Weatherford International plc Stock

Good day, and welcome to the Weatherford Third Quarter 2026 Results Conference Call. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Luke Lemoine, Senior Vice President, Corporate Development and Investor Relations. Please go ahead, sir.

Welcome, everyone, to the Weatherford International Third Quarter 2026 Earnings Conference Call. I'm joined today by Girish Saligram, President and CEO and a new true CFO. We'll start today with our prepared remarks and then open it up for questions. You may download a copy of the presentation slides corresponding to today's call from our website's Investor Relations section.

I want to remind everyone that some of our comments today include forward-looking statements. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed here at. Please refer to our latest Securities and Exchange Commission filings for risk factors and cautions regarding forward-looking statements.

Our comments today also include non-GAAP financial measures. The underlying details and a reconciliation of GAAP to non-GAAP financial measures are included in our earnings press release or accompanying slide deck, which can be found on our website. As a reminder, today's call is being webcast and a recorded version will be available on our website's Investor Relations section following the conclusion of this call.

With that, I'd like to turn the call over to Girish.

Thanks, Luke, and thank you all for joining our call. I'll start with an overview of our third quarter performance and near-term outlook, followed by a couple of key enterprise updates. Anuj will then cover specifics on financial performance, balance sheet and detailed guidance, and I will conclude with some thoughts on the current operating environment, our initial thoughts on 2027 and our priorities as we move forward before opening the call for Q&A.

To summarize our Q3 2026 performance, we delivered revenue of $1.143 billion, adjusted EBITDA of $254 million at a 22.2% margin and adjusted free cash flow of $155 million, representing a 61% conversion on adjusted EBITDA. Simply put, this was an excellent quarter, and I am very grateful to the one Weatherford team for continuing our track record of execution and performance.

A special note of pride in our Middle East team who continue to demonstrate resilience and customer focus in very challenging circumstances. Total revenues grew 3% sequentially, while absorbing the first full quarter without the [indiscernible] contract. The wind-down of our original [ Maru ] contract in Oman and the Middle East activity profile that has not returned to pre-conflict levels, points to the stability and growth of the contract portfolio across our segments and geographies.

Adjusted EBITDA margins about 22% is a tangible proof point there are thesis of being able to expand margins in a flat environment works and that expansion gets amplified with even a slight increase in revenue. Our adjusted EBITDA margins expanded 204 basis points sequentially and more significantly, 39 basis points year-over-year on a 7% decline on year-on-year revenue.

Finally, adjusted free cash flow increased 57% year-over-year, demonstrating our ability to generate cash at any cycle at a high conversion level. Next, I will run through some of the dynamics across our segment regions while highlighting near-term outlook.

Revenue in the Middle East, North Africa and Asia region was flat sequentially. That flat number absorbed 2 significant step-downs that we told you about in July. The conclusion of the Saudi LSTK contract and the transition in Oman from the original [indiscernible] scope to the new contract which means the rest of the business in the region grew sequentially, led by NPD, [indiscernible] hangers, completions at wireline and regional profitability improved across all 3 segments on strong fall-through.

To put this in perspective, revenue in the Arabian Gulf countries grew 1% sequentially with these headwinds. At the same time, I want to be clear that the environment has not normalized. While the headlines might suggest normalization of oil exports from the region, upstream activity has not recovered fully.

Rig counts in key countries are trending lower. Tender cycles have slipped and the recent escalation is a reminder that this remains an unsettled operating environment with daily operational disruptions. Our priority continues to be the safety of our people and business continuity for our customers and our teams have done an exceptional job with both.

We have deliberately not built a regional recovery into our near-term outlook. We are planning the business on the basis that the region stays roughly where it is today. The Middle East, North Africa and Asia region represented 39% of our business in Q3. The Kingdom of Saudi Arabia, which was 1% of enterprise revenue and 24% of the broader geomarket revenue in 2025, stood at 20% of the region in Q3 reflecting the LSTK contract step down and activity reduction.

At the same time, it is worth noting that the UAE, Oman and Kuwait collectively represented approximately 41% of this region in Q3, demonstrating the diversification of revenue within the broader region. Notably, activity levels have stayed very resilient in some countries like Oman, throughout the course of the year.

Latin America grew 14% sequentially, driven by Mexico and the Caribbean. In Mexico, activity with the largest customer improved. And just as importantly, collections were strong and consistent throughout the quarter. We are very encouraged now that we have had several consecutive quarters of regular payments, which is a meaningful change from where we were 18 months ago.

Another highlight in the region is Venezuela as we saw our first revenue in Q3. We will see tangible revenue contribution from Venezuela in the fourth quarter, but there will also be a significant start-up cost element. Importantly, we see potential for Venezuela to ramp up in 2027 to triple-digit revenues with further increases in 2028 and with the environment remaining stable, perhaps coming close to our prior peak in the next few years.

Europe [ Sub-Saharan ] Africa and Russia declined 9% sequentially on lower activity across the segments, with the Norway label strike weighing heavily on the early part of the quarter. Norway recovered as the quarter progressed, and I am especially pleased with the Equinor award, which I will come back to in a moment.

This region will remain roughly flattish in the fourth quarter, but I am very encouraged for 2027 and beyond with a step-up in the Norwegian profile, Caspian and Sub-Saharan Africa potential. North America saw an increase in Q3, partially driven by a single month contribution from our NCS acquisition.

While the rig count has gone up, we are not expecting a noteworthy increase in overall activity levels over the next few months, but we'll see a step up in our reported revenue with the full period contributions from NCS. Slides 9 -- 7 through 9 layout key highlights across our segments.

BRE revenue grew 14% sequentially and segment margins expanded by over 700 basis points. Our NPD capital sales were a key driver of the margin expansion. And while we recognize this will cause some lumpiness, the long-term aftermarket opportunity is something we are further developing to provide predictable high returns.

WCC revenue grew 4% sequentially, and this segment will see all of the impact from the MCS acquisition in the coming periods. PRI revenue was essentially flat sequentially, and we remain encouraged on a positive inflection here when the Middle East returns to normal, and there is an emphasis on interventions to restore production.

Offshore continues to be the most durable team over the next few years. Our core offshore offerings of managed pressure drilling, tubular running services and interventions had another strong quarter of awards that are highlighted in our press release and investor presentation on Slide 7 through 9.

The deepwater MPD systems we were awarded earlier this year are continuing to be delivered across the second half of this year. And every system we put on a deepwater rig growth in installed base that generates multiyear aftermarket parts and services revenue.

What we hear from customers is consistent. Deepwater sanctioning is increasing, led by Brazil, West Africa, the Mediterranean and Asia and this work is longer cycle, technology-intensive and far less exposed to the short cycle volatility we see on land.

While we estimate that around 70% of drillships, either currently have or are in the process of installing an MPD system there is a natural question of market saturation. However, we are confident that this number will continue to climb to around 85% or 90%, giving us an opportunity for several more systems over the next few years.

Additionally, there is a very significant opportunity around other offshore rigs, and the aftermarket opportunity creates a more stable revenue base. Our NPD business is projected to grow above double digits this year with further growth in 2027. That includes an aftermarket component that will more than double this year and could further double here on in the next couple of years.

Beyond these core offerings, I am very excited about our growth opportunity in offshore completions. Completions is now our largest product line and offshore represents significant potential for the future. We announced a significant award with Total Energies in Denmark a couple of quarters ago, a win with Exxon in Nigeria last quarter.

And in Q3, Equinor awarded us a 2-year extension and a new offshore Completions award to provide our integrated completions portfolio for the Norwegian continental shelf. Additionally, [ Seplat ] Energy awarded us a 5-year contract for completions, products and services, including gas Lip solutions for its shallow offshore operations in Nigeria.

In the legacy NCS business, during the quarter, we secured an award in the Deepwater Gulf of America for its frac sleeves and service tools following 4 years of collaborative development with a major international operator. The work is expected to commence in the first quarter of 2027, an important step into the offshore market for that technology.

With the MCS acquisition and our organic efforts, we now have a value proposition across the conventional, unconventional and offshore domains in completions. With that backdrop, I will frame our outlook for Q4, and Anuj will provide more specifics.

We are raising our full year adjusted free cash flow conversion outlook again for the third time this year and are narrowing our adjusted EBITDA range around a midpoint that is just slightly down from July. This, despite the Middle East region that has weakened relative to expectations in July and the divestiture of a few small noncore product lines.

Fourth quarter revenue steps up meaningfully with the full quarter of the delivery of the Brazil MPD system, the start-up in Venezuela and seasonally higher activity in North America and fourth quarter margins reflect the mix of that revenue and start-up costs in Venezuela. I am particularly encouraged that we have line of sight to a mid- to high single-digit increase sequentially in the Middle East, North Africa and Asia region, primarily driven by countries in the Arabian Gulf.

We have been consistent that we will not chase revenue at the expense of returns and the margin and cash performance in Q3 is the clearest evidence of that discipline. Let me now turn to a couple of enterprise updates, starting with the portfolio. As shown on Slides 13 through 15, we completed the acquisition of NCS Multistage during the quarter, and I am very pleased with how the integration is going.

The integration management office was in place to foreclose, day 1 went smoothly. And the key talent we wanted to retain is on board and the cost synergy work streams are tracking to be at least $15 million we committed to within 18 months of closing. More important than the cost synergies is the price we identified when we announced the deal.

Taking differentiated technology that was built in a concentrated footprint and putting it through a sales channel that covers 6 continents. That thesis is fully intact, and it is already showing up. With our acquisition of NCS, we now bring into our portfolio, a differentiated completions technology platform that surpassed 500,000 frac stages completed since 2009.

In North America, Customers have responded to the combination by asking for more joint projects and quotations and our international teams are qualifying early cross-sell opportunities in Argentina, the Middle East and the North Sea. MCS is a prime example of what we mean by portfolio enhancement, differentiated technology plus global distribution.

Over the past few months, we sent agreements to divest a few small non core product lines. Individually, none of these is material. And together, they will create some dislocation in reported revenue over the next couple of quarters. but they are deliberate. They free up management attention and capital.

They simplify the organization, and they sharpen the portfolio around the technology differentiated product lines that we are building the company around. That is the same lens we apply to M&A, adding where it strengthens the portfolio as with NCS and exiting where it does not. We are setting up the portfolio for the next phase of Weatherford.

Our infrastructure modernization program witnessed the first major milestone on our ERP journey with the successful launch of our enterprise performance management applications.

Essentially, this means that the financial consolidation of our quarter close was done in a new system was perfectly routine and the on-time external delivery of Q3 earnings and documentation showcases the outstanding planning and execution by the team driving it.

At our special shareholder meeting in September, shareholders approved all the proposals required to redomesticate from Ireland to Delaware. The redomestication remains subject to customary closing conditions, including final approval by the Irish High Court, and we expect it to become effective during the fourth quarter.

We continue to expect approximately $20 million to $30 million of annual cash savings beginning in 2027, while having no impact on our global footprint, our customer commitments or our ongoing operations. I want to thank our shareholders for their engagement and support through this process.

So to recap, a weaker-than-expected macro environment, especially in the Middle East. Nonetheless, a terrific quarter on financial performance. strong contract wins showcasing portfolio value. M&A is a strategic lever that is paying off and enterprise initiatives yielding tangible improvement.

That's the story of the past 90 days. With that, I'd like to turn the call over to Anuj.

Thank you, Girish, and good morning, everyone. Girish has covered the operating performance and the details are in our press release and slide deck so I will focus on cash flow, the balance sheet and guidance.

Turning to Slide 24. Adjusted free cash flow was $155 million in the third quarter, a 61% conversion on adjusted EBITDA and compared to 36.8% in the third quarter of 2025, driven by higher adjusted EBITDA, continued collections including from our largest customer in Mexico and disciplined capital expenditures. Year-to-date, we have generated $379 million of adjusted free cash flow up 55% year-over-year at a 53% conversion.

This is the second consecutive quarter above 60%, and the drivers are structural. Working capital discipline, capital intensity and asset utilization. While there will always be quarterly variances, it is very encouraging to have 2 consecutive quarters above 60% and provide clear proof points of our ramp to our target of sustainably achieving a 50% conversion level.

Adjusted net working capital was 29.2%, a trailing 12-month revenue, up sequentially with roughly 150 basis points from the consolidation of NCS and the balance from receivables and inventory timing ahead of fourth quarter deliveries.

Despite that, the ratio improved year-over-year, and we remain committed to our goal of 25% or better. Capital expenditures were $45 million or 3.9% of revenues within the 3% to 5% range we have laid out. For the fourth quarter, Capital expenditure dollars will increase as we're accelerating some spend based on the demand we see for 2027.

While total year CapEx will remain within the 3% to 5% of revenue range, the Q4 spend will likely be in the $70 million to $80 million range with our ERP spend captured within that. During the quarter, we returned $47 million to shareholders dividends and $28 million in share repurchases, bringing total returns since the inception of the program to more than $420 million.

Our focus on maintaining a fortress balance sheet remains clearly visible. We ended the quarter with approximately $1.2 billion of cash, total liquidity of approximately $1.8 billion which includes total cash and credit facility and net leverage of 0.28x.

S&P and Fitch upgraded their outlooks on our reaffirmed BB ratings to positive during the quarter, joining Moody's and recognizing the progress we have made in strengthening the company's credit profile. On October 20, we issued a notice to redeem all $236 million of our 8.625% senior notes due 2030 using cash on hand in line with our prior commentary of reducing gross leverage at the appropriate pricing level.

This redemption is at par and will leave us with no debt maturities for the next 7 years an annualized cash interest expense reduction of approximately $20 million. Coupled with the expected cash savings from redomestication. This would represent over 400 basis points of improvement in adjusted EBITDA to adjusted free cash flow conversion at these levels.

This sets us up well to achieve our 50% target in 2027. These actions represent the next step in simplifying our capital structure, lowering our cost of capital and positioning Weatherford with investment-grade equivalent credit metrics.

Importantly, they provide greater financial flexibility to invest in organic growth, selective M&A and shareholder returns through the cycle. Turning to guidance on Slide 25. For the fourth quarter, we expect revenues of $1.28 billion to $1.33 billion and adjusted EBITDA of $270 million to $290 million, which is a margin that is modestly down from third quarter levels.

The sequential revenue increase reflects a full quarter of NCS, Middle East product deliveries, the delivery of deepwater MPD systems seasonally higher activity in North America and increased volumes in Latin America, including the start-up in Venezuela. Fourth quarter margins reflect the mix of equivalent deliveries along with start-up cost in Venezuela.

At the midpoint of Q4 guidance, this will put second half adjusted EBITDA margins over 150 basis points above the first half, validating the ramp we have discussed, despite an obvious weakening in the Middle East activity.

Our productivity initiatives, technology-driven mix changes and higher activity we expect should result in year-on-year margin improvements in 2027 and we will provide more specific quantification of that on our next call.

We expect adjusted free cash flow of more than $100 million, while our AR balance for our largest customer in Mexico, as a percentage of total enterprise revenues is at the lowest level it's been in the past 6 years.

The magnitude of remaining payments is still the largest variable on quarterly free cash flow. We have raised our adjusted free cash flow conversion outlook every quarter this year, and we're again raising it for the full year to the high 40% range from mid- to high 40% in July which puts us within closing distance of our 50% target on the strength of structural improvements rather than onetime items.

In connection with the effectiveness of the redomestication, we also plan to take a certain restructuring actions at a subsidiary level. While the accounting and tax implications of those actions are still being evaluated, we expect they would have a material positive noncash impact to the income tax provision in the fourth quarter. Thank you. And I will now pass the call back to Girish.

Thanks, Anuj. I want to step back and share how we are thinking about 2027 and what we are doing to position Weatherford for the next several years. Let me start with the backdrop. The Middle East has not normalized and our base case is status quo on the current situation.

Unfortunately, that status quo implies volatility and uncertainty versus a steady run rate, but we are planning with the run rate to be in line with the last few months of this year. Outside the Middle East, however, the picture is constructive and getting more so.

Deepwater sanction is increasing, led by Brazil, West Africa, the Mediterranean and Asia, and our offshore MPD TRS interventions and completions businesses will be the drivers of impact from that team. Latin America is growing with Venezuela reopening to international operators and Mexico stabilizing.

The international markets where NCS strengthens our position, Argentina, the Middle East and the North Sea continue to develop, and U.S. land remains short cycle, and we plan it accordingly. So here's how we think about 2027.

Excluding the Middle East, international market activity levels should rise mid- to high single digits, driven by Latin America and Asia. North America will likely be up low single digits. Assuming the Middle East remains at current levels, that ought to provide a global market activity increased in the mid-single digits with a more noticeable increase starting in the second quarter.

For Weatherford specifically, we expect to be higher than that based on the contribution of the NCS business share gain in some key areas and Venezuela reopening, while simultaneously offsetting the first half 2026 headwinds of the ISP contracts and Middle East activity levels.

The mantra of margin expansion is central to our operating [indiscernible] cost and should manifest itself driven by a structurally lower cost base, mix effects, synergies and higher activity-driven fall-through. We are within touching distance of 50% full year adjusted free cash flow conversion and expect to achieve that in 2027 based on the factors on our job line.

All in all, despite the headwinds from the Middle East, we see a constructive outlook shaping up for 2027 and the years following that. We will provide specific guidance on our next call, but wanted to paint the picture of the emerging landscape.

As we think about the next phase of the company, I'd like to reiterate what we have consistently said for the past 6 years. Please do not judge us by words or rhetoric, rather let our numbers speak for us. We have consistently delivered over 20% adjusted EBITDA margins over the past few years.

When rigs got cut in Saudi when Mexico activity collapsed with the current conflict and so on. At the same time, we have continued to march on our path to higher free cash flow conversion and margins, focusing on our controllable elements.

Performance remains our calling card and our north star of free cash flow remains unchanged. We are focused on driving a higher degree of absolute dollars as well as margins. We believe that achieving mid- to adjusted EBITDA margins with 50% conversion of free cash flow is not just achievable. It is a very clear path in the next few years and likely sooner with activity increases.

To enable that performance, we now have more capability in our portfolio and are investing in further enhancing that value proposition. We are well positioned as a technology differentiator in key segments and product lines. Our MPD, TRS, interventions, artificial lift and cementing products businesses have leadership positions in several areas.

We are further augmenting that with a continued pruning of lower return businesses and capability addition in completions, drilling services, wireline and digital. The liquidity on the balance sheet and low leverage affords the capacity to accelerate that with inorganic growth in a thoughtful and prudent fashion.

While we believe we can meaningfully expand margin through technology mix and operating efficiencies in a flat environment, the combination of unconventional growth, mature field rejuvenation offshore resilience and Venezuela, give me a lot of confidence in revenue growth over the next few years.

The most important element of the confidence in our portfolio delivering performance is the third team. This is a team that has consistently adapted and delivered, and I am grateful for the experience, expertise and energy of the leadership team that permeates all the way to the front line of the company.

Thank you for your time this morning. And with that, operator, please open the floor for questions.

[Operator Instructions] And today's first question comes from David Anderson of Barclays.

So on your '27, you're kind of out framing the picture for us here. I was wondering this kind of quite a bit to unpack in there. So you're talking about mid-single-digit growth activity, Weatherford is going to outperform that. So if we take sort of the second half of '26 run rate, can you help us bridge the gap of kind of the things that are kind of weather for specific in here that are going to see growth outside of that? And you're not assuming any Middle East recovery in there.

So, should we imply that Weatherford could be up double digits if Miles does come back? I mean, is that kind of what we're thinking about here just based upon how the rest of the portfolio is setting up?

Yes. Dave, you're right. Look, it is a little bit complex with a lot of different moving pieces. I'm not going to comment on what you could imply. I'll leave that to your more than capable mind and abilities to figure that out.

But look, we've had -- we'll have this year, 4 months of impact from NCS. So obviously, that will have a much impact in the first 8 months of next year. So I think that will be a bit of a positive. On the other hand, what we do have is through the first half of 2026, we have the ISP contracts in the Middle East.

Plus a much higher activity profile in the first half or the first quarter of 2026. So those will need to get offset. So I think it's really better to look at this on a bit of a longer-term basis and take a look at it as a total sort of 12-month view and frame it as that with some degree of movement across the quarter.

I think more importantly is what Anuj alluded to in his prepared remarks on that margin expansion on a year-on-year basis. That's something we feel really good about. Just given the fact that we have made some structural improvements this year.

We will not have some of the natural effects of a spike in cost that we had earlier this year. as well as the synergies that we're going to get, plus fall-throughs from increased revenue. So net debt, I think it's shaping up to be very positive.

It will be a bit more of a ramp in the second half. But this is now the second year in '26 that we have had that ramp. We have delivered it. So hopefully, that gives everyone a lot more confidence as we talk about it in 2027.

And just to clarify just on that margin improvement in 2017. Is that off the full year 26? Or is that a second half exit rate?

At this point, best to take it as a full year Dave.

And our next question today comes from Scott Gruber at Citigroup.

Yes. Girish, you mentioned that you're not building a Middle East recovery into the outlook. You're planning for status quo and you do see mid- to high single-digit sequential growth in the NAND 4Q led by the Golf countries.

Can you reconcile those 2? Is 4Q mostly year-end product sales versus underlying activity and with Saudi, now about 20% of the region. And I think I heard you say UAE and Mona Kuwait are like double that at 40%. Can you kind of walk around the region and identify areas of relative strength or normalcy versus areas of continued weakness?

Scott. Look, great question. You're right. They do at the face while you sound a little bit divergent statements. But essentially, when we talk about that activity level, we're really referring primarily to service activity on the ground.

And -- there is -- in Q4, we typically have a much higher product delivery quarter that is very true in North America, but it's also very true in the Middle East were typically year-end deliveries of completions, liner hangers and cementing products.

So we've got the pipeline on that. We've got the purchase orders. Our manufacturing teams are working [indiscernible] to make sure those deliveries happen and that's what gives us that confidence. But the base activity level we are assuming does not actually change, and this will feed the inventory profile for our customers as they go into 2027.

So I think that's really what drives that. So on your second question, part of the reason we provided a little bit of that context was to give a bit of a sense of, look, there is a lot of concern, understandably, naturally and appropriately so around the Middle East right now. But we've got a revenue profile that is fairly well diversified across the various countries.

