in different classes of products and
service lines depending upon the region.
Overall, the level of market improvements for our businesses for
2007 will continue to depend heavily on our ability to gain
market share, primarily in the Eastern Hemisphere, recruit and
retain personnel and secure further acceptance of our new
technologies. 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.
Results
of Operations
In connection with our integration plan relating to the
acquisition of divisions of Precision Drilling Corporation and
the operational realignment of our Pipeline and Specialty
Services businesses, we undertook a review of our presentation
of segment information in the second quarter of 2006. In
addition to their former businesses,
26
Evaluation, Drilling & Intervention Services now
includes the operations of Precision Drilling International, and
Completion & Production Services includes the
operations of Pipeline and Specialty Services.
The following charts contain selected financial data comparing
our consolidated and segment results from operations for 2006,
2005 and 2004. On August 31, 2005, we completed the
acquisition of Precision Energy Services and Precision Drilling
International, divisions of Precision Drilling Corporation. The
results of operations from the acquired businesses are included
in our results of operations from the date of acquisition;
therefore, the year ended December 31, 2005 includes four
months of activity from these acquired businesses. We are unable
to provide certain information regarding our current period
results excluding the impact of acquisitions due to the
integration of these acquisitions into our operations.
27
Comparative
Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except percentages and
|
|
|
|
per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Evaluation, Drilling &
Intervention Services
|
|
$
|
4,234,024
|
|
|
$
|
2,528,745
|
|
|
$
|
1,697,635
|
|
Completion & Production
Systems
|
|
|
2,344,904
|
|
|
|
1,804,482
|
|
|
|
1,434,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,578,928
|
|
|
|
4,333,227
|
|
|
|
3,131,774
|
|
Gross Profit %(a):
|
|
|
|
|
|
|
|
|
|
|
|
|
Evaluation, Drilling &
Intervention Services (a)
|
|
|
38.0
|
%
|
|
|
34.2
|
%
|
|
|
34.1
|
%
|
Completion & Production
Systems
|
|
|
32.1
|
|
|
|
28.6
|
|
|
|
27.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35.9
|
|
|
|
31.9
|
|
|
|
31.1
|
|
Research and Development:
|
|
|
|
|
|
|
|
|
|
|
|
|
Evaluation, Drilling &
Intervention Services
|
|
$
|
96,353
|
|
|
$
|
56,909
|
|
|
$
|
39,258
|
|
Completion & Production
Systems
|
|
|
53,076
|
|
|
|
50,453
|
|
|
|
44,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149,429
|
|
|
|
107,362
|
|
|
|
83,552
|
|
Selling, General and
Administrative Attributable to Segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Evaluation, Drilling &
Intervention Services
|
|
|
487,395
|
|
|
|
301,813
|
|
|
|
216,378
|
|
Completion & Production
Systems
|
|
|
274,326
|
|
|
|
247,754
|
|
|
|
219,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
761,721
|
|
|
|
549,567
|
|
|
|
436,364
|
|
Corporate General and
Administrative
|
|
|
115,593
|
|
|
|
77,154
|
|
|
|
55,889
|
|
Equity in Earnings of
Unconsolidated Affiliates
|
|
|
(5,830
|
)
|
|
|
(10,427
|
)
|
|
|
(3,838
|
)
|
Exit Costs and Restructuring
Charges
|
|
|
|
|
|
|
93,581
|
|
|
|
|
|
Operating Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Evaluation, Drilling &
Intervention Services
|
|
|
1,025,630
|
|
|
|
506,737
|
|
|
|
323,190
|
|
Completion & Production
Systems
|
|
|
424,342
|
|
|
|
218,413
|
|
|
|
131,126
|
|
Exit Costs and Restructuring
Charges
|
|
|
|
|
|
|
(93,581
|
)
|
|
|
|
|
Corporate (b)
|
|
|
(109,763
|
)
|
|
|
(66,727
|
)
|
|
|
(52,051
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,340,209
|
|
|
|
564,842
|
|
|
|
402,265
|
|
Gain on Sale of Universal Common
Stock
|
|
|
|
|
|
|
115,456
|
|
|
|
77,642
|
|
Debt Redemption Expense
|
|
|
|
|
|
|
(4,733
|
)
|
|
|
|
|
Interest Income
|
|
|
6,656
|
|
|
|
11,208
|
|
|
|
3,846
|
|
Interest Expense
|
|
|
(109,577
|
)
|
|
|
(80,343
|
)
|
|
|
(63,562
|
)
|
Other, Net
|
|
|
(13,065
|
)
|
|
|
19,762
|
|
|
|
10,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate
|
|
|
25.9
|
%
|
|
|
25.4
|
%
|
|
|
21.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
per Diluted Share
|
|
$
|
2.53
|
|
|
$
|
1.47
|
|
|
$
|
1.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Discontinued
Operation, Net of Taxes
|
|
|
|
|
|
|
1,211
|
|
|
|
(7,153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income per Diluted Share
|
|
|
2.53
|
|
|
|
1.47
|
|
|
|
1.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
483,061
|
|
|
|
334,338
|
|
|
|
255,884
|
|
|
|
|
(a) |
|
During the year ended December 31, 2005, we incurred
$20.7 million of inventory write-downs associated with our
2005 acquisition of Precision. Total Costs of Products and
Services associated with the 2005 Exit and Restructuring Charge
were $51.3 million (see page 30). |
|
(b) |
|
Includes equity in earnings of unconsolidated affiliates which
are integral to our operations. |
28
Consolidated
Revenues by Geographic Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
U.S.
|
|
|
38
|
%
|
|
|
37
|
%
|
|
|
36
|
%
|
Canada
|
|
|
18
|
|
|
|
18
|
|
|
|
17
|
|
Latin America
|
|
|
11
|
|
|
|
10
|
|
|
|
10
|
|
Europe, CIS and West Africa
|
|
|
13
|
|
|
|
15
|
|
|
|
18
|
|
Middle East and North Africa
|
|
|
14
|
|
|
|
12
|
|
|
|
12
|
|
Asia Pacific
|
|
|
6
|
|
|
|
8
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
Results
Revenues
Consolidated revenues increased $2,245.7 million, or 51.8%,
in 2006 as compared to 2005. The 2005 acquisition of Precision
Energy Services and Precision Drilling International contributed
approximately $1,040 million of the increase. The remaining
increase was due primarily to market activity, share gains and
pricing initiatives. North America generated revenue growth of
53.0%, and included revenue increases of 56.2% and 46.5% in the
U.S. and Canada, respectively. Excluding revenues from
acquisitions, North America revenues increased approximately
$700 million, or 33%. This regions increase outpaced
the North America rig count increase of 15.3%. The increase in
activity and pricing in the U.S. and Canadian markets were the
key contributors to revenue growth during 2006. Internationally,
revenues increased $973.8 million, 50.4%, or approximately
$510 million, 29%, excluding acquisitions, as compared to
the 10.4% increase in the average annual international rig
count. Excluding our acquisitions, the revenue increase was
generated by increased volume through market share and activity
improvement and increased pricing obtained through the renewal
of long-term contracts. Our international revenue growth,
excluding acquisitions, was led by increases of approximately
41%, 30% and 24% in the Middle East and North Africa region, the
Latin America region and the Europe, CIS and West Africa region,
respectively.
Consolidated revenues increased $1,201.5 million, or 38.4%,
in 2005 as compared to 2004. The acquisition of Precision Energy
Services and Precision Drilling International contributed
$448.3 million of the increase. Organic growth of
$753.2 million was due primarily to market activity, share
gains and pricing initiatives. North America generated revenue
growth of 43.8%, and included revenue increases of 41.0% and
49.7% in the U.S. and Canada, respectively. Excluding
acquisitions, North America revenues increased
$481.1 million, or 28.8%. This increase is compared to an
average annual North America rig count increase of 18.1%, and
was due to product specific market share gains, activity
increases and pricing improvement. Although our
U.S. operations generated substantial revenue growth during
2005, certain of our U.S. manufacturing and distribution
facilities were negatively impacted by devastating hurricane
activity in the Gulf Coast region. Internationally, revenues
increased $470.3 million, 32.2%, or $272.1 million,
18.6%, excluding acquisitions, as compared to the 8.6% increase
in the average annual international rig count. Excluding our
acquisitions, the revenue increase was generated by increased
volume through market share and activity improvement and
increased pricing obtained through the renewal of long-term
contracts. Our international revenue growth, excluding
acquisitions, was led by increases of 29.8%, 19.6% and 15.8% in
the Asia Pacific, Middle East and North Africa and Europe, CIS
and West Africa regions, respectively.
Gross
Profit
Our gross profit as a percentage of revenues increased from
31.9% in 2005 to 35.9% in 2006. This increase was primarily the
result of the positive impact of higher base revenues to cover
fixed costs, with additional contributions from stronger North
America and international pricing. In addition, the year ended
December 31, 2005 included inventory write downs of
$20.7 million associated with our 2005
integration/reorganization plan.
Our gross profit as a percentage of revenues increased from
31.1% in 2004 to 31.9% in 2005. The increase in our gross profit
percentage in 2005 was primarily volume related, with additional
contributions from stronger
29
pricing increases. This increase was offset by increasing labor
costs, inventory write downs of $20.7 million associated
with our 2005 integration/reorganization plan and the lower
margins of businesses acquired in 2005.
Research
and Development
Research and development expenses increased $42.1 million,
or 39.2%, in 2006 as compared to 2005 and $23.8 million, or
28.5%, in 2005 as compared to 2004. Research and development
expenses as a percentage of revenues were 2.3%, 2.5% and 2.7% in
2006, 2005 and 2004, respectively. Our 2005 acquisition
accounted for approximately $40 million of the current
years increase and approximately $15 million of the
increase experienced during 2005. The remaining increases of
research and development expenditures reflect our continued
focus on developing and commercializing new technologies as well
as investing in our core product offerings.
Corporate
General and Administrative
Corporate general and administrative expenses increased
$38.4 million, or 49.8%, from 2005 to 2006. Approximately
$17 million of the increase is due to severance charges.
The remainder of the increase is primarily due to increased
costs associated with higher employee compensation expense and
professional services fees. Corporate general and administrative
expenses increased $21.3 million, or 38.0%, from 2004 to
2005 due primarily to increases in stock-based compensation,
severance, increases in professional fees and increased costs
associated with our 2005 acquisition.
Exit
Costs and Restructuring Charges
During 2005, we underwent both a restructuring related to our
acquisition of Precision and reorganization activities related
to our historical businesses, including a change in management,
a change in regional structure and an evaluation of product
lines. We incurred exit costs of $114.2 million related to
this exit and reorganization. The charge included an inventory
write-down of $20.7 million which has been recorded in Cost
of Products and a remaining amount of $93.6 million which
has been recorded as Exit Costs and Restructuring Charges in the
accompanying Consolidated Statements of Income.
The exit plan related to the Precision acquisition resulted in
exit costs and restructuring charges of $105.5 million. We
initiated an integration plan to combine worldwide operations,
rationalize product lines, and eliminate certain products,
services and locations. Product line rationalization included
wireline, controlled pressure drilling and testing and
directional product and service offerings. Inventory totaling
$20.7 million was written-down. Asset impairment charges
included $20.9 million for fixed assets, $12.9 million
related to information technology and $1.7 million related
to investments. Employee severance and termination benefits
totaled $33.0 million. Contract terminations and facility
closures of $7.3 million were also recorded. In connection
with the valuation of the Precision assets, $9.0 million
was identified as purchased in process research and development
and was written-off.
The exit plan related to the reorganization activities
surrounding our historical businesses resulted in exit costs and
restructuring charges of $8.7 million. We incurred
severance and termination benefits of $3.6 million and
recorded $2.6 million of facility termination charges
related to the rationalization of two facilities in the United
Kingdom and the U.S. The remaining $2.5 million charge
related to the write-off of other assets.
30
The 2005 integration and reorganization plans are substantially
complete as of December 31, 2006. No additional costs were
recorded during the year ended December 31, 2006, and we do
not anticipate future charges, relating to these activities. A
summary of the exit costs and restructuring charges by segment
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Evaluation,
|
|
|
|
|
|
|
|
|
|
|
|
|
Drilling &
|
|
|
Completion &
|
|
|
|
|
|
|
|
|
|
Intervention
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Systems
|
|
|
Corporate
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Cost of Products
|
|
$
|
20,654
|
|
|
$
|
3,842
|
|
|
$
|
|
|
|
$
|
24,496
|
|
Cost of Services
|
|
|
25,766
|
|
|
|
1,083
|
|
|
|
|
|
|
|
26,849
|
|
Research and Development
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
Selling General &
Administrative
|
|
|
17,349
|
|
|
|
3,803
|
|
|
|
|
|
|
|
21,152
|
|
Corporate General &
Administrative
|
|
|
|
|
|
|
|
|
|
|
32,738
|
|
|
|
32,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
72,769
|
|
|
|
8,728
|
|
|
|
32,738
|
|
|
|
114,235
|
|
Cash Payments
|
|
|
(20,239
|
)
|
|
|
(7,905
|
)
|
|
|
(13,830
|
)
|
|
|
(41,974
|
)
|
Non-cash Utilization
|
|
|
(52,410
|
)
|
|
|
(722
|
)
|
|
|
(15,852
|
)
|
|
|
(68,984
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
$
|
120
|
|
|
$
|
101
|
|
|
$
|
3,056
|
|
|
$
|
3,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006, the remaining accrual was
comprised primarily of severance benefits. The length of time we
are obligated to make severance payments varies, with the
longest obligation continuing through 2018.
Gain
on Sale of Universal Common Stock
We sold our remaining 6.75 million shares of Universal
Compression common stock during 2005 for net proceeds of
$276.8 million and recognized a gain of $115.5 million
with no related tax impact. During 2004, we sold
7.0 million shares of Universal Compression common stock
for net proceeds of $231.8 million and recognized a gain of
$77.6 million with no related tax impact.
Debt
Redemption Expense
During the third quarter of 2005, we settled our Zero Coupon
Convertible Senior Debentures and expensed $4.7 million,
$3.3 million net of taxes, of unamortized issuance costs.
Interest
Expense
Interest expense increased $29.2 million, or 36.4%, in 2006
as compared to 2005. This increase was due primarily to our
additional long-term debt issuances during 2006 used to fund our
acquisition of shares under our share repurchase program and to
fund current year acquisitions. The increase was partially
offset by the settlement of our Zero Coupon Convertible Senior
Debentures and the reduction of our outstanding debt balance
with the proceeds received from the sale of our remaining
investment in Universal Compression, which occurred in the third
and fourth quarters of 2005, respectively. Interest expense
increased $16.8 million, or 26.4%, in 2005 as compared to
2004. This increase was due primarily to the incremental
borrowings used to fund the cash portion of our 2005
acquisition, offset by the settlement of our Zero Coupon
Convertible Senior Debentures during the third quarter of 2005.
Other,
Net
Other, net decreased $32.8 million from 2005 to 2006
primarily as a result of unfavorable changes in foreign exchange
rates experienced during the current year. In addition, the year
ended December 31, 2005 included equity in earnings of
$9.5 million from our investment in Universal Compression.
Our remaining interest in Universal Compression was sold in
December of 2005. Our other, net increased approximately
$9.2 million from 2004 to 2005 primarily due to the
favorable impact of fair value changes in foreign exchange and
interest rate derivatives not accounted for as hedging
instruments.
31
Income
Taxes
Our effective tax rates were 25.9% in 2006, 25.4% in 2005, and
21.5% in 2004. During 2006, we realized a tax benefit of
$26.4 million related to the favorable settlement of
certain foreign tax exposures, which lowered our effective rate
for the period.
During 2005, we incurred exit and restructuring charges and debt
redemption expense of $119.0 million, $81.9 million
net of tax, and a gain on our sale of Universal Compression
common stock of $115.5 million with no related tax impact.
We also incurred additional tax expense of $23.9 million
associated with the impairment of certain foreign tax credits
resulting from the integration of the Precision acquisition into
our tax structure. These items and their associated income tax
impact reduced our 2005 effective income tax rate.
Our 2004 effective tax rate was reduced due to our sale of
Universal common stock which generated a $77.6 million gain
with no related tax impact.
Segment
Results
Evaluation,
Drilling & Intervention Services
Evaluation, Drilling & Intervention Services revenues
increased $1,705.3 million, or 67.4%, in 2006 as compared
to 2005. All of our product lines generated substantial growth.
Our third quarter 2005 acquisition of Precision Energy Services
provided significant top-line growth in our controlled pressure
drilling and testing systems, cased and open hole wireline and
directional drilling product line offerings. Geographically, the
North America revenue increase of $849.5 million, or 69.1%,
included approximately $570 million of revenues from
acquisitions. The increase of approximately 28% before
acquisitions was due to volume growth above the 15.3% increase
in the average annual North America rig count and price
increases in the U.S. market implemented during the first
half of 2006. International revenues increased
$855.7 million, or 65.8%, from 2005 to 2006. The most
significant organic international growth was in the Middle East
and North Africa region, the Asia Pacific region, and the
Europe, CIS and West Africa region, where revenues increased
approximately 43%, 40% and 31%, respectively. Our international
revenue growth, excluding acquisitions, increased approximately
$390 million, or 35% as compared to a 10.4% increase in the
average international rig count. This increase reflects our
continued investment in the Eastern Hemisphere and new,
technologically advanced product offerings.
Evaluation, Drilling & Intervention Services revenues
increased $831.1 million, or 49.0%, in 2005 as compared to
2004. Excluding the impact of acquisitions, the increase was
$382.8 million, or 22.6%. Our controlled pressure drilling
and testing systems, proprietary drilling tools, well
installation systems and intervention services all posted
significant growth during 2005, excluding the impact of
acquisitions. Our 2005 acquisition provided significant top-line
growth to our cased and open hole wireline and directional
drilling product line offerings. Geographically, the North
America revenue increase of $446.9 million, or 57.2%,
included $250.1 million of revenues from the Precision
Energy Services acquisition. The increase of 25.2% before
acquisitions was due to volume growth above the 18.1% increase
in the average annual North America rig count and price
increases in the U.S. market implemented throughout 2005.
International revenues increased $384.2 million, or 41.9%,
from 2004 to 2005. Precision Energy Services contributed
$198.2 million of international revenue of which
approximately 41% was derived in Latin America. Excluding
acquisitions, the international revenue increase of
$186.0 million, or 20.3%, was generated primarily by
increases of 25.0%, 20.6%, and 20.2% in the Latin America
region, the Europe, CIS and West Africa region and the Asia
Pacific region, respectively. This increase in international
revenues was over two times the increase in activity as measured
by the average annual international rig count, which increased
8.6%, and reflects our continued investment in the Eastern
Hemisphere and new, technologically advanced product offerings.
Our gross profit as a percentage of revenue was 38.0% in 2006,
34.2% in 2005, and 34.1% in 2004. The increase in our gross
profit percentage in 2006 was primarily volume driven, with
additional benefits realized from the North America and
international price increases. The year ended 2005 included
$20.7 million of inventory write downs associated with our
2005 integration/reorganization plan. The increase in our gross
profit percentage in 2005 over 2004 levels was due primarily to
increases in pricing and volume, offset by increasing labor and
raw material costs, the impact of the 2005 hurricanes on our
U.S. operations, an inventory write down of
$20.7 million associated
32
with our 2005 integration/reorganization plan and the impact of
the 2005 acquisition. Although the acquired product lines have
similar margins to our historical divisional margins in North
America, the
start-up
nature of the operations in the Eastern Hemisphere had a
negative impact on overall gross profit margins of the acquired
business during 2005.
Research and development expenses increased $39.4 million,
or 69.3%, from 2005 to 2006 and $17.7 million, or 45.0%,
from 2004 to 2005. Our late 2005 acquisition of Precision was
the primary cause of the increase in expenditures year over
year. As a percentage of revenues, research and development
expenses for each of the three years ended 2006, 2005 and 2004
were 2.3%.
Selling, general and administrative expenses as a percentage of
revenues were 11.5%, 11.9%, and 12.7% in 2006, 2005 and 2004,
respectively. The decline as a percentage of revenues was due
primarily to our higher revenue base to absorb certain inherent
fixed costs included in our selling, general and administrative
expenses, such as intangible asset amortization.
Completion &
Production Systems
Completion & Production Systems revenues increased
$540.4 million, or 29.9%, in 2006 as compared to 2005. This
increase was driven primarily by higher demand across all
product lines. On a geographic basis, North America revenues
increased $422.4 million, or 36.0%, and included increases
of 48.0% and 16.3% in the U.S. and Canada, respectively.
Improvements in the region, beyond increases in activity, were
primarily due to North America price increases and product
specific U.S. market share gains. International revenues
improved $118.0 million, or 18.7%, and were led by revenue
growth of 35.7% in the Middle East and North Africa region and
31.2% in the Latin America region.
Completion & Production Systems revenues increased
$370.3 million, or 25.8%, in 2005 as compared to 2004.
Significant revenue growth was generated by our portfolio of
artificial lift products and services and our continued
introduction of our fracturing technologies. We also realized
revenue growth in our sand screen applications, including
expandable sand screens. North America revenues increased
$284.2 million, or 32.0%, and included increases of 42.9%
and 17.3% in the U.S. and Canada, respectively. In addition to
an increase in activity, as indicated by an 18.1% increase in
the average annual North America rig count, increases in pricing
and product specific U.S. market share gains attributed to
the increase in revenue. Our international operations realized
revenue growth of $86.1 million, or 15.8%. The Eastern
Hemisphere fueled this robust growth with increases of 40.4%,
27.6% and 8.6% in the Asia Pacific region, the Middle East and
North Africa region and the Europe, CIS and West Africa region,
respectively.
Gross profit as a percentage of revenue was 32.1% in 2006, 28.6%
in 2005, and 27.6% in 2004. The continued increase in this
segments gross profit percentages was due primarily to the
higher revenue base, increases in pricing in the
U.S. market and changes in product mix.
Selling, general and administrative expenses as a percentage of
revenues were 11.7%, 13.7% and 15.3% in 2006, 2005 and 2004,
respectively. The percentage decline was due primarily to our
higher revenue base and certain inherent fixed costs included in
our selling, general and administrative expenses such as
intangible asset amortization. In addition, the year ended 2006
includes the effect from the divestiture of a portion of our
minority interest in a subsidiary. This transaction represents
approximately 7% of selling, general and administrative expenses
for the year ended 2006.
Discontinued
Operation
Our discontinued operation consists of our Gas Services
International compression fabrication business. We generated a
gain from our discontinued operation of $1.2 million, net
of taxes, for the year ended December 31, 2005 and incurred
a loss from our discontinued operation, net of taxes, of
$7.2 million for the year ended December 31, 2004. The
sale of this business was finalized in July 2005 for a gain of
approximately $0.6 million. Included in the 2004 loss were
non-cash charges related to goodwill and asset impairments of
$3.1 million and an income tax provision of
$2.4 million to record a valuation allowance against
unrealized deferred tax assets.
33
Liquidity
and Capital Resources
Historical
Cash Flows
Our historical cash flows for the years ended December 31,
2006 and 2005 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In millions)
|
|
|
Net Cash Provided by Operating
Activities
|
|
$
|
1,087.0
|
|
|
$
|
503.1
|
|
Acquisition of Businesses, Net of
Cash Acquired
|
|
|
(194.3
|
)
|
|
|
(991.1
|
)
|
Acquisition of Intellectual
Property
|
|
|
(31.2
|
)
|
|
|
(13.4
|
)
|
Capital Expenditures for Property,
Plant & Equipment
|
|
|
(1,071.1
|
)
|
|
|
(526.6
|
)
|
Proceeds from Sale of Universal
Common Stock
|
|
|
|
|
|
|
276.8
|
|
Proceeds from Sale of Assets and
Businesses
|
|
|
39.9
|
|
|
|
15.9
|
|
Other Investing Activities
|
|
|
14.2
|
|
|
|
(16.5
|
)
|
Cash Paid for Redemption of Zero
Coupon Convertible Debentures
|
|
|
|
|
|
|
(348.8
|
)
|
Borrowings of Long-Term Debt and
Short-Term Facilities, Net
|
|
|
622.5
|
|
|
|
728.8
|
|
Purchases of Treasury Shares
|
|
|
(548.6
|
)
|
|
|
|
|
Proceeds from Exercise of Stock
Options
|
|
|
55.4
|
|
|
|
191.1
|
|
Other Financing Activities
|
|
|
18.2
|
|
|
|
(2.5
|
)
|
|
|
|
|
|
|
|
|
|
Net Decrease in Cash and Cash
Equivalents
|
|
$
|
(8.0
|
)
|
|
$
|
(183.2
|
)
|
|
|
|
|
|
|
|
|
|
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. In 2005, we
also generated cash proceeds from the sale of our investment in
Universal Compression Holdings, Inc. and non-core businesses. We
also historically have accessed banks for short-term loans from
uncommitted borrowing arrangements and the capital markets with
debt, equity and convertible offerings. We maintain a shelf
registration statement covering the future issuance of various
types of securities, including debt, common shares, preferred
shares and warrants.
Committed
Borrowing Facilities
The following summarizes our short-term committed financing
facilities and our usage and availability of committed
facilities as of December 31, 2006 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Uses of Availability
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
Short-term Committed
|
|
Facility
|
|
|
Expiration
|
|
|
Paper
|
|
|
|
|
|
Letters of
|
|
|
Committed
|
|
Financing Facilities
|
|
Amount
|
|
|
Date
|
|
|
Support
|
|
|
Drawn
|
|
|
Credit
|
|
|
Availability
|
|
|
Revolving Credit Facility
|
|
$
|
1,500.0
|
|
|
|
May 2011
|
|
|
$
|
490.8
|
|
|
$
|
75.3
|
|
|
$
|
25.8
|
|
|
$
|
908.1
|
|
Canadian Facility
|
|
|
21.5
|
|
|
|
July 2007
|
|
|
|
|
|
|
|
6.9
|
|
|
|
0.3
|
|
|
|
14.3
|
|
In August 2005, we entered into a
364-Day
Revolving Credit Agreement
(364-Day
Facility). Under this agreement, we were allowed to borrow
up to $1.2 billion to fund the redemption of our zero
coupon convertible senior debentures and the acquisition of
Precision Energy Services and Precision Drilling International,
and were allowed to fund certain refinancings, including
commercial paper repayments or common share repurchases. The
364-Day
Facility was terminated on August 10, 2006 in connection
with the completion of our debt issuance of $600.0 million.
On May 2, 2006, we amended and restated our revolving
credit agreement with a syndicate of banks of which JPMorgan
Chase Bank is the Administrative Agent (Revolving Credit
Facility). As restated, the Revolving Credit Facility
provided us a $750.0 million, five-year multi-currency
senior unsecured revolving credit facility. The
34
Revolving Credit Facility provided that, with the consent of the
lenders, we could increase the size of the facility up to
$1.5 billion. Effective November 14, 2006, we
increased the aggregate lending commitment available under this
facility to $1.5 billion. Based on our current debt
ratings, we will pay a commitment fee of 0.08% per year,
and borrowings under the facility will bear interest at variable
annual rates based on LIBOR plus 0.27%, plus an additional 0.05%
for any period in which more than half of the total commitment
is utilized. The Revolving Credit Facility superceded our
previous $500.0 million facility that was scheduled to
mature May 12, 2006. The weighted average interest rate on
the outstanding borrowing under this facility was 5.4% at
December 31, 2006.
The Revolving Credit Facility requires us to maintain a
debt-to-capitalization
ratio of less than 60% and contains other covenants and
representations customary for investment-grade commercial
credit. We were in compliance with these covenants at
December 31, 2006. The Revolving Credit Facility is
guaranteed by our wholly-owned indirect subsidiary, Weatherford
International, Inc., subject to certain conditions. The
Revolving Credit Facility does not contain any provisions that
make its availability dependent upon our credit ratings;
however, the interest rate is dependent upon the credit rating
of our long-term senior debt.
We also maintain a Canadian dollar committed facility
(Canadian Facility) to support our operations in
that country. The Canadian Facility provides for borrowings or
letters of credit under the facility up to an aggregate of
25.0 million Canadian dollars, or $21.5 million as of
December 31, 2006. The weighted average interest rate of
the outstanding borrowings of this facility was 6.7% at
December 31, 2006.
Commercial
Paper
In October 2005, we initiated a commercial paper program under
which we may from time to time issue short-term unsecured notes.
In connection with this program, we entered into agreements with
third-party lending institutions under which each of these
lending institutions may act as dealers of this commercial
paper. Also in connection with the program, Weatherford
International, Inc., one of our wholly-owned indirect
subsidiaries, provides a guarantee of any commercial paper notes
that we may issue. Our commercial paper issuances are supported
by the Revolving Credit Facility. In connection with the
increase in the aggregate lending commitments under our
Revolving Credit Facility, the size of our commercial paper
program was increased to $1.5 billion on November 15,
2006. As of December 31, 2006, we had $490.8 million
of outstanding commercial paper issuances with maturities
ranging from 3 to 26 days. The weighted average interest
rate related to outstanding commercial paper issuances at
December 31, 2006 was 5.4%.
Cash
Requirements
During 2007, we anticipate our cash requirements to include
working capital needs, capital expenditures, and the repurchase
of our common shares.
Capital expenditures for 2007 are projected to be approximately
$1.0 billion. The expenditures are expected to be used
primarily to support the growth of our business and operations.
