Weatherford’s Margins Rise as North America Spend Slumps

Date of Call: Feb 4, 2026

Financials Results

• Revenue: Q4: 5% sequential growth; Full Year 2025: Not explicitly stated, but 2026 guidance implies slight revenue decline year-on-year.
• Operating Margin: Q4 EBITDA margin: 22.6%, sequential improvement of 74 basis points; Full Year 2025 EBITDA margin: 21%+.

Guidance:

• Q1 2026 revenue: $1.125B to $1.165B; adjusted EBITDA: $230M to $240M.
• Full Year 2026 revenue: $4.6B to $5.05B; adjusted EBITDA: $980M to $1.12B.
• Full Year 2026 adjusted free cash flow conversion expected in low to mid-40% range.
• North America spending expected to decline mid- to high single digits in 2026.
• International activity levels expected flat to slightly down for 2026, with potential second half growth.
• 2026 CapEx expected $190M to $230M; IT/ERP spend increasing while service tool CapEx declines.
• Effective tax rate expected low to mid-20% for 2026.

Business Commentary:

Revenue and Margin Performance:

• Weatherford International reported 5% sequential revenue growth in Q4 2025, with operating income higher both sequentially and year-on-year, and adjusted EBITDA margins above 22%.
• The growth was driven by higher activity in Latin America, particularly Mexico and Brazil, and strong performance in completions and artificial lift segments.

Geopolitical and Market Outlook:

• The company's international activity levels are expected to be flat to slightly down in 2026 compared to the prior year, with a significant decline anticipated in North America.
• The outlook is influenced by geopolitical conflicts, trade policy impacts, and commodity price volatility, with expectations for growth in the second half of 2026 driven by contract awards and project start-ups.

Cash Flow and Balance Sheet Improvements:

• Weatherford achieved an adjusted free cash flow of $222 million in Q4 2025, contributing to a full-year total of $466 million, with a conversion ratio improvement to 43.7%.
• This improvement was supported by collections from a key customer in Mexico and a strengthened balance sheet with a net leverage ratio of 0.42x.

Strategic Focus and Cost Optimization:

• The company executed over $150 million in personnel expense reductions in 2025, with an additional $7 million restructuring charge in Q4.
• Cost optimization efforts are focused on aligning the cost structure with activity levels and leveraging technology to enhance efficiency and margin performance.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed being 'very pleased' with team execution and 'highly optimistic about Weatherford's future.' They noted 'strong operational performance,' 'significant improvement' in margins, and a 'stronger-than-ever balance sheet.' The company increased the dividend by 10% and sees 'a significant uptick in activity starting in 2027.'

Q&A:

• Question from John Anderson (Barclays Bank PLC): Could you give more detail on how you see Saudi playing out this year, regarding the ~40 rigs tendered to return, and what pricing or product line trends you are seeing?
  Response: Saudi is the largest international market; recovery expected in second half as rigs come online, with significant long-term opportunity. Pricing remains competitive; focus is on total cost of ownership solutions to maintain margins.

• Question from Scott Gruber (Citigroup Inc.): Can you provide details on the broader Middle East and North Africa region outlook?
  Response: The region is the largest and foundational for Weatherford, with strong momentum in UAE, Kuwait, and Egypt, and some natural variability in countries like Qatar and Oman due to project cycles.

• Question from James West (Melius Research LLC): How did Mexico business trend in 2025, what about collections going forward, and what is the 2026 activity outlook?
  Response: Mexico saw three consecutive quarters of sequential improvement; worst is behind, with stability expected to lead to slight year-on-year growth. Collections have been consistent and transparent, providing confidence for 2026.

• Question from Saurabh Pant (BofA Securities): What needs to happen for Venezuela to move forward, and what product lines benefit?
  Response: Venezuela requires stable governance, regulatory clarity, and a clear payment framework. Weatherford is ready when the right conditions arise, with initial opportunities in interventions, well services, and artificial lift.

• Question from Doug Becker (Capital One Securities, Inc.): Can you expand on the offshore outlook given improvements in offshore deepwater activity?
  Response: Offshore is a key growth area with opportunities in MPD, TRS, completions (e.g., Petrobras cycle 10), and interventions, positioning Weatherford well as the market rebounds.

• Question from James Rollyson (Raymond James & Associates, Inc.): How is Weatherford positioned in North America given the mid- to high single-digit activity decline outlook?
  Response: Focus is on optimizing footprint for efficiency and driving differentiation through innovation (e.g., well construction products, digital business) to maintain margins despite activity decline.

• Question from Derek Podhaizer (Piper Sandler & Co.): Can you elaborate on the Q1 2026 guidance, which implies an 11% sequential revenue decline and margin contraction?
  Response: The decline is due to typical seasonality, work pulled into Q4 from customers, and some weather impact. Year-over-year, Q1 2026 is roughly flat with Q1 2025 when normalizing for the Argentina divestiture and tariff impacts, with a ramp expected in the second half.