There tends to be a little bit of concern, especially just given the recent escalation in the kingdom of things that have happened. And we've got a very strong revenue profile in places like the UAE, and especially in Oman have remained pretty intact.

So as we look at activity levels, I think UAE and Oman remain pretty strong and kind of normalized at this point. Kuwait and Saudi a little bit down Iraq substantially. So that's sort of the mix that we see. But I think all in all, we feel pretty good about the position that we have and the ability to generate the margins and cash.

And our next question today comes from James West at Melius Research.

I wanted to just ask a bit about the NTI acquisition. You're tracking to about $50 million of cost synergies. But you've consistently said and I agree with this, that the revenue synergy is the real price. Would you mind giving us some more detail on the cross-sell pipeline in Argentina, the Middle East, the North Sea, timing to kind of first meaningful international revenue and what a reasonable revenue synergy number could be?

And then kind of throw a second one in there. Has anything surprised you positively or negatively in the first 9 days of the -- since the closing?

Yes. James, let me start with maybe the latter part of the question. Acquisitions are always a little tricky regardless of the size and sometimes you're buying a company with 50 people, 500 people or 5,000 people, it sort of feels like out of work. But I've been very, very impressed with the degree of planning our integration team has put in.

They've done an outstanding job. It's gone really, really smoothly. And I've been very excited to attract a lot of the legacy NCS team who are excited to be part of a bigger global platform. They see the opportunities, and I think they're starting to now really come out in speed.

So I think the biggest positive for me has just been really a crystallization of this potential revenue synergy profile, which is the first part of your question. So, I look at it really sort of in 3 parts. I think the first is from an offshore standpoint, really on the deepwater side.

One of the things that we get with NCS is a platform that unlocks tight place. And these were tight place that were previously potentially noncommercial due to lower permeability in the reservoir. We have had some very interesting trials. We are now taking it into the Gulf of America. And when you combine that with the rest of the capability that we have across the portfolio, it becomes a much bigger integrated completion play in offshore.

And so that's something that's brand new and I think we'll add over the coming years. I've talked in the past about the tracers capability that NCS brings -- that is really an extension of our overall completions portfolio, and it really allows customers to get a much deeper sense of what is happening downhole once they've actually deployed the jewelry into the well.

So that really becomes now how do you get -- use your completions to gain a view in the reservoir performance -- and then the other thing that is really exciting is on the geothermal space, I think we've got some very interesting capability there on engineered geothermal systems.

Again, you combine that with what we have with our natural high-temperature capabilities, our DFS capability it becomes, again, a bigger offering.

So look, I've not put a specific number around it, and we won't -- at this point in time, we are focused on the quantification being around the cost synergies that we feel very good about getting to at least and my hope is, over the coming years, we will grow this business at a run rate that is at least mid- to high single digits about its natural run rate.

And our next question today comes from Saurabh Pant with BOA.

So I want to touch on [indiscernible] a little bit, Girish. Last quarter, you were getting more encouraged. And now you're talking about first revenue in the third quarter, and I think a ramp to more than $100 million of revenue in '27. Further upside in '28. So it's very positive. Maybe just walk us through on what's underpinning that confidence. Is this contracted work with specific operators or activity assumption on specific product lines?

How are you thinking about this? And then how should we think about the 4Q start-up costs that I think Anuj was talking about in his prepared remarks.

Sure. Yes, Saurabh, look, I think if you look back at the last few calls, our tone, my excitement ramp, Venezuela has grown very steadily in each one. That has really been driven by the conversations that we've been having with customers, the magnitude of the conversations, the number of different customers that we've been talking to has increased significantly. .

Conversations have gone from sort of what if to now how soon, how fast and are on the basis of actual orders that we are getting versus sort of pie the sky kind of concept. So really, that confidence is underpinned by us having very clear line of sight contracting work, some of which is very much in progress.

We are furiously hiring people in Venezuela. Our headcount has increased substantially in the past several weeks, and we continue to add to the capability of our team. So look, I would expect that in the next few months, there will probably be more visibility and more specifics around which customers. But I think suffice to say, we are talking to several different operators.

We're focused on international operators a lot of these agreements that have been in the news and are well publicized. We have gotten purchase orders in.

We are starting work, and that's really what's driving it. Now the start-up costs, look, we're not going to get into a very specific quantification because we don't do that on a country and project basis. It is a little bit of a drag, but very naturally so. We've got some refurbishment of our facilities.

We've got hiring costs, bringing people on board -- we've got to make sure we get some inventory, which is a bit more of a cash impact more than anything else. But just making sure we're getting ready for what we see as a fairly big wave of activity that is coming upon us. And that's what, look, we would not use words like a potential ramp to triple-digit revenue if we weren't seeing a pretty clear line of sight to it.

And our next question today comes from Derek Podhaizer at Piper Sandler Company.

Are you iterated the mid-20% EBITDA margin, 50% free cash flow conversion, clear path over the next 2 years. The second half margins are already at 150 points above first half -- maybe could you help us bridge today from the 22% to your mid-20% target, Breaking it down, how much is structural, how much is technology like the MPD aftermarket and completions that you mentioned? And importantly, how much activity is needed.

I know the underlying guidance is based on a flat Middle East, but does the path to the mid-20% require the Middle East recovery? Or can you get there if the region does stay flat?

Yes. Derek, look, I'll reiterate what we have said multiple times. We really try to run the business with a focus on we're going to get to that target at flat revenues. It's going to take a lot longer, obviously, but our role really is to drive 25 to 75 bps of margin expansion on flat revenue.

That's kind of the way we think about it. And we don't really look at how much exactly is going to come from each element just going to vary on a quarter-by-quarter, year-by-year basis. But we do expect that there will be a contribution from structural cost, the modernization of our infrastructure, we think, is a very significant play that will unlock a lot more cost efficiencies in the company and allow us to focus on things that are higher value added.

We are continuing to develop and deploy technology, and we are very encouraged by the initial signs of that, everything that is coming out increases that value gap.

So that helps. And then a mix shift towards lower capital intensity, higher margin kinds of businesses. We talked about some of the small divestitures. In totality, it's not a huge order of magnitude, less than 1% of the company, but it is lower margin.

It allows us to, again, focus our time and efforts on things that actually drive higher value. So we feel very good that even in a flat environment, we should be able to get to that mid-20s. It will probably take about 3 to 4 years if you just extrapolate it out.

Now on the flip side, if you see activity increases and we are confident that we will see that come through and we will see revenue increases, that increases the amplitude of that margin as well as accelerate the timing of it.

So I think if we see that activity increase, depending on what it is that 3 to 4 years could get accelerated a little bit.

Our next question today comes from Jim Rollyson at Raymond James.

Girish, if you kind of circle back to 4Q guide, so you've got margins coming down just kind of modestly from the 22.2% in 3Q on a pretty big step-up in revenues. You kind of walked through some of this, but I'd love to -- for you to decompose kind of how much of that margin delta is tied to NCS dilution?

How much is kind of that NPD Middle East equipment delivery mix and then Venezuela start-up costs? Just trying to kind of understand how that flows.

Yes. So short answer, Jim, is yes. So again, look, I think it's a variety of factors. Right. Let me start though with the third quarter. We did deliver significantly better margins than what we had expected.

Some of that is just also a shift between the third quarter and fourth quarter, just in terms of the projects that we had, the Venezuela start-up cost something that has ramped up and is a little bit newer in development, and we are sort of building that out on a day-to-day basis.

So that, I would say, is a bit more of a reality than it was when we gave our prior guidance in July. And then look, the rest of it is natural, I would say, seasonality. It's not just the Middle East deliveries -- what's actually a bigger factor is North America.

What we typically see in the fourth quarter is typical year-end bailment sales typically lower margin eventually leads to higher pull-throughs on an aftermarket basis later in the life cycle. So altogether, if you put it, it's not a huge drag, and it's still significantly ahead of the first half, and that's really what we try to manage it around it.

That's the bigger focus rather than try to sort of try to time it within a 90-day window. It's structurally getting better, and all of this will eventually lead to higher margins, especially the Venezuela start-up costs.

Got it. And just a follow-up on that MPD capital sales margin benefit you referenced earlier. Is that something that is a recurring thing? Or do we think of DRE margins, at least in the short run, is kind of 3Q being a high watermark.

Yes. Great question. Look, I think let me start with the latter part. I would certainly not call it the high watermark. We have done better on DRE margins in the past. But it clearly in the short term, does create a little bit of a natural spike, if you will.

And typically, when we have older equipment used asset sales, that is a significantly higher contribution to those margin levels, as we have discussed in prior earnings calls. But as we pointed out in our prepared remarks, we still see the opportunity over the next few years of a lot more NPD sales up.

So I do think there will be some degree of lumpiness, but I think as activity levels improved, my hope is that there is still more headroom in DRE margins. Appreciate your thoughts.

And our next question today comes from Doug Becker at Capital One.

Girish one to follow up on some of those MPD comments. Offshore is clearly a durable theme over the next couple of years, 70% MTD penetration among drillships potentially go to 90% you mentioned. Aftermarket doubling this year, could double again over the next couple of years.

So I was hoping you would size the MTD business, the aftermarket component. What do deepwater deliveries look like the rest of this year and into next year? And then finally, just what's the opportunity for other offshore rig types if we go to semis and jackups?

Yes. Doug, look, we don't break out, as you know, specific product line sizing, et cetera. I think suffice to say NPD continues to be an important part of the company. It's obviously one of our leading businesses, but we've got it's sort of in the same ballpark as a lot of our other product lines.

What I am very encouraged by is the growth rate we've seen in MPD this year, and that has been dramatically exaggerated on the offshore side. So offshore has clearly grown in a much stronger profile this year than the onshore business.

Some of it is just a natural weakness of the Middle East, but I think it's more a testament to the strength of the offshore cycle. So Doug, what we see is you look at -- depending on how you count it, order of magnitude between 80 and 90 deepwater rigs out there.

If we've got another 10% to 15% opportunity, let's call it, that's still a sizable number of systems. The exact timing of that is always going to be a little bit unpredictable. But I think suffice to say, we've got very clear line of sight to a lot more in the pipeline, the conversations that we are having with the drillship operators, the contractors are very positive as they understand that MPD is now becoming just an integral part of their overall offering.

It's something that customers expect, not just NPD enablement, but having the capability on the rig and then it's not just about having the hardware. It's about how do you actually make it function so that services element over the long term becomes important.

And then look, there is a much larger price out there as you look at the jack-up market, the semi-submarket. That is significantly underpenetrated. And I think as we tend to look at more mature field rejuvenation. We look at reservoirs that are harder to drill I think the whole notion of MPD making wells accessible that previously we really start to become a team as well as the extension from MPD into this concept of MPW or managed pressure wells across various life cycles.

So I'm very, very encouraged by this the PD business. Really excited about the aftermarket muscle that we have built on it. And I think the next few years should be very positive for this product line.

Our next question today comes from Keith MacKey at RBC Capital Markets.

So the Q4 free cash flow guidance of $100 million plus looks conservative relative to Q3 $155 million with a higher EBITDA number. Can you just bridge the pieces there, including the increased CapEx and working capital build?

And just on Mexico, you said your largest customers, AR as a percentage of revenues at a 6-year low, but remaining payments are still the largest variable. Can you just size what's outstanding and what's assumed in the Q4 guide, please?

Keith, happy to. So you're right. The $100 million could prove to be a bit conservative. That has been our approach given the overall macro environment. So we are guiding at $100 million versus $155 million. And so just to take a step back and reiterate what we said in the prepared remarks.

One, our year-to-date free cash flow generation has been $379 million, and we've converted about 53% of that to free cash and we do have quarters that are lumpier than others. We've had 2 quarters above 60%.

We've had one quarter in the mid-30%. And so you do have items such as timing of collections our cash interest payment, our cash bonus payments, large product sales that can swing any given quarter and free cash correspondingly.

However, the key for us is to ensure we drive to the full year target, which we've put out there, which is at the high 40%. As it relates to Q4 specifically, we do have a cash interest payment that we'll make, which we did not have in Q3.

For good measure, I'll point out we did redeem and we are in the process of redeeming our 2030 note which will, going forward, reduce our interest expense by $20 million on an annual basis. The second piece in Q4 that Girish alluded to a bit and so did I in the prepared remarks, is we are ramping our CapEx in Q4 and to the $70 million to $80 million range, which sequentially is an increase of $25 million to $35 million.

And the reason we're doing that is to meet the demand we're seeing for 2027. So when you couple the interest payment and the increase in CapEx, that accounts for most of the delta between the $155 million that we guided or that we hit here in Q3.

From a working capital standpoint, we did build inventory in and the reason for that is we do have product deliveries generally that are a bit lumpier in Q4. And so we should see some relief in Q4 as it comes to inventory as we deliver these overall products.

From Appendix standpoint, yes, very, very positive that Pemex as a percent of our total accounts receivable, is that the lowest it's been in the last 6-plus years. However, they still continue to be a large, large variable in our quarterly free cash flow number.

We have been very positive, and we've seen a lot of momentum in collections from our largest customer, recent this time last year when there was structural reform items that the government undertook in Mexico and since then, the collections have been really coming in like clockwork.

And so we do have collections baked into our Q4 number, and we do expect to receive this from our largest customer in Mexico. But just to summarize all of this, we've said this many times, and I hope all 16,500 of our Weatherford employees are on the call, nodding their head to this, are singular.

If you had to have one singular goal, our North Star is to drive free cash flow-based decisions. And so our key is to continue to march towards the overall 50% target, and we're very confident in hitting the high 40% here for full year 2026.

And our next question today comes from Philip Jungwirth at BMO.

Greece, you mentioned completions is now your largest product line, and you've strung together a number of offshore completion awards here from Total, Exxon, Equinor, Seplat. Just curious what's driving this offshore win rate? Is it more technology-led or an integration story? And just how should we think about completions growth in '27 across conventional and offshore. And if I can just squeeze one more in.

The NCS deepwater frac sleeve award that you called out, is that a one-off or it could be -- or could it be the start of a real offshore channel for that technology?

Yes. Look, I'm incredibly proud of what the team has done here. And it's been a very focused and disciplined effort over several years. It started with a vision, but really having the investment that went in to drive technology differentiation, but you don't -- you just don't win on the merits of that.

There has to be integration we have to have a track record of execution. So all of those elements come in. And it's taken some time because this is not a place where customers naturally want to take risk and the hest to try new things, but things done an outstanding job. So I'm very confident and hopeful that we will see this trend continue, and we will continue to win more.

So I would expect -- Look, it tends to be, again, a tad bit more lumpy given its product sales, et cetera. But over the next few years, I would expect that as the offshore momentum continues to build out, this is a product line that will be in the very top tier of our CAGR across the business.

On the NCS question, look, really, really focused on this as being a new pathway for us. every time you get the first one, it is a bit of a one-off. But really, the intent on this is to create a completely new space for us, where we have a differentiated offering. So very excited about that, but it's going to start one thing.

And our next question today comes from Josh Silverstein at UBS.

Anuj, I'll go back to you on the free cash flow side and kind of target working capital here. moved up to over 29% of revenue with 150 basis points from NCS and the rest from receivables and inventory timing. What's that path -- the path back towards 25%? Is that a '27 target?

And how much of this is structural with NCS, the mix versus Mexico's receivable? And what are the specific levers on the inventory given the 4Q delivery build? Josh, thanks for the question. So just to start off, yes, 29.2% for working capital as a percent of revenue.

There's an asteric next to that number there with regards to NCS, the way it's amalgamated, as you know, is we have a month of the underlying financial cash flow revenue results but we have the entire balance sheet that we've consolidated.

And so it is not structural, the 150 basis points over time as the full order impact is reflected in our numbers. that should normalize. And so if you look at the overall progress we've made relative to the same time last year, we've had a lower revenue base and as a percent of revenue, we've decreased our working capital even greater.

And so there are significant actions underway in order for us to go and structurally be at that 25%. But I do want to note that, which is even in a tough environment where the denominator has come down relative to the year before, we've reduced our working capital even more so on a percentage basis.

And the reason I alluded to this is as we look forward -- you've heard the comments in the prepared remarks and the Q&A here from Girish around what we're expecting in '27. And so as you start ramping the denominator higher, it naturally will allow us to start marching even faster towards the 25% number.

And so that will help. But at the same time, our ability to manage working capital will be essential. And I'm confident that as we start ramping into 2027 and through 2027, we can manage our working capital such that it does not increase at a higher percentage relative to what we've done in the past.

And so to summarize, the 25%, there are a lot of moving variables. We talked a bit about our largest customer in Mexico. That can be chunky here and there, and there is always some risk in the timing of those collections however, they have been paying and we've been receiving money every quarter like backward.

And so if all these variables continue on, there's some inventory optimization that we're working towards on doing part of your question, you talked about inventory, I believe, and what are the levers we need for inventory really for Q4 for inventory, just deliver our products. That simple.

We have an inventory build in to deliver products in Q4. So we deliver those products, the inventory ends up coming down and it's probably a net benefit for the quarter. And so just summarizing everything, I do think that in 20 there's potential line of sight for us to hit -- and march towards that 25%.

But again, it's not just hitting that 25% and then being comfortable with it. It's making sure that we have the structural cadence and processes in place inside, so we can remain at that 25%.

And that 25% of working capital is really a subcomponent of our target of hitting a 50% free cash flow conversion, which, as you've seen here in 2026 in various quarters, we've been well ahead of that.

And so more to come, but the trains are on the right track, I believe.

Our next question today comes from Alex Breno at Goldman Sachs.

I wanted to just double-click on the opportunity set. If we get a normalization in Middle East activity, I think we talk a lot about what that intervention work could look like for the PRI segment. Can you just help us size .

Opportunity?

Yes. Alexa, it's very hard to tell because it changes with time. And I think the longer this drags on, perversely, I think it gets a little bit higher, but it's really a function of where it drags on, how long it drags on, but my expectation would be sort of a mid-single-digit incremental increase over what it is.

Good news is we've already got in place. We've got -- we're covered with a lot of capability in the region. So I think as it ramps up based on our customers' plans and what they see, we are very well poised to support them.

And our final question today comes from Josh Jan at Daniel Energy Partners.

You made a number of helpful guideposts for '27 with respect to activity, but I just want to take a temperature a bit on operator CapEx on a relative basis. So we're in an elevated crude price environment. everything should be economic.

But just based on what you're seeing in sense of urgency on upticks, any thoughts on companies who have a diversified asset base -- are you seeing a shift of relative CapEx dollars offshore versus onshore over the next couple of years? Or do you think things are sort of moving at a similar pace?

Yes. Josh, we've not seen a dramatic change. I think there is the been a very clear trend towards that offshore inflection and putting more dollars in there. So we haven't seen that necessarily change there other than perhaps countries where you've got the situation where there's simultaneously net importers, but do have reserves of their own.

So we are seeing perhaps a little bit more from those NOCs on focusing on their own reserves, and that's leading to a bit more of that offshore capability, if you will, over the next few years.

And that concludes our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

Great. Thank you all for joining. Appreciate it, and we'll talk to you in early February about the fourth quarter and total year. Thank you.

Thank you, sir. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Ladies and gentlemen, thank you for standing by. Welcome to the Weatherford Second Quarter 2026 Results. [Operator Instructions]. As a reminder, today's event is being recorded.

I would now like to turn the conference over to Luke Lemoine, Senior Vice President of Corporate Development. Sir, you may begin.

Welcome, everyone, to the Weatherford International Second Quarter 2026 Earnings Conference Call. I'm joined today by Girish Saligram, President and CEO; and Anuj Dhruv, Executive Vice President and CFO. We'll start today with our prepared remarks and then open up for questions. You may download a copy of the presentation slides corresponding to today's call from our website Investor Relations section.

I want to remind everyone that some of today's comments include forward-looking statements. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed herein. Please refer to our latest Securities and Exchange Commission filings for risk factors and cautions regarding forward-looking statements. Our comments today also include non-GAAP financial measures.

The underlying details and a reconciliation of GAAP to non-GAAP financial measures are included in our earnings press release or accompanying slide deck, which can be found on our website. As a reminder, today's call is being webcast, and a recorded version will be available on our website's Investor Relations section following the conclusion of this call.

With that, I'd like to turn the call over to Girish.

Thanks, Luke, and thank you all for joining our call. I'll start with an overview of our second quarter performance and short-term outlook, followed by a couple of key enterprise updates. Anuj will then cover specifics on financial performance, balance sheet, detailed guidance, and I will wrap up with some thoughts on the current operating environment and our focus areas before opening for Q&A.

To summarize our Q2 2026 performance, we delivered revenue of $1.105 billion, adjusted EBITDA of $223 million at a 20.2% margin and adjusted free cash flow of $139 million, representing a 62.3% conversion on adjusted EBITDA. I would like to thank the One Weatherford team and especially our Middle East-based employees for their focus on customers safety and operational discipline as the region continues to work through a challenging operating environment due to the ongoing conflict.

I am especially pleased with Q2 margin and cash performance given the challenging environment. We were hampered by the Middle East activity profile, not returning to pre-conflict levels driven by the geopolitical events that everyone is well aware of.

Further, we had activity declines in Indonesia pockets of pricing headwinds leading to volume declines and a union strike in Norway that put further pressure. Despite those incremental pressures, our team rallied to deliver EBITDA margins north of 20% and and essentially flat to Q1.

Moreover, our adjusted free cash flow performance was excellent, driven by working capital execution, including strong payments from our largest customer in Mexico. I am again encouraged by progress on payments in Mexico and remain hopeful for the trend to continue in the second half.

The Middle East region were the most visible impact of the conflict in the second quarter. Activity suspensions, project deferrals and logistical disruptions that began in March carried through much of the quarter, and freight and logistics costs remain elevated, peaking in May before beginning to moderate.

Throughout this period, our priority has remained the safety of our people and business continuity for our customers and our teams have done an exceptional job on both while tightly managing costs. While the quarter ended with signs of recovery, the recent and ongoing incidents across the region create an environment of uncertainty in the short-term outlook. We do expect the recovery to continue, but it will take some time to fully normalize.