Capital expenditures during the year ended December 31,
2006 were $999.3 million, net of proceeds from tools lost
down hole of $71.8 million.
In December 2005, our board authorized us to repurchase up to
$1.0 billion of our outstanding common shares. We may from
time to time repurchase our common shares depending upon the
price of our common shares, our liquidity and other
considerations. During the year ended December 31, 2006, we
repurchased 12.5 million of our common shares at an
aggregate price of $548.6 million.
From time to time we acquire businesses or technologies that
increase our range of products and services, expand our
geographic scope or are otherwise strategic to our businesses.
During the year ended December 31, 2006, we used
approximately $194.3 million in cash, net of cash acquired,
in business acquisitions.
35
Contractual
Obligations
The following summarizes our contractual obligations and
contingent commitments by period. The obligations we pay in
future periods may vary from those reflected here due to certain
assumptions including the duration of our obligations and
anticipated actions by third parties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less than
|
|
|
1-3
|
|
|
4-5
|
|
|
After 5
|
|
Obligations and Commitments
|
|
Total
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
|
(In millions)
|
|
|
Recorded Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
$
|
633.0
|
|
|
$
|
633.0
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Senior notes (a)
|
|
|
1,550.0
|
|
|
|
|
|
|
|
|
|
|
|
350.0
|
|
|
|
1,200.0
|
|
Other long-term debt
|
|
|
23.8
|
|
|
|
13.5
|
|
|
|
8.7
|
|
|
|
1.6
|
|
|
|
|
|
Unrecorded Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncancellable operating leases
|
|
|
315.2
|
|
|
|
59.9
|
|
|
|
79.0
|
|
|
|
52.6
|
|
|
|
123.7
|
|
Letters of credit
|
|
|
159.1
|
|
|
|
106.8
|
|
|
|
33.4
|
|
|
|
10.1
|
|
|
|
8.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
2,681.1
|
|
|
$
|
813.2
|
|
|
$
|
121.1
|
|
|
$
|
414.3
|
|
|
$
|
1,332.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
Short-term
Debt
We have short-term borrowings with various domestic and
international institutions pursuant to uncommitted facilities.
At December 31, 2006, we had $60.0 million in
short-term borrowings outstanding under these arrangements with
a weighted average interest rate of 6.5%.
Senior
Notes
On August 7, 2006, we completed an offering of
$600.0 million senior notes at a coupon rate of 6.50%
(6.50% Senior Notes) with a maturity in August
2036. Net proceeds of $588.3 million were used to partially
repay outstanding borrowings on our commercial paper program.
Interest on the notes is payable semi-annually in arrears on
February 1 and August 1 of each year. The notes are fully
and unconditionally guaranteed by Weatherford International,
Inc. In connection with the issuance, we elected to notify our
administrative agent under our
364-Day
Facility to terminate the commitments under that agreement. In
addition, the size of our commercial paper program was reduced
to correspond to the availability under the Revolving Credit
Facility.
On May 15, 2006, the stated maturity date, we repaid in
full the outstanding $200.0 million of
71/4% Senior
Notes plus all accrued interest.
On February 17, 2006, we completed an offering of
$350.0 million of 5.50% senior notes due 2016
(5.50% Senior Notes). The notes are fully and
unconditionally guaranteed by Weatherford International, Inc.
Interest on the notes is payable semi-annually in arrears on
February 15 and August 15 of each year. Net proceeds from the
offering were $346.2 million and were used to reduce
borrowings on our commercial paper program.
On October 7, 2003, we issued $250.0 million of
4.95% senior notes due 2013 (4.95% Senior
Notes). The notes are fully and unconditionally guaranteed
by Weatherford International, Inc. Interest on the notes is
payable semi-annually in arrears on April 15 and October 15 of
each year.
On November 16, 2001, we issued $350.0 million of
65/8% senior
notes due 2011
(65/8% Senior
Notes). Interest on the
65/8% Senior
Notes is payable semi-annually on May 15 and November 15.
The notes were issued by our wholly-owned indirect subsidiary,
Weatherford International, Inc., and are fully and
unconditionally guaranteed by Weatherford International Ltd.
36
Other
Long-term Debt
We have long-term borrowings with various domestic and
international institutions, primarily related to capital leases
and foreign and other bank debt. At December 31, 2006, we
had $23.8 million in other long-term borrowings outstanding
under these arrangements with a weighted average interest rate
of 6.2%.
Derivative
Instruments
From time to time, we enter into derivative transactions to
hedge existing or projected exposures to changes in interest
rates and foreign currency exchange rates. We do not enter into
derivative transactions for speculative or trading purposes.
Interest
Rate Swaps
We use interest rate swap agreements to take advantage of
available short-term interest rates. Amounts received upon
termination of the swap agreements represent the fair value of
the agreements at the time of termination and are recorded as an
adjustment to the carrying value of the related debt. These
amounts are being amortized as a reduction to interest expense
over the remaining term of the debt.
As of December 31, 2006 and 2005, we had net unamortized
gains of $14.3 million and $18.3 million,
respectively, associated with interest rate swap terminations.
These gains have been deferred and recorded as an adjustment to
the carrying value of the related debt and are amortized against
interest expense over the remaining term of the debt issuance
against which they were hedged. Our interest expense was reduced
by $4.0 million, $6.8 million and $12.3 million
for 2006, 2005 and 2004, respectively, as a result of our
interest rate swap activity. There were no interest rate swap
agreements outstanding as of December 31, 2006 and 2005.
Cash Flow
Hedges
During December 2005, we recorded a $4.2 million loss in
Other Comprehensive Income on interest rate derivatives entered
into and terminated in 2005; this loss is being amortized to
interest expense over the life of the 5.50% Senior Notes.
In January 2006 we entered into interest rate derivative
instruments for a notional amount of $350.0 million to
hedge projected exposures to interest rates in anticipation of a
future debt issuance. Those hedges were terminated at the time
of issuance of the 5.50% Senior Notes. We received cash
proceeds of $6.2 million at termination, and the gain on
these hedges is being amortized to interest expense over the
life of the 5.50% Senior Notes.
In July 2006 we entered into interest rate derivative
instruments for a notional amount of $500.0 million to
hedge projected exposures to interest rates in anticipation of a
future debt issuance. Those hedges were terminated at the time
of issuance of the 6.50% Senior Notes. We paid a cash
settlement of $1.5 million at termination, and the loss on
these hedges is being amortized to interest expense over the
life of the 6.50% Senior Notes.
Other
Derivative Instruments
As of December 31, 2006 and 2005, we had several foreign
currency forward contracts and one option contract with notional
amounts aggregating $271.0 million and $88.9 million,
respectively, which were entered into to hedge exposure to
currency fluctuations in various foreign currencies, including
the euro, the Australian dollar, the Canadian dollar, the
Norwegian kroner, the Brazilian reais, the Mexican peso, the
Thai bhat and the pound sterling. The total estimated change in
fair value of these contracts compared to the original notional
amount at December 31, 2006 and 2005 resulted in a
liability of $1.0 million and $0.1 million,
respectively. These derivative instruments were not designated
as hedges and the changes in fair value of the contracts are
recorded each period in current earnings.
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 with notional amounts at
execution totaling $588.9 million. On March 31, 2006,
cross-currency swaps with an original notional value of
$140.4 million were terminated and we paid a net settlement
in April 2006 of $3.5 million. On
37
September 11, 2006, a cross-currency swap with an original
notional value of $84.2 million was terminated and we paid
a net settlement of $6.3 million. At December 31,
2006, we had notional amounts outstanding of
$364.3 million. The total estimated change in fair value of
these contracts compared to the original notional amount at
December 31, 2006 resulted in a liability of
$11.1 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. During
the year ended December 31, 2006, net cash proceeds of
$3.2 million were received from the cross-currency swaps,
which were the net settlements of quarterly interest rate
payments on the two currencies swapped. These quarterly net
interest rate settlements are based on the variable interest
rates of both the Canadian dollar and the U.S. dollar.
We also have the following cash commitments and contractual
obligations:
Warrant
On February 28, 2002, we issued Shell Technology Ventures
Inc. a warrant to purchase up to 6.5 million common shares
at a price of $30.00 per share. Effective July 12,
2006, this agreement was amended and restated to reflect, among
other things, changes in our capital structure. The warrant
remains exercisable until February 28, 2012 and is subject
to adjustment for changes in our capital structure or the
issuance of dividends in cash, securities or property. Upon
exercise by the holder, settlement may occur through physical
delivery, net share settlement, net cash settlement or a
combination of those methods. The net cash settlement option
upon exercise is at our sole discretion. In addition, the
amended and restated warrant no longer contains a conversion
feature, which previously allowed the warrant holder to convert
the warrant into common shares. The amendment did not affect the
accounting or classification of the warrant.
Pension
Plans
We have defined benefit pension plans covering certain of our
U.S. and international employees that provide various pension
benefits. During 2006, we contributed $9.6 million towards
those plans, and for 2007, we anticipate funding approximately
$10.8 million through cash flows from operating activities.
Our nonqualified supplemental executive retirement plan is
unfunded; however, we maintain life insurance policies on the
participants with the intent to use the proceeds from such
policies to meet the plans benefit requirements.
Zero
Coupon Convertible Senior Debentures
On June 30, 2000, we completed the private placement of
$910.0 million face amount of Zero Coupon Debentures. These
debentures were issued at $501.6 million, providing the
holders with an annual 3% yield to maturity. At June 30,
2005, the holders had the option to require us to repurchase the
Zero Coupon Debentures at the accreted amount which was
$582.2 million. In total, $11.0 million of face value
for an aggregate accreted value of $7.1 million was put to
us. We settled this obligation during July 2005 with cash on
hand.
On July 28, 2005, we called for redemption on
August 29, 2005 of all of the outstanding Zero Coupon
Debentures. At their option, certain holders tendered for
conversion an aggregate of $367.4 million principal amount
at maturity. The debentures were converted to an aggregate of
approximately 7.3 million of our common shares. We redeemed
the remaining $531.6 million aggregate principal amount at
maturity for a cost of $341.8 million. We funded
$240.0 million of that amount at that time through a
borrowing on our
364-Day
Facility and the remaining $101.8 million with available
cash.
Off
Balance Sheet Arrangements
Guarantees
The
65/8% Senior
Notes of Weatherford International, Inc. were guaranteed by
Weatherford International Ltd. as of December 31, 2006. The
following obligations of Weatherford International Ltd. were
guaranteed by Weatherford International, Inc. as of
December 31, 2006: (i) the Revolving Credit Facility,
(ii) the Canadian Facility, (iii) the
4.95% Senior Notes, (iv) the 5.50% Senior Notes,
(v) the 6.50% Senior Notes and (vi) issuances of
commercial paper.
38
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, 2006, we had
$159.1 million of letters of credit and bid and performance
bonds outstanding, consisting of $133.0 million outstanding
under various uncommitted credit facilities and
$26.1 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.
Operating
Leases
We are committed under various operating lease agreements
primarily related to office space and equipment. Generally,
these leases include renewal provisions as well as provisions
which permit the adjustment of rental payments for taxes,
insurance and maintenance related to the property.
Related
Party Agreements
See Item 8. Financial Statements and Supplementary
Data Notes to Consolidated Financial
Statements Note 20 for additional
discussion of related party transactions.
Critical
Accounting Policies and Estimates
Our discussion and analysis of our financial condition and
results of operation is based upon our consolidated financial
statements. We prepare these financial statements in conformity
with U.S. generally accepted accounting principles. As
such, we are required to make certain estimates, judgments and
assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the periods
presented. We base our estimates on historical experience,
available information and various other assumptions we believe
to be reasonable under the circumstances. On an on-going basis,
we evaluate our estimates; however, actual results may differ
from these estimates under different assumptions or conditions.
The accounting policies we believe require managements
most difficult, subjective or complex judgments and are the most
critical to our reporting of results of operations and financial
position are as follows:
Business
Combinations and Goodwill and Indefinite-Lived Intangible
Assets
Goodwill and intangible assets acquired in connection with
business combinations represent the excess of consideration over
the fair value of tangible net assets acquired. Certain
assumptions and estimates are employed in determining the fair
value of assets acquired, the fair value of liabilities assumed,
as well as in determining the allocation of goodwill to the
appropriate reporting unit.
We perform an impairment test for goodwill and indefinite-lived
intangible assets annually as of October 1, or earlier if
indicators of potential impairment exist. Our goodwill
impairment test involves a comparison of the fair value of each
of our reporting units with their carrying value. Our impairment
test for indefinite-lived intangible assets involves the
comparison of the fair value of the intangible asset and its
carrying value. The fair value is determined using discounted
cash flows and other market-related valuation models, including
earnings multiples and comparable asset market values. Certain
estimates and judgments are required in the application of these
fair value models. The discounted cash flow analysis consists of
estimating the future cash flows that are directly associated
with each of our reporting units. These cash flows, in addition
to the earnings multiples and comparable asset market values,
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.
39
Long-Lived
Assets
Long-lived assets, which includes property, plant and equipment
and definite-lived intangibles, comprise a significant amount of
our total assets. In accounting for long-lived assets, we must
make estimates about the expected useful lives of the assets and
the potential for impairment based on the fair value of the
assets and the cash flows they are expected to generate. The
value of the long-lived assets is then amortized over its
expected useful life. A change in the estimated useful lives of
our long-lived assets would have an impact on our results of
operations. We estimate the useful lives of our long-lived asset
groups as follows:
|
|
|
|
|
Useful Lives
|
|
Buildings and leasehold
improvements
|
|
5-40 years or lease term
|
Rental and service equipment
|
|
2-20 years
|
Machinery and other
|
|
2-12 years
|
Intangible assets
|
|
3-20 years
|
In estimating the useful lives of our property, plant and
equipment, we rely primarily on our actual experience with the
same or similar assets. The useful lives of our intangible
assets are determined by the years over which we expect the
assets to generate a benefit based on legal, contractual or
regulatory terms.
Long-lived assets to be held and used by us are reviewed to
determine whether any events or changes in circumstances
indicate that we may not be able to recover the carrying amount
of the asset. Factors that might indicate a potential impairment
may include, but are not limited to, significant decreases in
the market value of the long-lived asset, a significant change
in the long-lived assets physical condition, the
introduction of competing technologies, legal challenges, a
change in industry conditions or a reduction in cash flows
associated with the use of the long-lived asset. If these or
other factors exist that indicate the carrying amount of the
asset may not be recoverable, we determine whether an impairment
has occurred through the use of an undiscounted cash flow
analysis. The undiscounted cash flow analysis consists of
estimating the future cash flows that are directly associated
with and expected to arise from the use and eventual disposition
of the asset over its remaining useful life. These cash flows
are inherently subjective and require significant estimates
based upon historical experience and future expectations such as
budgets and internal projections. If the undiscounted cash flows
do not exceed the carrying value of the long-lived asset, an
impairment has occurred, and we recognize a loss for the
difference between the carrying amount and the estimated fair
value of the asset. The fair value of the asset is measured
using market prices, or in the absence of market prices, is
based on an estimate of discounted cash flows. Cash flows are
generally discounted at an interest rate commensurate with our
weighted average cost of capital for a similar asset.
Employee
Stock-Based Compensation
In December 2004, the Financial Accounting Standards Board
(FASB) issued SFAS No. 123 (Revised
2004) Share-Based Payment
(SFAS No. 123R).
SFAS No. 123R addresses the accounting for all
share-based payment awards, including shares issued under
employee stock purchase plans, stock options, restricted stock
and stock appreciation rights. Under the new standard, companies
are no longer able to account for share-based compensation
transactions using the intrinsic value method in accordance with
Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to
Employees. Under the intrinsic method, no compensation
expense is recognized when the exercise price of an employee
stock option is equal to the common share market price on the
grant date and all other factors of the grant are fixed. Under
SFAS No. 123R, companies must account for share-based
compensation transactions using a fair-value method and
recognize the expense in the consolidated statement of income.
Effective January 1, 2006, we adopted
SFAS No. 123R using the modified-prospective
transition method. Under this method, compensation cost is
recognized for all awards granted, modified or settled after the
adoption date as well as for any awards that were granted prior
to the adoption date for which the requisite service has not yet
been rendered.
Previously on January 1, 2003, we adopted
SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123), to
expense the fair value of employee stock-based compensation for
awards granted, modified or settled subsequent to
December 31, 2002. We elected the prospective method of
adoption, and under this method, the fair value of employee
stock-based awards granted or modified subsequent to adoption is
measured at the grant
40
date and is recognized as an expense over the service period,
which is usually the vesting period. Accordingly, the adoption
of SFAS No. 123Rs fair value method does not
have a significant impact on our reported results of operations
for the year ended December 31, 2006 as all of the grants
issued prior to the adoption of SFAS No. 123 were
fully vested in the prior year and the grants issued subsequent
to January 1, 2003 are currently being expensed at their
estimated fair value.
The fair value of each option is estimated using the
Black-Scholes option pricing model. Key assumptions in the
Black-Scholes option pricing model, some of which are based on
subjective expectations, are subject to change. A change in one
or more of these assumptions would impact the expense associated
with future grants. These key assumptions include the volatility
of our common shares, the risk-free interest rate and the
expected life of options.
We used the following weighted average assumptions in the
Black-Scholes option pricing model for determining the fair
value of our 2005 and 2006 stock option grants:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
|
|
|
Risk-Free
|
|
|
Expected
|
|
|
|
|
|
|
Volatility
|
|
|
Interest Rate
|
|
|
Life
|
|
|
Dividends
|
|
|
2005
|
|
|
38.88
|
%
|
|
|
4.4
|
%
|
|
|
5.0
|
|
|
|
None
|
|
2006
|
|
|
36.24
|
%
|
|
|
4.7
|
%
|
|
|
5.0
|
|
|
|
None
|
|
We calculated the expected volatility 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.
We are not required to recalculate the fair value of our stock
option grants estimated using the Black-Scholes option pricing
model after the initial calculation under the related option
terms as modified. However, a 100 basis point increase in our
expected volatility and risk-free interest rate at the grant
date would have had the following impact on our compensation
expense for the year ended December 31, 2006:
|
|
|
|
|
|
|
100 Basis Point Increase
|
|
|
|
(In millions)
|
|
|
Expected volatility
|
|
$
|
0.1
|
|
Risk-free interest rate
|
|
$
|
0.1
|
|
Pension
and Other Postretirement Benefits
In September 2006, the FASB issued Statement No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R)
(SFAS No. 158). Among other items,
SFAS No. 158 requires recognition of the overfunded or
underfunded status of an entitys defined benefit or
postretirement plan as an asset or liability in the financial
statements, requires the measurement of defined benefit or
postretirement plan assets and obligations as of the end of the
employers fiscal year, and requires recognition of the
previously deferred portion of defined benefit or postretirement
plans in other comprehensive income.
Amounts recognized in the financial statements must be
determined on an actuarial basis. Two of the more critical
assumptions in the actuarial calculations are the discount rate
for determining the current value of plan benefits and the
expected rate of return on plan assets. Discount rates are based
on the yields of government bonds or high quality corporate
bonds in the respective country or economic market. The expected
long-term rates of return on plan assets are based on a
combination of historical experience and anticipated future
returns in each of the asset categories. As we have both
domestic and international plans, the assumptions, though the
same in nature, are based on varying factors specific 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.
41
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:
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|
|
|
|
|
|
|
|
Increase (Decrease) of Annual
|
|
|
|
Pension Expense
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|
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|
50 Basis Point
|
|
|
50 Basis Point
|
|
|
|
Increase
|
|
|
Decrease
|
|
|
|
(In millions)
|
|
|
Discount rate
|
|
$
|
(1.2
|
)
|
|
$
|
1.6
|
|
Expected long-term rate of return
|
|
$
|
(0.6
|
)
|
|
$
|
0.6
|
|
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 2006, 2005 and 2004 were 25.9%, 25.4%
and 21.5%, respectively.
We operate in approximately 100 countries through various legal
entities. As a result, we are subject to numerous domestic and
foreign tax jurisdictions and tax agreements and treaties among
the various taxing authorities. Our operations in these
jurisdictions are taxed on various bases: income before taxes,
deemed profits (which is generally determined using a percentage
of revenues rather than profits) and withholding taxes based on
revenue. The calculation of our tax liabilities involves
consideration of uncertainties in the application and
interpretation of complex tax regulations in a multitude of
jurisdictions across our global operations. We recognize
potential liabilities and record tax liabilities for anticipated
tax audit issues in the U.S. and other tax jurisdictions based
on our estimate of whether, and the extent to which, additional
taxes will be due. The tax liabilities are reflected net of
realized tax loss carryforwards. We adjust these reserves upon
specific events; however, due to the complexity of some of these
uncertainties, the ultimate resolution may result in a payment
that is different from our current estimate of the tax
liabilities. If our estimate of tax liabilities proves to be
less than the ultimate assessment, an additional charge to
expense would result. If payment of these amounts ultimately
proves to be less than the recorded amounts, the reversal of the
liabilities would result in tax benefits being recognized in the
period when the contingency has been resolved and the
liabilities are no longer necessary. If the tax liabilities
relate to tax uncertainties existing at the date of the
acquisition of a business, the adjustment of such tax
liabilities will result in an adjustment to the goodwill
recorded at the date of acquisition. Changes in tax laws,
regulations, agreements and treaties, foreign currency exchange
restrictions or our level of operations or profitability in each
taxing jurisdiction could have an impact upon the amount of
income taxes that we provide during any given year.
Valuation
Allowance for Deferred Tax Assets
We record a valuation allowance to reduce the carrying value of
our deferred tax assets when it is more likely than not that a
portion or all of the deferred tax assets will expire before
realization of the benefit or that future deductibility is not
probable. The ultimate realization of the deferred tax assets
depends on the ability to generate sufficient taxable income of
the appropriate character and in the related jurisdiction in the
future. In evaluating our 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
42
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, 2006, our net deferred tax assets were
$90.5 million before a related valuation allowance of
$51.8 million. As of December 31, 2005, our net
deferred tax assets were $159.7 million excluding a related
valuation allowance of $44.0 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, establishes a framework for measuring fair value under
GAAP, and expands disclosures about fair value measurements.
SFAS No. 157 applies to other accounting
pronouncements that require or permit fair value measurements.
The new guidance is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and for
interim periods within those fiscal years. We are currently
evaluating the potential impact, if any, of the adoption of
SFAS No. 157 on our consolidated financial position,
results of operations and cash flows.
In July 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes an
Interpretation of FASB Statement No. 109
(FIN No. 48). FIN No. 48
prescribes a recognition threshold and measurement attribute for
financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. In
addition, it provides guidance on the measurement,
derecognition, classification and disclosure of tax positions,
as well as the accounting for related interest and penalties.
FIN No. 48 is effective for fiscal years beginning
after December 15, 2006. We do not expect the
Interpretation to have a material impact on our results from
operations or financial position.
|
|
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. At December 31, 2006,
approximately 38.9% of our net assets are impacted by changes in
foreign currencies in relation to the U.S. dollar. We
recorded a $45.4 million adjustment to increase our equity
account for the year ended December 31, 2006 to reflect the
net impact of the strengthening of various foreign currencies
against the U.S. dollar.
As of December 31, 2006, we had entered into several
foreign currency forward contracts with notional amounts
aggregating $271.0 million to hedge exposure to currency
fluctuations in various foreign currencies, including the euro,
the Australian dollar, the Canadian dollar, the Norwegian
kroner, the Mexican peso, and the pound sterling. The total
estimated change in fair value of these contacts compared to the
original notional amount
43
at December 31, 2006 resulted in a liability of
$1.0 million. These derivative instruments were not
designated as hedges and the changes in fair value of the
contracts are recorded each period in current earnings.
In addition, after the closing of the acquisition of Precision
Energy Services and Precision Drilling International, we entered
into a series of cross-currency swaps between the
U.S. dollar and Canadian dollar with notional amounts at
execution totaling $588.9 million. On March 31, 2006,
cross-currency swaps with an original notional value of
$140.4 million were terminated and we paid a net settlement
in April 2006 of $3.5 million. On September 11, 2006,
a cross-currency swap with an original notional value of
$84.2 million was terminated and we paid a net settlement
of $6.3 million. At December 31, 2006, we had notional
amounts outstanding of $364.3 million. The estimated change
in fair value of these contracts compared to the original
notional amount at December 31, 2006 resulted in a
liability of $11.1 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.
During the year ended December 31, 2006, net cash proceeds
of $3.2 million were received from the cross-currency
swaps, which were the net settlement of quarterly interest rate
payments on the two currencies swapped. These quarterly net
interest rate settlements are based on the variable interest
rates of both the Canadian dollar and the U.S. dollar.
Interest
Rates
We are subject to interest rate risk on our long-term
fixed-interest rate debt and variable-interest rate borrowings.
Variable rate debt, where the interest rate fluctuates
periodically, exposes us to short-term changes in market
interest rates. Fixed rate debt, where the interest rate is
fixed over the life of the instrument, exposes us to changes in
market interest rates reflected in the fair value of the debt
and to the risk that we may need to refinance maturing debt with
new debt at a higher rate. All other things being equal, the
fair value of our fixed rate debt will increase or decrease as
interest rates change.
Our long-term borrowings that were outstanding at
December 31, 2006 subject to interest rate risk consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
|
(In millions)
|
|
|
65/8% Senior
Notes due 2011
|
|
$
|
356.9
|
|
|
$
|
368.8
|
|
|
$
|
358.1
|
|
|
$
|
374.0
|
|
4.95% Senior Notes due 2013
|
|
|
255.4
|
|
|
|
245.2
|
|
|
|
256.0
|
|
|
|
244.5
|
|
5.50% Senior Notes due 2016
|
|
|
348.6
|
|
|
|
339.9
|
|
|
|
|
|
|
|
|
|
6.50% Senior Notes due 2036
|
|
|
595.7
|
|
|
|
619.5
|
|
|
|
|
|
|
|
|
|
We have various other long-term debt instruments of
$12.5 million, but believe the impact of changes in
interest rates in the near term will not be material to these
instruments. Short-term borrowings of $633.0 million at
December 31, 2006 and $741.5 million at
December 31, 2005 approximate fair value.
As it relates to our variable rate debt, if market interest
rates average 1.0% more in 2007 than the rates as of
December 31, 2006, interest expense for 2007 would increase
by $6.4 million. This amount was determined by calculating
the effect of the hypothetical interest rate on our variable
rate debt. This sensitivity analysis assumes there are no
changes in our financial structure.
Interest
Rate Swaps
We manage our debt portfolio to achieve an overall desired
position of fixed and floating rates and may employ interest
rate swaps as a tool to achieve that goal. The major risks from
interest rate derivatives include changes in the interest rates
affecting the fair value of such instruments, potential
increases in interest expense due to market increases in
floating interest rates and the creditworthiness of the
counterparties in such transactions. The counterparties to our
interest rate swaps are creditworthy multinational commercial
banks. We believe that the risk of counterparty nonperformance
is immaterial.
44
We have used interest rate swap agreements to take advantage of
available short-term interest rates. Amounts received upon
termination of the swap agreements represent the fair value of
the agreements at the time of termination and are recorded as an
adjustment to the carrying value of the related debt. These
amounts are being amortized as a reduction to interest expense
over the remaining term of the debt.
As of December 31, 2006 and 2005, we had net unamortized
gains of $14.3 million and $18.3 million,
respectively, associated with interest rate swap terminations.
These gains have been deferred and recorded as an adjustment to
the carrying value of the related debt and are amortized against
interest expense over the remaining term of the debt issuance
against which they were hedged. Our interest expense was reduced
by $4.0 million and $6.8 million for the years ended
December 31, 2006 and 2005, respectively. There were no
interest rate swap agreements outstanding as of
December 31, 2006.
45
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
INDEX TO
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
|
|
|
|
|
|
|
Page
|
|
|
Managements Report on
Internal Control Over Financial Reporting
|
|
|
47
|
|
Report of Independent Registered
Public Accounting Firm on Internal Control over Financial
Reporting
|
|
|
48
|
|
Report of Independent Registered
Public Accounting Firm
|
|
|
49
|
|
Consolidated Balance Sheets as of
December 31, 2006 and 2005
|
|
|
50
|
|
Consolidated Statements of Income
for each of the three years in the period ended
December 31, 2006
|
|
|
51
|
|
Consolidated Statements of
Shareholders Equity for each of the three years in the
period ended December 31, 2006
|
|
|
52
|
|
Consolidated Statements of Cash
Flows for each of the three years in the period ended
December 31, 2006
|
|
|
53
|
|
Notes to Consolidated Financial
Statements
|
|
|
54
|
|
Financial Statement
Schedule II:
|
|
|
|
|
Valuation and Qualifying Accounts
and Allowances
|
|
|
104
|
|
46
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, 2006. 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, 2006 the companys internal control over
financial reporting is effective.
Our assessment of the effectiveness of the Companys
internal control over financial reporting has been audited by
Ernst & Young LLP, an independent registered public
accounting firm, as stated in their report, which is included
herein. This report appears on page 48.
47
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of
Weatherford International Ltd. and Subsidiaries
We have audited managements assessment, included in the
accompanying Managements Report on Internal Control over
Financial Reporting, that Weatherford International Ltd.
maintained effective internal control over financial reporting
as of December 31, 2006, 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. Our
responsibility is to express an opinion on managements
assessment and an opinion on the effectiveness of 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, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, 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, managements assessment that Weatherford
International Ltd. maintained effective internal control over
financial reporting as of December 31, 2006, is fairly
stated, in all material respects, based on the COSO criteria.