• Question from Phillip Jungwirth (BMO Capital Markets Equity Research): With lower CapEx year-on-year, what product lines are being prioritized, and how is business mix helping?
  Response: CapEx remains within 3-5% of revenue; focus is on optimizing asset utilization, trading CapEx to OpEx, and investing in ERP systems for efficiency gains over the next few years.

• Question from Joshua Silverstein (UBS Investment Bank): What drove the significant cost-cutting initiatives in 2025 and where could margins go longer term?
  Response: Cost actions were driven by a significant workforce reduction (~2,000 employees) to align with activity levels. Ongoing structural improvements, including ERP implementation, aim to drive further efficiency and margin expansion when market conditions improve.

• Question from Ati Modak (Goldman Sachs Group, Inc.): Could you give more color on the nature of the new transformational initiatives and their impact on revenue/portfolio mix?
  Response: Initiatives include a new ERP system for automation and data transparency, and a focus on new, lower-capital-intensity product technologies. The operating model remains focused on consistent margin improvement, especially in flat markets.

• Question from Joshua Jayne (Daniel Energy Partners, LLC): Why was Modus Managed Pressure Wells Solution successful in 2025, and what is the growth outlook?
  Response: Success due to access to a new performance tier and shallow water markets. Growth is expected to accelerate as the technology expands to more applications, with strong customer interest globally.

Contradiction Point 1

MENA Region Growth Outlook

Contradiction on the expected growth rate for the MENA region.

What are the key tailwinds driving the broader MENA region? - Scott Gruber (Citigroup Inc.)

2025Q4: The MENA region is Weatherford’s largest and historically strongest. Performance has been strong... For 2026, there will be some variability: strength in UAE, Kuwait, and Oman, but declines in Qatar due to the life cycle of development campaigns. - [Girish Saligram](CEO)

Does the pipeline of awarded international projects indicate international revenue growth will be closer to 15% rather than 10%? - Kurt Hallead (Benchmark)

2023Q3: Growth will be mixed by region, with strength expected in the Middle East, Latin America, and various offshore markets. - [Girish Saligram](CEO)

Contradiction Point 2

Venezuela Business Resumption Timeline

Contradiction on when a return to Venezuela is expected.

What steps are needed for Weatherford and its customers to progress in Venezuela, how quickly can operations resume, and which product lines will benefit? - Saurabh Pant (BofA Securities)

2025Q4: A return to Venezuela is not expected to be overnight, and no uptick is assumed in 2026 guidance. - [Girish Saligram](CEO)

What's the investment narrative moving forward, considering strong performance? - Ati Modak (Goldman Sachs)

2023Q3: The narrative is consistent: 1) Weatherford has a proven track record of three years of consistent performance; 2) The company is well-positioned in a robust international cycle... - [Girish Saligram](CEO)

Contradiction Point 3

Saudi Arabia Recovery and Revenue Growth Timeline

Inconsistent timing for market bottoming and year-on-year growth.

How do you see Saudi's progress this year with 40 rigs returning, and what impact does that have on Weatherford's 2026-2027 outlook, along with current pricing, salary trends, and product line performance? - John Anderson (Barclays Bank PLC)

2025Q4: An optimistic recovery is expected in the second half of 2026... with significant growth anticipated in 2027. - [Girish Saligram](CEO)

What drives Saudi Arabia's potential growth in H2 2026—oil or gas activity—and how does this impact Weatherford's revenue opportunity? - Scott Gruber (Citigroup Inc.)

2025Q3: Year-on-year growth is expected in the second half of 2026, but first-half 2026 revenues will still be down compared to 2025. - [Girish Saligram](CEO)

Contradiction Point 4

Nature and Scope of Pricing Pressure

Contradiction on whether pricing pressure is broad-based or limited to specific areas/services.

How will the tendering of 40 rigs in Saudi impact Weatherford's 2026 and 2027 outlook, and what trends are you seeing in pricing, salaries, and product line performance? - John Anderson (Barclays Bank PLC)

2025Q4: On pricing, there is increased competition and a strong focus on cost efficiency. The approach is to deliver total cost of ownership value rather than just discounted pricing, maintaining margins through collaboration. - [Girish Saligram](CEO)

Is the pricing pressure in certain pockets regional (e.g., Middle East) or related to specific product lines? - John Anderson (Barclays Bank PLC)

2025Q3: Pricing pressure is most visible in commodity-type services and undifferentiated activity, particularly in the Middle East. Weatherford is not seeing similar pressure on its differentiated product lines and specialty services. - [Girish Saligram](CEO)

Contradiction Point 5

Mexico's Cash Collection Expectations

Contradiction on the timing and predictability of cash collections from Mexico.

Could you discuss Mexico's 2025 business trend and outlook for collections? - James West (Melius Research LLC)

2025Q4: Payment mechanisms are now in place, providing consistent and predictable collections. For 2026, the company is optimistic... - [Anuj Dhruv](CFO)

Could you provide details on the stability of the Mexico market, expectations for near-term and medium-term improvement, and the current cash situation? - Saurabh Pant (BofA Securities)

2025Q2: On cash, minimal payments came in during the first half, but the company is hopeful for a significant change in the second half... The timing is very unclear. - [Girishchandra K. Saligram](CEO)