The financial impact in the first half was within the $30 million to $50 million profit range we outlined on our last call. And given the recent flare up, we expect that to increase over the course of the year and have incorporated that into our guidance. We did experience a revenue decline in Saudi Arabia due to the conclusion of our LSTK contract, and this will be further visible in the second half.

We continue to view the Kingdom as an opportunity for growth, but at the same time are comfortable with not having an LSTK contract given the pricing levels in the market. I am very proud of our team's execution on this contract for the past 3 years and grateful to Aramco for the opportunity. We have a very strong presence in Saudi and we'll continue our journey on adding value through technology differentiation.

In Oman, we also concluded our 5-year integrated contract with PDL. It is a testament to the operating progress of our team that we finished the original scope 14 months ahead of schedule. On the back of this execution, I am pleased that we have won the Marmul extension with PDO and that will commence in the third quarter. Latin America declined sequentially, driven predominantly by Mexico, where activity came in below our expectations. Several wells were deferred and our largest customer in the country continued to prioritize its spending.

Collections from our largest customer in Mexico was strong through the quarter and supported our working capital performance. We have aligned our cost structure and footprint in Mexico to current activity levels, and we are positioned to respond quickly as activity increases. I've also been pleasantly surprised with the progress in Venezuela, and now believe that Venezuela can provide a tangible contribution to revenue and margins in 2027.

Our pipeline of opportunities with multiple customers is growing and we are anticipating closing on some of these in the second half. In Europe, sub-Saharan Africa and Russia, revenue grew sequentially on higher activity despite the labor strike in Norway impacting activity late in the second quarter. This will remain a headwind into the third quarter and will weigh on the region's near-term results.

Russia revenues as a percent of enterprise revenue increased, but this was driven more by the decline of the rest of the world and impacted significantly by the conflict result in decline in the Middle East.

Slide 7 through 9 lay out key highlights across our segments. WCC revenue declined 5% year-over-year, primarily for lower activity in MENA, partly offset by higher completions activity in Latin America. DRE revenue declined 13% year-over-year, primarily from lower wireline and drilling-related services activity in MENA, partly offset by higher managed pressure drilling activity in ESSR.

PRI revenue declined 3% year-over-year, primarily from lower artificial lift activity in North America and Latin America. Across all 3 segments, our product lines continue to benefit from differentiated technology a strong installed base and the operational and manufacturing capability we have built over the past several years.

During the quarter, we continued to build momentum with new contract wins across our portfolio and key regions. I'm especially encouraged by the number and quality of deepwater awards this quarter. In Brazil, Constellation Oil Services awarded us 2 contracts for offshore well intervention and NPD in deep water. Ventura Offshore awarded us a complete NPD solution for the SSV Victoria and Valaris awarded us a 2-year contract for MPD equipment and services offshore.

In West Africa, Global Corporation awarded us multiple NPD contracts and a global aftermarket agreement in Nigeria and [ Esso ] Exploration and Production Nigeria awarded us a deepwater integrated completions contract covering upper and lower completion solutions. And in Australia, Chevron awarded us a 5-year framework contract for tubular running services, casing accessories and other tools supporting a deepwater development project.

We will see some of these NPD awards get delivered in the fourth quarter, and that is part of the ramp we expect to see in the second half. Beyond deepwater, KOC awarded us 2 5-year contracts for cementation products and completion services in Kuwait. PTTEP awarded us a 22-month downhole deployment out contract in Thailand. And as I referenced earlier, PDO awarded us a 3-year contract to provide integrated drilling services covering 247 wells in the Marmul field, supporting both production and injection operations following the successful completion of the 837 wells contract awarded in 2022.

Given all of the near-term market dynamics, we have adjusted our second half guidance in what we believe is a realistic and responsible fashion. We do expect second half margins to be significantly higher than the first, but the quantum of improvement is slightly reduced versus our April expectations due to the ongoing nature of the Middle East conflict.

Our total year thesis on margins is generally intact but it is difficult to offset the impacts of operational disruptions due to the Iran conflict. At the same time, we have increased confidence in our adjusted free cash flow conversion and are, therefore, increasing guidance on that metric.

We have been clear that we will not chase revenue at the expense of returns and we would rather step away from lower margin work and concentrate on higher quality revenue that strengthens the business. The clearest evidence of that discipline is our second quarter margins and our third quarter guidance, where we expect adjusted EBITDA margins to be up at least 100 basis points despite the ongoing conflict in the Middle East and the loss of revenue from the Saudi LSTK contract.

Let me also provide an update on our proposed redomestication to the United States. At our shareholder meetings on June 11, the proposals to redomesticate to Texas received support from more than 60% of the votes cast, but fell short of the 75% approval threshold required under Irish law. The engagement we had with shareholders through that process reinforced our conviction in the value creation potential of the move back to the U.S. and taking that feedback into account, we introduced an updated proposal to redomesticate to Delaware.

The definitive proxy statement was recently filed and is being distributed to shareholders, and we will hold special shareholder meetings on September 3 to vote on the Delaware proposals. We continue to expect approximately $20 million to $30 million of annual cash savings beginning in 2027, with completion expected by the end of this year, subject to shareholder and Irish High Court approvals.

Importantly, the redomestication does not impact our global footprint, our customer commitments or our ongoing operations. And our Board unanimously recommends that shareholders would for all of the related proposals.

During the quarter and as shown on Slides 13 and 14, we also announced a definitive agreement to acquire NCS Multistage, which expands our completions portfolio and deepens our exposure to unconventional resources. It has been approved by the boards of both companies and by NCS' controlling shareholder, and we expect it to close in the second half of 2026 subject to regulatory approvals and customary closing conditions.

The industrial logic of this transaction is compelling. NCS' technology spans completions design, execution production optimization and late-life intervention, which completes our coverage of the well life cycle and enhances the application fit of our well construction products portfolio. It deepens our exposure to unconventional resources in North American basins and in the international and conventional markets, where we see the next leg of growth, including the Middle East and Argentina, along with the offshore opportunities such as the North Sea. And it is, at its core, a distribution play.

NCS has built a differentiated capital-light business with a concentrated footprint and Weatherford brings a customer base across 6 continents on which to scale them. The financial logic is equally clear. The consideration is structured predominantly in equity, preserving our balance sheet strength. We expect at least $15 million of annual cost synergies within 18 months of closing.

NCS's operationally levered capital-light model that supports both our EBITDA margins and our cash conversion, fully consistent with the M&A criteria and our capital allocation framework.

With that, I'd like to turn the call over to Anuj.

Thank you, Girish. Good morning, and thank you, everyone, for joining us on the call. Girish has already shared an overview of our second quarter performance. For a more detailed breakdown of the results, please refer to our press release and accompanying slide deck presentation. My comments today will center around our cash flow, working capital, balance sheet, liquidity, capital allocation and guidance.

Turning to Slide 23 for cash flows and liquidity. In the second quarter, we generated $139 million of adjusted free cash flow, representing a 62.3% adjusted free cash flow conversion. This compares favorably to the 31.1% conversion we delivered in the second quarter of 2025 and the 36.5% conversion we delivered in the first quarter of this year and was driven primarily by working capital relief, continued collections, including from our key customer in Mexico and lower capital expenditures.

Our adjusted net working capital as a percentage of revenues was 27% in the second quarter, a sequential improvement of approximately 90 basis points despite the lower revenue base, driven largely by better receivables and payables management. This is the second consecutive quarter of improvement and it reflects the operational rigor we have put behind working capital across the organization.

We remain fully committed to our internal initiatives aimed at achieving the goal of 25% or better. As we stay agile and adapt to evolving market conditions, we're continually optimizing our cost structure, we have seen the impact of these cost actions in the second quarter and they have helped partially offset the impact of revenue decrementals, pricing pressure and the geopolitical conflict in the Middle East and they were a key factor in holding our adjusted EBITDA margins essentially flat sequentially.

During the second quarter, CapEx was $42 million or 3.8% of revenues down approximately $12 million compared to the second quarter of 2025. We continue to remain in the 3% to 5% range across a 12- to 18-month cycle that we have laid out and will make the appropriate and prudent trade-offs through the cycle with cash returns guiding our decisions. In the second quarter of 2026, we returned $36 million to shareholders, comprising $20 million in dividends and $16 million in share repurchases.

Since the inception of the shareholder return program we have now returned more than $370 million to shareholders via share repurchases and dividends. Our balance sheet remains very strong. At the end of the second quarter, we had approximately $1.14 billion of cash and restricted cash.

Total liquidity was $1.7 billion, which includes total cash and credit facility and our net leverage ratio declined to 0.34x, despite the Middle East situation and resulting adjusted EBITDA declines, our leverage levels remain resilient and correspond to investment-grade equivalent ratios demonstrating our commitment to prudent balance sheet management that provides us degrees of freedom.

Our focus on strengthening the capital structure over time has resulted in a stronger than ever fortress balance sheet, which provides a solid foundation to not just navigate business operations in a challenging environment, but also pursue strategic opportunities. as evidenced by the NCS multi-stage acquisition.

Turning to the third quarter 2026 guidance on Slide 24. We expect revenues to be in the range of $1.105 billion to $1.155 billion and adjusted EBITDA to be between $235 million and $265 million. The sequential improvement reflects the progressive recovery of activity in the Middle East and operational improvements driving productivity, which are partially offset by activity declines in a few geographies and the LSTK contract falloff we referenced earlier.

We expect adjusted free cash flow of more than $100 million in the third quarter. Collections from our largest customer in Mexico continue to be the biggest driver of variability in this regard, but we are encouraged by the past several months of consistent payments and transparent communication.

For the full year 2026, we are updating our guidance with minimal changes to the midpoint of adjusted EBITDA despite the impacts from the Middle East, while raising our free cash flow conversion outlook on the strength of our first half cash performance.

Revenues are now expected to be in the range of $4.54 billion to $4.80 billion, and adjusted EBITDA is expected to be in the range of $951 million to $1.046 billion. Adjusted free cash flow conversion is now expected to be in the mid- to high 40% range, an increase from our prior outlook and our effective tax rate is expected to be in the low to mid-20% range for 2026.

As communicated across periods, our priorities are to drive margin and cash-based outcomes which we are confident will continue in the second half of 2026. Thank you for your time today.

I will now pass the call back to Girish for his closing comments.

Thanks, Anuj. Before we open it up to questions, I want to step back and share how we see the environment evolving and what we are doing to position Benefit for what comes next.

On our last call, I laid out why we believe the industry is entering a period of structural multiyear demand for our services anchored in energy security. One quarter later, that thesis remains intact. But clearly, the ongoing geopolitical issues and the impact of demand destruction requires a recalibration on timing and pace.

The rebuilding of supply capacity, redundancy and infrastructure across the Middle East and beyond is real, but it will not happen overnight. Tender cycles, rig availability, the normalization of logistics, and the sequencing of budgets all mean that the conversion of intent into activity and activity into revenue plays out over several months and quarters, not days and weeks.

We saw that dynamic firsthand this quarter with the recovery beginning later and building more gradually than the headlines on a return to pre-conflict situations might suggest. What has changed since April is that energy security has moved from rhetoric toward capital plans.

Over the past quarter, I have visited customers in all of our geo zones, and it is very clear that across our customer base, national oil companies and their governments are explicitly anchoring investment programs in security of supply, both as exporters and importers. This thematic is consistent and very visible in gas-focused programs in the Eastern Mediterranean, Southeast Asia in deepwater expansion in India and South America and in the renewed policy emphasis on domestic production in North America.

These are the building blocks of a durable multiyear cycle, but they build progressively. None of these programs converts to revenue in a single quarter, and we are managing the company on that basis. And although at times, it feels hard to change DNA across the sector, I am hopeful that the capacity discipline of the past few years in the sector translates into pricing discipline.

Against that backdrop, our job is to position Weatherford to convert this environment into cash flow and returns. And you saw the blueprint in our second quarter results. There are 3 central teams that run through the company to deliver on that objective. The first element is strained true to our North Star of free cash flow, driving increased dollars, margins and conversion.

We delivered $139 million of adjusted free cash flow at a 62.3% conversion and adjusted free cash flow margin of 13% of revenue in a quarter with meaningful operational disruption. That is not the product of onetime items. It is the product of structural improvements in working capital discipline, capital intensity and asset utilization.

Our adjusted net working capital efficiency improved for the second consecutive quarter. Capital expenditures were 3.8% of revenue, and net leverage ended the quarter at 0.34x and despite relatively lower adjusted EBITDA base. We are institutionalizing this focus with an emphasis on further aligning and providing visibility to cash metrics across the company. And you can see this focus in our numbers.

We have raised our full year 2026 free cash flow conversion outlook every quarter since we first provided it from the low to mid-40% range in February, to the mid-40% range in April and now to the mid- to high 40% range, all while absorbing the disruption of the conflict and each step closing the gap to our 50% through-cycle target.

The second element is portfolio enhancement with technology differentiation being our strategy. The NCS multi-stage acquisition is a clear expression of that. We recognize the earnings volatility that comes with our scale in a cyclical market. However, we will never do M&A purely for the sake of scale. It will always be rooted in strategic intent and conviction and financial returns.

We have the balance sheet capacity, experience and operational bandwidth to do more but will always be hyper focused on delivering shareholder value as our priority. More importantly, we are clear that organic innovation is critical, and our new product introductions are debated and decided on that dimension.

The growth in our offshore NPD, well services, integrated completions and digital offerings are all testament to the philosophy and set the stage for more in the coming quarters and years.

The third element is structural efficiency and effectiveness. Our investments in state-of-the-art ERP systems, a new structure to serve the offshore markets, the launch of our Managed Pressure Wealth Center of Excellence and several other initiatives are all aimed at state at taking us to the next level.

Not only do I expect them to improve our margin performance, I also expect them to serve as enablers to drive top line growth. So to conclude, the demand backdrop for our industry is strengthening on a structural multiyear basis anchored in energy security, but the recovery will be progressive, and we are managing the company accordingly. Further elevating our focus on free cash flow generation, conversion and margin, driving technology differentiation in the portfolio through strategic M&A and organic innovation, and building out the next generation of structurally different and scalable company.

While all of this is future focused, we remain deeply committed to delivering in the short term. To put this in perspective, our total year adjusted EBITDA guidance is reduced by approximately 1% at the midpoint versus April, while increasing our free cash conversion.

The stock has seen a significantly more exaggerated impact, but we will keep doing what we have done every quarter, tell you exactly what we see, deliver against it and let our investors judge the results.

Thank you for your time this morning. With that, operator, please open the floor for questions.

[Operator Instructions]. And today's first question comes from David Anderson at Barclays.

So operational and financial discipline has been a theme of yours for some time now. I just want to talk about kind of how you're thinking about revenue growth versus margin growth in this next up cycle. You mentioned you were fine not winning that Saudi LSTK contract because there's low-margin work.

At the same time, your margins are moving up nicely in the second half without a big move in revenue. So I was wondering, could you talk about how you're going to balance that out of kind of growth versus margins? And in your approach to what appears to be an expanding set of opportunities once this up cycle starts to pick up?

Yes, Dave. Look, it's a really important and something we spent a fair amount of time on. Look, the reality is, let me start with, you always need to have top line growth to ultimately have a bottom line come through, right? So we're not naive and ignorant of that fact. And we can't cost cut our way to growth in the longer term. So we do need top line growth. Having said that, look, there are contracts that we will be okay walking away from if it doesn't provide the right returns. On the Saudi LSTK piece you referenced, look, 2 things, I think, that are incredibly important.

First, I'm enormously grateful to Aramco for the opportunity, and I believe we added a lot of value in the past 3 years in executing the contract, and it truly helps our own capability. A lot of our capability in deep gas drilling in Aramco has come as a result of Aramco trusting us with that contract and allowing us to expand our capability.

I think, look, the second thing is I'm very, very proud of the team for how they executed. The market is going to be what the market is and people will do different things and we've got to react to that. So what we try to do is say, look, is there a strategic intent on capability addition sometimes on a contract to take lower margins like we did on this one. And if that no longer exists, we are okay walking away.

What we've got to then do is say how do we have the right technology differentiation and the cost out within the company to get the appropriate margins. What I'm supremely confident of is that we have a backlog right now as well as a pipeline in front of us that allows us to go get that higher margin. And again, you see the proof in the proverbial pudding. You see the margins holding up very, very resiliently in the second quarter and picking up with our guidance on the third.

And our next question comes from Scott Gruber at Citigroup.

Girish, you mentioned that the Mid-East headwind was largely in line with your $30 million to $50 million estimate in the first half. that the impact will obviously continue in the second half. But curious about that kind of monthly cadence, is that moderating as you go into 3Q as you adjust ops and logistics? Or does the recent flare-up maintain that pace? And you obviously have good breadth across the region. So just curious, given the flare-up what you're seeing across the region today?

Yes. Look, -- in terms of the impact of that -- the financial impact of the conflict, what I will start with saying is don't see it increasing right now, and I think that's positive. So let me be very clear about that. I do believe it's moderating, but always subject to what happens tomorrow, next week, next month, et cetera. So -- but our hope is that it continues to moderate. It will unlikely go to 0 until we get to a firm and permanent resolution. And we have baked that into the guidance, but it is still a fairly significant number.

So I think extrapolating what we talked about is prudent. Look, from a region standpoint, it's very, very mixed. What we've seen over the past 10, 12 days is a very unfortunate played up once again, and that's created a significant amount of disruption. Prior to that, we had seen Saudi start returning to normalcy, resuming some of the offshore operations.

The UAE has kind of continued on that same pace and actually increased in a few areas. Oman has, by and large, stayed fairly consistent and normal through this period where we've seen probably the most amount of disruption and delay is really Bahrain. Qatar, Iraq and Kuwait. And we have started to see a little bit of recovery in all of those.

I think now it's again a bit of uncertainty that's gotten introduced. But -- we remain hopeful in very close contact with our customers and making sure we're supporting them and our team through this period.

And our next question today comes from James West of Melius Research.

Girish. You again mentioned the multiyear cycle you see developing here. But you've also noted this will take some time. It's not just in 1 quarter, which is perfectly reasonable. Could you just address maybe the type of conversations and regions where you're having these discussions and help -- maybe help us frame the way to think about the the a little bit early, but the '27 outlook.

Yes, it is a bit early, James. But let me start with the first part of the question. So look, I would bucketize it into really sort of 3 elements. I will start with the most obvious one, which is our customers in the Middle East. And the conversations there are really focused around first of all, the thematic business continuity and making sure that they can deliver to their plans, and we are an integral part of that.

The second is really hardening of infrastructure and making sure that as things come back to normal, the production can resume and so we are set up and deposition for that.

And I think the third is going to be a conversation on, hey, look, once all of this is behind us, how do you get back to getting production back to the levels it was then higher regaining share, et cetera. So I think there will be an activity uptick, and we are preparing for the -- from that standpoint.

If you then go to exporting countries around the rest of the world outside of the Middle East, I think several of them are looking at this opportunity saying, how do they position themselves as stable and resilient suppliers to countries that need their product. And so they are looking at potential plans to expand, but they're being cautious, they're being prudent about it.

I think the biggest manifestation of that is that thematic we've been talking about for a while, which is offshore. And so I think it really bolsters and strengthens this offshore cycle that we see coming upon us in the next few years. And again, we are very well positioned on that front.

The third is really countries that are in a position where they do have their own reserves, but they're still net importers, small or significant. And what they're really focused on is saying how do they guarantee a little bit more security of supply and increased domestic production so that they are less dependent on that variability of geopolitical shock. So I think there will be a bigger focus and investment on domestic production places like Thailand, Indonesia, India, think you've got several countries in this regard. And so we think we will see an activity uptick in that.

So look, you put it all together, I'm not going to give an outlook and guidance for '27 right now. But I think it's suffice to say that we are well positioned and '27 should definitely be a year of growth for us. And I think -- in the next few months, we'll be able to calibrate very specifically how much and the nature of that, but it's certainly shaping up to be a positive inflection.

And our next question today comes from Saurabh Pant with BofA,

Is, think you briefly touched on this in your prepared remarks, but I want to touch on -- go back on when Israel. I think you were talking about just getting more encouraged. I think you said you expect a more tangible contribution in both revenue and margins maybe Girish, if you can expand on this a little bit from a timing and ramp-up standpoint and then what product service lines that whether food could deploy in the country? And then ultimately, from an investor standpoint, what's the size of the opportunity? How big could the market be for Weatherford?.

Sure. Yes, look, I'll reiterate, I've been very pleasantly surprised. I think there's a lot of people, including myself, who back in January, February were a little skeptical of how fast this could move. And I think it has moved a lot faster than many people anticipated. Obviously, we've got customers like Chevron, who are well entrenched there and know the landscape very well.

So we continue to work with them on their plans. But we have seen a lot of other customers, not just announced plans, but there's a lot of conversation about further things. I'm encouraged as I travel around the world as to how many customers ask me about Venezuela. So look, we are talking to several customers and the range of products and services really runs the gamut. A lot of it is the expected we start with artificial lift and intervention services and wealth services as a means of increasing production. And again, that is the sort of sweet part of our portfolio.

But I think it's also important to recognize at its peak, Venezuela was about $0.5 billion for us, and we did pretty much everything in the country, including drilling services and wireline -- we also still have assets in the country. We are starting to ramp up our workforce in the country in anticipation of awards as well as the conversations that we're having with customers.

So I think it's a bit premature to say what is the exact size of it. I think it would be naive for me to assume that we're going to get back to anywhere close to that what it was at its peak of $500 million in the next few years. But I do certainly think this is something that will build in a fairly nonlinear fashion of going from a few million dollars to tens of millions of dollars to several more. And we'll provide more color on that as we get into guidance for 2027 and beyond.

And our next question today comes from Derek Podhaizer at Piper Sandler.

So Girish, in your opening comments, it sounded like maybe a little bit of slippage in the PEMEX calendar. Could you maybe touch on that more in the outlook for Mexico as we work through the year? And then Anuj, because you hit on those PEMEX collections, you struck a pretty confident to in your remarks, so maybe provide some more detail on how these could progress through the rest of the year.