Also, in our opinion, Weatherford International Ltd. maintained,
in all material respects, effective internal control over
financial reporting as of December 31, 2006, 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, 2006 and 2005 and the
related consolidated statements of income, shareholders
equity, and cash flows for each of the three years in the period
ended December 31, 2006, and our report dated
February 22, 2007 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Houston, Texas
February 22, 2007
48
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, 2006 and 2005, and the related consolidated
statements of income, shareholders equity, and cash flows
for each of the three years in the period ended
December 31, 2006. 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, 2006 and 2005, and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended
December 31, 2006, 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, 2006, the Company adopted
Statement of Financial Accounting Standards No. 123
(revised 2004), Share-Based Payment and, as discussed in
Note 16, 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), the
effectiveness of Weatherford International Ltd.s internal
control over financial reporting as of December 31, 2006,
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 22,
2007 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Houston, Texas
February 22, 2007
49
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except par value)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
126,287
|
|
|
$
|
134,245
|
|
Accounts Receivable, Net of
Allowance for Uncollectible
Accounts of $13,452 in 2006 and $12,210 in 2005
|
|
|
1,560,849
|
|
|
|
1,259,990
|
|
Inventories
|
|
|
1,239,034
|
|
|
|
890,121
|
|
Current Deferred Tax Assets
|
|
|
144,833
|
|
|
|
158,653
|
|
Other Current Assets
|
|
|
288,994
|
|
|
|
195,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,359,997
|
|
|
|
2,638,873
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, at
Cost:
|
|
|
|
|
|
|
|
|
Land, Buildings and Leasehold
Improvements
|
|
|
457,593
|
|
|
|
351,306
|
|
Rental and Service Equipment
|
|
|
2,813,739
|
|
|
|
2,361,188
|
|
Machinery and Other
|
|
|
1,657,575
|
|
|
|
1,248,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,928,907
|
|
|
|
3,960,599
|
|
Less: Accumulated Depreciation
|
|
|
1,925,259
|
|
|
|
1,593,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,003,648
|
|
|
|
2,367,237
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
3,007,487
|
|
|
|
2,808,217
|
|
Other Intangible Assets, Net
|
|
|
599,828
|
|
|
|
621,365
|
|
Other Assets
|
|
|
168,288
|
|
|
|
144,612
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,139,248
|
|
|
$
|
8,580,304
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Short-term Borrowings and Current
Portion of Long-term Debt
|
|
$
|
648,736
|
|
|
$
|
954,766
|
|
Accounts Payable
|
|
|
512,495
|
|
|
|
476,363
|
|
Accrued Salaries and Benefits
|
|
|
240,394
|
|
|
|
183,738
|
|
Foreign Income Taxes Payable
|
|
|
217,908
|
|
|
|
97,888
|
|
Other Current Liabilities
|
|
|
423,612
|
|
|
|
285,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,043,145
|
|
|
|
1,998,141
|
|
|
|
|
|
|
|
|
|
|
Long-term Debt
|
|
|
1,564,600
|
|
|
|
632,071
|
|
Deferred Tax Liabilities
|
|
|
136,208
|
|
|
|
88,476
|
|
Other Liabilities
|
|
|
220,496
|
|
|
|
194,799
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
Shareholders Equity:
|
|
|
|
|
|
|
|
|
Common Shares, $1 Par Value,
Authorized 1,000,000 Shares,
Issued 361,921 and 358,973 Shares, Respectively
|
|
|
361,921
|
|
|
|
358,973
|
|
Capital in Excess of Par Value
|
|
|
4,275,534
|
|
|
|
4,164,365
|
|
Treasury Shares, Net
|
|
|
(681,116
|
)
|
|
|
(152,111
|
)
|
Retained Earnings
|
|
|
2,099,307
|
|
|
|
1,202,938
|
|
Accumulated Other Comprehensive
Income
|
|
|
119,153
|
|
|
|
92,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,174,799
|
|
|
|
5,666,817
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,139,248
|
|
|
$
|
8,580,304
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
50
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Products
|
|
$
|
2,490,059
|
|
|
$
|
1,856,278
|
|
|
$
|
1,531,391
|
|
Services
|
|
|
4,088,869
|
|
|
|
2,476,949
|
|
|
|
1,600,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,578,928
|
|
|
|
4,333,227
|
|
|
|
3,131,774
|
|
Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Products
|
|
|
1,731,373
|
|
|
|
1,303,788
|
|
|
|
1,109,890
|
|
Cost of Services
|
|
|
2,486,433
|
|
|
|
1,647,360
|
|
|
|
1,047,652
|
|
Research and Development
|
|
|
149,429
|
|
|
|
107,362
|
|
|
|
83,552
|
|
Selling, General and
Administrative Attributable to Segments
|
|
|
761,721
|
|
|
|
549,567
|
|
|
|
436,364
|
|
Corporate General and
Administrative
|
|
|
115,593
|
|
|
|
77,154
|
|
|
|
55,889
|
|
Equity in Earnings of
Unconsolidated Affiliates
|
|
|
(5,830
|
)
|
|
|
(10,427
|
)
|
|
|
(3,838
|
)
|
Exit Costs and Restructuring
Charges
|
|
|
|
|
|
|
93,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,238,719
|
|
|
|
3,768,385
|
|
|
|
2,729,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
1,340,209
|
|
|
|
564,842
|
|
|
|
402,265
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on Sale of Universal Common
Stock
|
|
|
|
|
|
|
115,456
|
|
|
|
77,642
|
|
Interest Income
|
|
|
6,656
|
|
|
|
11,208
|
|
|
|
3,846
|
|
Interest Expense
|
|
|
(109,577
|
)
|
|
|
(80,343
|
)
|
|
|
(63,562
|
)
|
Debt Redemption Expense
|
|
|
|
|
|
|
(4,733
|
)
|
|
|
|
|
Other, Net
|
|
|
(13,065
|
)
|
|
|
19,762
|
|
|
|
10,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
Before Income Taxes and Minority Interest
|
|
|
1,224,223
|
|
|
|
626,192
|
|
|
|
430,747
|
|
Provision for Income Taxes
|
|
|
(316,524
|
)
|
|
|
(159,166
|
)
|
|
|
(92,672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
Before Minority Interest
|
|
|
907,699
|
|
|
|
467,026
|
|
|
|
338,075
|
|
Minority Interest, Net of Taxes
|
|
|
(11,330
|
)
|
|
|
(817
|
)
|
|
|
(776
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
896,369
|
|
|
|
466,209
|
|
|
|
337,299
|
|
Income (Loss) from Discontinued
Operation, Net of Taxes
|
|
|
|
|
|
|
1,211
|
|
|
|
(7,153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
896,369
|
|
|
$
|
467,420
|
|
|
$
|
330,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
$
|
2.59
|
|
|
$
|
1.55
|
|
|
$
|
1.26
|
|
Income (Loss) from Discontinued
Operation
|
|
|
0.00
|
|
|
|
0.01
|
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
2.59
|
|
|
$
|
1.56
|
|
|
$
|
1.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
$
|
2.53
|
|
|
$
|
1.47
|
|
|
$
|
1.17
|
|
Income (Loss) from Discontinued
Operation
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
2.53
|
|
|
$
|
1.47
|
|
|
$
|
1.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
346,123
|
|
|
|
300,336
|
|
|
|
268,000
|
|
Diluted
|
|
|
354,832
|
|
|
|
322,286
|
|
|
|
297,368
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
51
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Capital in
|
|
|
|
|
|
Other
|
|
|
Treasury Shares
|
|
|
Total
|
|
|
|
Shares
|
|
|
Excess of Par
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
Shareholders
|
|
|
|
$1 Par
|
|
|
Value
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Shares
|
|
|
Share Value
|
|
|
Compensation
|
|
|
Equity
|
|
|
|
(In thousands, except par value)
|
|
|
Balance at December 31, 2003
|
|
$
|
282,844
|
|
|
$
|
2,254,044
|
|
|
$
|
405,372
|
|
|
$
|
20,734
|
|
|
|
(20,216
|
)
|
|
$
|
(269,974
|
)
|
|
$
|
15,048
|
|
|
$
|
2,708,068
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
330,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
330,146
|
|
Foreign Currency Translation
Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,750
|
|
Pension Liability Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,457
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,457
|
)
|
Realized Loss on Derivative
Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
330,146
|
|
|
|
108,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
438,703
|
|
Equity Awards Granted and Exercised
|
|
|
7,714
|
|
|
|
104,058
|
|
|
|
|
|
|
|
|
|
|
|
2,160
|
|
|
|
26,677
|
|
|
|
|
|
|
|
138,449
|
|
Excess Tax Benefit of Options
Exercised
|
|
|
|
|
|
|
27,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,984
|
|
Purchase of Treasury Shares for
Executive Deferred Compensation Plans, Net of Distributions and
Forfeitures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
|
|
(1,236
|
)
|
|
|
1,421
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
|
290,558
|
|
|
|
2,386,086
|
|
|
|
735,518
|
|
|
|
129,291
|
|
|
|
(18,088
|
)
|
|
|
(244,533
|
)
|
|
|
16,469
|
|
|
|
3,313,389
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
467,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
467,420
|
|
Foreign Currency Translation
Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,856
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,856
|
)
|
Pension Liability Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,880
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,880
|
)
|
Unrealized Loss on Derivative
Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,180
|
)
|
Realized Loss on Derivative
Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
467,420
|
|
|
|
(36,639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
430,781
|
|
Shares Issued in Acquisition
|
|
|
52,000
|
|
|
|
1,346,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,398,020
|
|
Conversion of Zero Coupon
Convertible Senior Debentures
|
|
|
7,346
|
|
|
|
228,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
236,191
|
|
Equity Awards Granted, Vested and
Exercised
|
|
|
9,069
|
|
|
|
130,907
|
|
|
|
|
|
|
|
|
|
|
|
6,064
|
|
|
|
74,971
|
|
|
|
|
|
|
|
214,947
|
|
Excess Tax Benefit of Share-Based
Compensation Plans
|
|
|
|
|
|
|
72,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72,507
|
|
Purchase of Treasury Shares for
Executive Deferred Compensation Plans, Net of Distributions and
Forfeitures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165
|
|
|
|
(473
|
)
|
|
|
1,455
|
|
|
|
982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
358,973
|
|
|
|
4,164,365
|
|
|
|
1,202,938
|
|
|
|
92,652
|
|
|
|
(11,859
|
)
|
|
|
(170,035
|
)
|
|
|
17,924
|
|
|
|
5,666,817
|
|
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
896,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
896,369
|
|
Foreign Currency Translation
Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,445
|
|
Pension Liability Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,292
|
|
Unrealized Gain, Net on Derivative
Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,693
|
|
Realized Loss, Net on Derivative
Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Under the Share Repurchase Program
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,525
|
)
|
|
|
(548,575
|
)
|
|
|
|
|
|
|
(548,575
|
)
|
Equity Awards Granted, Vested and
Exercised
|
|
|
2,948
|
|
|
|
87,087
|
|
|
|
|
|
|
|
|
|
|
|
2,113
|
|
|
|
18,176
|
|
|
|
|
|
|
|
108,211
|
|
Excess Tax Benefit of Share-Based
Compensation Plans
|
|
|
|
|
|
|
14,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,121
|
|
Purchase of Treasury Shares for
Executive Deferred Compensation Plans, Net of Distributions and
Forfeitures
|
|
|
|
|
|
|
4,625
|
|
|
|
|
|
|
|
|
|
|
|
139
|
|
|
|
1,535
|
|
|
|
(141
|
)
|
|
|
6,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
$
|
361,921
|
|
|
$
|
4,275,534
|
|
|
$
|
2,099,307
|
|
|
$
|
119,153
|
|
|
|
(22,132
|
)
|
|
$
|
(698,899
|
)
|
|
$
|
17,783
|
|
|
$
|
6,174,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
52
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
896,369
|
|
|
$
|
467,420
|
|
|
$
|
330,146
|
|
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
483,061
|
|
|
|
334,338
|
|
|
|
255,884
|
|
Gain on Sale of Universal Common
Stock
|
|
|
|
|
|
|
(115,456
|
)
|
|
|
(77,642
|
)
|
(Gain) Loss on Sale of Assets and
Businesses, Net
|
|
|
(42,232
|
)
|
|
|
6,625
|
|
|
|
4,816
|
|
(Income) Loss from Discontinued
Operation
|
|
|
|
|
|
|
(1,211
|
)
|
|
|
7,153
|
|
Employee Stock-Based Compensation
Expense
|
|
|
62,739
|
|
|
|
28,948
|
|
|
|
9,061
|
|
Excess Tax Benefits from
Share-Based Compensation
|
|
|
(14,121
|
)
|
|
|
|
|
|
|
|
|
Equity in Earnings of
Unconsolidated Affiliates
|
|
|
(5,830
|
)
|
|
|
(19,923
|
)
|
|
|
(22,405
|
)
|
Minority Interest
|
|
|
11,330
|
|
|
|
817
|
|
|
|
776
|
|
Non-cash Portion of Exit Costs and
Restructuring Charges
|
|
|
|
|
|
|
65,200
|
|
|
|
|
|
Amortization of Original Issue
Discount
|
|
|
|
|
|
|
11,432
|
|
|
|
16,828
|
|
Debt Redemption Expense
|
|
|
|
|
|
|
4,733
|
|
|
|
|
|
Deferred Income Tax Provision
(Benefit)
|
|
|
43,319
|
|
|
|
28,777
|
|
|
|
(15,726
|
)
|
Other, Net
|
|
|
11,590
|
|
|
|
6,056
|
|
|
|
5,405
|
|
Change in Operating Assets and
Liabilities, Net of Effect of Businesses Acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Receivable
|
|
|
(299,335
|
)
|
|
|
(244,947
|
)
|
|
|
(109,248
|
)
|
Inventories
|
|
|
(338,323
|
)
|
|
|
(150,762
|
)
|
|
|
(70,712
|
)
|
Other Current Assets
|
|
|
(68,215
|
)
|
|
|
3,330
|
|
|
|
2,616
|
|
Accounts Payable
|
|
|
29,184
|
|
|
|
31,419
|
|
|
|
42,927
|
|
Accrued Current Liabilities
|
|
|
259,801
|
|
|
|
140,262
|
|
|
|
130,339
|
|
Other, Net
|
|
|
57,682
|
|
|
|
(96,258
|
)
|
|
|
(14,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Continuing
Operations
|
|
|
1,087,019
|
|
|
|
500,800
|
|
|
|
496,141
|
|
Net Cash Provided by Discontinued
Operation
|
|
|
|
|
|
|
2,294
|
|
|
|
7,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating
Activities
|
|
|
1,087,019
|
|
|
|
503,094
|
|
|
|
503,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of Businesses, Net of
Cash Acquired
|
|
|
(194,314
|
)
|
|
|
(991,067
|
)
|
|
|
(26,464
|
)
|
Capital Expenditures for Property,
Plant and Equipment
|
|
|
(1,071,084
|
)
|
|
|
(526,618
|
)
|
|
|
(310,868
|
)
|
Acquisition of Intellectual Property
|
|
|
(31,201
|
)
|
|
|
(13,423
|
)
|
|
|
(20,494
|
)
|
(Purchase) Sale of Equity
Investments in Unconsolidated Affiliate
|
|
|
14,240
|
|
|
|
(16,424
|
)
|
|
|
(2,856
|
)
|
Proceeds from Sale of Universal
Common Stock
|
|
|
|
|
|
|
276,750
|
|
|
|
231,798
|
|
Proceeds from Sale of Assets and
Businesses, Net
|
|
|
39,860
|
|
|
|
15,874
|
|
|
|
23,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used by Investing
Activities
|
|
|
(1,242,499
|
)
|
|
|
(1,254,908
|
)
|
|
|
(105,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments on Asset Securitization,
Net
|
|
|
|
|
|
|
|
|
|
|
(75,000
|
)
|
Borrowings of (Repayments on)
Short-term Debt, Net
|
|
|
(109,490
|
)
|
|
|
731,132
|
|
|
|
(183,775
|
)
|
Borrowings of Long-term Debt
|
|
|
947,820
|
|
|
|
3,259
|
|
|
|
202
|
|
Repayments on Long-term Debt
|
|
|
(215,805
|
)
|
|
|
(5,633
|
)
|
|
|
(9,186
|
)
|
Redemption of Convertible Debentures
|
|
|
|
|
|
|
(348,816
|
)
|
|
|
|
|
Purchase of Treasury Shares
|
|
|
(548,575
|
)
|
|
|
|
|
|
|
|
|
Proceeds from Exercise of Stock
Options
|
|
|
55,438
|
|
|
|
191,127
|
|
|
|
129,549
|
|
Excess Tax Benefits from
Share-Based Compensation
|
|
|
14,121
|
|
|
|
|
|
|
|
|
|
Other Financing Activities, Net
|
|
|
1,603
|
|
|
|
(960
|
)
|
|
|
(1,399
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by
Financing Activities
|
|
|
145,112
|
|
|
|
570,109
|
|
|
|
(139,609
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on
Cash and Cash Equivalents
|
|
|
2,410
|
|
|
|
(1,489
|
)
|
|
|
2,776
|
|
Net Increase (Decrease) in Cash and
Cash Equivalents
|
|
|
(7,958
|
)
|
|
|
(183,194
|
)
|
|
|
261,357
|
|
Cash and Cash Equivalents at
Beginning of Year
|
|
|
134,245
|
|
|
|
317,439
|
|
|
|
56,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of
Year
|
|
$
|
126,287
|
|
|
$
|
134,245
|
|
|
$
|
317,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
53
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
1.
|
Summary
of Significant Accounting Policies
|
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 have
significant influence or control (collectively, the
Company). Investments in affiliates in which ownership
interest ranges from 20 to 50 percent, and the Company
exercises significant influence over operating and financial
policies, are accounted for on the equity method. All material
intercompany accounts and transactions have been eliminated in
consolidation.
Nature
of Operations
The Company is one of the largest global providers of innovative
mechanical solutions, technology and services for the drilling
and production sectors of the oil and natural gas industry.
Reclassifications
Certain reclassifications have been made to conform prior year
financial information to the current period presentation.
Basis
of Presentation
The Company completed the acquisition of the Energy Services
Division (Precision Energy Services) and
International Contract Drilling Division (Precision
Drilling International) of Precision Drilling Corporation
on August 31, 2005 and began integrating those acquired
businesses into the Companys reporting structure. During
2005, in connection with the acquisition, the Company realigned
its operating and reporting segments to include Evaluation,
Drilling & Intervention Services, Completion &
Production Systems and Other Operations.
While the Companys intent was to integrate the Precision
Drilling International product lines into Evaluation, Drilling
and Intervention Services as of the acquisition date, the
reporting structure that optimized the Companys
productivity initiatives was not executed until the second
quarter of 2006, as other integration activities were ongoing.
Productivity initiatives the Company seeks to maximize include
but are not limited to (a) customer focus,
(b) streamlining business processes and (c) maximizing
product line pull-through including integrated projects. In
addition, it was subsequently determined that the Pipeline and
Specialty Services segment would be managed and reported under
the Completion & Production Systems Division to allow
for the elimination of certain cost redundancies and to benefit
from the similarities shared with other completion and
artificial lift product lines.
In connection with these changes, the Company realigned its
operating segments and reviewed the presentation of its
reporting segments in the second quarter of 2006 (See
Note 21). The three historical reporting segments of
Evaluation, Drilling & Intervention Services,
Completion & Production Systems and Other Operations
are now presented as: Evaluation, Drilling &
Intervention Services and Completion & Production
Systems. The previous components of Other Operations, Precision
Drilling International and Pipeline and Specialty Services, are
now reported under Evaluation, Drilling & Intervention
Services and Completion & Production Systems,
respectively. Historical segment data has been restated for all
periods to conform to the new presentation (See Notes 4, 8
and 21).
In July 2005, the Company sold its non-core Gas Services
International (GSI) compression fabrication
business. This business was historically included in the
Companys Completion & Production Systems segment.
The GSI compression fabrication business results of operations,
financial position and cash flows have been reflected in the
consolidated financial statements and notes as a discontinued
operation for all periods presented.
54
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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,
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.
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
2006, 2005 and 2004, there was no individual customer who
accounted for 10% or greater of consolidated revenues.
Inventories
Inventories are stated at the lower of cost or market. Cost
represents third-party invoice or production cost. Production
cost includes material, labor and manufacturing overhead. The
Company values inventories at lower of cost or market using
either the
first-in,
first-out (FIFO) or average cost methods.
Property,
Plant and Equipment
Property, plant and equipment, both owned and under capital
lease, is carried at cost less accumulated depreciation. The
carrying value of fixed assets is based on estimates and
judgments relative to capitalized costs, useful lives and
salvage value where applicable. Maintenance and repairs are
expensed as incurred. Expenditures for renewals, replacements
and betterments are capitalized. Depreciation on fixed assets,
including those under capital leases, is computed using the
straight-line method over the estimated useful lives after
allowing for salvage value, where applicable. Depreciation
expense for the years ended December 31, 2006, 2005 and
2004 was $432.7 million,
55
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
$303.3 million and $232.6 million, respectively. The
estimated useful lives of the major classes of property, plant
and equipment are as follows:
|
|
|
|
|
Estimated
|
|
|
Useful Lives
|
|
Buildings and leasehold
improvements
|
|
5-40 years or lease term
|
Rental and service equipment
|
|
2-20 years
|
Machinery and other
|
|
2-12 years
|
During 2005, the Company acquired Precision Drilling
International, a land rig contractor. Rig assets are classified
in Rental and Service Equipment on the Consolidated Balance
Sheets. From time to time, the Company may review the estimated
remaining useful lives of its drilling rigs and may extend the
useful life when events and circumstances, such as upgrades or
refurbishment activities, indicate the drilling rig can operate
beyond its original useful life. All estimated useful lives were
evaluated and established based upon appraisal concurrent with
the acquisition. No changes in the estimated useful lives have
occurred since the acquisition date.
Long-Lived
Assets
Long-lived assets, excluding goodwill and indefinite-lived
intangibles, to be held and used by the Company are reviewed to
determine whether any events or changes in circumstances
indicate the carrying amount of the asset may not be
recoverable. Factors that might indicate a potential impairment
may include, but are not limited to, significant decreases in
the market value of the long-lived asset, a significant change
in the long-lived assets physical condition, a change in
industry conditions or a reduction in cash flows associated with
the use of the long-lived asset. If these or other factors
indicate the carrying amount of the asset may not be
recoverable, the Company determines whether an impairment has
occurred through the use of an undiscounted cash flow analysis
of the asset at the lowest level for which identifiable cash
flows exist. If an impairment has occurred, the Company
recognizes a loss for the difference between the carrying amount
and the fair value of the asset. The fair value of the asset is
measured using market prices or, in the absence of market
prices, is based on an estimate of discounted cash flows. Cash
flows are generally discounted at an interest rate commensurate
with our weighted average cost of capital for a similar asset.
Assets are classified as held for sale when the Company has a
plan for disposal of certain assets and those assets meet the
held for sale criteria of Statement of Financial Accounting
Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets
(SFAS No. 144).
Goodwill
and Indefinite-Lived Intangible Assets
The Company tests for the impairment of goodwill and other
intangible assets with indefinite lives on at least an annual
basis. The Companys goodwill impairment test involves a
comparison of the fair value of each of the Companys
reporting units, as defined, 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 and other market-related valuation models, including
earnings multiples and comparable asset market values. If the
fair value is less than the carrying value, the asset is
considered impaired. The amount of the impairment, if any, is
then determined based on an allocation of the reporting unit
fair values to individual assets and liabilities.
Intangible
Assets
The Companys intangible assets, excluding goodwill, are
developed technology, technology licenses, patents, customer
relationships and contracts, trademarks and other identifiable
intangible assets. Intangible assets are amortized on a
straight-line basis over their estimated economic lives ranging
from 3 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
56
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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, 2006, the Company has recognized
the overfunded or underfunded status of its plans as an asset or
liability in the Consolidated Balance Sheet in accordance with
SFAS No. 158 (See Note 16).
Environmental
Expenditures
Environmental expenditures that relate to the remediation of an
existing condition caused by past operation and that do not
contribute to future revenues are expensed. Liabilities for
these expenditures are recorded when it is probable that
obligations have been incurred and costs can be reasonably
estimated. Estimates are based on available facts and
technology, enacted laws and regulations and the Companys
prior experience in remediation of contaminated sites. Accrued
undiscounted environmental liabilities were $9.0 million
and $10.3 million at December 31, 2006 and 2005,
respectively.
Derivative
Financial Instruments
The Company accounts for all derivative instruments under
SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, as amended
(SFAS No. 133). This standard requires
that every derivative instrument be recorded at fair value in
the balance sheet as either an asset or a liability. Changes in
the fair value of derivatives are recorded each period in
current earnings or other comprehensive income, depending on
whether the derivative is designated as part of a hedge
relationship, and if so, the type of hedge transaction. Any gain
or loss associated with the termination of a swap is deferred
and amortized over the remaining debt term.
Foreign
Currency
The functional currency for most of the Companys
international operations is the applicable local currency.
Results of operations for foreign subsidiaries with functional
currencies other than the U.S. dollar are translated using
average exchange rates during the period. Assets and liabilities
of these foreign subsidiaries are translated using the exchange
rates in effect at the balance sheet dates, and the resulting
translation adjustments are included as Accumulated Other
Comprehensive Income, a component of shareholders equity.
For
non-U.S. subsidiaries
where the functional currency is the U.S. dollar,
inventories, property, plant and equipment and other
non-monetary assets, together with their related elements of
expense, are translated at historical rates of exchange. All
other assets and liabilities are translated at current exchange
rates. All other revenues and expenses are translated at average
exchange rates. Translation gains and losses for these
subsidiaries are recognized in the Companys results of
operations during the period incurred. The gain or loss related
to individual foreign currency transactions are reflected in
results of operations when incurred.
Stock
Options
In December 2004, the Financial Accounting Standards Board
(FASB) issued SFAS No. 123 (Revised
2004) Share-Based Payment
(SFAS No. 123R).
SFAS No. 123R addresses the accounting for all
share-based payment awards, including shares issued under
employee stock purchase plans, stock options, restricted stock
and stock appreciation rights. Under the new standard, companies
are no longer able to account for share-based
57
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
compensation transactions using the intrinsic value method in
accordance with Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees.
Under the intrinsic method, no compensation expense is
recognized when the exercise price of an employee stock option
is equal to the common share market price on the grant date and
all other factors of the grant are fixed. Under
SFAS No. 123R, companies must account for share-based
compensation transactions using a fair-value method and
recognize the expense in the consolidated statement of income.
Effective, January 1, 2006, the Company adopted
SFAS No. 123R using the modified-prospective
transition method. Under this method, compensation cost is
recognized for all awards granted, modified or settled after the
adoption date as well as for any awards that were granted prior
to the adoption date for which the requisite service has not yet
been rendered.
Previously on January 1, 2003, the Company adopted
SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123), to
expense the fair value of employee stock-based compensation for
awards granted, modified or settled subsequent to
December 31, 2002. The Company selected the prospective
method of adoption, and under this method, the fair value of
employee stock-based awards granted or modified subsequent to
adoption is measured at the grant date and is recognized as an
expense over the service period, which is usually the vesting
period. Accordingly, the adoption of
SFAS No. 123Rs fair value method did not have a
significant impact on the Companys reported results of
operations for the year ended December 31, 2006 as all of
the grants issued prior to the adoption of
SFAS No. 123 were fully vested in the prior year and
the grants issued subsequent to January 1, 2003 are
currently being expensed at their estimated fair value.
SFAS No. 123R requires the cash outflows resulting
from the tax benefits from the tax deductions in excess of
compensation cost recognized for share based payment awards to
be classified as financing cash flows. Had the Company not
adopted SFAS No. 123R, the excess tax benefits would
have been classified as an operating cash inflow.
Accounting
for Income Taxes
Income taxes have been provided based upon the tax laws and
rates in the countries in which operations are conducted and
income is earned. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
A valuation allowance for deferred tax assets is recorded when
it is more likely than not that some or all of the benefit from
the deferred tax asset will not be realized.
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.
58
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Earnings
Per Share
Basic earnings per share for all periods presented equals net
income divided by the weighted average number of the
Companys common shares, $1.00 par value (Common
Shares) outstanding during the period. Diluted earnings
per share is computed by dividing net income, as adjusted for
the assumed conversion of dilutive debentures, by the weighted
average number of Common Shares outstanding during the period as
adjusted for the dilutive effect of the Companys stock
option and restricted share plans, warrant and the incremental
shares for the assumed conversion of dilutive debentures.
The diluted earnings per share calculation excludes 33 thousand,
13 thousand and 424 thousand stock options that were
anti-dilutive for the years ended December 31, 2006, 2005
and 2004, respectively. Net income for the diluted earnings per
share calculation for the years ended 2005 and 2004 is adjusted
to add back the amortization of original issue discount, net of
taxes, relating to the Companys Zero Coupon Convertible
Senior Debentures (the Zero Coupon Debentures)
totaling $7.9 million and $11.6 million, respectively.