Sure. So I'll start, Derek. Look, I think PEMEX, as we have talked about now multiple times, we really think they've gotten to a point of stability. I think there's been a lot of anticipation about growth and increased budgets, et cetera. I am hopeful about that, but we are not betting on that. I also think, look, it's a bit of a function of the PEMEX calendar is really there are well allocations, there's contract allocation. So it might be a tad bit more specific to us in the second quarter, but we see that normalizing over the second half, but I do think it will be more stable.

And like I've said previously, I think as we get into 2027 and beyond, we do think that activity levels will increase. They're probably not going to increase 30%, 50%, anything like that. But I think a reasonable mid- to high single-digit level kind of increase is warranted. And we are very well positioned to be able to do that, and we think we can scale up quite quickly. Anuj?

Sure. So on elections from Pemex. So Q2 did mark the third straight quarter where we did receive sizable collections from -- we've talked at length about some of the structural changes that have happened there in Mexico. And since then, the collections or the payments thereof have generally been consistent.

Our team has done a remarkable job, a remarkable job of working with our largest customer there, Pemex in Mexico to continue to invoice for future collections. And so we are cautiously optimistic that it continues. And generally, once we do invoice Pemex, the collections start coming in a few months thereafter. And so for the second half of the year, again, we are cautiously optimistic that this trend continues.

And our next question comes from James Rollyson with Raymond James.

Girish, you've been kind of pushing free cash flow conversion and generation pretty much since you came on board at Weatherford. So maybe this is for Anuj. But could you talk about just kind of your revised outlook for free cash flow conversion, given what second quarter looked like, kind of the fact that you're now in this mid- to upper 40s getting close to your 50% number is your long-term target kind of changing to the higher end now well beyond 50%.

Yes. Happy to take that one. So I appreciate you pointing out the focus on free cash flow and free cash flow conversion and generation. So -- this has been a deliberate deliberate target internally for us, and it's the result of actions across multiple years to get to where we are. And so I appreciate you noting that here at the onset -- so yes, we did increase our overall target from mid-40% to mid- to high 40%.

And this is really a function of the very strong free cash flow generation we've had here in the first half of the year. So if you look at Q1 plus Q2 combined, we are at around 49% of free cash flow conversion. And so this gives us the confidence to look at the second half of the year and revise higher our overall outlook.

We've talked at length about our MO here is to drive cash and margin-based outcomes. And there are numerous initiatives that are underway across every single working capital category across looking at how do we optimize our interest expense across -- we have an initiative out there, as you all know, about redomesticating the Delaware, which will further help drive the free cash flow number as it relates to our tax efficiency and management and so the team is laser focused to hit and improve upon in all of these areas.

Free cash flow conversion has an other component of the formula, which is the CapEx component. We do run the business capital light, 3% to 5% is what we will continue to invest. But this piece here is key. The aim is not to singularly drive free cash flow conversion, the aim is to take that CapEx to high-grade EBITDA to high-grade EBITDA margin and then be vigilant in converting that to a 50% free cash flow number.

Our history has been to put a target out there and ensure we have the might of the entire company aligned to go hit that target. And that is what we will do with this 50% number. And in the spirit of always improving, being a continuous improvement organization in the future, as we structurally are able to continue to deliver at a 50% free cash flow conversion, then and only then may we potentially raise the bogey.

And our next question today comes from Doug Becker at Capital One.

Girish, I was hoping you'd expand on NCS some more -- is this a deliberate move to increase your exposure to North American unconventionals? And how do you see the opportunity to expand their products across your global footprint?

Yes. Doug, I would say less about North America there a business that's very highly concentrated in North America, but that's really not the focus. It's really around what we can do with the technology. So to me, the unconventional parts, yes, is very, very interesting and exciting. And if you look at -- we've got a slide in the deck, Page 14, I believe, which lays out the complementarity of the solution set, and it gives us now a full spectrum completion solution from heel to toe in the unconventional space. And I think that's very powerful. So as we see unconventional growth in markets beyond North America, we see Argentina, VC, the Middle East, we see other parts of the world.

So we think that could be something that allows us to scale even more with our footprint. This is a business that operates very effectively in North America. So we -- obviously, we want to make sure we preserve and nurture and grow that. But the really exciting part is what we can do with our global footprint and scale this up.

And our next question today comes from Philip Jungwirth with BMO.

Realizing NCS hasn't closed yet, but I was hoping you could elaborate a bit more on your M&A strategy, potential timing? And also just should we expect things more like NCS in the future?

Yes. The crystal ball is always fascinating on this, Phil. So I appreciate the question. Look, what I'll start with is what I said earlier in my prepared remarks, for us, it's all about strategic intent, and that's rooted really in what that value proposition is. Does a target potentially give us something that significantly enhances our strategy or accelerates it versus just doing something for the sake of scale.

Beyond that, we look for businesses that are typically capital light, and there is a balance there, you're ultimately getting to greater amounts of free cash flow margins. So sometimes you have this business that are a little bit more capital intensive. We have some of those like our NPD and drilling business. But as long as they're generating the right returns.

And then we look at, look, does our global footprint give us an opportunity to scale up more significantly. And we've seen that in several of the acquisitions that we have done, whether it was a couple of years ago with the proven ISI businesses or in hopefully now once we close NCSM. So that's sort of what we are looking at.

So my hope is, look, as we look at the landscape in front of us, we think there's some very interesting opportunities for technologies that can not just help but enhance the overall portfolio, and we can scale up. At the same time, we will look at things that are potentially a tad bit larger. But again, the thesis is the same. We will not go after stuff just for the sake of scale. It's all about does it give us strategic optionality. Does it create more value? And are we convinced of the financial returns.

And our next question today comes from Keith Mackey at RBC Capital Markets.

Girish, I don't think I've heard you talk about offshore as much as you did on today's call before, certainly, with several announced awards as well. Are these awards a true indication of the potential market inflection? Or are you gaining market share? Then could you also expand on your comment on how your offshore operations have been restructured?

Yes. So Keith, I appreciate the question. Look, I think the short answer is yes to all of them, right? But look, different products different services have different connotations. So if you look at the offshore space, first of all, I do believe that we are entering a -- or we're going through a period where that offshore cycle is strengthening.

And we've talked about MPD in the past. The MPD business model is changing on the offshore side, but we still think there is a lot of opportunity for us as there are still rigs out there that do not have MPD systems. But what we have is a more unique and interesting opportunity of transforming that business from a pure capital sales model into a longer-term service partnership model, and that's something that we are working working on, and you've seen that reflected in some of the announcements.

Our tubular running service business, that's a direct correlation to the number of wells drilled. And so I think that just [indiscernible] the more commensurately. I think with both MPD and [ Claris, ] we are very comfortable with our market positions in those, and it's really more of growing with the cycle. Then you have a business like completions where I think we've made a lot of inroads.

We announced a very significant award with Total in Denmark. It was our first true fully integrated offshore Completions award. We followed that up with the award with Exxon in Nigeria. And I'm optimistic about [indiscernible] this is a function of very deliberate targeted investment and building out the portfolio over the past few years.

So I think over the next several years as the offshore cycle strengthens, my hope is that we will continue to grow that completions business in a place that we haven't. So you couple that then with what we have with NCSM on the unconventional side, the completions and integrated completions offering, I'm very, very excited about.

Look, on the offshore operations piece, what this really is, is a response to the marketplace. We've always been focused on offshore. It's always been a strength for us. What we're doing now is 2 things really.

The first is making sure we have an organization that can provide consistency of execution as well as normalization of commercialization across multiple geographies. So as you have operators and drilling contractors operate in multiple geographies ensuring that we have that same consistency across the board, whether it is in West Africa or it is in Brazil or the Gulf of America or the Caribbean or Asia, making sure that we can look at that consistently across the company.

The second piece of it is coupling that with fundamental capability in centers of excellence and our Managed Pressure Wealth Center of Excellence is a great example of that. We've just inaugurated and launched that this year. We had a fabulous event during OTC week very, very well attended by operators and drilling contractors. So where we can bring together engineering, manufacturing, repair and maintenance and remote operations capability to really create a very unique value proposition for customers.

And our next question today comes from Josh Silverstein with UBS.

Girish, you mentioned some pockets of pricing weakness along with your disciplined approach. However, I'm sure a large number of your awards aren't just because you're dropping pricing -- can you talk about where you're seeing strength and what you're encouraged about?

Yes. Look, let me start with we try really hard not to drop pricing and certainly don't showcase when you have to do that to win. So we are -- look, we are fundamentally, we believe, the way to offset the pricing weakness in the market is to have 2 things. The first is you have to have technology differentiation and the second is you have to have a competitive cost base.

So as we see the pricing weakness in the market, I remind myself that hopefully, everyone is motivated by the same concept of value creation and so we use it as a motivator for us to say, hey, if we are seeing pricing weakness, we've got to go figure out how to be more competitive versus anything else. So -- but the technology differentiation piece, that is really what is the driver for the bulk of our activity.

And look, we have tried very hard over the past several years to really get out of commodity businesses where the only differentiation is price. So we are very comfortable with that. We have always said we'd rather have much higher cash returns and profitability, even if it's on a slightly lower revenue base over time. And so I think where we've got that, and you see that across the board, our managed pressure drilling offerings tubile running services, in completions, in well services and interventions and cementing products.

Several of our businesses, we really don't have that as a significant issue.

Our next question today comes from Ati Modak with Goldman Sachs.

Girish, can you talk about the decline in North America revenue in the quarter? It seems like it was driven by Canada, but help us understand that better. And then you mentioned NCS is strategic for expanding globally, but curious how you think about the North America impact of having that in the portfolio.

Sure. So Adi, look, definitely, yes. So it is a seasonal business, and the spring breakup in Canada that we experience every year is the contributing factor for the North America decline. Look, U.S. land actually did have a positive sequential quarter. So I'm encouraged by that. we've seen rig count going up, albeit slightly. So I think there's a little bit more of encouragement in North America right now.

Overall, with NCS, I think we get a much stronger business. Look, we've always talked about in North America especially in the land side of the business, we are much more of a product-driven business. I think with NCS, we get even more capability on that. And I'm looking forward once we close to saying, how do we harness the capability that we have in the NCS organization and use that as a shot of Adrenalin to our own organization and do more. And so while the proverbial 1 plus 1 may not get us to necessarily 3, but I'm hoping it certainly gets us well over 2.

And our next question comes from Josh Jayne, Daniel Energy Partners.

We've magically gone almost an hour without talking substantially about AI or data things continue to move quickly and obviously, a number of operators are increasing investments. Maybe you could just update us on how quickly things are moving and update on some of the investments you've made in traction you're getting not only in AI, but a number of the investments you've made surrounding data and real-time monitoring please?

Yes. Josh, I continue to remain very excited, and I think there is a lot of potential around it. I think a lot of people are still trying to figure out the exact monetization equation around this. Look, we've taken the approach of really deploying it in 2 dimensions.

The first is in our portfolio and our offerings to customers and do you see this manifested in things like production optimization. You see it in some of our drilling programs. You've seen it in tubular running services, where we are building that in and essentially enabling customers to get better outcomes. And that is really what we think resonates with them versus I'm going to be the person that tells you an AI widget, which today everyone can start going and developing on their own.

The other piece that is really interesting is from an internal standpoint of productivity. How do we get not just personal productivity but large-scale organizational efficiency through that. So I think we're seeing some early signs of progress, the biggest manifestation of this ultimately for us will be in our ERP systems, which we are designing with an AI-first mentality of saying, how do we harness the massive amount of data that we have.

And then look, last but not least, I will point to in our digital portfolio. One of the things that I think we've got is a very unique capability of the ability to provide a unified data model to customers. So a lot of customers I talk to are struggling with this notion of they have a lot of data, and they have it from different vintages, they have it from different acquisitions, and they have a big data lake, and they're able to put it all together but to make sense of the data is the challenge, and that's where we have a very compelling offering with our UDM with Petrowiser that allows customers to say, okay, this is how normalize things and harmonize them together, and we're starting to get more traction with that commercially as well.

And that concludes our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

Great. Thank you all for joining the call today, and we look forward to updating you in 90 days on our third quarter results. Thank you. Have a great day.

Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Ladies and gentlemen, thank you for standing by. Welcome to the Weatherford First Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, today's event is being recorded. At this time, I'd like to turn the conference call over to Luke Lemoine, Senior of Corporate Development. Sir, you may begin.

Welcome, everyone, to the Weatherford International First Quarter 2026 Earnings Conference Call. I'm joined today by Girish Saligram, President and CEO; and Anuj Dhruv, Executive Vice President and CFO. We'll start today with our prepared remarks and then open it up for questions. You may download a copy of the presentation slides corresponding today's call from our website's Investor Relations section.

I want to remind everyone that some of today's comments include forward-looking statements. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed herein. Please refer to our latest Securities and Exchange Commission filings for risk factors and cautions regarding forward-looking statements.

Our comments today also include non-GAAP financial measures. The underlying details and a reconciliation of GAAP to non-GAAP financial measures are included in our earnings press release or accompanying slide deck, which can be found on our website. As a reminder, today's call is being webcast, and a recorded version will be available on our website's Investor Relations section following the conclusion of this call.

With that, I'd like to turn the call over to Girish.

Thanks, Luke, and thank you all for joining our call. I'll start with an overview of our financial and operational performance, followed by a short-term outlook on the markets. Anuj will then cover specifics on financial performance, balance sheet, detailed guidance, and I will wrap up with some thoughts on the current operating environment and structural market dynamics before opening for Q&A.

To summarize our Q1 2026 performance, we delivered revenue of $1.152 billion, adjusted EBITDA of $233 million at a 20.2% margin and adjusted free cash flow of $85 million. I would like to thank all of our One Weatherford team and especially our Middle East-based employees for their focus on customers, safety and operational discipline in a complex and challenging environment.

I would also like to highlight our announcement during the quarter of a proposal to re-domesticate from Ireland to the United States, specifically Texas, which we believe will simplify our corporate structure, enhance capital management flexibility and support long-term shareholder value creation.

As illustrated on Slide 3, revenue declined 3% on a year-on-year basis, but it is important to note that it was predominantly driven by the divestiture of the Pressure Pumping business in Argentina.

On a sequential basis, revenues were down 11%, reflecting typical first quarter seasonality and the conflict in Iran, partly offset by continued strength in parts of our international portfolio and some second quarter opportunities that materialized earlier in the first.

North America was modestly softer as operators maintain tight budgets, and U.S. land activity remained under pressure. Latin America declined sequentially as expected, but this was partly offset by higher artificial lift in Argentina.

In Mexico, we continued to make meaningful progress in the first quarter. Collections remained strong and consistent, reinforcing our confidence in the new payment mechanisms we discussed on our last call. This not only supported our Q1 cash flow performance, but also contributed to a sequential improvement in working capital efficiency.

The Middle East, North Africa and Asia region was impacted by the Iran conflict in the Middle East, which drove delays, dropped drilling and workover activity and resulted in project suspensions in multiple countries. Since the start of the recent Iran conflict and over the course of the past few weeks, our priority has been the safety and security of our employees and ensuring business continuity to the extent it was feasible.

Each country in the Middle East has been impacted in different ways, and we have taken actions in close coordination with customers and advice from local authorities. While the drop in revenue and resultant high decremental margins are the most obvious manifestation financially, we are also working through additional complexities.

Freight costs have risen dramatically. And with logistical disruptions, there are both delays and higher costs in moving materials and people to the appropriate locations. With a strong manufacturing, supply chain base and local expertise in the region, we were able to navigate the first month of the conflict well.

There was a financial impact, but that has been offset through contributions from the rest of the international regions and other items in the first quarter. However, with the prolonged nature of the conflict, the impact of lead times, inventory drawdowns, logistical bottlenecks, the impact is expected to show more clearly in the second quarter, both in the region and to shipments outside the region.

With the assumption that the conflict is behind us and activity starts to normalize towards the latter part of the quarter, we believe the conflict would result in about $30 million to $50 million profit impact over the first half of the year. However, we are very encouraged about second half 2026, along with increasing confidence in activity levels in 2027.

As the region rebounds in response to a growing need for energy security, we believe we will be well positioned to assist our customers in their efforts to normalize operations and provide that energy to the world.

From a segment perspective, WCC revenue was largely flat year-over-year with higher Liner Hanger activity partly offsetting lower cement position products and TRS activity in MENA. DRE revenue declined 8% year-over-year, primarily from lower activity in Latin America, MENA and North America, partly offset by higher wireline and drilling services activity in Europe.

PRI revenue declined 11% year-over-year, mostly driven by the sale of our Pressure Pumping business in Argentina, partly offset by higher subsea intervention activity. Across all 3 segments, our product lines continue to benefit from differentiated technology, a strong installed base and the operational and manufacturing capability we have built over the past several years.

Our first quarter adjusted EBITDA margin came in at 20.2%. Typical Q1 seasonality resulted in lower margins, and that was further exacerbated starting in March by the Iran conflict. We remain focused on productivity and cost actions to support margin performance. And barring the Iran conflict persisting, we believe they will result in margin expansion in the second half of 2026.

We are also taking further actions to fine-tune our portfolio through a series of small noncore divestitures. These will each be smaller than our Argentina Pressure Pumping divestiture by divesting these businesses should remove lower-margin revenue from our portfolio base, reduce capital intensity and align with our strategic priorities.

Our adjusted free cash flow for the first quarter was $85 million, which was supported by very strong collections across most of our geographies, including continued progress on payments from our largest customer in Mexico.

Importantly, our Q1 working capital efficiency improved by approximately 100 basis points sequentially, reflecting disciplined execution and the positive impact of continued strong collections. We believe free cash flow conversion will improve for the full year versus our prior expectations with continued progress towards our 50% through-cycle target.

Turning to our segments. Slide 7 through 9 lay out key highlights. During the quarter, we continued to build momentum with new contract wins across our portfolio and key regions. These wins are a testament to our operational and technical capabilities to deliver a range of differentiated technology and cost-effective solutions for our customers.

I'm especially encouraged by key awards this quarter, including a multiyear integrated completions contract with TotalEnergies in Denmark, a 5-year TRS contract with Phu Quoc POC in Vietnam and a multiyear contract with Shell to provide artificial lift in Argentina.

On the operational side, in our PRI segment, we completed the first AlphaV casing system deployment in the U.K. sector of Liverpool Bay. We also achieved important milestones in the Kingdom of Saudi Arabia, where we set a new global record for extended reach wireline work, logging over 29,000 feet measured depth with our Compact Well Shuttle system. successfully executed the first rigless thru-tubing sand-control gravel pack there, restoring a shut-in gas well without a workover rig, and we also successfully trialed our rod lift system at the Jafurah gas field.

Now turning to our outlook. As we near the second half, we are encouraged by a number of contract awards and project start-ups that should lead to noticeable second half growth over the first half. However, it goes without saying that the conflict in the Middle East must conclude and operations must normalize to pre-conflict levels. These start-ups in the second half include Argentina, UAE, Brazil, Australia, Indonesia and Egypt.

We are encouraged that second half 2026 international revenues could possibly be up year-on-year and are constructive on 2027 being a year of growth. Furthermore, we are seeing early signs of improvement in offshore deepwater activity, underpinned by rising service-related demands in core basins such as Gulf of America, Brazil, the Caribbean and the Caspian Sea.

With that, I'd like to turn the call over to Anuj.

Thank you, Girish. Good morning, and thank you, everyone, for joining us on the call. Girish has already shared an overview of our first quarter performance. For a more detailed breakdown of the results, please refer to our press release and accompanying slide deck presentation. My comments today will center around our cash flow, working capital, balance sheet, liquidity, capital allocation and guidance.

Turning to Slide 21 for cash flows and liquidity. In the first quarter, we generated $85 million of adjusted free cash flow, representing a 36.5% adjusted free cash flow conversion. This compares favorably to the 26.1% conversion we delivered in the first quarter of 2025 and was supported by very strong collections across most of our geographies, including continued progress on collections from our key customer in Mexico.

While sizable collections remain outstanding, recent payment trends have remained consistent, reinforcing our confidence in the full year free cash flow outlook. Our adjusted net working capital as a percentage of revenues was 27.9% in the first quarter, a sequential improvement of approximately 100 basis points, driven largely by improved collections relative to the revenue base, supported by continued collections from our key customer in Mexico.

While the year-over-year comparison remains affected by the revenue base decline, we are encouraged by the direction of travel. All things considered, we remain fully committed to our internal initiatives aimed at achieving the goal of 25% or better. As we stay agile and adapt to evolving market conditions, we continue to execute on a series of cost improvement actions across the company during the first quarter.

Our cost optimization efforts remain guided by two objectives. First, we are rightsizing elements of our cost structure, including headcount, real estate and supply chain footprint to better align with activity levels with a clear focus on ensuring each incremental dollar invested supports profitability. Second, we are maximizing the productivity of the current cost base by leveraging shared services, digital platforms and artificial intelligence to enhance efficiency and margin performance.

We have seen the impact of these cost actions in the first quarter, and they have helped partially offset the impact of revenue decrementals, pricing pressure, geopolitical conflict in the Middle East and the Argentina divestiture impact.

During the first quarter, CapEx was $54 million or 4.7% of revenues, down approximately $23 million compared to the first quarter of 2025. As we align our budgets with the current market conditions, we continue to expect the midpoint of CapEx for the full year 2026 to decline relative to 2025.

Given our investment in our infrastructure programs, the mix of our CapEx spend in 2026 will be noticeably different. Our CapEx on product and service line assets will decline commensurate with market activity and the completion of build-out on key projects. but we will see an increase in IT-related spend on our ERP systems. We continue to remain in the 3% to 5% range that we have laid out and will make the appropriate and prudent trade-offs through the cycle with cash returns guiding our decisions.

In the first quarter of 2026, we returned $30 million to shareholders comprising $20 million in dividends and $10 million in share repurchases, reflecting the 10% increase in the quarterly dividend announced in January. Since the inception of the shareholder return program, we have now returned more than $330 million to shareholders via share repurchases and dividends.