The following reconciles basic and diluted weighted average
number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Basic weighted average shares
outstanding
|
|
|
346,123
|
|
|
|
300,336
|
|
|
|
268,000
|
|
Dilutive effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
|
|
|
2,205
|
|
|
|
1,497
|
|
|
|
1,950
|
|
Stock option and restricted share
plans
|
|
|
6,504
|
|
|
|
8,476
|
|
|
|
9,224
|
|
Convertible debentures
|
|
|
|
|
|
|
11,977
|
|
|
|
18,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares
outstanding
|
|
|
354,832
|
|
|
|
322,286
|
|
|
|
297,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New
Accounting Pronouncements
In September 2006, the FASB issued Statement No. 157,
Fair Value Measurements
(SFAS No. 157), which defines fair
value, establishes a framework for measuring fair value under
generally accepted accounting principles (GAAP), and
expands disclosures about fair value measurements.
SFAS No. 157 applies to other accounting
pronouncements that require or permit fair value measurements.
The new guidance is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and for
interim periods within those fiscal years. The Company is
currently evaluating the potential impact, if any, of the
adoption of SFAS No. 157 on its consolidated financial
position, results of operations and cash flows.
In July 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes an
Interpretation of FASB Statement No. 109
(FIN No. 48). FIN No. 48
prescribes a recognition threshold and measurement attribute for
financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. In
addition, it provides guidance on the measurement,
derecognition, classification and disclosure of tax positions,
as well as the accounting for related interest and penalties.
FIN No. 48 is effective for fiscal years beginning
after December 15, 2006. The Company does not expect the
Interpretation to have a material impact on its results from
operations or financial position (See Note 17).
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 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
59
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
net assets acquired based upon their estimated fair values at
the date of acquisition. Final valuations of assets and
liabilities are obtained and recorded within one year from the
date of the acquisition.
On August 31, 2005, the Company acquired Precision Energy
Services and Precision Drilling International, former divisions
of Precision Drilling Corporation. Precision Energy Services is
a provider of cased hole and open hole wireline services,
drilling and evaluation services and production services. These
operations substantially broadened the Companys wireline
and directional capabilities and strengthened the Companys
controlled pressure drilling and testing product lines.
Opportunities exist to accelerate the acquired products
market penetration in the Eastern Hemisphere through the
Companys established infrastructure. Precision Drilling
International is a land rig contractor owning and operating rigs
with a concentrated presence in the Eastern Hemisphere. The
procurement of these assets will allow the Company to further
meet our customers comprehensive service needs.
Consideration paid for these businesses was approximately
$2,340.7 million consisting of $942.7 million in cash
and 52.0 million Weatherford Common Shares. The fair value
of the shares issued was determined using an average price of
$26.89, which represented the average closing price of the
Companys stock for a short period before and after the
agreement date. The purchase price was subject to a working
capital adjustment mechanism, which was settled on
January 10, 2007 resulting in additional consideration paid
of approximately $17.3 million.
The total purchase price was allocated to Precision Energy
Services and Precision Drilling Internationals net
tangible and identifiable intangible assets based on their
estimated fair values. The excess of the purchase price over the
net assets was recorded as goodwill.
In association with the acquisition, the Company identified
pre-acquisition contingencies related to duties and taxes
associated with the importation of certain equipment assets to
foreign jurisdictions. The Company calculated a range of
reasonable estimates of the costs associated with these duties.
As no amount within the range appeared to be a better estimate
than any other, the Company used the amount that is the low end
of the range in accordance with SFAS No. 5,
Accounting for Contingencies, and its interpretations. At
December 31, 2006, the Company has recorded a liability in
the amount of approximately $20 million for this matter. If
the Company used the high end of the range, the aggregate
potential liability would be approximately $27 million
higher. It is reasonably possible that the actual amount paid to
settle these items could be materially different from the
Companys estimate and could have a material adverse effect
on its consolidated financial statements.
The following presents the consolidated financial information
for the Company on a pro forma basis assuming the acquisition of
Precision Energy Services and Precision Drilling International
had occurred as of the beginning of the periods presented. The
historical financial information has been adjusted to give
effect to pro forma items that are directly attributable to the
acquisition and expected to have a continuing impact on the
consolidated results. These items include adjustments to record
the change in functional currencies of certain acquired foreign
entities, incremental amortization and depreciation expense
related to the increase in fair value of the acquired assets,
change in depreciation methodology, additional interest expense
related to the incremental borrowings and to reclassify certain
items to conform to the Companys financial reporting
presentation.
60
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The unaudited financial information set forth below has been
compiled from historical financial statements and other
information, but is not necessarily indicative of the results
that actually would have been achieved had the transaction
occurred on the dates indicated or that may be achieved in the
future.
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per
|
|
|
|
share amounts)
|
|
|
|
(Unaudited)
|
|
|
Revenues
|
|
$
|
5,077,127
|
|
|
$
|
4,034,470
|
|
Income from continuing operations
|
|
|
482,598
|
|
|
|
340,554
|
|
Net income
|
|
|
483,809
|
|
|
|
333,401
|
|
Basic earnings per share from
continuing operations
|
|
|
1.44
|
|
|
|
1.06
|
|
Diluted earnings per share from
continuing operations
|
|
|
1.37
|
|
|
|
1.01
|
|
The Company also acquired various other businesses during the
years ended December 31, 2006, 2005 and 2004 for cash
consideration of approximately $186.8 million,
$105.9 million and $22.3 million, respectively. All
other acquisitions are not material individually or in the
aggregate.
In June 2004, the Companys management approved a plan to
sell its non-core GSI compression fabrication business. The sale
of this business was finalized in July 2005 for a gain of
$0.6 million. The GSI Compression fabrication business was
historically included in the Companys
Completion & Production Systems segment. In accordance
with SFAS No. 144, the GSI compression fabrication
business results of operations, financial position and cash
flows have been reflected in the consolidated financial
statements and notes as a discontinued operation for all periods
presented. The loss of $7.2 million, net of taxes, from the
discontinued operation for the year ended December 31, 2004
includes non-cash charges of $5.5 million. The non-cash
charges consist of a $3.1 million goodwill and asset
impairment charge and an income tax provision of
$2.4 million to record a valuation allowance against
deferred tax assets from net operating losses that the Company
will not be able to utilize.
Interest charges have been allocated to the discontinued
operation based on a pro rata calculation of the net assets of
the discontinued business to the Companys consolidated net
assets. Operating results of the discontinued operation were as
follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Revenues
|
|
$
|
20,794
|
|
|
$
|
39,356
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes
|
|
$
|
777
|
|
|
$
|
(4,741
|
)
|
(Provision) Benefit for Income
Taxes
|
|
|
434
|
|
|
|
(2,412
|
)
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) from
Discontinued Operation, Net of Taxes
|
|
$
|
1,211
|
|
|
$
|
(7,153
|
)
|
|
|
|
|
|
|
|
|
|
In 2005, the Company divested its remaining holdings in
Universal Compression Holdings, Inc. (Universal)
(See Note 5). The Company also sold certain other assets
and businesses during 2006, 2005 and 2004. It was determined the
discontinued operations provisions of SFAS No. 144 did
not apply to these transactions as the disposals either did not
meet the SFAS No. 144 guidelines for discontinued
operations or neither the proceeds from the sale nor the
businesses financial position or results of operations
were material to the Company.
61
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
4.
|
Exit
Costs, Severance, Restructuring and Asset Impairment
Charges
|
During 2005, the Company underwent both a restructuring related
to its acquisition of Precision and reorganization activities
related to its historical businesses, including a change in
management, a change in regional structure and an evaluation of
product lines. It incurred exit costs of $114.2 million
related to its exit and reorganization. The charge included an
inventory write-down of $20.7 million which has been
recorded in Cost of Products and a remaining amount of
$93.6 million which has been recorded as Exit Costs and
Restructuring Charges in the accompanying Consolidated
Statements of Income.
The exit plan related to the Precision acquisition resulted in
exit costs and restructuring charges of $105.5 million. The
Company initiated an integration plan to combine worldwide
operations, rationalize product lines, and eliminate certain
products, services and locations. Product line rationalization
included wireline, controlled pressure drilling and testing and
directional product and service offerings. Inventory totaling
$20.7 million was written-down. Asset impairment charges
included $20.9 million for fixed assets, $12.9 million
related to information technology and $1.7 million related
to investments. Employee severance and termination benefits
totaled $33.0 million. Contract terminations and facility
closures of $7.3 million were also recorded. In connection
with the valuation of the Precision assets, $9.0 million
was identified as purchased in process research and development
and was written-off.
The exit plan related to the reorganization activities
surrounding its historical businesses resulted in exit costs and
restructuring charges of $8.7 million. The Company incurred
severance and termination benefits of $3.6 million and
recorded $2.6 million of facility termination charges
related to the rationalization of two facilities in the United
Kingdom and the U.S. The remaining $2.5 million charge
related to the write-off of other assets.
The 2005 integration and reorganization plans are substantially
complete as of December 31, 2006. No additional costs were
recorded during the year ended December 31, 2006, and the
Company does not anticipate future charges, relating to these
activities. A summary of the exit costs and restructuring
charges by segment is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Evaluation,
|
|
|
|
|
|
|
|
|
|
|
|
|
Drilling &
|
|
|
Completion &
|
|
|
|
|
|
|
|
|
|
Intervention
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Systems
|
|
|
Corporate
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Cost of Products
|
|
$
|
20,654
|
|
|
$
|
3,842
|
|
|
$
|
|
|
|
$
|
24,496
|
|
Cost of Services
|
|
|
25,766
|
|
|
|
1,083
|
|
|
|
|
|
|
|
26,849
|
|
Research and Development
|
|
|
9,000
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
Selling General &
Administrative
|
|
|
17,349
|
|
|
|
3,803
|
|
|
|
|
|
|
|
21,152
|
|
Corporate General &
Administrative
|
|
|
|
|
|
|
|
|
|
|
32,738
|
|
|
|
32,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
72,769
|
|
|
|
8,728
|
|
|
|
32,738
|
|
|
|
114,235
|
|
Cash Payments
|
|
|
(20,239
|
)
|
|
|
(7,905
|
)
|
|
|
(13,830
|
)
|
|
|
(41,974
|
)
|
Non-cash Utilization
|
|
|
(52,410
|
)
|
|
|
(722
|
)
|
|
|
(15,852
|
)
|
|
|
(68,984
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
$
|
120
|
|
|
|
101
|
|
|
$
|
3,056
|
|
|
$
|
3,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006, the remaining accrual was
comprised primarily of severance benefits. The length of time
the Company is obligated to make severance payments varies, with
the longest obligation continuing through 2018.
62
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
In 2004, the Company sold 7.0 million shares of Universal
common stock for net proceeds of $231.8 million. This sale,
which had no related tax effects, generated a gain of
$77.6 million and reduced the Companys ownership to
6.75 million shares, or approximately 21%, of
Universals then outstanding common stock.
In 2005, the Company sold its remaining 6.75 million shares
of Universal common stock for net proceeds of
$276.8 million. This sale, which had no related tax
effects, generated a gain of $115.5 million. The Company no
longer holds any ownership interest in Universal.
Cash
Equivalents and Restricted Cash
The Company considers all highly liquid investments with
original maturities of three months or less to be cash
equivalents. Cash and cash equivalents at December 31, 2006
and 2005 included cash of approximately $13.5 million and
$3.8 million, respectively, which was restricted primarily
as a result of bond requirements or the inability to repatriate
balances in certain foreign countries.
Non-cash
Activities
During the years ended December 31, 2005 and 2004, there
were non-cash operating activities of $72.5 million and
$28.0 million, respectively, relating to excess tax
benefits received from the exercise of nonqualified stock
options and vesting of restricted share awards. These benefits
were recorded as a reduction of income taxes payable and an
increase to Capital in Excess of Par Value on the accompanying
Consolidated Balance Sheets.
During the years ended December 31, 2006, 2005 and 2004,
there were non-cash investing activities of $0.1 million,
$3.2 million and $0.2 million, respectively, relating
to capital leases. In addition, during the years ended
December 31, 2006, 2005 and 2004, there were non-cash
investing activities of $64.0 million, $12.0 million
and $4.5 million, respectively, related to the notes
receivable received in exchange for the Companys business
and asset sales.
As a result of the adoption of SFAS No. 123R (See
Note 1), excess tax benefits of $14.1 million received
from the exercise of nonqualified stock options and vesting of
restricted share awards for the year ended December 31,
2006 are included as non-cash financing activities. These
benefits were recorded as a reduction of income taxes payable
and an increase to Capital in Excess of Par Value on the
accompanying Consolidated Balance Sheet. In addition, during the
year ended December 31, 2004, there were non-cash financing
activities related to our interest rate swaps of
$16.1 million.
Investing
Activities
The following summarizes investing activities relating to
acquisitions integrated into the Companys operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Fair value of assets, net of cash
acquired
|
|
$
|
97,935
|
|
|
$
|
1,577,864
|
|
|
$
|
17,293
|
|
Goodwill
|
|
|
135,940
|
|
|
|
1,170,141
|
|
|
|
20,833
|
|
Consideration paid related to
prior year acquisitions
|
|
|
7,520
|
|
|
|
3,935
|
|
|
|
4,142
|
|
Total liabilities
|
|
|
(47,081
|
)
|
|
|
(362,853
|
)
|
|
|
(15,804
|
)
|
Common Shares issued
|
|
|
|
|
|
|
(1,398,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash consideration, net of cash
acquired
|
|
$
|
194,314
|
|
|
$
|
991,067
|
|
|
$
|
26,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Supplemental
Cash Flow Information
Cash paid for interest and income taxes, net of refunds, was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Interest paid
|
|
$
|
93,288
|
|
|
$
|
68,614
|
|
|
$
|
69,296
|
|
Income taxes paid, net of refunds
|
|
|
147,973
|
|
|
|
114,198
|
|
|
|
91,059
|
|
Inventories by category are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Raw materials, components and
supplies
|
|
$
|
330,006
|
|
|
$
|
259,047
|
|
Work in process
|
|
|
98,920
|
|
|
|
63,491
|
|
Finished goods
|
|
|
810,108
|
|
|
|
567,583
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,239,034
|
|
|
$
|
890,121
|
|
|
|
|
|
|
|
|
|
|
Work in process and finished goods inventories include the cost
of materials, labor and plant overhead.
Goodwill is evaluated for impairment on at least an annual
basis. The Company performs its annual goodwill impairment test
as of October 1. The Companys 2006, 2005 and 2004
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 Company realigned its presentation of segment information
during 2006 (See Note 1). In connection with this
realignment, the Company re-evaluated its reporting units.
SFAS 142, Goodwill and Other Intangible Assets
(SFAS No. 142), defines the reporting
unit as an operating segment, as defined by SFAS 131,
Disclosures about Segments of an Enterprise and Related
Information (SFAS No. 131), or one
level below the operating segment. The Companys two
operating segments as defined by SFAS No. 131 are
Evaluation, Drilling & Intervention Services and
Completion & Production Systems.
The Companys Evaluation, Drilling & Intervention
Services operating segment consists of three components,
(i) Well Construction & Intervention Services,
(ii) Performance, Drilling & Evaluation Services
and (iii) Integrated Drilling Services. These components
are considered reporting units based on the availability of
discrete financial information that is reviewed by segment
management on a regular basis. The Companys
Completion & Production Systems operating segment
corresponds to the Companys Completion &
Production Systems reporting unit based upon the aggregation
principles outlined in SFAS No. 142.
64
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The changes in the carrying amount of goodwill for the two years
ended December 31, 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Evaluation,
|
|
|
|
|
|
|
|
|
|
Drilling &
|
|
|
Completion &
|
|
|
|
|
|
|
Intervention
|
|
|
Production
|
|
|
|
|
|
|
Services
|
|
|
Systems
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
As of December 31, 2004
|
|
$
|
852,804
|
|
|
$
|
816,833
|
|
|
$
|
1,669,637
|
|
Goodwill acquired during period
|
|
|
1,124,655
|
|
|
|
45,486
|
|
|
|
1,170,141
|
|
Disposals
|
|
|
|
|
|
|
(4,179
|
)
|
|
|
(4,179
|
)
|
Purchase price and other
adjustments
|
|
|
(10,653
|
)
|
|
|
2,665
|
|
|
|
(7,988
|
)
|
Impact of foreign currency
translation
|
|
|
(6,793
|
)
|
|
|
(12,601
|
)
|
|
|
(19,394
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2005
|
|
$
|
1,960,013
|
|
|
$
|
848,204
|
|
|
$
|
2,808,217
|
|
Goodwill acquired during period
|
|
|
117,990
|
|
|
|
17,950
|
|
|
|
135,940
|
|
Disposals
|
|
|
(1,216
|
)
|
|
|
|
|
|
|
(1,216
|
)
|
Purchase price and other
adjustments
|
|
|
46,953
|
|
|
|
896
|
|
|
|
47,849
|
|
Impact of foreign currency
translation
|
|
|
(16,139
|
)
|
|
|
32,836
|
|
|
|
16,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006
|
|
$
|
2,107,601
|
|
|
$
|
899,886
|
|
|
$
|
3,007,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
Other
Intangible Assets, Net
|
The components of intangible assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
December 31, 2005
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Net
|
|
|
Amount
|
|
|
Amortization
|
|
|
Net
|
|
|
|
(In thousands)
|
|
|
Acquired technology
|
|
$
|
311,939
|
|
|
$
|
(26,620
|
)
|
|
$
|
285,319
|
|
|
$
|
281,350
|
|
|
$
|
(6,501
|
)
|
|
$
|
274,849
|
|
Licenses
|
|
|
226,444
|
|
|
|
(60,316
|
)
|
|
|
166,128
|
|
|
|
205,232
|
|
|
|
(48,164
|
)
|
|
|
157,068
|
|
Patents
|
|
|
127,799
|
|
|
|
(42,184
|
)
|
|
|
85,615
|
|
|
|
116,590
|
|
|
|
(33,028
|
)
|
|
|
83,562
|
|
Customer relationships
|
|
|
27,043
|
|
|
|
(3,133
|
)
|
|
|
23,910
|
|
|
|
43,000
|
|
|
|
(717
|
)
|
|
|
42,283
|
|
Customer contracts
|
|
|
21,890
|
|
|
|
(4,027
|
)
|
|
|
17,863
|
|
|
|
22,450
|
|
|
|
(961
|
)
|
|
|
21,489
|
|
Covenants not to compete
|
|
|
24,831
|
|
|
|
(23,257
|
)
|
|
|
1,574
|
|
|
|
22,333
|
|
|
|
(19,942
|
)
|
|
|
2,391
|
|
Other
|
|
|
15,761
|
|
|
|
(7,743
|
)
|
|
|
8,018
|
|
|
|
13,277
|
|
|
|
(6,175
|
)
|
|
|
7,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finite-lived intangible
assets
|
|
|
755,707
|
|
|
|
(167,280
|
)
|
|
|
588,427
|
|
|
|
704,232
|
|
|
|
(115,488
|
)
|
|
|
588,744
|
|
Intangible assets with an
indefinite useful life
|
|
|
11,401
|
|
|
|
|
|
|
|
11,401
|
|
|
|
32,621
|
|
|
|
|
|
|
|
32,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
767,108
|
|
|
$
|
(167,280
|
)
|
|
$
|
599,828
|
|
|
$
|
736,853
|
|
|
$
|
(115,488
|
)
|
|
$
|
621,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated fair value of intangible assets obtained through
acquisitions consummated in the preceding twelve months are
based on preliminary information which is subject to change when
final valuations are obtained. During 2005, the Company
allocated value to the intangible assets acquired in the
Precision Energy Services and Precision Drilling International
acquisition. The Company allocated $281.4 million to
acquired technology, $43.0 million to customer
relationships, $22.5 million to customer contracts and
$3.4 million to an indefinite lived trademark. The final
valuation of the intangible assets acquired was completed during
2006, resulting in a $19.0 million increase in the acquired
technology value and a $16.0 million reduction in the
customer relationships
65
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
value. The acquired technology and customer relationships are
being amortized over estimated useful lives of
10-15 years.
The customer contracts are being amortized over the life of the
contracts.
The Company has trademarks which are considered to have
indefinite lives as the Company has the ability and intent to
renew indefinitely. These trademarks, including the
indefinite-lived assets acquired in the Precision acquisition,
had a carrying value of $11.4 million as of
December 31, 2006 and 2005, respectively.
At December 31, 2005, the Company had intangible assets of
$21.2 million recorded for unrecognized prior service costs
related to its supplemental executive retirement plan
(SERP) and several of its international pension
plans. As of December 31, 2006, there were no intangible
asset balances related to the SERP and international pension
plans as a result of the Companys adoption of
SFAS No. 158 (See Note 16).
Amortization expense was $50.4 million, $31.0 million
and $23.3 million for the years ended December 31,
2006, 2005 and 2004, respectively. Future estimated amortization
expense for the carrying amount of intangible assets as of
December 31, 2006 is expected to be as follows (in
thousands):
|
|
|
|
|
2007
|
|
$
|
50,380
|
|
2008
|
|
|
48,154
|
|
2009
|
|
|
47,239
|
|
2010
|
|
|
46,711
|
|
2011
|
|
|
46,091
|
|
|
|
10.
|
Short-term
Borrowings and Current Portion of Long-term Debt
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
364-Day
revolving credit facility
|
|
$
|
|
|
|
$
|
|
|
Revolving credit facility
|
|
|
75,321
|
|
|
|
|
|
Canadian credit facility
|
|
|
6,854
|
|
|
|
|
|
Commercial paper program
|
|
|
490,808
|
|
|
|
716,927
|
|
Short-term bank loans
|
|
|
60,010
|
|
|
|
24,596
|
|
|
|
|
|
|
|
|
|
|
Total Short-term Borrowings
|
|
|
632,993
|
|
|
|
741,523
|
|
Current Portion of Long-term Debt
|
|
|
15,743
|
|
|
|
213,243
|
|
|
|
|
|
|
|
|
|
|
Short-term Borrowings and Current
Portion of Long-term Debt
|
|
$
|
648,736
|
|
|
$
|
954,766
|
|
|
|
|
|
|
|
|
|
|
Weighted average interest rate on
short-term borrowings outstanding during the year
|
|
|
5.27
|
%
|
|
|
4.36
|
%
|
In August 2005, the Company entered into the
364-Day
Revolving Credit Facility
(364-Day
Facility) with UBS AG, Bank of America, N.A. and Morgan
Stanley Senior Funding, Inc. Under this agreement, the Company
was allowed to borrow up to $1.2 billion to fund the
redemption of its Zero Coupon Debentures, the acquisition of
Precision Energy Services and Precision Drilling International,
and certain refinancings, including repayment of commercial
paper or Common Share repurchases. The
364-Day
Facility was terminated on August 10, 2006 in connection
with the completion of a debt issuance of $600.0 million by
the Company.
In October 2005, the Company initiated a commercial paper
program under which it may from time to time issue short-term
unsecured notes. In connection with this program, the Company
entered into agreements with third-party lending institutions
under which each of these lending institutions may act as
dealers of this commercial paper. Also in connection with the
program, Weatherford International, Inc., one of the
Companys wholly-owned indirect subsidiaries, provides a
guarantee of any commercial paper notes that the Company may
issue. The
66
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Companys commercial paper issuances are supported by the
Revolving Credit Facility (as defined below). In connection with
the increase in the aggregate lending commitments under the
Revolving Credit Facility (discussed below), the size of the
commercial paper program was increased to $1.5 billion on
November 15, 2006. As of December 31, 2006, the
Company had $490.8 million of outstanding commercial paper
issuances with maturities ranging from 3 to 26 days. The
weighted average interest rate related to outstanding commercial
paper issuances at December 31, 2006 was 5.4%.
On May 2, 2006, the Company amended and restated the
revolving credit agreement with a syndicate of banks of which
JPMorgan Chase Bank is the Administrative Agent (Revolving
Credit Facility). As restated, the Revolving Credit
Facility provided a $750.0 million, five-year
multi-currency senior unsecured revolving credit facility. The
Revolving Credit Facility provided that, with the consent of the
lenders, the Company could increase the aggregate lending
commitments under the facility from $750.0 million to
$1.5 billion. Effective November 14, 2006, the Company
increased its aggregate lending commitment availability to
$1.5 billion. Based on the Companys current debt
ratings, it will pay a commitment fee of 0.08% per year,
and borrowings under the facility will bear interest at variable
annual rates based on LIBOR plus 0.27%, plus an additional 0.05%
for any period in which more than half of the total commitment
is utilized. The Revolving Credit Facility superseded the
previous $500.0 million facility that was scheduled to
mature May 12, 2006. At December 31, 2006, there were
$75.3 million of outstanding borrowings and
$25.8 million of letters of credit issued under the
Revolving Credit Facility. The weighted average interest rate on
the outstanding borrowings under this facility was 5.4% at
December 31, 2006.
The Revolving Credit Facility requires the Company to maintain a
debt-to-capitalization
ratio of less than 60% and contains other covenants and
representations customary for an investment-grade commercial
credit. The Company was in compliance with these covenants at
December 31, 2006. The Revolving Credit Facility is
guaranteed by the Companys wholly-owned indirect
subsidiary, Weatherford International, Inc., subject to certain
conditions. The Revolving Credit Facility does not contain any
provisions that make its availability dependent upon the
Companys credit ratings; however, the interest rate is
dependent upon the credit rating of its long-term senior debt.
The Company also maintains a Canadian dollar committed facility
to support its operations in that country. The Canadian facility
provides for borrowings or letters of credit under the facility
up to an aggregate of 25.0 million Canadian dollars, or
$21.5 million as of December 31, 2006. There were
borrowings of $6.9 million and $0.3 million in
outstanding letters of credit under the Canadian facility at
December 31, 2006. The weighted average interest rate on
the outstanding borrowings of this facility was 6.7% at
December 31, 2006.
The Company has short-term borrowings with various domestic and
international institutions pursuant to uncommitted facilities.
At December 31, 2006, the Company had $60.0 million in
short-term borrowings outstanding under these arrangements with
a weighted average interest rate of 6.5%. In addition, the
Company had $133.0 million of letters of credit and bid and
performance bonds outstanding under these uncommitted facilities.
67
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
71/4% Senior
Notes due 2006
|
|
$
|
|
|
|
$
|
201,892
|
|
65/8% Senior
Notes due 2011
|
|
|
356,874
|
|
|
|
358,057
|
|
4.95% Senior Notes due 2013
|
|
|
255,371
|
|
|
|
256,029
|
|
5.50% Senior Notes due 2016
|
|
|
348,612
|
|
|
|
|
|
6.50% Senior Notes due 2036
|
|
|
595,724
|
|
|
|
|
|
Foreign bank and other debt
denominated in foreign currencies
|
|
|
12,253
|
|
|
|
11,204
|
|
Capital lease obligations
|
|
|
11,241
|
|
|
|
12,935
|
|
Other
|
|
|
268
|
|
|
|
5,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,580,343
|
|
|
|
845,314
|
|
Less amounts due in one year
|
|
|
15,743
|
|
|
|
213,243
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
1,564,600
|
|
|
$
|
632,071
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of scheduled long-term debt
maturities by year (in thousands):
|
|
|
|
|
2007
|
|
$
|
15,743
|
|
2008
|
|
|
7,295
|
|
2009
|
|
|
6,405
|
|
2010
|
|
|
4,209
|
|
2011
|
|
|
350,128
|
|
Thereafter
|
|
|
1,196,563
|
|
|
|
|
|
|
|
|
$
|
1,580,343
|
|
|
|
|
|
|
71/4% Senior
Notes
On May 15, 2006, the stated maturity date, the Company
repaid in full the outstanding $200.0 million of
71/4% Senior
Notes plus all accrued interest. The carrying value of
$201.9 million has been included in Short-term Borrowings
and Current Portion of Long-term Debt in the December 31,
2005 Consolidated Balance Sheet. Based on borrowing rates
available to the Company, the fair value of the
71/4% Senior
Notes was $202.1 million at December 31, 2005.
65/8% Senior
Notes
On November 16, 2001, the Company completed a private
placement of $350.0 million of
65/8% Senior
Notes due 2011
(65/8% Senior
Notes). The interest on the notes is payable semi-annually
in arrears on May 15 and November 15 of each year. As evidenced
by market transactions, the estimated fair value of the
65/8% Senior
Notes was $368.8 million and $374.0 million as of
December 31, 2006 and 2005, respectively. The notes were
issued by the Companys wholly-owned indirect subsidiary,
Weatherford International, Inc., and are fully and
unconditionally guaranteed by Weatherford Limited.
4.95% Senior
Notes
On October 7, 2003, the Company completed a public offering
of $250.0 million of 4.95% Senior Notes due 2013
(4.95% Senior Notes). The notes are fully and
unconditionally guaranteed by Weatherford International, Inc.
The interest on the notes is payable semi-annually in arrears on
April 15 and October 15 of each year. Net
68
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
proceeds from the offering were $247.9 million and were
used to repay short-term borrowings. As evidenced by market
transactions, the estimated fair value of the 4.95% Senior
Notes was $245.2 million and $244.5 million as of
December 31, 2006 and 2005, respectively.
5.50% Senior
Notes
On February 17, 2006, the Company completed an offering of
$350.0 million senior notes at a coupon rate of 5.50%
(5.50% Senior Notes) with a maturity in
February 2016. Net proceeds of $346.2 million were used to
partially repay outstanding borrowings on the Companys
commercial paper program. The notes are fully and
unconditionally guaranteed by Weatherford International, Inc.
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 $339.9 million as of December 31, 2006.
6.50% Senior
Notes
On August 7, 2006, the Company completed an offering of
$600.0 million senior notes at a coupon rate of 6.50%
(6.50% Senior Notes) with a maturity in August
2036. Net proceeds of $588.3 million were used to partially
repay outstanding borrowings on the Companys commercial
paper program. The notes are fully and unconditionally
guaranteed by Weatherford International, Inc. The interest on
the notes is payable semi-annually in arrears on February 1 and
August 1 of each year. As evidenced by market transactions,
the estimated fair value of the 6.50% Senior Notes was
$619.5 million as of December 31, 2006.
The annualized effective rate for the 6.50% Senior Notes
and the 5.50% Senior Notes was 6.5% and 5.5% at
December 31, 2006. The effective rate for the
4.95% Senior Notes and
65/8% Senior
Notes was 4.8% and 6.3%, respectively, for the year ended
December 31, 2006 and 4.8% and 6.3%, respectively, for the
year ended December 31, 2005. The effective rate for the
71/4% Senior
Notes was 4.9% for the year ended December 31, 2005. The
effective rate is determined after giving consideration to all
derivative activity and amortization of original issue discount
(See Note 12).
|
|
12.
|
Derivative
Instruments
|
Interest
Rate Swaps
The Company uses interest rate swap agreements to take advantage
of available short-term interest rates. Amounts received upon
termination of the swap agreements represent the fair value of
the agreements at the time of termination and are recorded as an
adjustment to the carrying value of the related debt. These
amounts are being amortized as a reduction to interest expense
over the remaining term of the debt.
As of December 31, 2006 and 2005, the Company had net
unamortized gains of $14.3 million and $18.3 million,
respectively, associated with interest rate swap terminations.
These gains have been deferred and recorded as an adjustment to
the carrying value of the related debt and are being amortized
against interest expense over the remaining term of the debt
issuance against which they were hedged. The Companys
interest expense was reduced by $4.0 million,
$6.8 million and $12.3 million for 2006, 2005 and
2004, respectively. There were no interest rate swap agreements
outstanding as of December 31, 2006 and 2005.
Cash
Flow Hedges
During December 2005, the Company recorded a $4.2 million
loss in Other Comprehensive Income on interest rate derivatives
entered into and terminated in 2005; this loss is being
amortized to interest expense over the life of the
5.50% Senior Notes.
In January 2006 the Company entered into interest rate
derivative instruments for a notional amount of
$350.0 million to hedge projected exposures to interest
rates in anticipation of a future debt issuance. Those hedges
69
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
were terminated at the time of issuance of the 5.50% Senior
Notes. The Company received cash proceeds of $6.2 million
at termination, and the gain on these hedges is being amortized
to interest expense over the life of the 5.50% Senior Notes.
In July 2006 the Company entered into interest rate derivative
instruments for a notional amount of $500.0 million to
hedge projected exposures to interest rates in anticipation of a
future debt issuance. Those hedges were terminated at the time
of issuance of the 6.50% Senior Notes. The Company paid a
cash settlement of $1.5 million at termination, and the
loss on these hedges is being amortized to interest expense over
the life of the 6.50% Senior Notes.
Other
Derivative Instruments
As of December 31, 2006 and 2005, the Company had several
foreign currency forward contracts and one option contract with
notional amounts aggregating $271.0 million and
$88.9 million, respectively, which were entered into to
hedge exposure to currency fluctuations in various foreign
currencies, including the euro, the Australian dollar, the
Canadian dollar, the Norwegian kroner, the Brazilian reais, the
Mexican peso, the Thai bhat and the pound sterling. The total
estimated change in fair value of these contracts compared to
the original notional amount at December 31, 2006 and 2005
resulted in a liability of $1.0 million and
$0.1 million, respectively. These derivative instruments
were not designated as hedges and the changes in fair value of
the contracts are recorded each period in current earnings.
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 with notional amounts
at execution totaling $588.9 million. On March 31,
2006, cross-currency swaps with an original notional value of
$140.4 million were terminated and the Company paid a net
settlement in April 2006 of $3.5 million. On
September 11, 2006, a cross-currency swap with an original
notional value of $84.2 million was terminated and the
Company paid a net settlement of $6.3 million. At
December 31, 2006, the Company had notional amounts
outstanding of $364.3 million. The total estimated change
in fair value of these contracts compared to the original
notional amount at December 31, 2006 resulted in a
liability of $11.1 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.
During the year ended December 31, 2006, net cash proceeds
of $3.2 million were received from the cross-currency
swaps, which were the net settlements of quarterly interest rate
payments on the two currencies swapped. These quarterly net
interest rate settlements are based on the variable interest
rates of both the Canadian dollar and the U.S. dollar.
|
|
13.
|
Zero
Coupon Convertible Senior Debentures
|
On June 30, 2000, the Company completed the private
placement of $910.0 million face amount of Zero Coupon
Convertible Senior Debentures. These debentures were issued at
$501.6 million, providing the holders with an annual 3%
yield to maturity. On June 30, 2005, certain holders
required the Company to repurchase the Zero Coupon Debentures
for a face value of $11.0 million or an aggregate accreted
value of $7.1 million.
On July 28, 2005, the Company called for redemption on
August 29, 2005 all of the outstanding Zero Coupon
Debentures. At their option, the holders tendered, for
conversion, an aggregate of $367.4 million principal amount
at maturity. The tendered debentures were converted to
approximately 7.3 million of our Common Shares. The Company
redeemed the remaining $531.6 million aggregate principal
amount at maturity for a cost of $341.8 million. The
Company expensed $4.7 million of unamortized issuance costs
in connection with the redemption. These expenses have been
classified as Debt Redemption Expense on the accompanying
Consolidated Statement of Income.
70
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Authorized
Shares
On May 9, 2006, the Companys shareholders approved an
increase in the authorized share capital from 510,000,000 to
1,010,000,000. The Company is authorized to issue 1,000,000,000
Common Shares and 10,000,000 undesignated preference shares,
$1.00 par value. As of December 31, 2006, no
preference shares have been issued.
Share
Repurchase Program
In December 2005, the Companys Board of Directors approved
a share repurchase program under which up to $1 billion of
the Companys outstanding Common Shares could be purchased
in open market or privately negotiated transactions. Pursuant to
this program, the Company purchased approximately
12.5 million Common Shares during the year ended
December 31, 2006, at an average price per share of $43.79.
Precision
Division Acquisition
On August 31, 2005, we issued 52.0 million Common
Shares to Precision Drilling Corporation in connection with the
acquisition of the Precision Energy Services and Precision
Drilling International divisions.
Warrant
On February 28, 2002, the Company issued Shell Technology
Ventures Inc. a warrant to purchase up to 6.5 million
Common Shares at a price of $30.00 per share. Effective
July 12, 2006, this agreement was amended and restated to
reflect, among other things, changes in the Companys
capital structure. The warrant remains exercisable until
February 28, 2012 and is subject to adjustment for changes
in the Companys capital structure or the issuance of
dividends in cash, securities or property. Upon exercise by the
holder, settlement may occur through physical delivery, net
share settlement, net cash settlement or a combination thereof.
The net cash settlement option upon exercise is at the sole
discretion of the Company. In addition, the amended and restated
warrant no longer contains a conversion feature, which
previously allowed the warrant holder to convert the warrant
into Common Shares. The amendment did not affect the accounting
or classification of the warrant.
|
|
15.
|
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 shares, restricted share
units, 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.
No further options, restricted shares or restricted share units
will be granted under the other existing equity plans of the
Company and any future issuances of share-based awards will be
made from the Omnibus Plan. The provisions of each award will
vary based on the type of award granted and will be specified by
the Compensation Committee of the Board of Directors. Those
awards, such as options and SARs, that are based on a specific
contractual term will be granted with a term not to exceed ten
years. The terms of the issuances to date under the Omnibus Plan
are consistent with awards previously granted. Under the Omnibus
Plan, there are 10.0 million Common Shares available for
grant. As of December 31, 2006, approximately
9.4 million shares were available for grant under the plan.
To date, only options, restricted shares and restricted share
units have been granted under the Omnibus Plan.
The options granted under the Omnibus Plan are granted with an
exercise price equal to or greater than the fair market value of
the Common Shares at the time the option is granted. The Company
values and recognizes the
71
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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
restricted share awards (RSA) or restricted share
units (RSU), the vesting of which is subject to
conditions and limitations established at the time of the grant.
Upon the grant of an RSA, the participant has the rights of a
shareholder, including but not limited to the right to vote such
shares and the right to receive any dividends paid on such
shares. Recipients of RSU awards will not have the rights of a
shareholder of the Company until such date as the Common Shares
are issued or transferred to the recipient. Key employees,
directors and persons providing material services to the Company
may be eligible for participation in the Restricted Share Plan.
Subsequent to the approval of the Companys Omnibus Plan in
May 2006, future RSA and RSU grants under this plan have been
suspended.
RSAs and RSUs vest based on continued employment, and vesting
generally occurs over a two to four-year period, with an equal
amount of the restricted shares vesting on each anniversary of
the grant date. A portion of the 2005 and 2006 grants vest over
a four-year period, with 50% of the shares vesting after two
years and the remaining portion vesting in the fourth year.
The fair value of RSAs and RSUs is determined based on the
closing price of the Companys shares on the grant date.
The total fair value is amortized to expense on a straight-line
basis over the vesting period.
72
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The following illustrates the pro forma effect on net income and
earnings per share if the Company had applied the fair value
recognition provisions of SFAS No. 123 to all
outstanding and unvested awards as of December 31, 2005 and
2004:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Net Income:
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
467,420
|
|
|
$
|
330,146
|
|
Employee share-based compensation
expense included in reported net income, net of income tax
benefit
|
|
|
18,816
|
|
|
|
5,890
|
|
Pro forma compensation expense,
determined under fair value methods for all awards, net of
income tax benefit
|
|
|
(29,745
|
)
|
|
|
(26,911
|
)
|
|
|
|
|
|
|
|
|
|
Pro forma
|
|
$
|
456,491
|
|
|
$
|
309,125
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
1.56
|
|
|
$
|
1.23
|
|
Pro forma
|
|
|
1.52
|
|
|
|
1.15
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
1.47
|
|
|
$
|
1.15
|
|
Pro forma
|
|
|
1.44
|
|
|
|
1.08
|
|
The Company recognized $62.7 million, $28.9 million
and $9.1 million in employee share-based compensation
expense during the years ended 2006, 2005 and 2004,
respectively. The related income tax benefit recognized for the
years ended 2006, 2005 and 2004 was $22.0 million,
$10.1 million and $3.2 million, respectively. The
Company capitalized $2.6 million of share-based
compensation during the year ended 2006. The Company did not
capitalize any share based compensation during 2005
and 2004.
The Company uses the Black-Scholes option pricing model to
determine the fair value of each option award on the date of
grant. The estimated fair value of the option is amortized to
expense on a straight-line basis over the vesting period. The
specific assumptions used in determining the fair values for
option grants during the years ended 2006, 2005 and 2004 are
discussed in more detail below and are noted in the following
table.
The Company calculates the expected volatility by measuring the
volatility of the historical stock price for a period equal to
the expected life of the option and ending at the time the
option was granted. 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,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Expected volatility
|
|
|
36.2
|
%
|
|
|
38.9
|
%
|
|
|
48.2
|
%
|
Expected dividends
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Expected term (in years)
|
|
|
5.0
|
|
|
|
5.0
|
|
|
|
5.0
|
|
Risk-free rate
|
|
|
4.7
|
%
|
|
|
4.4
|
%
|
|
|
3.9
|
%
|
73
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
A summary of option activity under the stock option plans as of
December 31, 2006, and changes during the year then ended
is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
Options
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Outstanding at January 1, 2006
|
|
|
13,940,334
|
|
|
$
|
13.72
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
239,000
|
|
|
|
44.08
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(4,247,037
|
)
|
|
|
12.98
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(18,000
|
)
|
|
|
19.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31,
2006
|
|
|
9,914,297
|
|
|
|
14.77
|
|
|
|
7.92
|
|
|
$
|
268,467
|
|
Vested or Expected to Vest at
December 31, 2006
|
|
|
9,914,297
|
|
|
|
14.77
|
|
|
|
7.92
|
|
|
|
268,467
|
|
Exercisable at December 31,
2006
|
|
|
9,292,097
|
|
|
|
13.61
|
|
|
|
7.76
|
|
|
|
261,891
|
|
The weighted-average grant date fair value of options granted
during the years ended December 31, 2006, 2005 and 2004 was
$17.56, $14.20 and $9.81, respectively. The intrinsic value of
options exercised during 2006, 2005 and 2004 was
$145.9 million, $278.7 million and
$107.8 million, respectively. As of December 31, 2006,
there was $5.3 million of total unrecognized compensation
cost related to the Companys unvested stock options and
that cost is expected to be recognized over a weighted-average
period of 1.9 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, 2006 and changes during the year then
ended, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
|
|
Grant Date
|
|
|
|
RSA
|
|
|
Fair Value
|
|
|
RSU
|
|
|
Fair Value
|
|
|
Non-Vested at January 1, 2006
|
|
|
4,206,900
|
|
|
$
|
30.47
|
|
|
|
2,680,240
|
|
|
$
|
33.99
|
|
Granted
|
|
|
158,800
|
|
|
|
43.01
|
|
|
|
251,100
|
|
|
|
44.03
|
|
Vested
|
|
|
(833,140
|
)
|
|
|
25.98
|
|
|
|
(268,602
|
)
|
|
|
26.06
|
|
Forfeited
|
|
|
(239,980
|
)
|
|
|
33.22
|
|
|
|
(289,888
|
)
|
|
|
35.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested at December 31,
2006
|
|
|
3,292,580
|
|
|
|
33.56
|
|
|
|
2,372,850
|
|
|
|
35.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant date fair value of RSAs and RSUs
granted during the years ended 2006, 2005 and 2004 was $43.63,
$32.18 and $21.50, respectively. The total fair value of RSAs
and RSUs vested during the years ended 2006 and 2005 was
$46.5 million and $15.0 million, respectively. There
were no RSA or RSU vestings during the year ended
December 31, 2004. As of December 31, 2006, there was
$82.7 million and $65.5 million of total unrecognized
compensation cost related to non-vested RSAs and RSUs,
respectively, which is expected to be recognized over a
weighted-average period of 2.6 years.
Executive
Deferred Compensation Plan
In May 1992, the Companys shareholders approved the
Executive Deferred Compensation Stock Ownership Plan (the
EDC Plan). Under the EDC Plan, a portion of the
compensation for certain key employees of the Company, including
officers and employee directors, can be deferred for payment
after retirement or termination of employment.
The Company has established a grantor trust to fund the benefits
under the EDC Plan. The funds provided to such trust are
invested by a trustee independent of the Company in Common
Shares, which are purchased by the
74
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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.
|
|
16.
|
Retirement
and Employee Benefit Plans
|
The Company has defined contribution plans covering certain of
its employees. Contribution expenses related to these plans
totaled $21.9 million, $17.4 million and
$9.3 million in 2006, 2005 and 2004, respectively.
The Company has defined benefit pension and other
post-retirement benefit plans covering certain U.S. and
international employees. Plan benefits are generally based on
factors such as age, compensation levels and years of service.
Effective August 2003, the Company adopted a SERP to provide
pension benefits to certain executives upon retirement. This
plan is a nonqualified, unfunded retirement plan and in order to
meet its obligations under the SERP, the Company maintains life
insurance policies on the lives of the participants. These
policies are not included as plan assets nor in the funded
status amounts in the table below. The Company is the sole owner
and beneficiary of such policies.
In September 2006, the FASB issued Statement No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R)
(SFAS No. 158). Among other items,
SFAS No. 158 requires recognition of the overfunded or
underfunded status of an entitys defined benefit or
postretirement plan as an asset or liability in the financial
statements, requires the measurement of defined benefit or
postretirement plan assets and obligations as of the end of the
employers fiscal year, and requires recognition of the
previously deferred portion of defined benefit or postretirement
plans in other comprehensive income.
On December 31, 2006, the Company adopted the recognition
and disclosure provisions of SFAS No. 158. The
following table illustrates the incremental financial statement
impact of adopting SFAS No. 158:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before
|
|
|
|
|
|
After
|
|
|
|
Application of
|
|
|
|
|
|
Application of
|
|
|
|
SFAS No. 158
|
|
|
Adjustments
|
|
|
SFAS No. 158
|
|
|
|
(In thousands)
|
|
|
Other Intangible Assets, Net
|
|
$
|
618,013
|
|
|
$
|
(18,185
|
)
|
|
$
|
599,828
|
|
Other Assets
|
|
|
168,126
|
|
|
|
162
|
|
|
|
168,288
|
|
Total Assets
|
|
|
10,157,271
|
|
|
|
(18,023
|
)
|
|
|
10,139,248
|
|
Deferred Tax Liabilities
|
|
|
150,980
|
|
|
|
(14,772
|
)
|
|
|
136,208
|
|
Other Liabilities
|
|
|
196,684
|
|
|
|
23,812
|
|
|
|
220,496
|
|
Accumulated Other Comprehensive
Income
|
|
|
146,216
|
|
|
|
(27,063
|
)
|
|
|
119,153
|
|
Total Shareholders Equity
|
|
|
6,201,862
|
|
|
|
(27,063
|
)
|
|
|
6,174,799
|
|
Total Liabilities and
Shareholders Equity
|
|
|
10,157,271
|
|
|
|
(18,023
|
)
|
|
|
10,139,248
|
|
75
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Plan information including the funded status of the plans is
presented below.
The changes in benefit obligations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Benefit obligation at beginning of
year
|
|
$
|
81,865
|
|
|
$
|
124,883
|
|
|
$
|
63,019
|
|
|
$
|
84,239
|
|
Service cost
|
|
|
2,301
|
|
|
|
9,694
|
|
|
|
2,417
|
|
|
|
8,573
|
|
Interest cost
|
|
|
4,154
|
|
|
|
6,575
|
|
|
|
3,398
|
|
|
|
4,941
|
|
Plan participants
contributions
|
|
|
|
|
|
|
2,823
|
|
|
|
|
|
|
|
2,341
|
|
Business combinations
|
|
|
|
|
|
|
795
|
|
|
|
2,701
|
|
|
|
34,407
|
|
Divestiture
|
|
|
|
|
|
|
(1,956
|
)
|
|
|
|
|
|
|
|
|
Amendments
|
|
|
3,629
|
|
|
|
111
|
|
|
|
4,753
|
|
|
|
(5,976
|
)
|
Curtailments
|
|
|
(2,658
|
)
|
|
|
|
|
|
|
7,450
|
|
|
|
(2,385
|
)
|
Settlements
|
|
|
(7,484
|
)
|
|
|
(291
|
)
|
|
|
(14,334
|
)
|
|
|
(3,460
|
)
|
Actuarial loss
|
|
|
14,245
|
|
|
|
554
|
|
|
|
13,605
|
|
|
|
14,510
|
|
Currency fluctuations
|
|
|
|
|
|
|
14,843
|
|
|
|
|
|
|
|
(9,587
|
)
|
Benefits paid
|
|
|
(1,745
|
)
|
|
|
(4,091
|
)
|
|
|
(1,144
|
)
|
|
|
(2,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
94,307
|
|
|
$
|
153,940
|
|
|
$
|
81,865
|
|
|
$
|
124,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The changes in plan assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Fair value of plan assets at
beginning of year
|
|
$
|
12,150
|
|
|
$
|
91,271
|
|
|
$
|
10,075
|
|
|
$
|
56,554
|
|
Actual return on plan assets
|
|
|
1,183
|
|
|
|
10,375
|
|
|
|
535
|
|
|
|
12,546
|
|
Employer contribution
|
|
|
435
|
|
|
|
9,145
|
|
|
|
234
|
|
|
|
9,015
|
|
Plan participants
contributions
|
|
|
|
|
|
|
2,823
|
|
|
|
|
|
|
|
2,337
|
|
Business combinations
|
|
|
|
|
|
|
|
|
|
|
2,450
|
|
|
|
23,824
|
|
Divestiture
|
|
|
|
|
|
|
(1,240
|
)
|
|
|
|
|
|
|
|
|
Settlements
|
|
|
|
|
|
|
(291
|
)
|
|
|
|
|
|
|
(3,363
|
)
|
Currency fluctuations
|
|
|
|
|
|
|
12,041
|
|
|
|
|
|
|
|
(7,304
|
)
|
Benefits paid
|
|
|
(1,745
|
)
|
|
|
(3,677
|
)
|
|
|
(1,144
|
)
|
|
|
(2,338
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end
of year
|
|
|
12,023
|
|
|
|
120,447
|
|
|
|
12,150
|
|
|
|
91,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
(82,284
|
)
|
|
$
|
(33,493
|
)
|
|
$
|
(69,715
|
)
|
|
$
|
(33,612
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The amounts recognized in the Consolidated Balance Sheets are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Noncurrent assets
|
|
$
|
41
|
|
|
$
|
121
|
|
|
$
|
|
|
|
$
|
187
|
|
Current liabilities
|
|
|
(6,202
|
)
|
|
|
|
|
|
|
(200
|
)
|
|
|
(190
|
)
|
Noncurrent liabilities
|
|
|
(76,123
|
)
|
|
|
(33,614
|
)
|
|
|
(51,582
|
)
|
|
|
(33,991
|
)
|
Amounts in accumulated other comprehensive income that have not
yet been recognized as components of net periodic benefit cost
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Net loss
|
|
$
|
37,269
|
|
|
$
|
7,080
|
|
|
$
|
|
|
|
$
|
|
|
Net prior service costs (credit)
|
|
|
18,279
|
|
|
|
(1,505
|
)
|
|
|
|
|
|
|
|
|
Net transition asset
|
|
|
|
|
|
|
(27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other
comprehensive income
|
|
$
|
55,548
|
|
|
$
|
5,548
|
|
|
$
|
12,915
|
|
|
$
|
9,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accumulated benefit obligation for defined benefit pension
plans was $67.8 million and $62.9 million at
December 31, 2006 and 2005, respectively, for the
U.S. plans and $149.8 million and $121.3 million
at December 31, 2006 and 2005, 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, 2006 and 2005 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Plans with projected benefit
obligation in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
$
|
92,017
|
|
|
$
|
150,937
|
|
|
$
|
81,865
|
|
|
$
|
124,195
|
|
Fair value of plan assets
|
|
|
9,691
|
|
|
|
117,097
|
|
|
|
12,150
|
|
|
|
90,354
|
|
Plans with accumulated benefit
obligation in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
|
65,551
|
|
|
|
136,680
|
|
|
|
62,892
|
|
|
|
110,657
|
|
Fair value of plan assets
|
|
|
9,691
|
|
|
|
103,640
|
|
|
|
12,150
|
|
|
|
77,645
|
|
77
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The components of net periodic benefit cost during the years
ended December 31, 2006, 2005 and 2004 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Service cost
|
|
$
|
2,301
|
|
|
$
|
9,694
|
|
|
$
|
2,417
|
|
|
$
|
8,573
|
|
|
$
|
1,763
|
|
|
$
|
6,698
|
|
Interest cost
|
|
|
4,154
|
|
|
|
6,575
|
|
|
|
3,398
|
|
|
|
4,941
|
|
|
|
2,568
|
|
|
|
3,685
|
|
Expected return on plan assets
|
|
|
(765
|
)
|
|
|
(6,126
|
)
|
|
|
(802
|
)
|
|
|
(4,018
|
)
|
|
|
(899
|
)
|
|
|
(2,996
|
)
|
Amortization of transition asset
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(4
|
)
|
Amortization of prior service cost
(credit)
|
|
|
2,234
|
|
|
|
(104
|
)
|
|
|
2,457
|
|
|
|
323
|
|
|
|
2,629
|
|
|
|
13
|
|
Settlements/curtailments
|
|
|
6,848
|
|
|
|
|
|
|
|
17,432
|
|
|
|
(2,385
|
)
|
|
|
|
|
|
|
|
|
Amortization of net loss
|
|
|
1,807
|
|
|
|
549
|
|
|
|
1,140
|
|
|
|
11
|
|
|
|
166
|
|
|
|
589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
16,579
|
|
|
$
|
10,584
|
|
|
$
|
26,042
|
|
|
$
|
7,442
|
|
|
$
|
6,227
|
|
|
$
|
7,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts in accumulated other comprehensive income expected to be
recognized as components of net periodic benefit cost in 2007
are as follows:
|
|
|
|
|
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
|
(In thousands)
|
|
|
Net loss
|
|
$
|
2,606
|
|
|
$
|
146
|
|
Prior service costs (credit)
|
|
|
2,241
|
|
|
|
(104
|
)
|
Transition asset
|
|
|
|
|
|
|
(4
|
)
|
Prior service costs are amortized using an alternative
straight-line method over the average remaining service period
of employees expected to receive plan benefits.
Assumed long-term rates of return on plan assets, discount rates
and rates of compensation increases vary for the different plans
according to the local economic conditions.
The weighted average assumption rates used for benefit
obligations are as follows:
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2006
|
|
2005
|
|
Discount rate:
|
|
|
|
|
United States plans
|
|
5.00 - 5.50%
|
|
5.25 - 5.50%
|
International plans
|
|
1.90 - 5.80
|
|
2.00 - 5.80
|
Rate of compensation increase:
|
|
|
|
|
United States plans
|
|
8.00
|
|
6.00
|
International plans
|
|
2.00 - 5.34
|
|
2.25 - 6.08
|
78
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The weighted average assumption rates used for net periodic
benefit costs are as follows:
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2006
|
|
2005
|
|
2004
|
|
Discount rate:
|
|
|
|
|
|
|
United States plans
|
|
5.00 - 5.50%
|
|
5.25% - 5.75%
|
|
6.00%
|
International plans
|
|
2.00 - 5.80
|
|
1.80 - 6.00
|
|
1.80 - 7.00
|
Expected return on plan assets:
|
|
|
|
|
|
|
United States plans
|
|
5.00 - 7.00
|
|
8.00
|
|
8.00
|
International plans
|
|
4.00 - 7.50
|
|
4.00 - 7.00
|
|
4.00 - 8.00
|
Rate of compensation increase:
|
|
|
|
|
|
|
United States plans
|
|
6.00
|
|
4.00
|
|
3.00
|
International plans
|
|
2.00 - 6.08
|
|
2.25 - 6.85
|
|
2.75 - 7.50
|
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, 2006
and 2005, by asset category are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
United
|
|
|
|
|
|
United
|
|
|
|
|
|
|
States
|
|
|
International
|
|
|
States
|
|
|
International
|
|
|
Equity
|
|
|
61
|
%
|
|
|
73
|
%
|
|
|
58
|
%
|
|
|
77
|
%
|
Debt securities
|
|
|
38
|
|
|
|
18
|
|
|
|
41
|
|
|
|
18
|
|
Other
|
|
|
1
|
|
|
|
9
|
|
|
|
1
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2007, the Company expects to contribute $1.1 million in
the U.S. and $9.7 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
|
|
|
2007
|
|
$
|
9,496
|
|
|
$
|
1,632
|
|
2008
|
|
|
1,421
|
|
|
|
3,130
|
|
2009
|
|
|
2,419
|
|
|
|
2,900
|
|
2010
|
|
|
2,343
|
|
|
|
1,948
|
|
2011
|
|
|
2,651
|
|
|
|
4,599
|
|
2012 - 2016
|
|
|
19,359
|
|
|
|
32,150
|
|
79
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,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Domestic
|
|
$
|
525,104
|
|
|
$
|
94,016
|
|
|
$
|
50,141
|
|
Foreign
|
|
|
699,119
|
|
|
|
532,176
|
|
|
|
380,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,224,223
|
|
|
$
|
626,192
|
|
|
$
|
430,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys income tax benefit (provision) from
continuing operations consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal and state income
taxes
|
|
$
|
(82,232
|
)
|
|
$
|
605
|
|
|
$
|
388
|
|
Foreign
|
|
|
(190,973
|
)
|
|
|
(130,994
|
)
|
|
|
(108,786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
(273,205
|
)
|
|
|
(130,389
|
)
|
|
|
(108,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
(74,080
|
)
|
|
|
(48,465
|
)
|
|
|
(1,458
|
)
|
Foreign
|
|
|
30,761
|
|
|
|
19,688
|
|
|
|
17,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(43,319
|
)
|
|
|
(28,777
|
)
|
|
|
15,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(316,524
|
)
|
|
$
|
(159,166
|
)
|
|
$
|
(92,672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The difference between the tax (provision) benefit at the
statutory federal income tax rate and the tax (provision)
benefit attributable to Income from Continuing Operations Before
Income Taxes and Minority Interest for the three years ended
December 31, 2006 is analyzed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Statutory federal income tax rate
|
|
$
|
(428,479
|
)
|
|
$
|
(219,167
|
)
|
|
$
|
(150,762
|
)
|
Effect of state income tax, net
and alternative minimum tax
|
|
|
(1,965
|
)
|
|
|
(191
|
)
|
|
|
252
|
|
Effect of domestic non-deductible
expenses
|
|
|
3,247
|
|
|
|
6,568
|
|
|
|
(2,076
|
)
|
Change in valuation allowance
|
|
|
(8,395
|
)
|
|
|
(17,223
|
)
|
|
|
1,161
|
|
Effect of foreign income tax, net
|
|
|
98,384
|
|
|
|
66,923
|
|
|
|
60,933
|
|
Change in income tax reserve
|
|
|
7,500
|
|
|
|
8,744
|
|
|
|
|
|
Other
|
|
|
13,184
|
|
|
|
(4,820
|
)
|
|
|
(2,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(316,524
|
)
|
|
$
|
(159,166
|
)
|
|
$
|
(92,672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the fourth quarter of 2006, the Company recorded a
benefit of $26.4 million related to the favorable
settlement of certain foreign income tax exposures. This
adjustment is presented in Effect of foreign income tax, net.