Our balance sheet remains very strong. At the end of the first quarter, we had approximately $1.05 billion of cash and restricted cash, and our net leverage ratio remained well below 0.5x. This outcome reflects our focus on strengthening the capital structure over time. Our stronger-than-ever balance sheet provides a solid foundation to not just navigate business operations in a challenging environment, but also pursue strategic opportunities.

Turning to second quarter 2026 guidance on Slide 22, we expect revenues to be in the range of $1.017 billion to $1.110 billion and adjusted EBITDA to be between $195 million and $220 million. The sequential decline in the range is primarily a function of the Iran conflict and the operational disruptions in the Middle East. We expect adjusted free cash flow in the second quarter to be broadly in line with first-quarter levels.

For the full year 2026, we have greater confidence in the second half ramp, but are refining our guidance ranges to reflect the impact of the Iran conflict in the first half. Revenues are now expected to be in the range of $4.5 billion to $4.95 billion, and adjusted EBITDA is expected to be in the range of $945 million to $1.075 billion. Adjusted free cash flow conversion is now expected to be in the mid-40% range, reflecting increased confidence on collections combined with our operational initiatives. And our effective tax rate is expected to be in the low to mid-20% range for 2026.

Thank you for your time today. I will now pass the call back to Girish for his closing comments.

Thanks, Anuj. Before we open it up to questions, I want to step back and address the macro backdrop as I know it's the lens every one of you is applying to our results and to our guide.

The first quarter unfolded against the most severe disruption to the physical oil market in the industry's history. I want to acknowledge and recognize the leadership, efforts and resilience of our colleagues, customers and partners across the Middle East region. Our people performed extraordinarily through this period. Operations continued in a lot of cases, and the attitude and focus of our team was frankly one of the proof points I'm proudest of this quarter.

The conflict in Iran, the closure of the Strait of Hormuz in early March and the subsequent damage to infrastructure across the Gulf pulled roughly 20% of seaborne crude and significant LNG volumes out of the market almost overnight. Several well-respected sources have indicated this will take months to years to fully repair. The IEA has characterized this as the largest supply disruption in the history of the global oil market, and I don't think that framing is hyperbole.

The April 8 ceasefire was a welcome development, but OPEC+ barge supply fell by more than 9 million barrels a day month-on-month and prompt physical cargoes are still trading at meaningful premiums to the strip. Even right now, it is clear with the daily announcements and volatility that the notion of the strait being completely open to passage is not being manifested in reality.

Now what does all of this mean for our industry and specifically for Weatherford? I'd offer three observations. First, energy security has been fundamentally rewritten as a strategic priority, not as a slogan, but in capital plans. We are having conversations today with national oil companies, IOCs and independents that simply were not happening 6 months ago, and those conversations are about adding productive capacity, adding redundancy and hardening infrastructure.

Second, the demand destruction the IEA is flagging in its most recent monthly update concentrated in Asian petrochemicals and aviation is, in our view, cyclical, while the supply response required on the other side is structural and multiyear. You cannot replace 9 million barrels a day of OPEC+ output with inventory releases indefinitely.

And third, while it won't happen overnight, the pricing environment for services should eventually tighten because the same service intensity that funds reinvestment economics for our customers is the service intensity that flows through our P&L.

Against that backdrop, our outlook for the second half of 2026 and into 2027 and beyond is candidly the most constructive it has been since late 2023. In the Middle East, we expect multiyear acceleration of capacity and resilience programs across Saudi Arabia, the UAE, Oman, Iraq and Kuwait and are very well positioned to participate given our installed base and our integrated offerings across drilling, completions and production.

There are structural multiyear tailwinds, and we should see a reacceleration of FID activity in North American, East African and Eastern Mediterranean gas projects that had been previously deferred.

In North America, higher sustained prices and a renewed policy emphasis on domestic production should translate into rising completion intensity, and our portfolio is leveraged directly to that activity.

In international offshore and in mature field intervention, where our artificial lift and well services franchises are differentiated, we see a demand set that looks to us more like the front end of a durable up cycle than a late cycle peak.

To be clear about what I'm telling you, while the immediate couple of months are a bit murky, we believe the industry is entering a period of multiyear visibility that is rare in this sector. And Weatherford's portfolio, our geographic mix and the operating discipline we've built over the last several years position us to convert that environment into earnings, free cash flow and capital returns at a rate that I believe the market has not yet fully appreciated.

We will stay disciplined, we will continue to execute on the capital allocation framework we laid out, and we will keep doing what we have done every quarter, tell you exactly what we see, deliver against it and let our results speak.

Thank you for your time this morning. Operator, we're ready for questions, and please open the floor.

[Operator Instructions] Our first question today comes from Dave Anderson from Barclays.

So you tend to be a bit more measured in your outlooks, as we've seen over the years. But this is a pretty big shift in tone from you. Some inspiring closing remarks, and I agree this is -- seems to be a rare opportunity in terms of visibility. You were saying it's the most positive been since 2023.

I was wondering if you could talk a little bit more about the structural shift you're seeing. Maybe a few of the areas where you think you're really going to excel. And also if you could touch on some of those conversations you were mentioning, kind of how all the different customers are talking to you these days and kind of what those conversations are about. I just kind of want to see if you could elaborate a little bit more on all this.

Sure, Dave. Appreciate it. And look, you're right. We do tend to be a tad bit measured about it. But look, at the same time, we are always keen to point out that we are very clear about what we see and we deliver to that. And look, this time around, our comments truly reflect that we feel that the mid- to long term is incredibly positive for the sector.

Look, it's unfortunate the way it's come about. The backdrop is not great and especially from a humanitarian standpoint. But from a business standpoint, as this conflict comes to an end, we think it's going to really result in structural dynamics that are very beneficial.

So let me walk you through a couple of things. Look, first of all, as we pointed out and as everyone knows, there's been a lot of disruptions operationally on activity. So there is going to be a lot of work to go in and restart production. That's going to require service intensity. Again, we are very well positioned with our production portfolio.

What tends to happen when you've also got production that's shut in as some of our customers do, when you bring these wells back up, it's not a guarantee that you're going to get back at the exact same flow rates. And so you might have and likely will have in multiple circumstances, additional intervention work, et cetera, to go back in and make sure you're getting the same production rates. Again, very well positioned to participate in that.

And then lastly, you will, to offset that decline in production, need more drilling. And again, that's where our existing contract base comes very handy. On the other side of the equation, from a demand standpoint, what we think is, first of all, you're going to have to replace all the strategic reserves that have been depleted. That is going to take a fair amount of catching up to do.

But this notion of energy security that I alluded to in our prepared remarks, we think is really important, and you'll see a lot of customers do two things. First, customers who don't have any sources other than import, will look to expand their strategic reserves, and I think that will create a demand stimulus.

And the second is countries who have both oil and gas operations, but are still net importers will emphasize their own local operations a lot more heavily, and we are starting to see that today with multiple customers outside of the Middle East that [ we ] are talking to about expansion plans because they want to reduce their reliance on imports.

So net-net, what we think is this will lead to structurally higher oil prices and LNG prices, et cetera, which flows back to structural demand for our business. And so we think, look, coupled with what we see in the offshore side of the world, we think for the next few years, this is going to result in significantly more opportunities for us.

The world has changed.

Indeed.

Our next question comes from Scott Gruber from Citigroup.

I want to stay on the Middle East, just given that the activity set has been very dynamic there and your exposure differs a bit from larger peers. So just curious if you could walk us around the region, which countries and which product lines have been most impacted by activity disruptions, which have been more resilient? Just some color on that complexion and that dynamic would be great.

Sure, Scott. Look, I want to start off by truly acknowledging our gratitude to our customers. Their leadership has been phenomenal in the face of some very adverse circumstances. So Aramco, ADNOC, KOC, PDO, the list goes on and on. Every single customer has really, really taken a lot of effort to ensure safety, the security of all of our employees, making sure that everyone feels the same, facilitating logistics, and that's helped a lot.

Look, as we look at it, before I go country by country, one of the things that's important to note, for us, you're right, the Middle East has been our largest region. It's the region where we have the largest share. But as a result, we have a lot of local capability in the region as well. We have local capabilities in each country. It's also where we have our flagship manufacturing.

And as a result, we were able to withstand the first month of the conflict reasonably well. We had built-in inventory levels, and we worked out alternative logistics routes within the region to make sure that everyone was well supplied and well stocked.

As we look at it sort of on a country-by-country basis, everything is -- every country is a bit different. In Oman, for the most part, operations have been fairly normal, and there's really been no disruption. In Kuwait, we have seen some disruptions and some slowdown of activity. In Iraq, there has been some suspension of projects, and that is where one of the countries where we had to evacuate some personnel as well early in March.

In Saudi Arabia and the UAE, most of the operations have been normal with the biggest impact being on the offshore side. So I think what we have really seen over the course of March is on a day-by-day, week-by-week basis, things started to slow down a little bit more.

And so that's why, as we pointed out, we did have an impact, but it was muted, and we were able to offset it with other things. And then going into April is kind of when everything was sort of at the level that we are currently seeing that run rate off and truly sort of at a disrupted level.

Our next question comes from James West from Melius Research.

I wanted to kind of flip the Middle East question around and talk about or get your thoughts on countries that have restarted operations because we're hearing about activity pickups in Iraq, in Kuwait, Saudi on land didn't really shut down.

And so the disruption is not 100% everything in the Middle East is down, it's not that the countries aren't trying to get back to work either. We obviously have storage issues and transport issues. But it seems to me like the -- your customer base is trying to get back to operations. And I wanted to clarify if that's the case and if that's what you're seeing.

Yes. Look, I think that process has certainly started. Again, it varies on a country-by-country basis, James. I'll start with Qatar, which was probably the most affected. I didn't talk about Qatar earlier. Again, Qatar Energy has done a wonderful job with their leadership of making sure that safety was truly the #1 priority for personnel, but they've started to start drawing up plans, get back, et cetera.

But look, I think rightfully so, every country, every customer is being careful about this, is being cautious, is being thoughtful and making sure that they are prioritizing safety and security above everything else, but also doing this in a fashion that is going to be sustainable over the long term versus just a let's rush back and do something that is half baked.

So we are starting to see a little bit of a normalization. But I think until the strait fully opens and everyone can start loading up cargoes, it's going to be very difficult to get back to that full sense of normalcy just because storage capacity is essentially running out and there's nowhere to go with the barrels.

So I think that's going to be a gating factor on really getting back. And then, of course, making sure that the cease fire is truly permanent on the offshore side, especially, I think that's going to be another thing that everyone is going to look at.

So we are starting to see plans getting drawn up. Everyone is starting to work towards that. There is a little bit of activity in a few places, but nothing yet that would suggest that we are back to immediate normalcy. But I'm confident that, that will happen and hopeful that it will happen over the course of the quarter.

Our next question comes from Saurabh Pant from Bank of America.

Girish, maybe I want to flip a little bit and talk a little about Mexico. It seems like things are steady, positive. And steady is more important than positive alone, perhaps, right?

But I saw in your press release, you were talking about a rebound in activity in Mexico in 1Q, but I know that's from a low base in 1Q of last year. So maybe you can talk to how things are moving on the ground in Mexico. And then any early commentary you can give, Girish, on 2027, how that might roll in Mexico?

And then perhaps, Anuj, if you want to just talk a little bit about the new payment mechanism with your largest customer there? And then just what's baked into your free cash flow outlook for the year, just from a collection standpoint?

Sure. Saurabh, look, on Mexico, I think suffice to say, we are very encouraged by what is happening. Look, we have said this multiple times, it's really about being steady right now. And thank you for noticing that. It's not about now all of a sudden a big growth inflection, but we are encouraged that there is stability. We think that stability will continue on an activity level.

And look, there's now additional customers as we diversify our revenue base in Mexico. So I think over the next few years, it will be a bright spot. Right now, we're just very pleased with the fact that activity levels have normalized, and we are starting to get paid.

And I'll let Anuj talk a little bit more about that.

Sure. So on the payments and collection standpoint, Saurabh, we are very constructive on collections. So if you recall, last year in 2025, the government of Mexico announced a few structural reforms with the essential goal being to create an environment where our largest customer in Mexico is structurally and financially sound. And that included pre-capitalization, it included other tax reforms. And so real structural changes and not cyclical changes that were put in place.

And since then, the collections or the payments, I should say, from our largest customer in Mexico have been like clockwork. They put in a $13 billion mechanism for payments from [ Banobras ], and that mechanism has worked extremely well. So in Q4, we received a large payment from them. In Q1 of this year, we received a large payment, and we expect this trend to continue. And so we're expecting collections to come in Q2 as well as in the back half of this year.

Taking a step back on the total balance we have from our largest customer in Mexico, it's about $283 million as of March 31 in our [ Q ], and we're constructive that we'll continue to get these collections here over time. And so if you add all that together, this is one of the backbones and pillars for why we are optimistic on our robust free cash flow generation for the year, and we've guided to the mid-40% on a full year basis.

And on this topic, as we're here, I do want to take this opportunity to thank the local team in Mexico. They have done an excellent job working with our largest customer there in getting these collections through the door.

Our next question comes from Doug Becker from Capital One.

Girish, you gave us some high-level comments about project start-ups that support your confidence in the ramp. I was hoping you go into more detail about the moving pieces for the back half of this year and 2027.

Yes. So Doug, I'm not going to call out specific contracts, of course. Look, we mentioned a few countries. Over the past 2, 3 quarters, you've seen us make several announcements on new contract wins. I think that's really what feeds into that second half ramp that we expect.

We also typically have a higher degree of seasonality from a product sales standpoint, both on completions as well as artificial lift that leads into the second half. So we see that pipeline, we've got the purchase orders, we've got the manufacturing teams cranking on that. So we feel very good about that.

Look, the last piece of it is we've got several significant capital sales contracts, then this really leads into both '26 and into '27 on the offshore side that we feel very good about. And some of it will come in this year, some of it will come in next year. And then typically, those get followed up with aftermarket pieces as well.

On the offshore side, we've seen a lot of different announcements from operators. We've got plans that are moving forward for operations to start up in the latter part of this year, in early 2027. We've got expansion plans, whether it is in the Eastern Mediterranean, the Caspian. We've got the Caribbean.

And look, we've got several contracts on there that we are in the process of mobilizing for. Our CapEx spend reflects some of that as well as well as our personnel moves. So all of that really sort of puts that together and brings it up.

Our next question comes from Derek Podhaizer from Piper Sandler.

I just want to maybe talk about quantification of the Middle East impact a little bit more. You pointed to the $30 million to $50 million of profit impact. How do you -- how should we think about the split between lost revenue versus elevated cost, the logistics, the fuel? Could we maybe get a deeper dive into that from a country perspective? And how we should think about the return to normalcy, the shape of second half of this year, if we get a resolution by the end of second quarter?

Sure. So Derek, let me start with a couple of things. Look, first of all, that is truly a first-half view. And some of that was already experienced in the first quarter. It wasn't huge, and we were able to offset it, which is why we didn't call it out explicitly exactly how much it was. But the totality of that first half is in that $30 million to $50 million range.

Secondly, the range is important because the range really depends on not just the timing of operations returning to normalcy, but also a function of where it comes in and what does the new normal actually mean, right? So look, I think what we have seen so far is in the first quarter, the revenue hits were not very significant. It was really most of an elevated cost base as operations shut down, and we maintained all of our capacity on the ground.

As we go into the second quarter, and you've seen that reflected in our guidance with the reduction in revenue levels, that is a pretty significant impact, especially as we have countries that have gotten significantly disrupted and operations have paused for several weeks. I alluded a little bit to Iraq, the Qatar, pieces of Kuwait, et cetera, offshore in Saudi. So that all has an impact.

And look, that typically will have a very high detrimental impact simply because we are not having a knee-jerk reaction on personnel, et cetera. So we are very committed to our team as well as to our customers on making sure we are ready when operations resume as we hope they would reasonably quickly.

The cost side of it is a different story, right? So we are seeing that very immediately on freight costs, for example, that have soared dramatically. In addition to freight costs having gone up, and they've gone up in multiple parts of the world, it's not just restricted to the region with the increase in pricing in jet fuel, et cetera, which also leads to sort of general expense increases.

We also have logistical additions, right? So because we are not able to ship through our normal routes, we are shipping to alternative ports, and then you have additional trucking costs, et cetera. So I would say right now, it's really sort of order of magnitude, 60-40 from a revenue cost standpoint. But that can fluctuate on a country-by-country basis, and it all depends on when things come back.

What we've sort of assumed is really towards -- over the course of the quarter, things normalize. It's very, very difficult to pinpoint this and say this is today, everything goes back, given that we really don't know what the geopolitical outcomes are going to be. And so that's why we've taken a little bit of liberty on having a broader range here.

And I think once all of this is behind us, we'll be able to provide a heck of a lot more clarity on exactly what happened in terms of the various impacts and how the forward curve looks on coming back.

But either way, look, assuming that, again, we are entering the third quarter, the second half essentially with all of this behind us, we think that activity profile ramps up significantly. And the good news for us is we've got the capacity on the ground, we've got the fulfillment network on the ground, and we have the ability to ramp up very, very quickly.

Our next question comes from Jim Rollyson from Raymond James.

I actually wanted to change topics a little bit and inquire a little around the re-domestication back to the U.S. You mentioned, I think, Girish, at the beginning that there's some financial benefits, but I'd like to see if you could elaborate on that a bit.

Sure, James. I'm happy to take that question. So we are proposing to re-domesticate from Ireland to the U.S. and specifically to Texas. This will go to a shareholder vote here soon. And as we alluded to on the prepared remarks, the reason for us to do this is simple. It increases shareholder value. And it does so by simplifying many of our administrative and compliance complexities that we have. It does also position us much better from an M&A perspective and also from a tax perspective.

And so we've talked in length about our North Stars, one of those being free cash flow. And this initiative here is a step among many steps that we're taking to get to our target of achieving 50% free cash flow conversion.

I do want to take this moment to note, though, that this is a corporate structural change only. This will not impact day-to-day operations, it doesn't impact how we interact with our customers, where our leadership team sits. And our priorities will continue to stay the same.

Our next question comes from Phillip Jungwirth from BMO.

Can you come back to the portfolio [ pruning ] comment? Last year, you divested a higher capital-intensive business in Argentina and have seen free cash flow conversion improve. What's the nature of future divestitures? And how maybe those don't align with the strategic priorities, whether it's technology advantage, scale or regional positioning?

Yes. Look, Phil, we have gone through a few different phases in the company. But if I break it out very broadly, right, our initial focus was we had to stop depleting several years ago. And so we stopped activity and divested businesses that were losing us money that we couldn't operate. Notable examples being [ growing ] services in the United States, our wellhead business, for example, those kinds of things we got out of because we just were not making money on those.

We had a lot of other businesses, though, that we put a lot of effort in to make sure they were generating cash. And at that point in time, look, where the company was we didn't have a whole lot of flexibility on what exactly we might have wanted to do with the portfolio. And you've all heard my comment before of if you can't have what you want, you want what you have. And as long as what you have is generating cash, that is okay to a certain point.

As we have sort of been working through the company and sort of really saying we want to be a company that is, a, technology differentiated. That's how we win business; two, we want businesses that are truly capital-light; and third, we want things that we can add value into. A lot of things have now come up that are decent businesses, they're not bad businesses. They generate margins for us, they generate some degree of cash. But they're not really -- they don't fit that lens.

And so we have tried to now then go after those, and those are really at the intersection of our product line and country strategy and say, how do we move that out? So Pressure Pumping in Argentina was a great example. It wasn't really technology differentiation for us. It was very, very capital intensive and really didn't fit what we wanted to do.

Things like rentals, things that have a high pass-through of third-party services, for example, tubular [ business ], those are things that, look, we don't necessarily feel have the right place in Weatherford, but might in other organizations.

So again, we want to be very thoughtful about this. This is not just about taking x amount of revenue out and saying we're just done with that. We actually think there is monetary value in these. So we are working through a very systematic process on these. They're all pretty small, which is why, look, we think the effects will be on the edges.

And to put it in perspective, again, to reiterate what we said on the comments, each of these is definitely much smaller than the Argentina divestiture. So we don't expect it to have a huge impact any single one of these. But we are now in a position where we've got a great opportunity to continue to high-grade the portfolio and continue to look for opportunities where we can bring in things that are more differentiated either organically or inorganically.

And our next question comes from Keith MacKey from RBC Capital Markets.

So just want to keep on the free cash flow thread. It looks like things are certainly improving, increasing the target from the low 40s to the low to mid-40s or to the mid-40s rather. Just curious, on that 50% through cycle target, how aspirational of a target that is? Are the things that you've talked about, Girish, things that you have a very high degree of confidence will get you there? Or will there need to be additional things done to achieve that target over time?

Yes. Let me just start, and I'll have Anuj give you the specifics. On [ this ], Keith, look, we don't put out randomly aspirational targets. Our philosophy has always been we put a target, we've got a line of sight. So we absolutely intend to achieve this. So I'll let Anuj talk about the how.

Yes. So I'll maybe take this opportunity to talk a bit about our margins, but also free cash. And so we haven't been shy, Keith, to really highlight 2 North Stars that we have. One is margin and the second is free cash. And on the second, it's really maximizing the absolute amount of free cash, but then also maximizing our free cash flow conversion from EBITDA.

And so starting at the top, the key for us is to invest our money where we think there is line of sight to high ROIC. And so we're laser-focused on how we deploy our capital, our CapEx dollars to ensure that we can drive cash returns from those dollars. From that, we then look at how do we optimize all of the levers we have to drive margin, our procurement, our supply chain.

We then look at our cost structure. We have numerous initiatives underway that are driving the optimization of our cost structure. A few examples being do we in-source, do we outsource? How do we use technology? How do we automate, how do we drive efficiencies? And it's not just saying what we're -- it's not just saying it, it's doing it. In 2025, if you recall, we had significant, significant reductions, one, to rightsize activity to the headcount that we have, but also two, to really optimize based on all these initiatives that are underway.

And so that then takes you to EBITDA. You drive EBITDA and EBITDA margins. And thereafter, the focus is on how do you convert that EBITDA to free cash flow and hit the 50% target. And so that is a continuous relentless focus on AR, AP inventory.