During the fourth quarter of 2006, the Company completed an
analysis of book and tax basis differences in its major tax
paying jurisdictions and, as a result, recorded a tax benefit of
$12.9 million, of which, $5.1 million is
80
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
presented in Effect of foreign income tax, net and
$7.8 million is presented in Other. In addition, during the
fourth quarter of 2006, the Company recorded $10.8 million
of benefits related to certain prior year foreign income tax
returns. This adjustment is presented in Effect of foreign
income tax, net. The Company recorded a $19.8 million
benefit related to its prior year domestic income tax returns
during the third quarter of 2006. Of this benefit,
$14.7 million is presented in Effect of foreign income tax,
net and $5.1 million is presented in Other. The Company
assessed these adjustments and concluded that these adjustments
were immaterial, individually and in the aggregate, to the
Companys prior years results of operations.
Deferred tax assets and liabilities are recognized for the
estimated future tax effects of temporary differences between
the tax basis of an asset or liability and its reported amount
in the financial statements. The measurement of 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,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Domestic and foreign operating
losses
|
|
$
|
103,940
|
|
|
$
|
57,458
|
|
Accrued liabilities and reserves
|
|
|
158,904
|
|
|
|
137,457
|
|
Tax credits
|
|
|
26,277
|
|
|
|
70,489
|
|
Unremitted foreign earnings
|
|
|
|
|
|
|
5,355
|
|
Other differences between
financial and tax basis
|
|
|
59,731
|
|
|
|
33,683
|
|
Differences between financial and
tax basis inventory
|
|
|
25,375
|
|
|
|
22,735
|
|
Valuation allowance
|
|
|
(51,808
|
)
|
|
|
(44,003
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
322,419
|
|
|
|
283,174
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
(113,960
|
)
|
|
|
(128,850
|
)
|
Goodwill and other intangibles
|
|
|
(164,537
|
)
|
|
|
(30,972
|
)
|
Other differences between
financial and tax basis
|
|
|
(5,227
|
)
|
|
|
(7,690
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(283,724
|
)
|
|
|
(167,512
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
38,695
|
|
|
$
|
115,662
|
|
|
|
|
|
|
|
|
|
|
In connection with the acquisition of the Precision divisions,
certain of Precisions operations were integrated with the
Companys operations resulting in a charge of
$23.9 million in 2005. The integration required recognition
of certain gains that had previously been deferred for tax
purposes and also required a valuation allowance to be placed on
a portion of the Companys tax credits. The integration and
restructuring should enable the Company to more effectively
realize tax credits.
The overall increase in the valuation allowance in 2006 is
primarily attributable to the establishment of a valuation
allowance against net operating losses (NOLs) in
various jurisdictions. The overall increase in the valuation
allowance in 2005 is primarily attributable to the establishment
of a valuation allowance against NOLs in various jurisdictions
and tax credits in the United States. 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.
81
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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 US
federal and state income taxes has been provided. If the
earnings were not indefinitely reinvested, the estimated tax
liability would be approximately $52.8 million after
application of available foreign tax credits.
At December 31, 2006, the Company had approximately
$420.0 million of NOLs, $115.3 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 2007 through 2025.
At December 31, 2006, the Company had approximately
$17.2 million of foreign tax credits available to offset
future payments of federal income taxes. The foreign tax credits
expire in varying amounts through 2015.
As of January 1, 2007, the Company adopted
FIN No. 48 and does not expect the Interpretation to
have a material impact on its results from operations or
financial position (See Note 1).
On June 26, 2002, the stockholders and Board of Directors
of Weatherford International, Inc. approved the Companys
corporate reorganization, and Weatherford International Ltd., a
newly formed Bermuda company, became the parent holding company
of Weatherford International, Inc. The realization of the tax
benefit of this reorganization could be impacted by changes in
tax laws, tax treaties or tax regulations or the interpretation
or enforcement thereof or differing interpretation or
enforcement of applicable law by the U.S. Internal Revenue
Service or other taxing jurisdictions. The inability to realize
this benefit could have a material impact on the Companys
financial statements.
|
|
18.
|
Disputes,
Litigation and Contingencies
|
Litigation
and Other 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.
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. Although the Company believes adequate reserves
have been provided for expected liabilities arising from its
self-insured obligations, it is reasonably possible that
managements estimates of these liabilities will change
over the near term as circumstances develop.
82
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Operating
Leases
The Company is committed under various operating lease
agreements primarily related to office space and equipment.
Generally, these leases include renewal provisions and rental
payments, which may be adjusted for taxes, insurance and
maintenance related to the property. Future minimum rental
commitments under noncancelable operating leases are as follows
(in thousands):
|
|
|
|
|
2007
|
|
$
|
59,906
|
|
2008
|
|
|
44,173
|
|
2009
|
|
|
34,819
|
|
2010
|
|
|
29,225
|
|
2011
|
|
|
23,413
|
|
Thereafter
|
|
|
123,668
|
|
|
|
|
|
|
|
|
$
|
315,204
|
|
|
|
|
|
|
Total rent expense incurred under operating leases was
approximately $90.8 million, $69.9 million and
$42.0 million for the years ended December 31, 2006,
2005 and 2004, respectively.
|
|
20.
|
Related
Party Transactions
|
A member of the Companys Board of Directors is the Chief
Executive Director of London Merchant Securities plc. The
Company began leasing office space from London Merchant
Securities during 2004. The annual rent is $0.3 million
plus the Companys proportional share of building expenses.
The terms of the lease are standard market terms.
In 2005, the Company entered into a spot-rate foreign exchange
transaction totaling $4.0 million with Lehman Brothers,
Inc. (Lehman), an investment banking firm in which
two directors of the Company are managing directors. The Company
also sold its interest in an agreement to explore and develop
oil and gas interests to a Lehman affiliate, who also was an
original party to the agreement, for $4.2 million. In 2003
and 2004, the Company entered into interest rate swap agreements
for its
65/8% Senior
Notes with Lehman at market rates.
During 2003, the Company sold one of its businesses to two
former employees for $0.1 million in cash and a note
receivable of $3.2 million. The balance of the note
receivable was $1.4 million and $1.9 million at
December 31, 2006 and 2005, respectively.
A member of the Companys Board of Directors is the Chief
Executive Officer of First Reserve Corporation. First Reserve
Corporation beneficially owns certain convertible preferred
securities of CiDRA Corporation (CiDRA), which are
convertible into less than 10% of CiDRA common stock on a fully
diluted and convertible basis. In 2004, the Company sold and
licensed certain technology and rights to CiDRA. The Company
received $2.0 million in cash, a $7.0 million
promissory note payable over four years and will receive royalty
payments equal to 5% of CiDRAs sales. The member of the
Companys Board of Directors did not participate in the
Companys consideration or approval of these transactions.
The note balance was fully paid as of December 31, 2006.
The balance of the note receivable was $7.0 million at
December 31, 2005.
During 2002, the Company sold certain assets to a former
employee for a note receivable. The balance of the note
receivable was $4.5 million and $8.1 million at
December 31, 2006 and 2005, respectively.
83
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Geographic
Segments
Financial information by geographic segment, as provided to the
chief operating decision maker, for each of the three years
ended December 31, 2006, is summarized below. Revenues are
attributable to countries based on the ultimate destination of
the sale of products and performance of services. Long-lived
assets are long-term assets excluding deferred tax assets of
$34.0 million, $47.1 million and $37.8 million at
December 31, 2006, 2005 and 2004, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from Unaffiliated Customers
|
|
|
Long-lived Assets
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
United States
|
|
$
|
2,512,840
|
|
|
$
|
1,609,209
|
|
|
$
|
1,140,974
|
|
|
$
|
2,956,817
|
|
|
$
|
1,306,406
|
|
|
$
|
1,761,501
|
|
Canada
|
|
|
1,159,790
|
|
|
|
791,496
|
|
|
|
528,581
|
|
|
|
1,291,666
|
|
|
|
1,515,520
|
|
|
|
534,286
|
|
Latin America
|
|
|
726,197
|
|
|
|
423,974
|
|
|
|
301,392
|
|
|
|
360,220
|
|
|
|
423,490
|
|
|
|
171,570
|
|
Europe, CIS and West Africa
|
|
|
827,343
|
|
|
|
659,308
|
|
|
|
556,112
|
|
|
|
875,645
|
|
|
|
1,376,412
|
|
|
|
730,944
|
|
Middle East and North Africa
|
|
|
922,131
|
|
|
|
519,826
|
|
|
|
376,054
|
|
|
|
1,031,280
|
|
|
|
902,904
|
|
|
|
234,840
|
|
Asia Pacific
|
|
|
430,627
|
|
|
|
329,414
|
|
|
|
228,661
|
|
|
|
229,642
|
|
|
|
369,604
|
|
|
|
129,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,578,928
|
|
|
$
|
4,333,227
|
|
|
$
|
3,131,774
|
|
|
$
|
6,745,270
|
|
|
$
|
5,894,336
|
|
|
$
|
3,562,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting
Segments
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 Company divides its business
into two separate segments as defined by the chief operating
decision maker: Evaluation, Drilling & Intervention
Services and Completion & Production Systems.
In connection with the Companys integration plan relating
to the acquisition of divisions of Precision Drilling
Corporation and the operational realignment of its Pipeline and
Specialty Services businesses, the Company undertook a review of
its presentation of segment information in the second quarter of
2006 (See Note 1). In addition to its former businesses,
Evaluation, Drilling & Intervention Services now
includes the operations of Precision Drilling International and
Completion & Production Services includes the
operations of Pipeline and Specialty Services. The following
describes our reporting segments:
The Companys Evaluation, Drilling & Intervention
Services segment provides a wide range of oilfield products and
services, including drilling services and equipment, cased hole
and open hole wireline services, well installation services and
cementing products and equipment, controlled pressure drilling
and testing, fishing and intervention services, liner systems,
expandable solid tubular systems and contract drilling rigs.
The Companys Completion & Production Systems
segment designs, manufactures, sells and services a complete
line of artificial lift equipment, including progressing cavity
pumps, reciprocating rod lift systems, gas lift systems and
electrical submersible pumps as well as provides fracturing
technologies, production optimization services and automation
and monitoring of wellhead production. This segment also
provides pipeline specialty services and certain completion
products and systems including cased hole systems, flow control
systems, sand screens, expandable sand screen systems and
intelligent completion technologies. Completion &
Production Systems also provides screens for industrial
applications.
84
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Financial information by industry segment for each of the three
years ended December 31, 2006 is summarized below. The
total assets and capital expenditures for the years ended
December 31, 2005 and 2004 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.
Inter-segment sales are not material.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Evaluation,
|
|
|
|
|
|
|
|
|
|
|
|
|
Drilling &
|
|
|
Completion &
|
|
|
|
|
|
|
|
|
|
Intervention
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Systems
|
|
|
Corporate(a)
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from unaffiliated
customers
|
|
$
|
4,234,024
|
|
|
$
|
2,344,904
|
|
|
$
|
|
|
|
$
|
6,578,928
|
|
Depreciation and amortization
|
|
|
379,406
|
|
|
|
100,000
|
|
|
|
3,655
|
|
|
|
483,061
|
|
Operating income (loss)
|
|
|
1,025,630
|
|
|
|
424,342
|
|
|
|
(109,763
|
)
|
|
|
1,340,209
|
|
Total assets
|
|
|
6,940,426
|
|
|
|
2,942,165
|
|
|
|
256,657
|
|
|
|
10,139,248
|
|
Capital expenditures for property,
plant and equipment
|
|
|
774,875
|
|
|
|
262,562
|
|
|
|
33,647
|
|
|
|
1,071,084
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from unaffiliated
customers
|
|
$
|
2,528,745
|
|
|
$
|
1,804,482
|
|
|
$
|
|
|
|
$
|
4,333,227
|
|
Depreciation and amortization
|
|
|
246,061
|
|
|
|
85,824
|
|
|
|
2,453
|
|
|
|
334,338
|
|
Operating income (loss)(b)
|
|
|
454,622
|
|
|
|
209,685
|
|
|
|
(99,465
|
)
|
|
|
564,842
|
|
Total assets
|
|
|
5,750,477
|
|
|
|
2,407,083
|
|
|
|
422,744
|
|
|
|
8,580,304
|
|
Capital expenditures for property,
plant and equipment
|
|
|
397,330
|
|
|
|
109,933
|
|
|
|
19,341
|
|
|
|
526,604
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from unaffiliated
customers
|
|
$
|
1,697,635
|
|
|
$
|
1,434,139
|
|
|
$
|
|
|
|
$
|
3,131,774
|
|
Depreciation and amortization
|
|
|
177,468
|
|
|
|
75,947
|
|
|
|
2,469
|
|
|
|
255,884
|
|
Operating income (loss)
|
|
|
323,190
|
|
|
|
131,126
|
|
|
|
(52,051
|
)
|
|
|
402,265
|
|
Total assets
|
|
|
2,647,441
|
|
|
|
2,153,973
|
|
|
|
729,312
|
|
|
|
5,530,726
|
|
Capital expenditures for property,
plant and equipment
|
|
|
194,139
|
|
|
|
92,773
|
|
|
|
23,918
|
|
|
|
310,830
|
|
|
|
|
(a) |
|
Includes Equity in Earnings of Unconsolidated Affiliates that
are integral to the Companys operations. |
|
(b) |
|
Includes Exit Costs and Restructuring Charges of $72,769, $8,728
and $32,738 in Evaluation, Drilling & Intervention
Services, Completion & Production Systems and
Corporate, respectively (See Note 4). |
On January 8, 2007, the Company created the position of
Senior Vice President and Chief Operating Officer. During 2007,
in conjunction with this organizational change, the Company
decided to merge its two existing divisions, Evaluation,
Drilling & Intervention Services and
Completion & Production Systems, into a single
operating group.
|
|
22.
|
Consolidating
Financial Statements
|
Effective June 26, 2002, Weatherford Limited became the
parent holding company of Weatherford International, Inc.
following a corporate reorganization. Weatherford International,
Inc. continues to exist as an indirect, wholly owned subsidiary
of Weatherford Limited. Weatherford Limited and its subsidiaries
continue to conduct the business previously conducted by
Weatherford International, Inc. and its subsidiaries. The
reorganization has been
85
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
accounted for as a reorganization of entities under common
control, and accordingly, did not result in any changes to the
consolidated amounts of assets, liabilities or
shareholders equity. As part of the reorganization,
Weatherford Limited (Parent) and Weatherford
International, Inc. (Issuer) each guaranteed, on a
full and unconditional basis, certain indebtedness of the
Company.
As of December 31, 2006, the
65/8% Senior
Notes of the Issuer were guaranteed by the Parent. As of
December 31, 2005, the
65/8% Senior
Notes and the
71/4% Senior
Notes of the Issuer were guaranteed by the Parent. The
71/4% Senior
Notes were paid in full in May 2006. The following obligations
of the Parent were guaranteed by the Issuer as of
December 31, 2006 and 2005: (i) the Revolving Credit
Facility, (ii) the 4.95% Senior Notes, and
(iii) issuances of notes under the commercial paper
program. As of December 31, 2006, the 5.50% Senior
Notes and 6.50% Senior Notes are guaranteed by the Issuer.
As of December 31, 2005, the
364-Day
Facility was guaranteed by the Issuer.
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.
86
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Condensed
Consolidating Balance Sheet
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
35
|
|
|
$
|
2,271
|
|
|
$
|
123,981
|
|
|
$
|
|
|
|
$
|
126,287
|
|
Other Current Assets
|
|
|
131
|
|
|
|
3,739
|
|
|
|
3,229,840
|
|
|
|
|
|
|
|
3,233,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166
|
|
|
|
6,010
|
|
|
|
3,353,821
|
|
|
|
|
|
|
|
3,359,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Investments in Affiliates
|
|
|
10,009,855
|
|
|
|
3,502,589
|
|
|
|
12,935,625
|
|
|
|
(26,448,069
|
)
|
|
|
|
|
Shares Held in Parent
|
|
|
|
|
|
|
132,541
|
|
|
|
548,575
|
|
|
|
(681,116
|
)
|
|
|
|
|
Intercompany Receivables, Net
|
|
|
329,237
|
|
|
|
1,333,181
|
|
|
|
|
|
|
|
(1,662,418
|
)
|
|
|
|
|
Other Assets
|
|
|
40,897
|
|
|
|
8,517
|
|
|
|
6,729,837
|
|
|
|
|
|
|
|
6,779,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,380,155
|
|
|
$
|
4,982,838
|
|
|
$
|
23,567,858
|
|
|
$
|
(28,791,603
|
)
|
|
$
|
10,139,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Borrowings and Current
Portion of Long-term Debt
|
|
$
|
491,542
|
|
|
$
|
9,272
|
|
|
$
|
147,922
|
|
|
$
|
|
|
|
$
|
648,736
|
|
Accounts Payable and Other Current
Liabilities
|
|
|
33,788
|
|
|
|
3,887
|
|
|
|
1,356,734
|
|
|
|
|
|
|
|
1,394,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
525,330
|
|
|
|
13,159
|
|
|
|
1,504,656
|
|
|
|
|
|
|
|
2,043,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Debt
|
|
|
1,198,973
|
|
|
|
355,318
|
|
|
|
10,309
|
|
|
|
|
|
|
|
1,564,600
|
|
Intercompany Payables, Net
|
|
|
|
|
|
|
|
|
|
|
1,662,418
|
|
|
|
(1,662,418
|
)
|
|
|
|
|
Other Long-term Liabilities
|
|
|
72,789
|
|
|
|
57,119
|
|
|
|
226,796
|
|
|
|
|
|
|
|
356,704
|
|
Shareholders Equity
|
|
|
8,583,063
|
|
|
|
4,557,242
|
|
|
|
20,163,679
|
|
|
|
(27,129,185
|
)
|
|
|
6,174,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,380,155
|
|
|
$
|
4,982,838
|
|
|
$
|
23,567,858
|
|
|
$
|
(28,791,603
|
)
|
|
$
|
10,139,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Condensed
Consolidating Balance Sheet
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
124
|
|
|
$
|
3,172
|
|
|
$
|
130,949
|
|
|
$
|
|
|
|
$
|
134,245
|
|
Other Current Assets
|
|
|
952
|
|
|
|
1,179
|
|
|
|
2,502,497
|
|
|
|
|
|
|
|
2,504,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,076
|
|
|
|
4,351
|
|
|
|
2,633,446
|
|
|
|
|
|
|
|
2,638,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Investments in Affiliates
|
|
|
8,029,938
|
|
|
|
2,602,236
|
|
|
|
12,368,520
|
|
|
|
(23,000,694
|
)
|
|
|
|
|
Shares Held in Parent
|
|
|
|
|
|
|
152,111
|
|
|
|
|
|
|
|
(152,111
|
)
|
|
|
|
|
Intercompany Receivables, Net
|
|
|
180,959
|
|
|
|
1,741,011
|
|
|
|
|
|
|
|
(1,921,970
|
)
|
|
|
|
|
Other Assets
|
|
|
43,493
|
|
|
|
10,366
|
|
|
|
5,887,572
|
|
|
|
|
|
|
|
5,941,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,255,466
|
|
|
$
|
4,510,075
|
|
|
$
|
20,889,538
|
|
|
$
|
(25,074,775
|
)
|
|
$
|
8,580,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Borrowings and Current
Portion of Long-term Debt
|
|
$
|
717,628
|
|
|
$
|
206,118
|
|
|
$
|
31,020
|
|
|
$
|
|
|
|
$
|
954,766
|
|
Accounts Payable and Other Current
Liabilities
|
|
|
4,002
|
|
|
|
7,770
|
|
|
|
1,031,603
|
|
|
|
|
|
|
|
1,043,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
721,630
|
|
|
|
213,888
|
|
|
|
1,062,623
|
|
|
|
|
|
|
|
1,998,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term Debt
|
|
|
255,329
|
|
|
|
357,449
|
|
|
|
19,293
|
|
|
|
|
|
|
|
632,071
|
|
Intercompany Payables, Net
|
|
|
|
|
|
|
|
|
|
|
1,921,970
|
|
|
|
(1,921,970
|
)
|
|
|
|
|
Other Long-term Liabilities
|
|
|
46,792
|
|
|
|
80,231
|
|
|
|
156,252
|
|
|
|
|
|
|
|
283,275
|
|
Shareholders Equity
|
|
|
7,231,715
|
|
|
|
3,858,507
|
|
|
|
17,729,400
|
|
|
|
(23,152,805
|
)
|
|
|
5,666,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,255,466
|
|
|
$
|
4,510,075
|
|
|
$
|
20,889,538
|
|
|
$
|
(25,074,775
|
)
|
|
$
|
8,580,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Condensed
Consolidating Statement of Operations
Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,578,928
|
|
|
$
|
|
|
|
$
|
6,578,928
|
|
Costs and Expenses
|
|
|
(16,872
|
)
|
|
|
(1,013
|
)
|
|
|
(5,226,664
|
)
|
|
|
|
|
|
|
(5,244,549
|
)
|
Equity in Earnings of
Unconsolidated Affiliates
|
|
|
|
|
|
|
|
|
|
|
5,830
|
|
|
|
|
|
|
|
5,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
(16,872
|
)
|
|
|
(1,013
|
)
|
|
|
1,358,094
|
|
|
|
|
|
|
|
1,340,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net
|
|
|
(74,669
|
)
|
|
|
(26,337
|
)
|
|
|
(1,915
|
)
|
|
|
|
|
|
|
(102,921
|
)
|
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
|
)
|
|
|
(11,876
|
)
|
|
|
|
|
|
|
(13,065
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing
Operations Before Income Taxes and Minority Interest
|
|
|
896,372
|
|
|
|
1,045,899
|
|
|
|
1,319,112
|
|
|
|
(2,037,160
|
)
|
|
|
1,224,223
|
|
Provision for Income Taxes
|
|
|
(3
|
)
|
|
|
(14,929
|
)
|
|
|
(301,592
|
)
|
|
|
|
|
|
|
(316,524
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing
Operations Before Minority Interest
|
|
|
896,369
|
|
|
|
1,030,970
|
|
|
|
1,017,520
|
|
|
|
(2,037,160
|
)
|
|
|
907,699
|
|
Minority Interest, Net
|
|
|
|
|
|
|
|
|
|
|
(11,330
|
)
|
|
|
|
|
|
|
(11,330
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing
Operations
|
|
|
896,369
|
|
|
|
1,030,970
|
|
|
|
1,006,190
|
|
|
|
(2,037,160
|
)
|
|
|
896,369
|
|
Loss from Discontinued Operation,
Net of Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
896,369
|
|
|
$
|
1,030,970
|
|
|
$
|
1,006,190
|
|
|
$
|
(2,037,160
|
)
|
|
$
|
896,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Condensed
Consolidating Statement of Operations
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,333,227
|
|
|
$
|
|
|
|
$
|
4,333,227
|
|
|
|
|
|
Costs and Expenses
|
|
|
(16,524
|
)
|
|
|
(912
|
)
|
|
|
(3,761,376
|
)
|
|
|
|
|
|
|
(3,778,812
|
)
|
|
|
|
|
Equity in Earnings of
Unconsolidated Affiliates
|
|
|
|
|
|
|
|
|
|
|
10,427
|
|
|
|
|
|
|
|
10,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
(16,524
|
)
|
|
|
(912
|
)
|
|
|
582,278
|
|
|
|
|
|
|
|
564,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on Sale of Universal Common
Stock
|
|
|
115,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,456
|
|
|
|
|
|
Debt Redemption Expense
|
|
|
|
|
|
|
(4,733
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,733
|
)
|
|
|
|
|
Interest Expense, Net
|
|
|
(22,953
|
)
|
|
|
(43,324
|
)
|
|
|
(2,858
|
)
|
|
|
|
|
|
|
(69,135
|
)
|
|
|
|
|
Intercompany Charges, Net
|
|
|
(35,500
|
)
|
|
|
104,146
|
|
|
|
(68,646
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in Subsidiary Income
|
|
|
411,695
|
|
|
|
376,282
|
|
|
|
|
|
|
|
(787,977
|
)
|
|
|
|
|
|
|
|
|
Other, Net
|
|
|
15,598
|
|
|
|
(315
|
)
|
|
|
4,479
|
|
|
|
|
|
|
|
19,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing
Operations Before Income Taxes and Minority Interest
|
|
|
467,772
|
|
|
|
431,144
|
|
|
|
515,253
|
|
|
|
(787,977
|
)
|
|
|
626,192
|
|
|
|
|
|
Provision for Income Taxes
|
|
|
(352
|
)
|
|
|
(19,449
|
)
|
|
|
(139,365
|
)
|
|
|
|
|
|
|
(159,166
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing
Operations Before Minority Interest
|
|
|
467,420
|
|
|
|
411,695
|
|
|
|
375,888
|
|
|
|
(787,977
|
)
|
|
|
467,026
|
|
|
|
|
|
Minority Interest, Net
|
|
|
|
|
|
|
|
|
|
|
(817
|
)
|
|
|
|
|
|
|
(817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing
Operations
|
|
|
467,420
|
|
|
|
411,695
|
|
|
|
375,071
|
|
|
|
(787,977
|
)
|
|
|
466,209
|
|
|
|
|
|
Income from Discontinued
Operation, Net of Taxes
|
|
|
|
|
|
|
|
|
|
|
1,211
|
|
|
|
|
|
|
|
1,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
467,420
|
|
|
$
|
411,695
|
|
|
$
|
376,282
|
|
|
$
|
(787,977
|
)
|
|
$
|
467,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Condensed
Consolidating Statement of Operations
Year Ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
Revenues
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,131,774
|
|
|
$
|
|
|
|
$
|
3,131,774
|
|
Costs and Expenses
|
|
|
(3,662
|
)
|
|
|
(1,490
|
)
|
|
|
(2,728,195
|
)
|
|
|
|
|
|
|
(2,733,347
|
)
|
Equity in Earnings of
Unconsolidated Affiliates
|
|
|
|
|
|
|
|
|
|
|
3,838
|
|
|
|
|
|
|
|
3,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
(3,662
|
)
|
|
|
(1,490
|
)
|
|
|
407,417
|
|
|
|
|
|
|
|
402,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on Sale of Universal Common
Stock
|
|
|
77,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,642
|
|
Interest Expense, Net
|
|
|
(11,839
|
)
|
|
|
(43,720
|
)
|
|
|
(4,157
|
)
|
|
|
|
|
|
|
(59,716
|
)
|
Intercompany Charges, Net
|
|
|
(31,297
|
)
|
|
|
90,547
|
|
|
|
(59,250
|
)
|
|
|
|
|
|
|
|
|
Equity in Subsidiary Income
|
|
|
281,281
|
|
|
|
283,320
|
|
|
|
|
|
|
|
(564,601
|
)
|
|
|
|
|
Other, Net
|
|
|
17,847
|
|
|
|
340
|
|
|
|
(7,631
|
)
|
|
|
|
|
|
|
10,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing
Operations Before Income Taxes and Minority Interest
|
|
|
329,972
|
|
|
|
328,997
|
|
|
|
336,379
|
|
|
|
(564,601
|
)
|
|
|
430,747
|
|
(Provision) Benefit for Income
Taxes
|
|
|
174
|
|
|
|
(47,716
|
)
|
|
|
(45,130
|
)
|
|
|
|
|
|
|
(92,672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing
Operations Before Minority Interest
|
|
|
330,146
|
|
|
|
281,281
|
|
|
|
291,249
|
|
|
|
(564,601
|
)
|
|
|
338,075
|
|
Minority Interest, Net
|
|
|
|
|
|
|
|
|
|
|
(776
|
)
|
|
|
|
|
|
|
(776
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Continuing
Operations
|
|
|
330,146
|
|
|
|
281,281
|
|
|
|
290,473
|
|
|
|
(564,601
|
)
|
|
|
337,299
|
|
Loss from Discontinued Operation,
Net of Taxes
|
|
|
|
|
|
|
|
|
|
|
(7,153
|
)
|
|
|
|
|
|
|
(7,153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
330,146
|
|
|
$
|
281,281
|
|
|
$
|
283,320
|
|
|
$
|
(564,601
|
)
|
|
$
|
330,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Condensed
Consolidating Statement of Cash Flows
Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
Cash Flows from Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
896,369
|
|
|
$
|
1,030,970
|
|
|
$
|
1,006,190
|
|
|
$
|
(2,037,160
|
)
|
|
$
|
896,369
|
|
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided (Used) by Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in Earnings of
Unconsolidated Affiliates
|
|
|
|
|
|
|
|
|
|
|
(5,830
|
)
|
|
|
|
|
|
|
(5,830
|
)
|
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
|
)
|
|
|
65,981
|
|
|
|
|
|
|
|
43,319
|
|
Other Adjustments
|
|
|
95,020
|
|
|
|
22,774
|
|
|
|
35,367
|
|
|
|
|
|
|
|
153,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by
Continuing Operations
|
|
|
3,151
|
|
|
|
(43,031
|
)
|
|
|
1,126,899
|
|
|
|
|
|
|
|
1,087,019
|
|
Net Cash Provided by Discontinued
Operation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
(1,071,084
|
)
|
|
|
|
|
|
|
(1,071,084
|
)
|
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
|
|
|
(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
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Condensed
Consolidating Statement of Cash Flows
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
Cash Flows from Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
467,420
|
|
|
$
|
411,695
|
|
|
$
|
376,282
|
|
|
$
|
(787,977
|
)
|
|
$
|
467,420
|
|
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided (Used) by Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in Earnings of
Unconsolidated Affiliates
|
|
|
(9,496
|
)
|
|
|
|
|
|
|
(10,427
|
)
|
|
|
|
|
|
|
(19,923
|
)
|
Gain on Sale of Universal Common
Stock
|
|
|
(115,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(115,456
|
)
|
Non-cash Portion of Exit Costs and
Restructuring Charges
|
|
|