And a few of the tools I mentioned before with regards to automation, using artificial intelligence, are key really for us to go and chase things on the AR, AP and inventory side. We do have inefficiencies like every company. And on the AR side, there are situations where an invoice can cross the hands of many people before it goes to a customer.

And so these are on-the-ground items that we are focused on. These aren't the high-level corporate items. These are on the ground, how do we structurally improve our processes so that we can continue to drive a better cash outcome.

And on the inventory front, it's about optimizing, it's about reusing inventory. We've recently deployed an AI tool that allows us to look at inventory that might be sitting idle in a plant and allows us to use it in similar or other locations before a similar process. And so this allows us to reuse inventory that otherwise might have been potentially obsolete. And so these are all initiatives that are aimed at driving our working capital and optimizing that.

Then you have on the interest expense side. And so last year, if you recall, we delevered our debt portfolio by $160 million, and we also refinanced $1.2 billion of our 2030 notes, and we extended them out to 2033. And by doing so, one, we derisked the balance sheet; but two, we also reduced our interest expense substantially.

We printed in September of last year the lowest spread to treasury for an OFS high-yield company ever at that point in time. And so we're expecting to get $35-plus million on a run rate basis relative to 2025 on the benefits from lower interest.

And then lastly, on the tax side, we've alluded to how we're going to optimize our tax structure. And the re-domestication from Ireland to the U.S. into Texas specifically is a key, key milestone in this initiative. And so you'll likely see some of the accrued benefits this year from that change, but you'll really see some of the cash benefits start kicking in, in 2027.

And as Girish alluded to, this is our initial target. It's not an aspirational target, this is our initial target. My aspirational target is well above 50%. And so this is our core, is how do we continue to improve, not just based on the initial target, but also maximizing what we think the true potential of the company can be. And that is, in my view, over time, above the 50% level.

Our next question comes from Josh Silverstein from UBS.

Girish, you mentioned the potential growth in offshore, and you have [ NPD ]as one of your strongest offerings. Can you talk about the growth potential here over the next few years? And are you already starting to see signs of an uptick?

Josh, yes, look, I think it's one of the most exciting parts of the portfolio right now as well as one of the most exciting times. We've talked a lot and others have talked about the offshore cycle over the next several years that everyone sees happening. And as you look at what we've done, we've got several offerings, [ NPD ] being foremost amongst them. We've got a very, very healthy share of the [ NPD ] market on the offshore side.

But what's interesting is, look, over the next order of magnitude a couple of years, we still think there is an opportunity for 30-odd drillships to get equipped with [ MPD ] systems. And if you take a conversion of even about 20% to 30% on that, which is, I think, reasonable, that's a pretty significant opportunity.

So we've got a rental fleet. We've got the ability to drive capital sales followed by aftermarket service agreements. Our technology differentiation on deepwater is very significant. We've got a lot of new advances on control systems as well that bring it together. On the shallow side of it, shallow market side of it, we've got the Modus offering that is starting to get a lot of traction.

Look, recently, we have put together -- we've built a new center of excellence in Houston for Managed Pressure wells. We're actually hosting an event there during the OTC week in Houston with several of our customers. So I think this is something that over the next few years has a lot of tailwind and something that I'm excited about seeing a lot of growth.

Our next question comes from Ati Modak from Goldman Sachs.

Girish, can you give us your thoughts on the North American market a little bit? It sounds like there's some excitement around in-season activity, maybe less so on pricing just yet, but would love to get your thoughts on what you're seeing and expecting?

Sure. Look, I think, first of all, it's a broad -- very broad market. I'll address sort of the two ends of it first and then come back to U.S. land.

So I think, look, Canada is pretty positive, especially with the current environment. We think there could be additional opportunities there. We've got a portfolio in Canada that is a lot more like our international business versus U.S. land, much more of a full spectrum service provider. So I think there's some good opportunities that we've got to go after and materialize.

And then look, U.S. offshore in the Gulf of America, a very stable business, but also has some very interesting growth prospects. So we think those two things are the things that will sort of prop us up.

U.S. land, look, for us, we tend to be a much more product-driven business, a little bit more production oriented on the product side where you're right, look, price competition is pretty high. We don't really participate in the true drilling and fracking completion activity. So for us, activity levels on that don't have a direct impact. They do on our cementing products business, et cetera, but it's not as extreme.

Look, we think the U.S. market is going to continue to be a little bit more restrained. We have not really seen a significant uptick from our key customers on adding rigs or anything like that. There is a lot of, I think, talk, but much more on the private and small player side.

I think as the next few months develop, I think it will be really interesting to see where ultimately commodity prices stabilize and that activity profile that comes out of it. But we've got a portfolio, I think, that's well positioned to benefit from the production side of growth there.

[Operator Instructions] Our next question comes from Josh Jayne from Daniel Energy Partners.

Just one for me on global supply chain and the state of it. You alluded to this a bit earlier, but maybe you could just talk about the numerous issues outside of the strait. So we've had tariffs on top of mind for more than a year, and then we talk about the strait with oil, but that matters not just for oil, but also for aluminum and a number of other products.

So I'm just curious how long after the conflict ends do those things take to normalize? And are costs structurally elevated for the balance of this year? And do you believe that these will easily be passed on to the operator community?

Yes. Josh, look, I think it will take a little bit of time for it to fully normalize. I think there's different components of it. I think things like fuel costs that are being passed through as surcharges will just automatically come down as that abates, both from a commodity price level as well as refining flows and ultimately, fuel being available back to normal levels.

I think the rest of it, everyone is going to always try to hang on to price to whatever extent. I mean we do that. Every industry, every company is going to try to do that and say it's now there. What has really benefited us over the past couple of years, our team has done a fabulous job in continuing to diversify our supply chain, having multiple sources of supply, moving to lower-cost countries for our sources of supply. And so we've been able to withstand that, and I think we will continue to be able to drive towards that greater degree of efficiency.

In terms of passing it on to customers, I think things that are just trade-up surcharges, et cetera, are generally a little bit simpler because you can do that as a pass-through, though they have significant dilutive effects. Things that are more structural, especially in longer-term contracts, become a lot more challenging and they require very thoughtful discussions.

But look, I'm always of the opinion that the -- our customers need a thriving service sector for them to be successful, and we don't just sort of pass it on and say, "Hey, this is what it is." So it's all about adding value. And as long as we can demonstrate that, I think we will have some degree of pricing flexibility.

And ladies and gentlemen, with that, we'll be concluding our question-and-answer session for this morning. I would like to turn the floor back over to management for any closing remarks.

Great. Thank you. Thank you all for joining our call today, and we look forward to updating you again in about 90 days. Thanks so much.

And with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

Good day, and welcome to the Weatherford Fourth Quarter 2025 Results Conference Call. [Operator Instructions] Please also note today's event is being recorded. I would now like to turn the conference over to Luke Lemoine, Senior Vice President, Corporate Development. Please go ahead.

Welcome, everyone, to the Weatherford International Fourth Quarter and Full Year 2025 Earnings Conference Call. I'm joined today by Girish Saligram, President and CEO; and Anuj Dhruv, Executive Vice President and CFO. We'll start today with our prepared remarks and then open it up for questions. You may download a copy of the presentation slides corresponding to today's call from our website's Investor Relations section. I want to remind everyone that some of today's comments include forward-looking statements.

These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed herein. Please refer to our latest Securities and Exchange Commission filings for risk factors and cautions regarding forward-looking statements. Our comments today also include non-GAAP financial measures. The underlying details and a reconciliation of GAAP to non-GAAP financial measures are included in our earnings press release or accompanying slide deck, which can be found on our website. As a reminder, today's call is being webcast and a recorded version will be available on our website's Investor Relations section following the conclusion of this call.

With that, I'd like to turn the call over to Girish.

Thanks, Luke, and thank you all for joining our call. I'll start with an overview of our financial and operational performance, followed by our outlook on the markets. Anuj will then cover specifics on financial performance, balance sheet, detailed guidance and I will wrap up with some thoughts on Weatherford's strategic plans for 2026 and beyond before opening for Q&A. I want to start by summarizing our Q4 2025 performance. We had sequential revenue growth operating income that was higher sequentially and year-on-year, adjusted EBITDA margins well above 22% and free cash flow conversion of 76%.

Overall, I am very pleased with our team's execution, and I would like to thank everyone on our One Weatherford team for clearly demonstrating our ability to perform well even in a soft and challenging market environment. This performance builds on our confidence in the long-term prospects of the company, which is reflected in the significant increase of 10% to the dividend. As illustrated on Slide 3, we delivered 5% sequential revenue growth, driven by higher activity in Latin America, which grew 16% sequentially, led primarily by Mexico and Brazil.

North America grew modestly supported by higher Canadian activity and U.S. offshore that was partially offset by a decline in U.S. land activity. The Europe Sub-Sahara Africa and Russia region declined 2% sequentially, and this region continues to exhibit softness. I'm also very pleased with the continued strong performance in the Middle East. The Middle East, North Africa and Asia region delivered 4% sequential growth, led by Kuwait, Oman, the UAE and Indonesia. Activity in Saudi Arabia remained muted, although we are hopeful of a healthy recovery in the back half of 2026. As we have been discussing for a while, 2025 was notably characterized by the significant activity decline in Mexico.

For the full year, Mexico revenues declined a little over 50% compared to the prior year. We believe the worst in Mexico is behind us, and the situation has stabilized as evidenced by steady activity levels and the resumption of payments in the second half of 2025. From a segment perspective, WCC and PRI were the largest contributors to top line growth, driven by strong performance in completions and artificial lift, respectively. These product lines are a great example of the opportunity and execution in Weatherford.

Completions, a low capital intensity business has grown significantly on a year-on-year and quarter-on-quarter basis and over the past few years, has become our largest product line, fueled by technology advancements and manufacturing capabilities. Artificial lift is the outcome of a very strong installed base, great customer relationships and leveraging our international footprint to take our North America expertise and scale it.

Despite macro headwinds, our fourth quarter EBITDA margins came in at 22.6%, representing a sequential improvement of 74 basis points, showcasing our intense focus on operations and execution. Our adjusted free cash flow for the quarter came in at $222 million, which was significantly enhanced by collections from a key customer in Mexico. We received payments for 2025 operations as well as some older receivables, and we are more confident on payment streams with the new mechanisms in place.

As a result, our full year 2025 adjusted free cash flow totaled $466 million, representing a 43.7% conversion ratio as seen on Slide 4. This is a 576 basis points improvement over 2024, well over our initial view of an increase of 100 to 200 basis points coming into the year. While we are cautiously optimistic about the visibility and cadence of payments, our 2026 outlook on free cash flow will continue to remain dependent on this important variable.

In addition to strong operational performance throughout the year, we also significantly fortified the balance sheet with improvements in leverage, interest costs, credit ratings and total liquidity with a net leverage that now stands at 0.42x. This gives us a greater degree of financial flexibility to pursue long-term strategic objectives. As shown on Slide 7, 2025 was also our first full year of shareholder returns, and we returned $173 million between dividends and share repurchases. Our conviction in the long-term prospects of the company is underpinned by our announcement last week to increase the dividend by 10%.

Slides 9 through 12 lay out key highlights of our segments. During the quarter, we continued to build momentum with new contract wins across our portfolio and key regions. These wins are a clear testament to our operational and technical capabilities to deliver a diverse range of differentiated technology and cost-effective solutions for our customers. I am especially encouraged by the wins in product lines like wireline in Romania, completions in Kuwait and operational milestones, such as more than 25 installations of plug-and-play liner systems in Norway. These highlights underscore the meaningful progress we are making in product lines that were not historically ranked #1 or #2, reflecting the impact of sustained investment and focus over the past several years.

Now turning to our outlook. Overall, customer spending is expected to increase over the course of the year. And while we are encouraged about second half 2026 and beyond, legacy pricing variability will need to be mitigated with productivity and cost control in the first half of 2026. North America spending is expected to decline this year as operators continue to maintain tight budgets resulting in mid- to high single-digit declines in activity levels throughout the year.

At the same time, the international outlook is a tale of 2 halves. We expect the first half to experience slightly greater than normal seasonal declines due to geopolitical conflicts, trade policy impacts, commodity price volatility and the market restraint deriving from a concern of global oil demand supply imbalance. As we enter the second half, we are encouraged by a number of contract awards and project start-ups that should lead to noticeable second half growth over the first half, similar to what we saw in second half 2025 versus first half 2025. These include Saudi, Argentina, UAE, Brazil, Australia, Indonesia and Egypt.

Accounting for all these moving parts, we expect 2026 international activity levels to be flat to slightly down compared to the prior year. However, we are encouraged that second half 2026 international revenues could possibly be up year-on-year and lead to growth in 2027. Furthermore, we are seeing early signs of improvement in offshore deepwater activity underpinned by rising service-related demands in core basins such as Gulf of America, Brazil, the Caribbean and the Caspian Sea. Speaking of potential opportunities, I'd like to briefly address the Venezuelan one.

At its peak, Venezuela represented over $500 million of revenues for Weatherford, and recent developments may begin to reopen a market that was once meaningful to us. Assuming a stable governance and regulatory environment, operational stability and the approval of brownfield redevelopment with a strong payment plan, we see substantial potential for our intervention, well services and artificial lift portfolios over the mid- to long term.

We are closely monitoring the situation. And as we have done in the past, we will act swiftly and decisively as the opportunity materializes. We remain optimistic about a stronger 2027 outlook, where we expect activity levels to show year-on-year growth. We remain well positioned to benefit from stable or improving activity. And at the same time, we are taking proactive measures to strengthen margins should the market move sideways.

With that, I'd like to turn the call over to Anuj.

Thank you, Girish. Good morning, and thank you, everyone, for joining us on the call. Girish has already shared an overview of our fourth quarter and full year performance. For a more detailed breakdown of the results please refer to our press release and accompanying slide deck presentation. My comments today will center around cash flow, working capital, balance sheet, liquidity, capital allocation and guidance.

Turning to Slide 27 for cash flows and liquidity. In the fourth quarter, we generated $222 million of adjusted free cash flow representing a 76.3% adjusted free cash flow conversion, significantly boosted by collections from a key customer in Mexico that we originally expected to receive in 2026. Although sizable collections remain outstanding, recent payment trends have become more consistent, improving our confidence to project continued strong free cash flow into 2026.

For full year 2025, our outstanding collections in Mexico significantly impacted our net working capital efficiency. Our net working capital as a percentage of revenue was 28.9% in 2025 versus 24.5% in 2024, an increase of approximately 450 basis points. However, this number is expected to improve as the pending collections materialize. For context, on a sequential basis, the working capital efficiency improved by around 70 basis points. All things considered, we remain fully committed to our internal initiatives aimed at achieving the goal of 25% or better.

As we stay agile and adapt to evolving market conditions, we continue to execute a series of cost improvement actions across the company. In this context, we took an additional restructuring and severance charge of $7 million in Q4, bringing the total charge to $58 million for full year 2025. Our cost optimization efforts are guided by 2 objectives. First, we are rightsizing elements of our cost structure including headcount, real estate and supply chain footprint to better align with activity levels with a clear focus on ensuring each incremental dollar invested supports profitability.

Second, we are maximizing the productivity of the current cost base by leveraging shared services, digital platforms and artificial intelligence to enhance efficiency and margin performance. We have seen the impact of these cost actions over the course of the year, and they have helped partially offset the impact of margin decrementals, tariff-driven dilution and the divestiture impact. During the fourth quarter, CapEx was $51 million versus $44 million in the third quarter. For the full year, CapEx was $226 million, or 4.6% of revenues. As we align our budgets with the current market conditions, 2026 CapEx is expected to be $190 million to $230 million with the midpoint expected to decline relative to 2025.

Given our investment in our infrastructure programs, it is worth noting that the mix of our CapEx spend in 2026 will be noticeably different. Our CapEx on service tools will decline commensurate with market activity, but we will see an increase in IT-related spend on our ERP systems. However, we continue to remain very much in the 3% to 5% range that we have laid out and will make the appropriate and prudent trade-offs through the cycle.

For the full year 2025, shareholder returns totaled $173 million, comprising $72 million in dividends and $101 million in share repurchases. This payout represents roughly 37% of our annual adjusted free cash flow. Since the inception of the shareholder return program about 1.5 years ago, we have returned roughly 38% of the corresponding adjusted free cash flow base to shareholders via share repurchases and dividends. And we remain fully committed to returning approximately 50% of adjusted free cash flow over the course of the cycle.

During the year, we successfully executed our debt restructuring plan including reducing gross debt by $161 million, upsizing our revolving credit facility to $1 billion and pursuing a refinancing exercise at attractive interest rates. As a result of these actions, our net leverage ratio stands at approximately 0.42x with roughly $1 billion of cash and restricted cash and total liquidity of $1.6 billion. To put our multiyear progress in context, the new Weatherford has sustainably brought down our net leverage from 3.3x in the beginning of 2021 to today's 0.42x. This outcome reflects our resilience in opportunistically strengthening the capital structure over time.

Our stronger-than-ever balance sheet provides a solid foundation to not just navigate business operations in a tough cycle, but also pursue strategic opportunities. For 2025, when combining shareholder remuneration of $173 million and paying down higher interest burden debt of $161 million, 72% of our full year adjusted free cash flow was directed to these capital allocation initiatives. Turning to the first quarter 2026 guidance on Slide 28, we expect revenues to be in the range of $1.125 billion to $1.165 billion and adjusted EBITDA to be between $230 million to $240 million. The sequential decline is primarily a function of typical seasonality factors, along with some work that was pulled into Q4.

As a reminder, the year-on-year comparisons are also impacted by the Argentina divestiture, which has a full quarter of contribution in Q1 2025. We expect adjusted free cash flow in the first quarter to be slightly positive on account of a typical working capital build. For full year 2026, revenues are expected to be in the range of $4.6 billion to $5.05 billion, consistent with the overall market outlook Girish laid out. Adjusted EBITDA is expected to be in the range of $980 million to $1.12 billion. For full year 2026, we expect adjusted free cash flow conversion to be in the low to mid-40% range, and this would have been higher had substantial collections not been pulled into Q4.

Importantly, it demonstrates our progress towards our 50% target. Our effective tax rate is expected to be in the low to mid-20% range for 2026. Overall, we expect 2026 to have slight revenue declines, but improving margins and strong free cash flow generation. As Girish said, it will be a tale of 2 halves and the 5.2% revenue increase in the second half of 2025 over the first half of 2025 coupled with a commensurate 10% increase in adjusted EBITDA is a good precedent for confidence in the second half of our 2026 ramp. Thank you for your time today.

I will now pass the call back to Girish for his closing comments.

Thanks, Anuj. I remain highly optimistic about Weatherford's future over the next several years. While 2025 was a challenging year, marked by rapidly changing market conditions, it also represented a year to refine our operating model and demonstrated efficacy on a through-cycle basis. Our margins proved resilient, and the expansion in the second half is a tangible proof point of our operating thesis. Most importantly, our cash flow generation not only remained strong, but conversion improved versus 2024.

As we move forward, our internal initiatives will build on the successes of the past, but will also incorporate fresh thinking and new ideas to drive our North Star of generating greater free cash flow. For 2026, we are laser focused on driving cost and CapEx to be at optimal levels for the activity mix we have in front of us. We drove over $150 million of personnel expense reduction in 2025 and believe we have additional opportunities without impacting safety or performance.

Concurrently, we have a heightened sense of focus on the performance of each business unit, which we consider to be the intersection of product line and country. We are willing to make revenue trade-offs to ensure a higher quality mix of margin and cash performance. At the same time, we are driving transformational changes to set up the future of the company, and I am very excited about these. We look at this as our 4 Ps of people, portfolio, partnerships and performance. I won't belabor each of these, but we'll share a couple of highlights.

Our infrastructure program overhaul is well underway with promising benefits and this will allow us to scale the company through cycles very efficiently and effectively. Product innovations like MARS or Mature Asset Rejuvenation to Surveillance. A fiber optic-enabled solution is providing real-time insights to create a significant opportunity in the production enhancement space with over 1 million wells in over 100 countries that could benefit from this. We rolled out our performance tier MPD solution, Modus.

And in the first full year of commercial availability in 2025, we completed over 70 jobs in almost every geography we operate in. Recognizing that we cannot do everything ourselves. We have signed partnership agreements with leaders in this space on technology development, infrastructure provision, customer collaboration and new energy platforms.

We have seen over the past few years that Weatherford can deliver top-tier profitability and cash margins in different phases of the OFS cycle. As we look towards the next few years, we see a significant uptick in activity starting in 2027 and believe that our operating model, initiatives and people will propel the company forward to deliver stronger results than ever before.

With that, operator, please open the call for questions.

[Operator Instructions] And today's first question comes from David Anderson of Barclays.

I was wondering if you could give us a little bit more detail on how you see Saudi playing out this year. Something like 40 rigs or so have been tendered to come back to work. How does that play in Weatherford's outlook for the year and in 2027 and secondarily, what are you seeing in terms of pricing in salary? Are there any product lines seeing increases or conversely under pressure?

Sure. Look, Saudi continues to be our most significant country internationally. It's our largest one internationally. So an incredibly important one. As I pointed out in our prepared remarks, we are very hopeful of a very healthy recovery going into the second half as these rigs come online. It will take a little bit of time. So it's not going to be immediate, which is why I think we'll see the impact really more in the second half and then going into 2027. I've always maintained that we have a very strong opportunity in Saudi because we are still very underrepresented. Our team has done an outstanding job with just phenomenal support from Aramco, but it's still -- the onus is on us to continue to develop technology.

And I'm very excited about what we have in the pipeline, what we are working with Aramco on to drive that. So I'm hopeful that we can continue to have performance that exceeds the market and especially as the volume and activity levels increase, I think there's huge opportunity with some of the things that we are working on. Regarding pricing, I think that is something that is always present and especially in an environment like this, there's a lot more competition, and there's a lot more focus around it. Cost inefficiency is one of the critical parameters for Aramco. So we are looking at every which way to really support and drive that while continuing to maintain margins. So I'm very confident in our ability to deliver a sort of total cost of ownership solution derived value versus just a straight-up discount. So it's been a very collaborative approach and I look forward to this year because I think it will set us up really well going into '27.