8,191
|
|
|
|
|
|
|
|
57,009
|
|
|
|
|
|
|
|
65,200
|
|
Charges from Parent or Subsidiary
|
|
|
35,500
|
|
|
|
(104,146
|
)
|
|
|
68,646
|
|
|
|
|
|
|
|
|
|
Equity in (Earnings) Loss of
Affiliates
|
|
|
(411,695
|
)
|
|
|
(376,282
|
)
|
|
|
|
|
|
|
787,977
|
|
|
|
|
|
Deferred Income Tax Provision
|
|
|
|
|
|
|
19,839
|
|
|
|
8,938
|
|
|
|
|
|
|
|
28,777
|
|
Other Adjustments
|
|
|
(163,275
|
)
|
|
|
(177,042
|
)
|
|
|
415,099
|
|
|
|
|
|
|
|
74,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by
Continuing Operations
|
|
|
(188,811
|
)
|
|
|
(225,936
|
)
|
|
|
915,547
|
|
|
|
|
|
|
|
500,800
|
|
Net Cash Provided by Discontinued
Operation
|
|
|
|
|
|
|
|
|
|
|
2,294
|
|
|
|
|
|
|
|
2,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by
Operating Activities
|
|
|
(188,811
|
)
|
|
|
(225,936
|
)
|
|
|
917,841
|
|
|
|
|
|
|
|
503,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of Businesses, Net of
Cash Acquired
|
|
|
|
|
|
|
|
|
|
|
(991,067
|
)
|
|
|
|
|
|
|
(991,067
|
)
|
Capital Expenditures for Property,
Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
(526,618
|
)
|
|
|
|
|
|
|
(526,618
|
)
|
Acquisition of Intellectual Property
|
|
|
|
|
|
|
|
|
|
|
(13,423
|
)
|
|
|
|
|
|
|
(13,423
|
)
|
Proceeds from Sale of Universal
Common Stock
|
|
|
276,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
276,750
|
|
Proceeds from Sale of Assets and
Businesses, Net
|
|
|
|
|
|
|
|
|
|
|
15,874
|
|
|
|
|
|
|
|
15,874
|
|
Other, Net
|
|
|
|
|
|
|
|
|
|
|
(16,424
|
)
|
|
|
|
|
|
|
(16,424
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by
Investing Activities
|
|
|
276,750
|
|
|
|
|
|
|
|
(1,531,658
|
)
|
|
|
|
|
|
|
(1,254,908
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of Short-term Debt, Net
|
|
|
716,927
|
|
|
|
1,885
|
|
|
|
12,320
|
|
|
|
|
|
|
|
731,132
|
|
Borrowings of (Repayments on)
Long-term Debt, Net
|
|
|
|
|
|
|
1,736
|
|
|
|
(4,110
|
)
|
|
|
|
|
|
|
(2,374
|
)
|
Redemption of Convertible Debentures
|
|
|
|
|
|
|
(348,816
|
)
|
|
|
|
|
|
|
|
|
|
|
(348,816
|
)
|
Proceeds from Exercise of Stock
Options
|
|
|
|
|
|
|
191,127
|
|
|
|
|
|
|
|
|
|
|
|
191,127
|
|
Borrowings (Repayments) Between
Subsidiaries, Net
|
|
|
(943,721
|
)
|
|
|
309,596
|
|
|
|
634,125
|
|
|
|
|
|
|
|
|
|
Other, Net
|
|
|
|
|
|
|
(473
|
)
|
|
|
(487
|
)
|
|
|
|
|
|
|
(960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by
Financing Activities
|
|
|
(226,794
|
)
|
|
|
155,055
|
|
|
|
641,848
|
|
|
|
|
|
|
|
570,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on
Cash and Cash Equivalents
|
|
|
|
|
|
|
|
|
|
|
(1,489
|
)
|
|
|
|
|
|
|
(1,489
|
)
|
Net Increase (Decrease) in Cash and
Cash Equivalents
|
|
|
(138,855
|
)
|
|
|
(70,881
|
)
|
|
|
26,542
|
|
|
|
|
|
|
|
(183,194
|
)
|
Cash and Cash Equivalents at
Beginning of Year
|
|
|
138,979
|
|
|
|
74,053
|
|
|
|
104,407
|
|
|
|
|
|
|
|
317,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of
Year
|
|
$
|
124
|
|
|
$
|
3,172
|
|
|
$
|
130,949
|
|
|
$
|
|
|
|
$
|
134,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Condensed
Consolidating Statement of Cash Flows
Year Ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidation
|
|
|
|
(In thousands)
|
|
|
Cash Flows from Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
330,146
|
|
|
$
|
281,281
|
|
|
$
|
283,320
|
|
|
$
|
(564,601
|
)
|
|
$
|
330,146
|
|
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided (Used) by Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in Earnings of
Unconsolidated Affiliates
|
|
|
(18,567
|
)
|
|
|
|
|
|
|
(3,838
|
)
|
|
|
|
|
|
|
(22,405
|
)
|
Gain on Sale of Universal Common
Stock
|
|
|
(77,642
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77,642
|
)
|
Charges from Parent or Subsidiary
|
|
|
31,297
|
|
|
|
(90,547
|
)
|
|
|
59,250
|
|
|
|
|
|
|
|
|
|
Equity in (Earnings) Loss of
Affiliates
|
|
|
(281,281
|
)
|
|
|
(283,320
|
)
|
|
|
|
|
|
|
564,601
|
|
|
|
|
|
Deferred Income Tax Provision
(Benefit)
|
|
|
(686
|
)
|
|
|
15,786
|
|
|
|
(30,826
|
)
|
|
|
|
|
|
|
(15,726
|
)
|
Other Adjustments
|
|
|
117,186
|
|
|
|
5,131
|
|
|
|
159,451
|
|
|
|
|
|
|
|
281,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by
Continuing Operations
|
|
|
100,453
|
|
|
|
(71,669
|
)
|
|
|
467,357
|
|
|
|
|
|
|
|
496,141
|
|
Net Cash Provided by Discontinued
Operation
|
|
|
|
|
|
|
|
|
|
|
7,338
|
|
|
|
|
|
|
|
7,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by
Operating Activities
|
|
|
100,453
|
|
|
|
(71,669
|
)
|
|
|
474,695
|
|
|
|
|
|
|
|
503,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of Businesses, Net of
Cash Acquired
|
|
|
|
|
|
|
|
|
|
|
(26,464
|
)
|
|
|
|
|
|
|
(26,464
|
)
|
Capital Expenditures for Property,
Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
(310,868
|
)
|
|
|
|
|
|
|
(310,868
|
)
|
Acquisition of Intellectual Property
|
|
|
|
|
|
|
|
|
|
|
(20,494
|
)
|
|
|
|
|
|
|
(20,494
|
)
|
Proceeds from Sale of Assets and
Businesses, Net
|
|
|
|
|
|
|
|
|
|
|
23,595
|
|
|
|
|
|
|
|
23,595
|
|
Proceeds from Sale of Universal
Common Stock
|
|
|
231,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
231,798
|
|
Other, Net
|
|
|
|
|
|
|
|
|
|
|
(2,856
|
)
|
|
|
|
|
|
|
(2,856
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by
Investing Activities
|
|
|
231,798
|
|
|
|
|
|
|
|
(337,087
|
)
|
|
|
|
|
|
|
(105,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments on Asset Securitization,
Net
|
|
|
|
|
|
|
(75,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(75,000
|
)
|
Repayments on Short-term Debt, Net
|
|
|
(144,000
|
)
|
|
|
|
|
|
|
(39,775
|
)
|
|
|
|
|
|
|
(183,775
|
)
|
Repayments on Long-term Debt, Net
|
|
|
|
|
|
|
(1,118
|
)
|
|
|
(7,866
|
)
|
|
|
|
|
|
|
(8,984
|
)
|
Proceeds from Exercise of Stock
Options
|
|
|
|
|
|
|
129,549
|
|
|
|
|
|
|
|
|
|
|
|
129,549
|
|
Borrowings (Repayments) between
Subsidiaries, Net
|
|
|
(50,854
|
)
|
|
|
90,568
|
|
|
|
(39,714
|
)
|
|
|
|
|
|
|
|
|
Other, Net
|
|
|
|
|
|
|
(1,236
|
)
|
|
|
(163
|
)
|
|
|
|
|
|
|
(1,399
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Used) by
Financing Activities
|
|
|
(194,854
|
)
|
|
|
142,763
|
|
|
|
(87,518
|
)
|
|
|
|
|
|
|
(139,609
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on
Cash and Cash Equivalents
|
|
|
|
|
|
|
|
|
|
|
2,776
|
|
|
|
|
|
|
|
2,776
|
|
Net Increase in Cash and Cash
Equivalents
|
|
|
137,397
|
|
|
|
71,094
|
|
|
|
52,866
|
|
|
|
|
|
|
|
261,357
|
|
Cash and Cash Equivalents at
Beginning of Year
|
|
|
1,582
|
|
|
|
2,959
|
|
|
|
51,541
|
|
|
|
|
|
|
|
56,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of
Year
|
|
$
|
138,979
|
|
|
$
|
74,053
|
|
|
$
|
104,407
|
|
|
$
|
|
|
|
$
|
317,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94
WEATHERFORD
INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
23.
|
Quarterly
Financial Data (Unaudited)
|
The following tabulation sets forth unaudited quarterly
financial data for 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st Qtr.
|
|
|
2nd Qtr.
|
|
|
3rd Qtr.
|
|
|
4th Qtr.
|
|
|
Total
|
|
|
|
(In thousands, except per share amounts)
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,536,011
|
|
|
$
|
1,538,576
|
|
|
$
|
1,696,753
|
|
|
$
|
1,807,588
|
|
|
$
|
6,578,928
|
|
Gross Profit
|
|
|
548,370
|
|
|
|
540,304
|
|
|
|
618,467
|
|
|
|
653,981
|
|
|
|
2,361,122
|
|
Net Income
|
|
|
203,317
|
|
|
|
186,847
|
|
|
|
234,203
|
|
|
|
272,002
|
|
|
|
896,369
|
|
Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.58
|
|
|
$
|
0.54
|
|
|
$
|
0.68
|
|
|
$
|
0.80
|
|
|
$
|
2.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.57
|
|
|
$
|
0.52
|
|
|
$
|
0.66
|
|
|
$
|
0.78
|
|
|
$
|
2.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
857,706
|
|
|
$
|
937,295
|
|
|
$
|
1,076,816
|
|
|
$
|
1,461,410
|
|
|
$
|
4,333,227
|
|
Gross Profit
|
|
|
274,970
|
|
|
|
304,187
|
|
|
|
328,154
|
|
|
|
474,768
|
|
|
|
1,382,079
|
|
Income from Continuing Operations
|
|
|
80,435
|
|
|
|
94,725
|
|
|
|
47,299
|
|
|
|
243,750
|
|
|
|
466,209
|
|
Income from Discontinued Operation
|
|
|
161
|
|
|
|
463
|
|
|
|
587
|
|
|
|
|
|
|
|
1,211
|
|
Net Income
|
|
|
80,596
|
|
|
|
95,188
|
|
|
|
47,886
|
|
|
|
243,750
|
|
|
|
467,420
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
0.29
|
|
|
$
|
0.34
|
|
|
$
|
0.16
|
|
|
$
|
0.70
|
|
|
$
|
1.55
|
|
Discontinued Operation
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
0.29
|
|
|
$
|
0.34
|
|
|
$
|
0.16
|
|
|
$
|
0.70
|
|
|
$
|
1.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
0.27
|
|
|
$
|
0.32
|
|
|
$
|
0.15
|
|
|
$
|
0.69
|
|
|
$
|
1.47
|
|
Discontinued Operation
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
0.27
|
|
|
$
|
0.32
|
|
|
$
|
0.15
|
|
|
$
|
0.69
|
|
|
$
|
1.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent to December 31, 2006, the Company announced
certain organizational changes (See Note 21).
95
|
|
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 and the Chief Financial Officer, 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 Chief Executive Officer and Chief Financial
Officer have concluded the Companys disclosure controls
and procedures are effective as of the end of the period covered
by this report to timely alert them to material information
relating to the Company (including its consolidated
subsidiaries) required to be included in the Companys
Exchange Act filings.
Changes
in internal controls.
During the three-month period ended December 31, 2006 there
have been no changes in our assessed internal control over
financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control
over financial reporting. In December 2006, we established the
position of Vice President and Chief Accounting Officer as our
principal accounting officer, reporting to the Senior Vice
President and Chief Financial Officer.
Internal
controls over financial reporting.
Managements report on our internal controls over financial
reporting can be found in Item 8 of this report. The
Independent Registered Public Accounting Firms attestation
report on managements assessment of the effectiveness of
our internal control over financial reporting can also be found
in Item 8 of this report.
|
|
Item 9B.
|
Other
Information
|
Effective February 22, 2007, we amended and restated the
Weatherford International Ltd. Nonqualified Executive Retirement
Plan. The amendments include certain clarifications to age
calculations under the plan and to the tax treatment of the plan
and payments made pursuant to the plan. The plan, as amended and
restated, is attached as an exhibit to this report.
PART III
|
|
Item 10.
|
Directors
and Executive Officers of the Registrant
|
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 30, 2007.
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 30, 2007.
96
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management
|
Pursuant to General Instruction G(3), information on
security ownership of certain beneficial owners and 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 30, 2007.
Equity
Compensation Plan Information
The following table provides information as of December 31,
2006 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 to
|
|
|
|
|
|
for Future Issuance
|
|
|
|
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
|
|
|
667
|
|
|
$
|
40.66
|
|
|
|
9,406
|
|
Equity compensation plans not
approved by shareholders (a)
|
|
|
21,532
|
|
|
|
23.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
22,199
|
|
|
|
24.24
|
|
|
|
9,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The Weatherford International, Inc. 1998 Employee Stock Option
Plan, as amended (the Plan), is administered by the
Compensation Committee of the Board of Directors, and all
employees are eligible to receive options under the Plan. The
Plan provides for the grant of nonqualified options to purchase
Common Shares of Weatherford International Ltd. The price at
which shares may be purchased is based on the market price of
the shares and cannot be less than the aggregate par value of
the shares on the date the option was granted. Unless otherwise
provided in an option agreement, no option may be exercised
after one day less than 10 years from the date of vesting.
Options generally become fully exercisable after three to four
years from the date of grant, subject to earlier vesting in the
event of the death, disability or retirement of the employee or
in the event of a change of control of the Company. The Plan
provides for the grant of options to purchase up to
44,000,000 shares. As of December 31, 2006, there were
options to purchase an aggregate of 7,928,605 Common Shares
outstanding under this Plan, of which options to purchase an
aggregate of 7,306,405 Common Shares were vested. Subsequent to
the shareholder approval of the Companys Omnibus Plan in
May 2006, future grants under this plan have been suspended. |
|
|
|
On September 8, 1998, July 5, 2000, and
September 26, 2001, the Company granted to each of its
directors other than Mr. Duroc-Danner an option or warrant
to purchase 187,264, 120,000 and 120,000 Common Shares,
respectively, at a purchase price per share equal to $5.8075,
$18.375 and $11.885, respectively, which was the fair market
value of our Common Shares as of the day we granted the options
or warrant. The options and warrants were issued under
agreements between us and the directors. Each option or warrant
is exercisable for a period of ten years from the date which it
becomes fully exercisable. The options and warrant granted on
September 8, 1998 and July 5, 2000 become fully
exercisable three years from the date of grant, and the options
and warrant granted on September 26, 2001 become fully
exercisable four years from the date of grant, in each case
subject to earlier vesting in the event of the death, disability
or retirement of the optionee or warrantholder or a change of
control of the Company. Under these agreements there were
options and warrants to purchase an aggregate of 1,672,992
Common Shares outstanding as of December 31, 2006, all of
which are fully vested. |
|
|
|
Under our Non-Employee Director Deferred Compensation Plan, each
non-employee director may elect to defer up to 7.5% of any fees
paid by the Company. The deferred fees are converted into
non-monetary units representing Common Shares that could have
been purchased with the deferred fees based on the market price
of the Common Shares on the last day of the month in which fees
were deferred. If a non-employee director |
97
|
|
|
|
|
elects to defer at least 5% of his fees, the Company will make
an additional contribution to the directors account equal
to the sum of (1) 7.5% of the directors fees plus
(2) the amount of fees deferred by the director. The
non-employee directors are fully vested at all times. The
Companys directors may generally determine when
distributions will be made from the plan. The amount of the
distribution will be a number of Common Shares equal to the
number of units at the time of distribution. Distributions are
made in Common Shares. As of December 31, 2006, there were
61,412 deferred units outstanding under this plan. |
|
|
|
|
|
The Company established its Foreign Executive Deferred
Compensation Stock Ownership Plan for key foreign employees.
Under the Companys Foreign Executive Deferred Compensation
Stock Ownership Plan, the Company contributes 15% of each
participants total salary, bonus and commission
compensation each year. The Companys contributions vest
over a five-year period on the basis of 20% per year for
each year of service. Under the Foreign Executive Deferred
Compensation Stock Ownership Plan, the Companys
contributions are converted into non-monetary units equal to the
number of Common Shares that could have been purchased with the
amounts contributed based on the average closing price of the
Common Shares for each day of the month in which contributions
are made. Distributions are made under the Foreign Executive
Deferred Compensation Stock Ownership Plan after a participant
retires, becomes disabled or dies or after his employment is
terminated. Distributions under the Foreign Executive Deferred
Compensation Stock Ownership Plan are made in a number of Common
Shares equal to the number of units allocated to the
participants account at the time of distribution. As of
December 31, 2006, there were 91,486 deferred units
outstanding under this plan. |
|
|
|
On February 28, 2002, the Company issued Shell Technology
Ventures Inc. a warrant to purchase up to 6,464,428 Common
Shares at a price of $30.00 per share. The warrant has a
nine-year exercisable life beginning one year after the issue
date. The warrant holder may exercise the warrant and settlement
may occur through physical delivery, net share settlement, net
cash settlement or a combination thereof. |
|
|
|
In 2003, the Companys Board of Directors approved a
restricted share plan that allows for the grant of up to
7,670,000 of our Common Shares to key employees and directors of
the Company. Restricted shares are subject to forfeiture
restrictions that generally lapse after a specified period from
the date of grant and are subject to earlier vesting in the
event of death, retirement or a change in control. As of
December 31, 2006 there were 6,968,870 shares granted
under this plan, of which 1,656,055 shares are vested.
Subsequent to the shareholder approval of the Companys
Omnibus Plan in May 2006, future grants under this plan have
been suspended. |
|
|
Item 13.
|
Certain
Relationships and Related Transactions
|
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 30, 2007.
|
|
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 30, 2007.
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
(a) The following documents are filed as part of this
report or incorporated herein by reference:
1. The consolidated financial statements of the Company
listed on page 46 of this report.
2. The financial statement schedule on page 104 of
this report.
3. The exhibits of the Company listed below under
Item 15(b).
98
(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).
|
|
3
|
.1
|
|
Memorandum of Association of
Weatherford International Ltd. (incorporated by reference to
Annex II to the proxy statement/prospectus included in
Amendment No. 1 to the Registration Statement on
Form S-4
(Reg. No.
333-85644)
filed on May 22, 2002).
|
|
3
|
.2
|
|
Memorandum of Increase of Share
Capital of Weatherford International Ltd. (incorporated by
reference to Annex II to the proxy statement/prospectus
included in Amendment No. 1 to the Registration Statement
on
Form S-4
(Reg. No.
333-85644)
filed on May 22, 2002).
|
|
3
|
.3
|
|
Bye-laws of Weatherford
International Ltd. (incorporated by reference to Annex III
to the proxy statement/prospectus included in Amendment
No. 1 to the Registration Statement on
Form S-4
(Reg.
No. 333-85644)
filed on May 22, 2002).
|
|
4
|
.1
|
|
See Exhibits 3.1, 3.2 and 3.3
for provisions of the Memorandum of Association and Bye-laws of
Weatherford International Ltd. defining the rights of holders of
common shares.
|
|
4
|
.2
|
|
Guarantee, dated as of
October 25, 2005, of Weatherford International, Inc. for
the benefit of holders of any notes issued by Weatherford
International Ltd., from time to time pursuant to the Issuing
and Paying Agent Agreement, dated as of October 25, 2005,
between Weatherford International Ltd., Weatherford
International, Inc. and JPMorgan Chase Bank, National
Association (incorporated by reference to Exhibit 4.1 to
the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 31, 2005).
|
|
4
|
.3
|
|
Second Amended and Restated Credit
Agreement dated as of May 2, 2006, among Weatherford
International Ltd., Weatherford International, Inc., Weatherford
Liquidity Management Hungary Limited Liability Company, JPMorgan
Chase Bank as Administrative Agent, and the other Lenders party
thereto (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File No. 1-31339) filed May 5, 2006).
|
|
4
|
.4
|
|
Indenture, dated October 1,
2003, among Weatherford International Ltd., Weatherford
International, Inc., and Deutsche Bank Trust Company Americas
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 2, 2003).
|
|
4
|
.5
|
|
Indenture dated May 17, 1996,
between Weatherford Enterra, Inc. and Bank of Montreal Trust
Company, as Trustee (incorporated by reference to
Exhibit 4.1 to Weatherford Enterra, Inc.s Current
Report on
Form 8-K
(File No. 1-7867) filed May 31, 1996).
|
|
4
|
.6
|
|
Third Supplemental Indenture dated
November 16, 2001, between Weatherford International, Inc.
and The Bank of New York, as Trustee (incorporated by reference
to Exhibit 4.11 to the Registration Statement on
Form S-3
(Reg. No.
333-73770)
filed November 20, 2001).
|
|
4
|
.7
|
|
Fourth Supplemental Indenture
dated June 26, 2002, among Weatherford International, Inc.,
Weatherford International Ltd. and The Bank of New York (as
successor in interest to Bank of Montreal Trust Company)
(incorporated by reference to Exhibit 4.7 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2002 (File No. 1-13086)
filed August 14, 2002).
|
|
4
|
.8
|
|
Form of global note for
4.95% Senior Notes due 2013 (incorporated by reference to
Exhibit 4.1 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 7, 2003).
|
|
4
|
.9
|
|
Form of global note for
5.50% Senior Notes due 2016 (incorporated by reference to
Exhibit 4.1 to the Registrants Current Report on
Form 8-K
(File No. 001-31339) filed February 17, 2006).
|
|
4
|
.10
|
|
Officers Certificate dated
as of February 17, 2006 (incorporated by reference to
Exhibit 4.2 to the Registrants Current Report on
Form 8-K
(File No. 001-31339) filed February 17, 2006).
|
99
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
4
|
.11
|
|
Certificate of Assistant Secretary
as to the adoption of a resolution increasing authorized share
capital (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed May 15, 2006).
|
|
4
|
.12
|
|
Amended and Restated Warrant
Agreement, dated effective as of July 12, 2006, by and
among Weatherford International, Ltd., Weatherford
International, Inc. and Shell Technology Ventures, Inc.
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed July 14, 2006).
|
|
4
|
.13
|
|
Officers Certificate, dated
August 7, 2006, establishing the series of
6.50% Senior Notes due 2036 (incorporated by reference to
Exhibit 4.1 to the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed August 7, 2006).
|
|
4
|
.14
|
|
Form of $500,000 Global note for
6.50% Senior Notes due 2036 (incorporated by reference to
Exhibit 4.2 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed August 7, 2006).
|
|
4
|
.15
|
|
Form of $100,000 Global note for
6.50% Senior Notes due 2036 (incorporated by reference to
Exhibit 4.3 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed August 7, 2006).
|
|
4
|
.16
|
|
Notice of Commitment Increase
dated as of November 14, 2006, among Weatherford
International Ltd., Weatherford International, Inc., Weatherford
Liquidity Management Hungary Limited Liability Company, JPMorgan
Chase Bank as Administrative Agent, and the other Lenders party
thereto (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File No. 1-31339) filed November 16, 2006.
|
|
10
|
.1
|
|
Issuing and Paying Agent
Agreement, dated as of October 25, 2005, among Weatherford
International Ltd., Weatherford International, Inc. and JPMorgan
Chase Bank, National Association (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 31, 2005).
|
|
10
|
.2
|
|
Commercial Paper Dealer Agreement,
dated as of October 25, 2005, among Weatherford
International Ltd., Weatherford International, Inc. and J. P.
Morgan Securities Inc. (incorporated by reference to
Exhibit 10.2 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 31, 2005).
|
|
10
|
.3
|
|
Commercial Paper Dealer Agreement,
dated as of October 25, 2005, among Weatherford
International Ltd., Weatherford International, Inc. and Goldman,
Sachs & Co. (incorporated by reference to
Exhibit 10.3 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 31, 2005).
|
|
10
|
.4
|
|
Commercial Paper Dealer Agreement,
dated as of October 25, 2005, among Weatherford
International Ltd., Weatherford International, Inc. and Merrill
Lynch Money Markets Inc. (for notes with maturities up to
270 days) and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, (for notes with maturities over
270 days up to 397 days) (incorporated by reference to
Exhibit 10.4 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 31, 2005).
|
|
10
|
.5
|
|
Amendment to Preferred Supplier
Agreement dated April 14, 2003 (incorporated by reference
to Exhibit 10.1 to the Grant Prideco Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2003 (File
No. 1-15423), filed May 15, 2003).
|
|
*10
|
.6
|
|
Weatherford Enterra, Inc. 1991
Stock Option Plan, as amended and restated (incorporated by
reference to Exhibit 10.4 to Weatherford Enterra,
Inc.s Annual Report on
Form 10-K
for the year ended December 31, 1996 (File 1-7867) filed
March 23, 1997).
|
|
*10
|
.7
|
|
2004 Weatherford Variable
Compensation Plan, Including Form of Award Letter (incorporated
by reference to Exhibit 10.1 to the Registrants
Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2004 (File No. 1-31339)
filed November 9, 2004).
|
|
*10
|
.8
|
|
Weatherford Variable Compensation
Plan (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on
Form 8-K
(File No. 1-31339) filed January 25, 2005).
|
|
*10
|
.9
|
|
Weatherford International Ltd.
Restricted Share Plan, including form of agreement for officers
and non-officers (incorporated by reference to Exhibit 10.2
to Amendment No. 1 to the Registrants Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2004 on
Form 10-Q/A
(File No. 1-31339) filed September 15, 2004).
|
100
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.10
|
|
Weatherford International, Inc.
Executive Deferred Compensation Stock Ownership Plan and Related
Trust Agreement (incorporated by reference to Exhibit 10.5
to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.11
|
|
Amended and Restated Weatherford
International Ltd. Nonqualified Executive Retirement Plan.
|
|
*10
|
.12
|
|
Weatherford International, Inc.
Foreign Executive Deferred Compensation Stock Plan (incorporated
by reference to Exhibit 10.4 to the Registrants
Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.13
|
|
Weatherford International
Incorporated Non-Employee Director Retirement Plan (incorporated
by reference to Exhibit 10.12 to the Registrants
Annual Report on
Form 10-K
for the year ended December 31, 2004 (File No. 1-13086)
filed March 11, 2005).
|
|
*10
|
.14
|
|
Weatherford International, Inc.
Non-Employee Director Deferred Compensation Plan (incorporated
by reference to Exhibit 10.5 to the Registrants
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2000 (File No. 1-13086)
filed May 15, 2000).
|
|
*10
|
.15
|
|
Trust under Weatherford
International Ltd. Nonqualified Executive Retirement Plan dated
March 23, 2004 (incorporated by reference to
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2004 (File
No. 1-31339) filed May 6, 2004).
|
|
*10
|
.16
|
|
Energy Ventures, Inc. 1991
Non-Employee Director Stock Option Plan and Form of Agreement
(incorporated by reference to the Registrants Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 1991 (File No. 1-13086)
filed August 8, 1991).
|
|
*10
|
.17
|
|
Energy Ventures, Inc. 1992
Employee Stock Option Plan, as amended (incorporated by
reference to Exhibit 4.7 to the Registration Statement on
Form S-8
(Reg.
No. 333-13531)
filed October 4, 1997).
|
|
*10
|
.18
|
|
Amended and Restated Non-Employee
Director Stock Option Plan (incorporated by reference to
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 1995 (File No. 1-13086)
filed August 12, 1995).
|
|
*10
|
.19
|
|
General Amendment of Employee
Stock Option Programs of Weatherford International, Inc. dated
May 9, 2003 (incorporated by reference to Exhibit 10.1 to
the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.20
|
|
General Amendment of
Directors Stock Option Plans and Agreements dated
May 9, 2003 (incorporated by reference to Exhibit 10.2
to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.21
|
|
Weatherford International, Inc.