And our next question today comes from Scott Gruber at Citigroup.

Following Dave's question, I want to ask about the broader Middle East and North Africa region. There seems to be more tailwinds than headwinds across the region. But Girish, maybe if you can provide some more details on what you're seeing across the broader Middle East and North African market.

Sure, Scott. The Middle East, North Africa region has historically been a very strong one for us. It is our largest region. It is one where we have historically had the largest share relative to some of the other regions and have done really well and really have the entire portfolio of the company that comes to bear. So as I look at the region, over the last few years, our team has done an outstanding job. Clearly, there's been a lot of market support and activity levels that supported that. But we have had exaggerated performance. We've been able to go in and drive share through technology advancements and just outstanding operational execution.

As I look at the rest of this year, I think there's a bit of variability in some of the countries, and that's very natural. We see continued strong momentum in places like the UAE, to some extent, Kuwait, et cetera, but we will probably see a bit of a decline in countries like Qatar and that's just a natural function of the life cycle of their development campaigns that they're going through as it relates to our products and services. We have had tremendous growth in Oman over the last several years.

I'm very excited about the opportunity set that we have in front of us in Oman, but we also have our large integrated service contract that is going to come to an end. So we will likely see a little bit of variability based on that with plenty of other stuff that comes in to offset that. But that's a great example of just outstanding execution where we've been able to finish that well, well, well ahead of schedule. That's been a huge factor in driving customer satisfaction.

I'm very encouraged by places like Egypt. I think in the second half, we're going to see a lot more activity and opportunity there. So I've addressed Saudi already. So I think, look, broadly speaking, this is the region that we continue to see as providing sort of the foundational baseload for driving activity levels and growth in the coming years.

And our next question today comes from James West at Melius Research.

I wanted to touch on Mexico in particular. And a few items there. One, 2025, how did the business trend? It seems like you continue to build on activity in fourth quarter, probably your best quarter. Secondarily, collections obviously picked up pretty significantly. How do you kind of feel about that going forward here? And then lastly, for '26, how do you see activity levels trending in one of that kind of key market for you?

Yes. Look, so maybe I'll start with the market a bit and ask Anuj to talk about payments and collections. We've seen 3 consecutive quarters now of sequential improvements in Mexico. So Q1 into Q2 into Q3 into Q4, so as we said earlier, we think the worst is certainly behind us, and we think we've reached a point of stability. That stability is likely going to result in a slight degree of growth year-on-year as we look at the total year. And really, I think, sort of a rough order of magnitude, sort of a second half amalgamated view is sort of what we expect.

We don't expect there to be a dramatic increase this year, but I think that stability is really important, and that now allows us to have an operating cadence that is solid. We're also continuing to do a lot more in Mexico outside of just one large customer. We announced some of the other awards, especially on the Trion deepwater development. So we're excited about that. Again, it's a country that has been very important for us. We are very glad that activity levels have stabilized and we look to build on from here. So Anuj, payments?

Yes. So on the payments front, we did collect multiple payments throughout the course of 2025 and in Q4 of '25, we had multiple tranches that came in. And we had 1 tranche that came in, I believe, on the last day or the second to last day of December. And so some ambiguity there around timing of when within the quarter and the month we'll get the collections. However, we did get ample collections, if you will, in 2025. And as we look through 2026, we're optimistic given the cadence that recently has been in place. Once there are the mechanisms and structure in place to make the payments, there's been clear communication. It's been transparent.

Generally, we get about a 2-week heads up before we get the payments in our account, and it's been like clockwork. And so the mechanisms have been working well. And as we take a step back and we combine the recent collection activity with the overall structural reforms we're seeing with the government of Mexico supporting the capitalization thereof, we are even more confident in the ability or the continuation, if you will, of these collections into 2026.

And our next question comes from Saurabh Pant with Bank of America.

Girish, maybe let's touch on Venezuela a little bit, if you don't mind. You gave some color in your prepared remarks. I think you said at the peak, Venezuela was north of $500 million for you. Now that's 10% of your 2025 revenue. I don't want anybody to get ahead of their skis, right? So maybe Girish, just talk to us a little bit about -- what needs to happen on the ground for Weatherford for your customers to really start to move forward over there? And then how quickly can you move operationally, what product lines benefit? Maybe just a little walk through on what to expect?

Sure. So yes, look, it's certainly not going to be overnight and to be very explicit and clear, we have not assumed any Venezuela uptick in the guidance that we have given. So that on top. I think the other thing that's important to just sort of note, Saurabh is, yes, at the peak, it was $500 million. There will be a natural question. The company was very different back then. But a lot of the technologies, a lot of the product lines that operate in Venezuela are things that we still have and are very central to the company. So it's something that I think will actually fit in well with the portfolio. And as we pointed out, things like interventions, well services, artificial lift, et cetera, is where especially initially will be the biggest impact.

So look, what we need to see is pretty much what a lot of other people have been talking about and it's no different, right? It's a really clear view on governance, what are the laws, the rules that are going to be followed. How are we going to ensure the safety and security of our teams. What is really the regulatory environment, especially from a licensing standpoint, et cetera, how do we work with customers around that. And we've got to have a line of sight to payment. So I think, look, this is stuff that is moving very rapidly. It's evolving in multiple different dimensions. We are staying very close to what is happening, trying to understand and making sure we have plans in place so that as we see the right opening and the right framework, we're ready to move on it. But again, I don't expect it to be overnight.

And our next question today comes from Doug Becker at Capital One.

Girish, you've always been careful not to provide specific numbers for Weatherford's offshore-related revenue, but you did mention early signs of improvement in offshore deepwater activity and some of your larger product lines like TRS, MPD and completions have significant offshore applications. So with offshore activity looking to be ramping later this year and into 2027, just expand on your offshore outlook for Weatherford.

Yes. Doug, the MPD and TRS businesses are very natural, and I think that's an obvious thing. I'm especially excited about MPD from a standpoint of getting more rigs that are MPD enabled to actually have MPD packages on them. I think we've got multiple different opportunities. So that's something that we continue to focus on. On TRS, for us, it's really about how do we continue to drive margins up, get more efficiency, more automation that's something that we're driving. In addition to that, though, look, I'm really excited about some of the other product lines.

We've made tremendous improvements and advancements in completions, for example. So having a much broader portfolio now. A few quarters ago, we announced part of the award with Petrobras and some of their cycle 10 works. So that's something that's well underway. Things like that, that I think we will continue to see in basins across the world. We've got the full gamut, everything from drilling to completions then, of course, MPD and TRS. Interventions is another really big focus area for us on the offshore space. So there's a lot of different things. And I think as the market really sort of fully rebounds and gets back into high gear, I think we're going to be very well positioned.

And our next question comes from Jim Rollyson with Raymond James.

Girish, maybe circling back around on North America, I think you said the activity outlook you guys have, which kind of fits, I think, with most is down mid- to high single digits in '26. Maybe just talk about how Weatherford is kind of positioned and how that has evolved over time. Your business model has evolved over time to maybe do better than a down mid- to high single digits revenues relative [indiscernible].

Yes. Jim, look, we have talked about our North America business, especially U.S. land being far more production-oriented, so that is something that actually helps us. Artificial lift is a very big product line for us in U.S. land. That's something we'll continue to exploit. Obviously, we do get impacted with rig count and well count on products like cementing products, our liners and completions business, et cetera. What we are really trying to do is a couple of things.

First is to make sure that our footprint is optimized for the current environment, and we can be more efficient serving customers with the responsiveness that the North America market expects. The second is really making sure that we are driving differentiation and innovation. That has always been our go-to for how do we combat market pressure. So I think, look, we will continue to see some of the decline, but our focus is on making sure that we keep our margins intact in the business.

And we have had several examples of where we've been able to drive growth through innovation. Some of our well construction products is a great example. Our digital business is another really good example. Production optimization, for example, that really gets enabled through our digital business. That's something that's a huge focus for us, and we think will become even more important in this North America landscape, but we are not immune at all to the decline in activity, but our focus is how do we offset that by making sure we get higher quality revenue with better EBITDA contribution and cash contribution.

And our next question today comes from Derek Podhaizer at Piper Sandler.

Hoping you could just maybe dig into the first morning -- maybe dig into the first quarter guidance a bit more, implies the top line decline of about 11% quarter-over-quarter, 200 basis point margin contraction. I know you've been hearing a lot about more pronounced seasonality from your peers, but could you maybe elaborate on some of the puts and takes, the different moving pieces that's impacting your guide?

Yes, yes, happy to. So I'll maybe break this down into a few parts. First, I'll answer your question around Q4 to Q1. And then I'll talk a bit about Q1 '25 versus Q1 '26 because I think that context is important. And so from Q4 to Q1, you alluded to the typical seasonality we see that regardless of where we are in the cycle. We're seeing that now from Q4 to Q1. The other piece though, however, that we're seeing is we had in Q4, a few of our orders from our customers pulled in from Q1 into Q4, particularly or specifically one in Brazil and the second in the Gulf of America.

And so that combination of seasonality plus orders being pulled in is really some of the key drivers of the difference you're seeing. And then lastly, there has been some weather impact here in Texas. Production has been down for a few days because of that. And so that does have a slight impact in our Q1 numbers. And now taking a step back and looking at the sequential year-over-year from a Q1 '25 to Q1 2026. In Q1 2025, we did have the benefit of having our Argentina divestiture fully baked into our numbers.

And in Q1 of 2026, we have a slight impact of tariffs, which we did not have in Q1 2025. We do think our team has done an excellent job in managing the impact of the tariffs and has protected margin very well. However, if you combine those 2 and really focus on the divestiture and you normalize for that, you look at top line, Q1 '25 to top line Q1 '26 are generally flat.

And the reason I bring this up is, if you look at the trend in Q1 through Q4 2025, we had a significant ramp-up in the second half of 2025. And this is our expectation for 2026 is as you start seeing some of these areas that Girish and I alluded to in our prepared remarks, hitting, if you will, in the second half of 2026, you'll see that sequential ramp-up in our view and really create that solid foundation leading into 2027 and beyond.

And our next question today comes from Phillip Jungwirth with BMO.

You pointed to lower CapEx year-on-year despite the increased ERP spend. I was just hoping you could talk more about what product lines you're taking a harder look at and where CapEx will be focused now versus the past? And is business mix also helping like how you called outgrowth in lower capital-intensive businesses like completions and also divested higher capital-intensive businesses in Argentina last year.

Sure, I'll start with that. So we will continue to have CapEx within the 3% to 5% range. This is -- this will be true in 2026 as well. But we are taking a very hard look at where we are spending. For us, in order for us to deploy that capital, there has to be tangible line of sight versus speculating. And so we'll continue to evaluate our CapEx in that light. To that end, we are, as you alluded to, doubling, if you will, to spend in 2026 versus 2025 on our ERP. Very excited as to the efficiencies we can gain from the ERP, it is a multiyear journey for us.

However, we have teams deployed and are confident and looking at driving further efficiencies kind of later in '27, 2028 as we fully implement this and it goes live. On our current asset base, we are looking at where we can improve our asset utilization and so how do we do more without spending more is absolutely key. And then lastly, we're looking for areas where we can trade CapEx to OpEx or specifically leveraging our CapEx that we've spent to drive incremental business without the capital outlay.

An example of this would be recently here in '24, 25-ish, we had some capital outlay with Petrobras for a large contract with them. And here, we have incremental business that we will drive without that incremental capital outlay. And so the key for us is to look to see how we can optimize cash and margin on the capital we deploy and we are heavily focused on the return on invested capital as we seek to deploy more CapEx.

And our next question today comes from Josh Silverstein with UBS.

It was a really nice year for cost cuts for you guys. I think it totaled around $150 million and showed a really nice margin improvement. And then even for the outlook for 2026, you're showing still slight margin improvement despite some revenue headwinds. Can you just talk about what the initiatives are that were driving this and then where you think margins could start to go longer term?

Sure. Sure. Happy to take this one. So yes, we did right-size the ship, if you will, here in 2025. I tell the folks on the team, the hardest thing to do is to have a workforce reduction. And we -- in our business, given the cyclicality of the -- the cyclicality nature of the business, this is a necessity and something we need to do, and we did. We reduced around 2,000-plus of our workforce here in 2025. This resulted in about $150 million of run rate if you will, purely on the margin standpoint.

And so we moved fast to avoid margin degradation. And I do believe that we were early to diagnose the environment and the market in 2025. We were the first ones to initially lower guidance in early 2025, and that enabled us internally to move with speed. And those actions are reflected in our full 2025 full year margins where we were able to protect here and landed at the 21-plus percent EBITDA margin for the full year. And so we will continue evaluating and rightsizing and matching activity with our footprint throughout the world, and we'll make those changes as we -- as we see.

And then second, on the structural side. And so on the structural side, I've alluded to this before, but we are a continuous improvement organization. There is no finish line. The finish line keeps getting pushed forward and forward. And so for us, it's evaluating how are we structured organizationally as a company. What materials or what processes and people do we -- and tasks do we tackle in-house? versus what do we outsource and potentially move to a lower-cost jurisdiction.

And so these organizational evaluations are constantly going on. I alluded to our ERP. Again, this is a multiyear journey that we have embarked on over the last year, and this will likely go into 2027, 2028. But we are very excited at what this can do for us. This is not just a technology upgrade, where you come in, you click a button and you have a different version of a tool. This will change the way that we're looking at our supply chain, procurement, at how we go to market, managing our working capital, how much inventory we need, how easily it is for us to move our inventory around the world.

And so very excited about what the efficiencies that we can gain from all this will be. As I take an even further step back, I do think in '25, we were able to show the market what Weatherford as a company can do when the seas are choppy and you have a large headwind. And we've managed the boat, if you will, fairly well. And on top of that, we're making structural changes so that when we do get the tailwind, structural changes kick in and complement the tailwind, I am excited to see how fast this new boat can go when all those confluences come to fruition.

And our next question today comes from Ati Modak with Goldman Sachs Company.

Girish, you talked about transformational changes, gave some highlights also, but would love to hear more on the nature of the new initiatives? Is this something that could drive changes in revenue mix, portfolio mix over time as well, if you can give any more color?

Yes, sure, Ati. Look, I think transformation is almost sort of a consistent and constant theme for us, but the nature of what we are doing has changed. So as Anuj just talked about, look, one of the most significant changes is our new ERP system, and this is going to give us a degree of automation in our processes, AI enablement truly seamless integration that we have never had before in the company to data transparency, et cetera. So I think that's going to allow us to navigate cycles dramatically differently and leverage best practices from around the world, share resources are a lot better.

In addition, the portfolio changes that we have been making, the first few years or the last few years, if you will, our portfolio focus was really on, hey, what we have, how do we do better with it, where do we get more penetration. Now it's all about the new products that we are developing, the new technologies that are coming at and those have been very specifically targeted towards where we think we have significant market opportunity, lower capital intensity businesses, things of that nature.

So I think, look, as we bring all of this together, what has also remained constant in the company is a focus on the operating model how do we just consistently get better on an everyday basis, kind of the basic blocking and tackling. We're not going to let go of that. So I look at it and look, our philosophy of saying, we will always plan for a flat market. And in that flat market, we want to get 25 to 75 basis points of margin improvement. And when we have activity increases, that actually just increases the amplitude. When we have activity decreases that allows us to be more resilient on the margins. I think that's going to remain very true for us, and I think that will serve us really well as we get into the next few years.

And our final question today comes from Josh Jayne at Daniel Energy Partners.

I just wanted to follow up on your Modus Managed Pressure Wells Solution. I think at the end of your prepared remarks, you highlighted 70 jobs in almost every geography. Maybe if you could talk about why you had the success you did in 2025 and how you're thinking about growth, not only in 2026, but beyond?

Yes. Josh, look, this is a technology. I continue to be very, very excited about our team listening on the call probably Chuck will speak is I'm constantly internally saying we need to do even more, but I think it's a tremendous breakthrough for us for a couple of reasons. One is that it allows us to hit a tier of the market that we really didn't have access to before in that performance tier, where our high-end systems are too complex and potentially cost prohibitive for the kinds of wells. It gives us foray into shallow water markets. So there is a huge swath of opportunities.

And then as we extend the concept of our Managed Pressure Regime from just Managed Pressure Drilling to this concept of Managed Pressure Wells, different applications like cementing, like setting liner hangers, a lot of other things that you can do using this technology I think the growth is going to be even greater. So now we've got a full complement of packages out there so we have the tools in place in the different geographies. The customer interest has been very significant and very, very encouraging. So I'm really looking forward to a year where this becomes another very significant part of the overall product line.

That concludes the question-and-answer session. I'd like to turn the conference back over to the company for any closing remarks.

Thank you all again for joining our call. Again, I remain very excited about the prospects of the company. Thank you all for listening, and we'll be back in April to share our first quarter results. Operator, you may close the call. Thank you.

Thank you, sir. Everyone, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Ladies and gentlemen, thank you for standing by. Welcome to the Weatherford International Third Quarter 2025 Results.

[Operator Instructions] As a reminder, today's event is being recorded.

I would now like to turn the conference over to Luke Lemoine, Senior Vice President of Corporate Development. Please go ahead, sir.

Welcome, everyone, to the Weatherford International Third Quarter 2025 Earnings Conference Call. I'm joined today by Girish Saligram, President and CEO; and Anuj Dhruv, Executive Vice President and CFO. We'll start today with our prepared remarks and then open it up for questions. You may download a copy of the presentation slides corresponding to today's call from our website's Investor Relations section.

I want to remind everyone that some of today's comments include forward-looking statements. These statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any expectation expressed herein. Please refer to our latest Securities and Exchange Commission filings for risk factors and cautions regarding forward-looking statements.

Our comments today also include non-GAAP financial measures. The underlying details and a reconciliation of GAAP to non-GAAP financial measures are included in our earnings press release or accompanying slide deck, which can be found on our website.

As a reminder, today's call is being webcast and a recorded version will be available on our website's Investor Relations section following the conclusion of this call. With that, I'd like to turn the call over to Girish.

Thanks, Luke, and thank you all for joining our call. I'll start with an overview of our performance and key highlights and will then share our outlook on the markets. Anuj will then cover specifics on financial performance, balance sheet, detailed guidance. And I will wrap up with some thoughts on Weatherford's operating plans for this environment, before opening for Q&A.

As illustrated on Slide 3, our third quarter results were above the expectations that we outlined in July. Despite continued market headwinds and a soft macro environment, the One Weatherford team delivered strong performance, and I'm incredibly grateful for the team's unwavering spirit customer focus and operating intensity.

In Q3, North America was up slightly sequentially due to the seasonal Canadian rebound, along with a slight improvement in the North America offshore business. However, this was partially offset by a decline in U.S. land.

After 3 quarters of declining revenue in Latin America, this geo market improved revenues by 10% sequentially, primarily due to an improvement in Mexico. Mexico revenues will still be down in the 60% range this year. However, the past 2 quarters have seen sequential revenue improvements in the country. We believe they're now at a point of relative stability with cautious optimism for slight improvements into 2026.

The ESSR region was relatively flat quarter-on-quarter, with a number of countries helping to offset the continued weakness in the U.K.

I continue to be pleased with our performance in the broader MENA and Asia region as it posted another quarter of sequential growth, led by the UAE, Qatar, Australia and Thailand. We believe Saudi Arabia is in the process of bottoming, and I'm hopeful we can get back to year-on-year growth in the second half of next year. Despite overall market headwinds, I believe the MENA/Asia region can again show growth in Q4 for us.

We continue to see margin dilution from tariff cost pass-throughs, but have managed to keep overall margin dollars reasonably intact. There is rising pricing pressure in several markets. And while that might create short-term issues, we are confident in our ability to drive differentiation as a means to offset. We have previously talked about the acceleration of our cost initiatives, and despite the tariff and pricing pressures, this has helped significantly, evidenced by EBITDA margin expansion of over 70 bps.

Our team did a terrific job of focusing on working capital and CapEx that enabled adjusted free cash flow of $99 million, despite lack of payments from Mexico. We had mentioned that this was a timing concern back in July, but I'm very pleased with the way our team executed to offset this impact.

Since the end of the quarter, we have seen tangible progress in payments from Mexico as the new process begins to take effect. That said, there remains a possibility that some payments for 2024 receivables could be deferred into 2026, and we have taken that into account in our adjusted free cash flow projections.

As shown on Slide 6, we have now paid 4 quarterly dividends of $0.25 per share, and repurchased approximately $193 million worth of shares over the past 5 quarters, which includes approximately $7 million during Q3. While this amount may vary each quarter due to market conditions, we remain committed to our buyback program and still have sufficient capacity under our $500 million authorization.

Now turning to our segment overview on slides 8 through 11. The operational and technical highlights showcase advancements in new market penetration, technology adoption and continued innovation of our product and services portfolio. As noted in our earnings release, our continued success in securing high-impact contracts across key regions reflects the strength of our technology and the trust of our customers.

In deepwater Brazil, Petrobras awarded Weatherford a 3-year $147 million contract to deliver tubular running services. In Romania, Romgaz awarded Weatherford an 8-year contract to provide real-time monitoring services and transmission of dynamic parameters from the wellheads of gas wells. In the Gulf of America, Talos Energy awarded Weatherford a contract to provide managed pressure drilling and tubular running services in their operations.

Finally, at our FWRD 2025 conference we demonstrated innovation as a catalyst for long-term value creation. This event is now a showcase of our technology capabilities, but more importantly, a thought leadership forum with several senior delegates from customer organizations. We launched over 20 new products and extensions across our segments: from a more robust rotary steerable offering to our new Optimax well-controlled barrier valve, to Mars, which enables mature field rejuvenation with sophisticated fiber optic surveillance, we are driving the next phase of the company's growth based on innovation. I'm especially excited about Intelligent Completions and our digital launches, both of which have a very long runway of opportunity.

Now turning to our outlook. For the past couple of quarters, we have provided what we believe was a prudent view, and we continue to believe this outlook remains reasonable in today's market. While we've seen a positive impact from excellent operational execution, the overall market remains soft. Customer spending trends for the next year remain uncertain, and we are seeing pricing pressure in certain pockets. Trade discussions continue to cause significant uncertainty and may lead to further demand destruction in the short to midterm. We began to see larger tariff impacts in the third quarter with impacts on volumes, cost increases and margin dilution in specific U.S. product lines. Lastly, OPEC+ continues adding supply back to the market, increasing pressure on the global oil supply-demand balance.

We believe this softness will persist for the next several months, and coupled with seasonality, will result in year-on-year comparisons being down in the first half of 2026. However, we are hopeful that offshore activity as well as incremental onshore activity driven by the rebalancing of supply and demand will create improvement into the second half of 2026. We also remain hopeful that the industry discipline of recent years will result in a milder global downturn than the last 3 cycles. We have continued to adapt our cost structure over the past 4 quarters, and this will further evolve as the market unfolds.

Since the third quarter of last year and excluding divestitures, we have reduced our head count by over 2,000 and lowered our annualized personnel expenses by more than $145 million. While much of this is offset by revenue declines, our swift actions have positioned us to continue operating efficiently. This ought to enable us to continue to deliver strong margins, such as we did as in Q3, while generating strong cash flows even when faced with revenue declines.

We continue to believe we are very well positioned to capitalize on stable or improving activity levels, but we are also taking proactive steps to ensure we can respond swiftly in the event of a more pronounced slowdown.

I'd like to turn the call over to Anuj before I come back with closing comments.

Thank you, Girish. Good morning, and thank you, everyone, for joining us on the call. Girish has already shared an overview of our third quarter performance and an update on our capital return program. For a more detailed breakdown of the third quarter results, please refer to our press release and accompanying slide deck presentation. My comments today will center around our cash flow, working capital, balance sheet, liquidity and guidance.

Turning to Slide 22 for cash flows and liquidity. For the third quarter, we generated $99 million of adjusted free cash flow at a 36.8% adjusted free cash flow conversion, which doesn't include any payments from a key customer in Mexico. As you know, our free cash flow is generally weighted towards the second half of the year, and we expect fourth quarter adjusted free cash flow to be at or above third quarter levels. While this is still contingent on receiving payments from our largest customer in Mexico, we are encouraged as we recently received a payment from them, their first since early 2025.

Net working capital efficiency, measured by net working capital as a percentage of revenues, increased from 26.7% in Q2 2025 to 29.6% in Q3 2025, due primarily to the lack of collections in Mexico as highlighted earlier. We expect this metric to improve in the fourth quarter. And regardless of the stage of the cycle, our goal remains to get to net working capital efficiency levels at 25% or better.

To this end, we have numerous internal initiatives underway to structurally improve working capital efficiency. We have continued to execute on a series of cost improvement actions across the company. In this context, we took an additional restructuring and severance charge of $11 million in Q3, which was in line with Q2. Several actions have already been completed and we expect to implement additional measures throughout the remainder of the year as we stay agile and adapt to evolving market conditions.

While a lot of the actions are volume related, we are also using opportunity to leverage shared services, automation technology and generative AI to drive productivity enhancements and bottom line impact. A key element of this is our investment in infrastructure systems, and we continue to protect and drive those forward.

During the third quarter, CapEx was $44 million, versus $54 million in the second quarter, driven by adjustments to align with market conditions. We expect CapEx to decline further in the fourth quarter and be at the lower end of our 3% to 5% range.

In Q3, we repurchased approximately $7 million worth of shares and paid a $0.25 per share quarterly dividend. Year-to-date, we have returned approximately 60% of free cash flow to shareholders via share repurchases and dividends. Since inception of the capital return program, we have returned roughly 48% of free cash flow to shareholders via share repurchases and dividends.

During the quarter, we executed a number of steps to enhance our liquidity and balance sheet. First, we expanded our credit facility by $280 million with commitments of $1 billion, with an accordion to expand to $1.15 billion. Second, we announced a private offering of $1.2 billion of 6.75% senior notes due 2033, and we announced a tender offer for up to $1.3 billion of our 2030 notes.

With these actions on our long-term debt, we've extended our maturity by 3 years and lowered our cash interest by approximately $31 million per year. Concurrent with these actions, we received ratings upgrades from all 3 credit rating agencies.

Our net leverage ratio is approximately 0.5x. We have approximately $1 billion of cash and restricted cash, and our liquidity is approximately $1.6 billion. With this, we feel very confident in the strength of our balance sheet and corresponding flexibility and optionality it provides to manage the company through the cycle.

Turning to the fourth quarter guidance on Slide 23. We expect revenues to be up slightly, with the Middle East, North Africa, Asia and Latin America geo markets being the best performers. With this, we're expecting $1.245 billion to $1.28 billion in revenues. We believe Brazil, North America Offshore, Kuwait, Oman and Iraq will be the primary areas of growth.

Adjusted EBITDA for the fourth quarter is expected to be between $274 million and $287 million, improving upon our prior midpoint, and margins should move up from Q3 levels driven by cost stabilization, a better mix and slight volume absorption. We expect adjusted free cash flow to be flat to slightly up from Q3 levels. However, this is still dependent on the levels of payments from Mexico.

Our effective tax rate can vary quarter-to-quarter depending on the geographic mix, and we still anticipate this will be similar to 2024, in the mid-20% range, for 2025. CapEx is expected to trend down over the course of the year and land in the range of 3% to 5% of revenues for the whole year.

Thank you for your time today. I will now pass the call back to Girish for his closing comments.

Thanks, Anuj. I remain highly optimistic about Weatherford's future over the next several years. Market conditions have changed and we have pivoted as needed. What hasn't changed is our commitment to evolve our operations along with focusing on margins and maximizing cash generation, versus chasing market share and unfavorable cash outcomes.

My confidence stems from 3 main factors. First, our balance sheet strength is now a source of advantage for us and gives us flexibility to manage the company with the right investment levels through the cycle. Second, our cost structure has dramatically transformed over the past few quarters. And what's exciting is that we still have a lot of room to improve this with that infrastructure modernization program. Third, we have a platform of differentiated technologies and services that we can leverage to grow on both an organic and inorganic basis.

I've talked about our cost optimization program a number of times, and this is being designed to reposition the company for the future operating environment. It's a multiyear program focused on achieving sustainable productivity gains through technology and lean processes, not just the traditional approach of flexing head count due to market conditions. Our new systems infrastructure is going to be state-of-the-art with built-in AI-driven workflows that will allow us to scale very efficiently.

Also, working capital efficiency remains a core focus area to drive free cash flow conversion to a sustainable 50%, and we are tracking to demonstrate solid progress on that in 2026.

The transformation of the new Weatherford is an ongoing journey, and the initiatives we've already implemented position us to navigate this part of the cycle far better than in the past. While market conditions remain challenging, we are cautiously optimistic about a potential improvement in the second half of 2026. Even if that doesn't materialize, we remain confident in our ability to manage through this phase. I have full confidence that our team will stay agile, adapt with focus and emerge from this period stronger than before.

And now operator, please open the call for questions.

[Operator Instructions] And today's first question comes from David Anderson at Barclays.

So you had mentioned some pricing pressure in certain pockets. I was wondering if you could expand on that a little bit more. Is this more on a regional basis. Like in the Middle East, we've seen Saudi slowing, the rest of the GCC is still growing? Or is this more about certain product lines are strongest? And maybe you could sort of talk through that a little bit, please.

Sure, Dave. Great question. And let me sort of break it up into 2 parts maybe. I'll talk first about the market generically and then talk a little bit more about Weatherford specifically. So look, what we are seeing is pricing pressure in a few places, a lot of which is in commodity-type services, a lot of nondifferentiated activities that we actually don't even participate in. But it is an important thing for us to observe and monitor just because it sort of signals the broader market trend.

I am a little bit concerned about some of the dramatic drops we are seeing, especially on truly undifferentiated things. And look, the Middle East tends to be the place where we see it the most. North America is more obvious, but the Middle East, we are certainly seeing that. Again, that's something that concerns us.

We're not seeing it quite as much on the truly differentiated product lines and specialty services, which is positive. So which leads me into the Weatherford sort of angle. Look, we will not really follow the herd, so to speak, on this. We are very, very careful about our pricing. We are very committed to margins and margin expansion. And we've got a very robust operating environment, which, look, the number of deals that come up to Anuj and myself is very significant. So we take a very granular look at all of these things and have the ability to monitor that.

So as we said in our prepared remarks, we are absolutely committed to not chasing market share at the expense of unfavorable cash outcome. But we believe we've got a portfolio that allows us to navigate this quite well.

And our next question today comes from Scott Gruber at Citigroup.

Girish, you mentioned Saudi could be finding a bottom here with the potential for year-on-year growth in the second half, which is encouraging. But wanted to get some color on that improvement. Obviously, Saudi has their long-term gas development strategy underway, but you also see recovery in oil activity in country, and if so, how meaningful could that be? And what does that mean for the outlook for Weatherford's revenue opportunity in the country?

Yes. Scott, look, I think part of it is just a little bit of math initially, right? So Saudi has trended down over the course of the year, and everyone has seen that. So I think as you sort of extrapolate that into the first half of next year, even if activity does rebound from Q4 levels in the first half, which we are cautiously optimistic that it will, just relative to the first half of 2025, it will be down. So I think that's part of it.

We think the improvements will be driven predominantly by gas, but there should be some oil activity as well. I think Aramco has done a great job in sort of driving operational stability and getting contracting in place, et cetera. So I think that provides a platform for then further growth going into going into 2026.

So like I've said multiple times before, for us, Saudi remains the single largest opportunity, and we think it's a massive opportunity for us for growth in the long term. And that's something we are very focused on. So yes, so the first half is likely to be down relative to this year, but definitely see a rebound in the second half.

And our next question today comes from Saurabh Pant with Bank of America.

Girish, maybe I want to come back to the Mexico part of the discussion. You did say you are cautiously optimistic, I'm just trying to see if you're more optimistic or cautious. But it seems like [ things are crossing], they're getting attached better on the margin, right? So maybe talk to that a little bit. What's going on? How should we think about '26?

And just related to that, the working capital side of things, right? You talked a little bit about getting some payments, I think you said earlier this month, last week, I missed that, right? But what's going on? What's the payment mechanism? What should we expect? Because I heard, I think you said, that 2024 receivables, when do we get to '25%, right? So maybe just talk to that a little bit.

Yes. Saurabh, let me start with activity and I'll ask Anuj to cover the payments and working capital piece. So look, as we have sort of been talking about for a while, we expected Mexico to start to stabilize, and we're starting to see that come through. So we have now seen 2 quarters of sequential improvement. And that gives us a little bit of cause for optimism.

The caution part of it is really more around we don't want to assume that things are just going to go up from here. So we are pretty comfortable and confident that we have reached a point of stability and these activity levels should flow in. And the optimism part is that there might be a slight bit of an inflection positively from here on, but we're not counting on that.

So I think, look, it's taken a while, but everything has now sort of gotten into place. The operational execution is starting to work through. The payment mechanisms are starting to come through. So I think we are getting back to a period of stability, a lot more clarity over the next several quarters as we look forward. We've also seen some announcements from other players. So this whole notion of private partnerships, that's starting to take a little bit of fold. So ultimately, look, given the production impacts that the programs had, we think there will be a natural motivation to drive activity levels.

Anuj, you want to talk about the payments?

Yes, happy to. So I'd say there's some positive momentum on multiple fronts, Girish did allude to a few of them. The first and foremost is that, recently, the government of Mexico has come out and has made significant -- has announced significant steps to support our largest customer there in Mexico. And we believe this is materially different than prior and a significant positive development, including for them to be financially self-sufficient by 2027.

On the second aspect, there is positive momentum on the payments front. We did receive a collection just last week from our largest customer there in Mexico. And this is the first one that we've received in early 2025. And so when you combine both the items 1 and 2 together, we are now moderately optimistic around the speed of collections here as we get into -- further into Q4 and into 2026.

Now as we think about working capital as a whole, we did say that we were at 29.6% working capital as relative to our last 12 months of revenue. As we do normalize for the impact of Mexico, we are within the 25% target that we have guided ourselves to in our structural target. But let me be clear, the 29.6% is not good enough for us. There are numerous initiatives underway that are targeting our DPO or DIO, our days sales outstanding, in order for us to achieve this. And I do feel confident with the one component around the payments in Mexico, and two, the structural initiatives we have in place that we will hit our target and be at the 25% thereafter and stay there and potentially improve thereafter.

And our next question today comes from Phil Jungwirth with BMO.

DRE margins saw a nice uptick in the quarter after being one of the hardest hit segments here in the first half. I was just wondering if you could talk about the improvements here, whether you're beyond the headwinds from earlier this year. Just looking at year-on-year comparisons, top line was still down 20%, but you only gave up about 150 bps of margin. So wondering if you can talk to the improvements there in the segment.

Sure, Phil. Look, I think a lot of it has to do with the improvements in Latin America. So we had been really focused on our cost structure and getting that stabilized. So as Anuj alluded to in some of his prepared remarks, as we have gotten that volume absorption and we've seen an uptick in DRE activity, especially in Latin America, that certainly helped those margins improve.

We've also seen strong activity in other parts of the world, in the Middle East and in a couple of other places. So we feel good about those DRE margins. But this has always been a business segment that is very, very service-oriented. So as revenues improve on here, the fall-throughs here tend to be exaggerated. And so giving higher impact around it versus the other 2 segments that have a varying mix of product and service.

And our next question come comes from James West with Melius Research.

Curious about the fourth quarter free cash flow guide, the $100 million with plus mark on it. What are the puts and takes there? How important is the [ PEMEX ] receivables to that guide? And how should we think about what do we need to make sure we hit that number? I think there's going to be -- given the guidance out, there's going to be a lot of focus on that.

James, sure. I'll take the question first and then I'll pass it on over to Girish. And so you're right, we did allude to $100 million plus in Q4. And to be candid, there is a decent amount of conservatism baked into these numbers. If we do continue to receive payments out of Mexico, we could be well above this. However, it's not something we directly control. And so we do tend to be -- and err on the side of conservatism. But as mentioned, we could be well above this if we start seeing the momentum that we saw as alluded to, getting recent payments out of Mexico.

And so before passing it on to Girish, just from a structural standpoint, we do target the 50%, and that's a level that we think we can hit. It is our North Star here at the company to focus on cash-based outcomes. And this is in the DNA, whether you're in the sales team, the IT team, HR, finance, operations, you name it, this is in our DNA to drive free cash flow and something we will continue to structurally do.

Yes. Anuj, I think that's spot on. Look, James, as Anuj pointed out, we really don't have a crystal-clear line of sight. We are very encouraged by the payments coming out of Mexico. So we've kind of set $100 million as a floor really. And the plus is meant to indicate that it is higher. Now we just got the payment a few days back, so that gives us a lot of comfort and confidence in hitting the $100 million. And I think as we get additional payments, it moves up.

If you take it just sort of from a math standpoint at the very bottom end of our estimates, so if you take the absolute floor, take that, and you look at the free cash flow conversion, it's very much in line with the third quarter. And so anything incremental really starts to wrap up that free cash flow conversion and just a small amount of that has the effect of getting up several hundred bps on the free cash flow conversion.

So I think there is a reasonable path to say we could be a lot higher, but what we have never wanted to do on these calls is that if put something out there and then walk it down either later in the quarter or just say, "Hey, we missed because of that." So we've always tried to provide guidance with something that we have line of sight to, and that's really what it is.

I think what is even more important, though, is to look at the longer term or even the sort of midterm around this, and you look at 2026, with everything that we have done here in the course of 2025 and as we go into 2026, our free cash flow conversion should improve significantly. The Mexico situation will normalize out. And I think it is very reasonable to expect that we will have free cash flow conversion well north of 40% as we go into 2026. And that's really, I think, what is far more important to consider than just sort of the timing around singular payments.

Our next question today comes from Jim Rollyson with Raymond James.

Girish, you've had some of your peers kind of give general '26 outlooks on spending or activity, and you've kind of touched on some of the key regions, and you kind of made the comments around first half versus second half. Maybe stepping back from a holistic view and for the full year, how are you thinking about kind of overall spend levels and activity levels as you think about '26 at this point, just as a maybe a North Star for us to think about for '26 before you guys give detailed guidance?

Yes. So Jim, I think it's still a tad bit early to really get into a whole lot of specifics. A lot of customers are still in the budgeting process, figuring out their CapEx spends. And I think everyone is sort of in a little bit of a wait and see or a wait and watch mode on where this whole supply-demand balance eventually shakes off, which is why we kind of look at it as a tale of 2 halves, with the first half being fairly soft and the second half rebounding really driven by offshore markets and some of the key international markets.

But look, very broadly speaking, we think North America will continue to be sort of flattish to down. Don't really see a significant inflection there. And then on the international side, I've already touched upon Saudi. We think offshore will be positive in the second half. We think countries like Brazil, Norway, et cetera, will be positive. We see also a lot of emphasis on production enhancement and mature field rejuvenation, both of which are sweet spots for us.

So look, we'll come out in February with more specific guidance for the total year. But look, more than sort of revenue really kind of where we look at the whole business is our goal is going to be around making sure that the margins in the company stay healthy. I think, look, this year, in a world where revenues have been down double digits, staying, keeping margins not just above 20%, but in the second half now increasing and expanding margins, I think, is a positive. And that's kind of the rhythm and the trend that we want to keep.

And then most importantly, as I alluded to earlier, on free cash flow conversion, having that sort of north of 40%, I think those are really the more important metrics. And then I think that sets us up extremely well for the second half of '26 and then going into '27 and '28, which we think will be very positive.

Our next question comes from Derek Podhaizer with Piper Sandler.

So I wanted to ask about your comments around cost controls, optimizing the organization. Just in the context of your previously guided '25 to 75% margin expansion in a flat to up environment, given your commentary around the muted first half '26, but constructive on second half of '26 and beyond, how should we think about the interplay of this cost optimization and your prior margin guide? And are there any specific examples that are the most impactful from a cost optimization standpoint? Or is it just a number of initiatives that are adding up in order to generate the cost savings?

Sure. I'll take that one. So thanks for the question. So I'll break this out into 2 aspects. One will be the cyclical aspect and the second will be the structural aspect.

And so from a cyclical standpoint, in the earnings prepared remarks we made, we did allude to about 2,000 heads and corresponding $145 million of incremental savings from support costs that we were able to achieve. I do believe we were generally fast to diagnose and move with speed and we were able to make many of these changes earlier on this year. As a result, we were able to hold margins at a level that alleviated some of the degradation given the headwinds we're seeing in the market. And this is something we'll continue to do, which is be laser-focused, be candid in terms of what we see and move with speed where we do need to align activity with the corresponding head count footprint that we have.

Second, on the structural aspect, this is an ongoing continuous improvement environment. And so we do evaluate how are we structured organizationally today? How do we utilize our shared services? How do we think through what we in-source versus what we outsource and where? And then we look at ways of becoming more efficient, utilizing technology, AI to reduce costs as examples.

I do lead, in the continuous improvement mindset, I do lead a monthly and quarterly steering committee where we are focused on the details. We are rolling up our pants and wading into the muck to evaluate our targets and our spend on things like T&E, logistics, IT, telecom, supplies, third party. And so we are consistently with detail looking through our cost structure to evaluate. And so all of these combined is really in support of the margin improvements you alluded to in a flat to stable market environment.

And our next question today comes from Doug Becker at Capital One. .

Girish, you mentioned your excitement for the Intelligent Completions and the introduction of Weatherford Intelligence. Just curious to get a little more context about how do you see these technology impacting financial results just over the next couple of years.

Yes. Doug, look, I'm incredibly excited. I think a few things that really stand out. First, what we are starting to do is now we've got the -- a pump prime, so to speak, on the innovation engine, and now we are really starting to get a lot more acceleration in our ability to get products out. So we launched over 20 new things at our FWRD conference. And that just goes to show how fast we're moving, and that's just in the last 1 year.

What we're really trying to do first and foremost with everything that we launch is increase the value gap. So essentially, the notion being you can come in at a higher price and a lower cost, either with what you are replacing or just sort of relative to the rest of the portfolio. So first of all, margin accretion is what we get from a financial standpoint.

The second thing that is really important for us is all of these businesses are capital-light, so really allowing us to become a business that reduces its capital intensity and further enables us to get better cash outcomes. So that's really key.

The third thing that we are trying to do with all of our product launches, and the more digital we get, of course, that helps tremendously, is also have an improvement on working capital, specifically around inventory, right? So this really helps in the digital piece, is tremendous from that standpoint because we don't carry inventory around a lot of the software pieces.

So ultimately, all of these things come together and just allow us to start growing margins at a slightly higher pace than what we would have naturally done, as well as improve the free cash flow conversion for the company.

And our next question comes from Josh Jayne of Daniel Energy Partners.

I was curious, could you just go into a bit more detail on your ERP implementation, the benefits that will provide, the time line and how it's ultimately impacting your business moving forward?

Sure. Happy to. Thanks for the question. So we are undergoing a full-scale ERP cloud-based implementation. This is a 2- to 3-year journey, so think 2027, 2028. This will be funded within our cash flow. It will be funded within our general 3% to 5% CapEx guidance. And this is something that we, as a company, are extremely excited about. This is not just a technological transformation. It's going to rethink how we do business with regards to managing our supply chain, our inventory, our procurement, all the processes we have in-house and more.

And so I've alluded to margins a handful of times here on the call. I do think the team was able to move with speed to protect our margin. And I'm excited as we roll out the ERP and as we start realizing even more efficiencies related to it, the potential upside that we can complement our margins with, with the rollout of the ERP.

Thank you. And that concludes our question-and-answer session. I'd like to turn the conference back over to the management team for any final remarks.

Great. Thanks, Rocco. Thank you all for joining the call today. Look, as we have alluded to multiple times in the past 45 minutes, the market is soft. We have gone through a lot of volatility and we have repositioned the company to prepare for this operating environment.

I joined the company 5 years ago. This is my 21st earnings call. And I will tell you with absolute unequivocal conviction that I have never been more excited about the future of Weatherford. I think we're really firing on all cylinders. And despite the softness in the market, I feel very good about our ability to compete and to deliver the value we need for our customers and for our shareholders.

Thank you all for joining, and we'll update you again in early February for our total year results. Thank you.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.