1998 Employee Stock Option Plan, as amended, including form of
agreement for officers (incorporated by reference to
Exhibit 10.18 to the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2003 (File No. 1-13086)
filed March 10, 2004).
|
|
*10
|
.22
|
|
Amendment to Stock Option Programs
(incorporated by reference to Exhibit 4.19 to the
Registrants Registration Statement on
Form S-8
(Reg. No.
333-36598)
filed May 19, 2000).
|
|
*10
|
.23
|
|
Employment Agreement, dated as of
December 1, 2005, between Weatherford International Ltd.
and Hazel A. Brown (incorporated by reference to Exhibit 10.2 to
the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed December 2, 2005).
|
|
*10
|
.24
|
|
Employment Agreement, dated as of
September 29, 2005, between Weatherford International Ltd.
and Andrew P. Becnel (incorporated by reference to
Exhibit 10.4 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 5, 2005).
|
|
*10
|
.25
|
|
Employment Agreement, dated as of
September 1, 2005, between Weatherford International Ltd.
and John R. King (incorporated by reference to Exhibit 10.2 to
the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed September 7, 2005).
|
|
*10
|
.26
|
|
Employment Agreement, dated as of
September 1, 2005, between Weatherford International Ltd.
and Ian E. Kelly (incorporated by reference to Exhibit 10.3 to
the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed September 7, 2005).
|
|
*10
|
.27
|
|
Employment Agreements dated
August 1, 2003, between Weatherford International Ltd. and
each of M. David Colley, E. Lee Colley III, Bernard J.
Duroc-Danner, Stuart E. Ferguson, Burt M. Martin, and Keith R.
Morley (incorporated by reference to Exhibit 10.2 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2003 (File No. 1-31339)
filed November 6, 2003).
|
101
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.28
|
|
Indemnification Agreement, dated
as of December 1, 2005, between Weatherford International
Ltd. and Hazel A. Brown (incorporated by reference to Exhibit
10.1 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed December 2, 2005).
|
|
*10
|
.29
|
|
Indemnification Agreement, dated
as of September 29, 2005, between Weatherford International
Ltd. and John R. King (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 5, 2005).
|
|
*10
|
.30
|
|
Indemnification Agreement, dated
as of September 29, 2005, between Weatherford International
Ltd. and Ian E. Kelly (incorporated by reference to
Exhibit 10.2 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 5, 2005).
|
|
*10
|
.31
|
|
Indemnification Agreement, dated
as of September 29, 2005, between Weatherford International
Ltd. and Andrew P. Becnel (incorporated by reference to
Exhibit 10.3 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 5, 2005).
|
|
*10
|
.32
|
|
Indemnification Agreements with
Robert K. Moses, Jr. (incorporated by reference to
Exhibit 10.10 to Weatherford Enterra, Inc.s Annual
Report on
Form 10-K
for the year ended December 31, 1987 (File
No. 1-7867)); and William E. Macaulay (incorporated by
reference to Exhibit 10.2 to Weatherford Enterra,
Inc.s Quarterly Report on
Form 10-Q
for the quarter ended September 30, 1995 (File
No. 1-7867)).
|
|
*10
|
.33
|
|
Indemnification Agreements with
each of Bernard J. Duroc-Danner, Gary L. Warren, Burt M.
Martin, E. Lee Colley III, Stuart E. Ferguson, David J.
Butters, Robert A. Rayne, Robert K. Moses, Jr., Robert B.
Millard, William E. Macaulay and Sheldon B. Lubar (incorporated
by reference to Exhibit 10.1 to the Registrants
Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2002 (File
No. 1-13086)
filed November 13, 2002).
|
|
*10
|
.34
|
|
Form of Stock Option Agreement for
Non-Employee Directors dated September 8, 1998
(incorporated by reference to Exhibit 10.23 to the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 1998 (File
No. 1-13086) filed March 31, 1999).
|
|
*10
|
.35
|
|
Form of Amendment to Stock Option
Agreements dated September 8, 1998 for Non-Employee
Directors (incorporated by reference to Exhibit 4.17 to the
Registration Statement on
Form S-8
(Reg.
No. 333-36598)
filed May 9, 2000).
|
|
*10
|
.36
|
|
Form of Stock Option Agreement for
Non-employee Directors dated July 5, 2000 (incorporated by
reference to Exhibit 4.16 to the Registration Statement on
Form S-8
(Reg.
No. 333-48322)
filed October 20, 2000).
|
|
*10
|
.37
|
|
Form of Stock Option Agreement for
Non-employee Directors dated September 26, 2001
(incorporated by reference to Exhibit 4.19 to the
Registration Statement on
Form S-8
(Reg.
No. 333-81678)
filed January 30, 2002).
|
|
*10
|
.38
|
|
Assumption and General Amendment
of Directors Stock Option and Benefit Programs and General
Amendment of Employee Stock Option and Benefit Programs of
Weatherford International, Inc. dated June 26, 2002
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2002 (File No. 1-13086)
filed August 14, 2002).
|
|
10
|
.39
|
|
License Agreement among Shell
Technology Ventures Inc., Weatherford/Lamb, Inc. and Weatherford
International, Inc. dated March 1, 2002, as amended on
April 29, 2002 (incorporated by reference to
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2002 (File
No. 1-13086) filed May 15, 2002).
|
|
10
|
.40
|
|
Framework Agreement between Shell
Technology Ventures Limited and Weatherford International, Inc.
dated March 1, 2002, as amended on April 19, 2002
(incorporated by reference to Exhibit 10.2 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2002 (File No. 1-13086)
filed May 15, 2002).
|
|
10
|
.41
|
|
Agreement dated August 31,
2005, between Weatherford International Ltd. and Precision
Drilling Corporation (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed September 7, 2005).
|
102
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.42
|
|
Employment Agreement dated
October 27, 2006, between Weatherford International Ltd.
and Andrew P. Becnel (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 27, 2006).
|
|
*10
|
.43
|
|
Employment Agreement dated
October 27, 2006, between Weatherford International Ltd.
and Jessica Abarca (incorporated by reference to Exhibit 10.2 to
the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 27, 2006).
|
|
*10
|
.44
|
|
Indemnification Agreement dated
October 27, 2006, between Weatherford International Ltd.
and Jessica Abarca (incorporated by reference to Exhibit 10.3 to
the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 27, 2006).
|
|
*10
|
.45
|
|
Form of Restricted Share Unit
Award Agreement for Officers pursuant to Weatherford
International Ltd. 2006 Omnibus Incentive Plan.
|
|
*10
|
.46
|
|
Form of Stock Option Award
Agreement for Officers pursuant to Weatherford International
Ltd. 2006 Omnibus Incentive Plan.
|
|
*10
|
.47
|
|
Form of Restricted Share Award
Agreement for Non-employee Directors pursuant to Weatherford
International Ltd. 2006 Omnibus Incentive Plan.
|
|
*10
|
.48
|
|
Form of Restricted Share Award
Agreement for Officers pursuant to Weatherford International
Ltd. 2006 Omnibus Incentive Plan.
|
|
*10
|
.49
|
|
Form of Stock Option Award
Agreement for Non-employee Directors pursuant to Weatherford
International Ltd. 2006 Omnibus Incentive Plan.
|
|
21
|
.1
|
|
Subsidiaries of Weatherford
International Ltd.
|
|
23
|
.1
|
|
Consent of Ernst & Young
LLP.
|
|
31
|
.1
|
|
Certification of Chief Executive
Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
|
|
31
|
.2
|
|
Certification of Chief Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
|
|
32
|
.1
|
|
Certification of Chief Executive
Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
32
|
.2
|
|
Certification of Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
|
|
* |
|
Management contract or compensatory plan or arrangement. |
|
|
|
Filed herewith. |
As permitted by Item 601(b)(4)(iii)(A) of
Regulation S-K,
the Company has not filed with this Annual Report on
Form 10-K
certain instruments defining the rights of holders of long-term
debt of the Company and its subsidiaries because the total
amount of securities authorized under any of such instruments
does not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. The Company agrees to
furnish a copy of any of such instruments to the Securities and
Exchange Commission upon request.
We agree to furnish to any requesting stockholder a copy of any
of the above named exhibits upon the payment of our reasonable
expenses of obtaining, duplicating and mailing the requested
exhibits. All requests for copies of exhibits should be made in
writing to our Investor Relations Department at 515 Post Oak
Blvd., Suite 600, Houston, TX 77027.
(c) Financial Statement Schedules
1. Valuation and qualifying accounts and allowances.
103
SCHEDULE II
WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
FOR THE THREE YEARS ENDED DECEMBER 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for uncollectible
accounts receivable
|
|
$
|
12,210
|
|
|
$
|
6,242
|
|
|
$
|
881
|
|
|
$
|
(5,881
|
)
|
|
$
|
13,452
|
|
Year Ended December 31,
2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for uncollectible
accounts receivable
|
|
$
|
15,910
|
|
|
$
|
3,291
|
|
|
$
|
824
|
|
|
$
|
(7,815
|
)
|
|
$
|
12,210
|
|
Year Ended December 31,
2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for uncollectible
accounts receivable
|
|
$
|
16,728
|
|
|
$
|
3,138
|
|
|
$
|
2,491
|
|
|
$
|
(6,447
|
)
|
|
$
|
15,910
|
|
All other schedules are omitted because they are not required or
because the information is included in the financial statements
or notes thereto.
104
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 22, 2007.
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 22, 2007
|
|
|
|
|
|
/s/ Andrew
P.
Becnel Andrew
P. Becnel
|
|
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
|
|
February 22, 2007
|
|
|
|
|
|
/s/ Jessica
Abarca Jessica
Abarca
|
|
Vice President
Accounting and
Chief Accounting Officer
(Principal Accounting Officer)
|
|
February 22, 2007
|
|
|
|
|
|
/s/ Nicholas
F.
Brady Nicholas
F. Brady
|
|
Director
|
|
February 22, 2007
|
|
|
|
|
|
/s/ David
J.
Butters David
J. Butters
|
|
Director
|
|
February 22, 2007
|
|
|
|
|
|
/s/ Sheldon
B.
Lubar Sheldon
B. Lubar
|
|
Director
|
|
February 22, 2007
|
|
|
|
|
|
/s/ William
E.
Macaulay William
E. Macaulay
|
|
Director
|
|
February 22, 2007
|
|
|
|
|
|
/s/ Robert
B.
Millard Robert
B. Millard
|
|
Director
|
|
February 22, 2007
|
|
|
|
|
|
/s/ Robert
K.
Moses, Jr. Robert
K. Moses, Jr.
|
|
Director
|
|
February 22, 2007
|
|
|
|
|
|
/s/ Robert
A.
Rayne Robert
A. Rayne
|
|
Director
|
|
February 22, 2007
|
105
(d) 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).
|
|
3
|
.1
|
|
Memorandum of Association of
Weatherford International Ltd. (incorporated by reference to
Annex II to the proxy statement/prospectus included in
Amendment No. 1 to the Registration Statement on
Form S-4
(Reg. No.
333-85644)
filed on May 22, 2002).
|
|
3
|
.2
|
|
Memorandum of Increase of Share
Capital of Weatherford International Ltd. (incorporated by
reference to Annex II to the proxy statement/prospectus
included in Amendment No. 1 to the Registration Statement
on
Form S-4
(Reg. No.
333-85644)
filed on May 22, 2002).
|
|
3
|
.3
|
|
Bye-laws of Weatherford
International Ltd. (incorporated by reference to Annex III
to the proxy statement/prospectus included in Amendment
No. 1 to the Registration Statement on
Form S-4
(Reg.
No. 333-85644)
filed on May 22, 2002).
|
|
4
|
.1
|
|
See Exhibits 3.1, 3.2 and 3.3
for provisions of the Memorandum of Association and Bye-laws of
Weatherford International Ltd. defining the rights of holders of
common shares.
|
|
4
|
.2
|
|
Guarantee, dated as of
October 25, 2005, of Weatherford International, Inc. for
the benefit of holders of any notes issued by Weatherford
International Ltd., from time to time pursuant to the Issuing
and Paying Agent Agreement, dated as of October 25, 2005,
between Weatherford International Ltd., Weatherford
International, Inc. and JPMorgan Chase Bank, National
Association (incorporated by reference to Exhibit 4.1 to
the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 31, 2005).
|
|
4
|
.3
|
|
Second Amended and Restated Credit
Agreement dated as of May 2, 2006, among Weatherford
International Ltd., Weatherford International, Inc., Weatherford
Liquidity Management Hungary Limited Liability Company, JPMorgan
Chase Bank as Administrative Agent, and the other Lenders party
thereto (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File No. 1-31339) filed May 5, 2006).
|
|
4
|
.4
|
|
Indenture, dated October 1,
2003, among Weatherford International Ltd., Weatherford
International, Inc., and Deutsche Bank Trust Company Americas
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 2, 2003).
|
|
4
|
.5
|
|
Indenture dated May 17, 1996,
between Weatherford Enterra, Inc. and Bank of Montreal Trust
Company, as Trustee (incorporated by reference to
Exhibit 4.1 to Weatherford Enterra, Inc.s Current
Report on
Form 8-K
(File No. 1-7867) filed May 31, 1996).
|
|
4
|
.6
|
|
Third Supplemental Indenture dated
November 16, 2001, between Weatherford International, Inc.
and The Bank of New York, as Trustee (incorporated by reference
to Exhibit 4.11 to the Registration Statement on
Form S-3
(Reg. No.
333-73770)
filed November 20, 2001).
|
|
4
|
.7
|
|
Fourth Supplemental Indenture
dated June 26, 2002, among Weatherford International, Inc.,
Weatherford International Ltd. and The Bank of New York (as
successor in interest to Bank of Montreal Trust Company)
(incorporated by reference to Exhibit 4.7 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2002 (File No. 1-13086)
filed August 14, 2002).
|
|
4
|
.8
|
|
Form of global note for
4.95% Senior Notes due 2013 (incorporated by reference to
Exhibit 4.1 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 7, 2003).
|
|
4
|
.9
|
|
Form of global note for
5.50% Senior Notes due 2016 (incorporated by reference to
Exhibit 4.1 to the Registrants Current Report on
Form 8-K
(File No. 001-31339) filed February 17, 2006).
|
|
4
|
.10
|
|
Officers Certificate dated
as of February 17, 2006 (incorporated by reference to
Exhibit 4.2 to the Registrants Current Report on
Form 8-K
(File No. 001-31339) filed February 17, 2006).
|
106
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
4
|
.11
|
|
Certificate of Assistant Secretary
as to the adoption of a resolution increasing authorized share
capital (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed May 15, 2006).
|
|
4
|
.12
|
|
Amended and Restated Warrant
Agreement, dated effective as of July 12, 2006, by and
among Weatherford International, Ltd., Weatherford
International, Inc. and Shell Technology Ventures, Inc.
(incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File No.
1-31339)
filed July 14, 2006).
|
|
4
|
.13
|
|
Officers Certificate, dated
August 7, 2006, establishing the series of
6.50% Senior Notes due 2036 (incorporated by reference to
Exhibit 4.1 to the Registrants Current Report on
Form 8-K
(File
No. 1-31339)
filed August 7, 2006).
|
|
4
|
.14
|
|
Form of $500,000 Global note for
6.50% Senior Notes due 2036 (incorporated by reference to
Exhibit 4.2 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed August 7, 2006).
|
|
4
|
.15
|
|
Form of $100,000 Global note for
6.50% Senior Notes due 2036 (incorporated by reference to
Exhibit 4.3 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed August 7, 2006).
|
|
4
|
.16
|
|
Notice of Commitment Increase
dated as of November 14, 2006, among Weatherford
International Ltd., Weatherford International, Inc., Weatherford
Liquidity Management Hungary Limited Liability Company, JPMorgan
Chase Bank as Administrative Agent, and the other Lenders party
thereto (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
(File No. 1-31339) filed November 16, 2006.
|
|
10
|
.1
|
|
Issuing and Paying Agent
Agreement, dated as of October 25, 2005, among Weatherford
International Ltd., Weatherford International, Inc. and JPMorgan
Chase Bank, National Association (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 31, 2005).
|
|
10
|
.2
|
|
Commercial Paper Dealer Agreement,
dated as of October 25, 2005, among Weatherford
International Ltd., Weatherford International, Inc. and J. P.
Morgan Securities Inc. (incorporated by reference to
Exhibit 10.2 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 31, 2005).
|
|
10
|
.3
|
|
Commercial Paper Dealer Agreement,
dated as of October 25, 2005, among Weatherford
International Ltd., Weatherford International, Inc. and Goldman,
Sachs & Co. (incorporated by reference to
Exhibit 10.3 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 31, 2005).
|
|
10
|
.4
|
|
Commercial Paper Dealer Agreement,
dated as of October 25, 2005, among Weatherford
International Ltd., Weatherford International, Inc. and Merrill
Lynch Money Markets Inc. (for notes with maturities up to
270 days) and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, (for notes with maturities over
270 days up to 397 days) (incorporated by reference to
Exhibit 10.4 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 31, 2005).
|
|
10
|
.5
|
|
Amendment to Preferred Supplier
Agreement dated April 14, 2003 (incorporated by reference
to Exhibit 10.1 to the Grant Prideco Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2003 (File
No. 1-15423), filed May 15, 2003).
|
|
*10
|
.6
|
|
Weatherford Enterra, Inc. 1991
Stock Option Plan, as amended and restated (incorporated by
reference to Exhibit 10.4 to Weatherford Enterra,
Inc.s Annual Report on
Form 10-K
for the year ended December 31, 1996 (File 1-7867) filed
March 23, 1997).
|
|
*10
|
.7
|
|
2004 Weatherford Variable
Compensation Plan, Including Form of Award Letter (incorporated
by reference to Exhibit 10.1 to the Registrants
Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2004 (File No. 1-31339)
filed November 9, 2004).
|
|
*10
|
.8
|
|
Weatherford Variable Compensation
Plan (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on
Form 8-K
(File No. 1-31339) filed January 25, 2005).
|
|
*10
|
.9
|
|
Weatherford International Ltd.
Restricted Share Plan, including form of agreement for officers
and non-officers (incorporated by reference to Exhibit 10.2
to Amendment No. 1 to the Registrants Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2004 on
Form 10-Q/A
(File No. 1-31339) filed September 15, 2004).
|
107
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.10
|
|
Weatherford International, Inc.
Executive Deferred Compensation Stock Ownership Plan and Related
Trust Agreement (incorporated by reference to Exhibit 10.5
to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.11
|
|
Amended and Restated Weatherford
International Ltd. Nonqualified Executive Retirement Plan.
|
|
*10
|
.12
|
|
Weatherford International, Inc.
Foreign Executive Deferred Compensation Stock Plan (incorporated
by reference to Exhibit 10.4 to the Registrants
Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.13
|
|
Weatherford International
Incorporated Non-Employee Director Retirement Plan (incorporated
by reference to Exhibit 10.12 to the Registrants
Annual Report on
Form 10-K
for the year ended December 31, 2004 (File No. 1-13086)
filed March 11, 2005).
|
|
*10
|
.14
|
|
Weatherford International, Inc.
Non-Employee Director Deferred Compensation Plan (incorporated
by reference to Exhibit 10.5 to the Registrants
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2000 (File No. 1-13086)
filed May 15, 2000).
|
|
*10
|
.15
|
|
Trust under Weatherford
International Ltd. Nonqualified Executive Retirement Plan dated
March 23, 2004 (incorporated by reference to
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2004 (File
No. 1-31339) filed May 6, 2004).
|
|
*10
|
.16
|
|
Energy Ventures, Inc. 1991
Non-Employee Director Stock Option Plan and Form of Agreement
(incorporated by reference to the Registrants Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 1991 (File No. 1-13086)
filed August 8, 1991).
|
|
*10
|
.17
|
|
Energy Ventures, Inc. 1992
Employee Stock Option Plan, as amended (incorporated by
reference to Exhibit 4.7 to the Registration Statement on
Form S-8
(Reg.
No. 333-13531)
filed October 4, 1997).
|
|
*10
|
.18
|
|
Amended and Restated Non-Employee
Director Stock Option Plan (incorporated by reference to
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 1995 (File No. 1-13086)
filed August 12, 1995).
|
|
*10
|
.19
|
|
General Amendment of Employee
Stock Option Programs of Weatherford International, Inc. dated
May 9, 2003 (incorporated by reference to Exhibit 10.1 to
the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.20
|
|
General Amendment of
Directors Stock Option Plans and Agreements dated
May 9, 2003 (incorporated by reference to Exhibit 10.2
to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2003 (File No. 1-31339)
filed August 14, 2003).
|
|
*10
|
.21
|
|
Weatherford International, Inc.
1998 Employee Stock Option Plan, as amended, including form of
agreement for officers (incorporated by reference to
Exhibit 10.18 to the Registrants Annual Report on
Form 10-K
for the year ended December 31, 2003 (File No. 1-13086)
filed March 10, 2004).
|
|
*10
|
.22
|
|
Amendment to Stock Option Programs
(incorporated by reference to Exhibit 4.19 to the
Registrants Registration Statement on
Form S-8
(Reg. No.
333-36598)
filed May 19, 2000).
|
|
*10
|
.23
|
|
Employment Agreement, dated as of
December 1, 2005, between Weatherford International Ltd.
and Hazel A. Brown (incorporated by reference to Exhibit 10.2 to
the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed December 2, 2005).
|
|
*10
|
.24
|
|
Employment Agreement, dated as of
September 29, 2005, between Weatherford International Ltd.
and Andrew P. Becnel (incorporated by reference to
Exhibit 10.4 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 5, 2005).
|
|
*10
|
.25
|
|
Employment Agreement, dated as of
September 1, 2005, between Weatherford International Ltd.
and John R. King (incorporated by reference to Exhibit 10.2 to
the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed September 7, 2005).
|
|
*10
|
.26
|
|
Employment Agreement, dated as of
September 1, 2005, between Weatherford International Ltd.
and Ian E. Kelly (incorporated by reference to Exhibit 10.3 to
the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed September 7, 2005).
|
|
*10
|
.27
|
|
Employment Agreements dated
August 1, 2003, between Weatherford International Ltd. and
each of M. David Colley, E. Lee Colley III, Bernard J.
Duroc-Danner, Stuart E. Ferguson, Burt M. Martin, and Keith R.
Morley (incorporated by reference to Exhibit 10.2 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2003 (File No. 1-31339)
filed November 6, 2003).
|
108
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.28
|
|
Indemnification Agreement, dated
as of December 1, 2005, between Weatherford International
Ltd. and Hazel A. Brown (incorporated by reference to Exhibit
10.1 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed December 2, 2005).
|
|
*10
|
.29
|
|
Indemnification Agreement, dated
as of September 29, 2005, between Weatherford International
Ltd. and John R. King (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 5, 2005).
|
|
*10
|
.30
|
|
Indemnification Agreement, dated
as of September 29, 2005, between Weatherford International
Ltd. and Ian E. Kelly (incorporated by reference to
Exhibit 10.2 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 5, 2005).
|
|
*10
|
.31
|
|
Indemnification Agreement, dated
as of September 29, 2005, between Weatherford International
Ltd. and Andrew P. Becnel (incorporated by reference to
Exhibit 10.3 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 5, 2005).
|
|
*10
|
.32
|
|
Indemnification Agreements with
Robert K. Moses, Jr. (incorporated by reference to
Exhibit 10.10 to Weatherford Enterra, Inc.s Annual
Report on
Form 10-K
for the year ended December 31, 1987 (File
No. 1-7867)); and William E. Macaulay (incorporated by
reference to Exhibit 10.2 to Weatherford Enterra,
Inc.s Quarterly Report on
Form 10-Q
for the quarter ended September 30, 1995 (File
No. 1-7867)).
|
|
*10
|
.33
|
|
Indemnification Agreements with
each of Bernard J. Duroc-Danner, Gary L. Warren, Burt M.
Martin, E. Lee Colley III, Stuart E. Ferguson, David J.
Butters, Robert A. Rayne, Robert K. Moses, Jr., Robert B.
Millard, William E. Macaulay and Sheldon B. Lubar (incorporated
by reference to Exhibit 10.1 to the Registrants
Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2002 (File
No. 1-13086)
filed November 13, 2002).
|
|
*10
|
.34
|
|
Form of Stock Option Agreement for
Non-Employee Directors dated September 8, 1998
(incorporated by reference to Exhibit 10.23 to the
Registrants Annual Report on
Form 10-K
for the year ended December 31, 1998 (File
No. 1-13086) filed March 31, 1999).
|
|
*10
|
.35
|
|
Form of Amendment to Stock Option
Agreements dated September 8, 1998 for Non-Employee
Directors (incorporated by reference to Exhibit 4.17 to the
Registration Statement on
Form S-8
(Reg.
No. 333-36598)
filed May 9, 2000).
|
|
*10
|
.36
|
|
Form of Stock Option Agreement for
Non-employee Directors dated July 5, 2000 (incorporated by
reference to Exhibit 4.16 to the Registration Statement on
Form S-8
(Reg.
No. 333-48322)
filed October 20, 2000).
|
|
*10
|
.37
|
|
Form of Stock Option Agreement for
Non-employee Directors dated September 26, 2001
(incorporated by reference to Exhibit 4.19 to the
Registration Statement on
Form S-8
(Reg.
No. 333-81678)
filed January 30, 2002).
|
|
*10
|
.38
|
|
Assumption and General Amendment
of Directors Stock Option and Benefit Programs and General
Amendment of Employee Stock Option and Benefit Programs of
Weatherford International, Inc. dated June 26, 2002
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2002 (File No. 1-13086)
filed August 14, 2002).
|
|
10
|
.39
|
|
License Agreement among Shell
Technology Ventures Inc., Weatherford/Lamb, Inc. and Weatherford
International, Inc. dated March 1, 2002, as amended on
April 29, 2002 (incorporated by reference to
Exhibit 10.1 to the Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2002 (File
No. 1-13086) filed May 15, 2002).
|
|
10
|
.40
|
|
Framework Agreement between Shell
Technology Ventures Limited and Weatherford International, Inc.
dated March 1, 2002, as amended on April 19, 2002
(incorporated by reference to Exhibit 10.2 to the
Registrants Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2002 (File No. 1-13086)
filed May 15, 2002).
|
|
10
|
.41
|
|
Agreement dated August 31,
2005, between Weatherford International Ltd. and Precision
Drilling Corporation (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed September 7, 2005).
|
109
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
*10
|
.42
|
|
Employment Agreement dated
October 27, 2006, between Weatherford International Ltd.
and Andrew P. Becnel (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 27, 2006).
|
|
*10
|
.43
|
|
Employment Agreement dated
October 27, 2006, between Weatherford International Ltd.
and Jessica Abarca (incorporated by reference to Exhibit 10.2 to
the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 27, 2006).
|
|
*10
|
.44
|
|
Indemnification Agreement dated
October 27, 2006, between Weatherford International Ltd.
and Jessica Abarca (incorporated by reference to Exhibit 10.3 to
the Registrants Current Report on
Form 8-K
(File No. 1-31339) filed October 27, 2006).
|
|
*10
|
.45
|
|
Form of Restricted Share Unit
Award Agreement for Officers pursuant to Weatherford
International Ltd. 2006 Omnibus Incentive Plan.
|
|
*10
|
.46
|
|
Form of Stock Option Award
Agreement for Officers pursuant to Weatherford International
Ltd. 2006 Omnibus Incentive Plan.
|
|
*10
|
.47
|
|
Form of Restricted Share Award
Agreement for Non-employee Directors pursuant to Weatherford
International Ltd. 2006 Omnibus Incentive Plan.
|
|
*10
|
.48
|
|
Form of Restricted Share Award
Agreement for Officers pursuant to Weatherford International
Ltd. 2006 Omnibus Incentive Plan.
|
|
*10
|
.49
|
|
Form of Stock Option Award
Agreement for Non-employee Directors pursuant to Weatherford
International Ltd. 2006 Omnibus Incentive Plan.
|
|
21
|
.1
|
|
Subsidiaries of Weatherford
International Ltd.
|
|
23
|
.1
|
|
Consent of Ernst & Young
LLP.
|
|
31
|
.1
|
|
Certification of Chief Executive
Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
|
|
31
|
.2
|
|
Certification of Chief Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
|
|
32
|
.1
|
|
Certification of Chief Executive
Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
32
|
.2
|
|
Certification of Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
|
|
|
* |
|
Management contract or compensatory plan or arrangement. |
|
|
|
Filed herewith. |
As permitted by Item 601(b)(4)(iii)(A) of
Regulation S-K,
the Company has not filed with this Annual Report on
Form 10-K
certain instruments defining the rights of holders of long-term
debt of the Company and its subsidiaries because the total
amount of securities authorized under any of such instruments
does not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. The Company agrees to
furnish a copy of any of such instruments to the Securities and
Exchange Commission upon request.
We agree to furnish to any requesting stockholder a copy of any
of the above named exhibits upon the payment of our reasonable
expenses of obtaining, duplicating and mailing the requested
exhibits. All requests for copies of exhibits should be made in
writing to our Investor Relations Department at 515 Post Oak
Blvd., Suite 600, Houston, TX 77027.
110