Ladies and gentlemen, thank you for standing by. Welcome to the Weatherford International Third Quarter 2021 Earnings Call. All participants will be in a listen-only mode. As a reminder, today’s event is being recorded. I would now like to turn the conference over to Mohammed Topiwala, Director of Investor Relations and M&A. Sir, you may begin.

Welcome everyone to the Weatherford International third quarter 2021 conference call. I'm joined today by Girish Saligram, President and CEO; and Keith Jennings, Executive Vice President and CFO. We will start today with our prepared remarks, then open it up for questions. You may download a copy of the presentation slides that correspond 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 materially differ 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 third quarter press release, which can be found on our website. With that, I'd like to turn the call over to Girish.

Thanks, Mohammed, and thank you all for joining our call today. We will start on Slide 3, which highlights very significant accomplishments on our key priorities during an exceptional third quarter. As you're all aware, there have been significant headwinds roiling several industries over the past quarter. In addition to the ongoing effects of the pandemic, the third quarter witnessed pervasive supply chain disruptions, inflationary pressures, and severe weather impacts. Despite these challenges, I am very pleased and proud of our team's commitment to our four strategic imperatives that enabled outperformance against expectations on revenue, adjusted EBITDA, and free cash flow. We ended the third quarter of 2021 with ample liquidity. Our product and service portfolio continued to prove its strength with record-breaking accomplishments. Our market-leading product lines, including Managed Pressure Drilling and Tubular Running Services enabled us to drive synergies across our portfolio and demonstrate the unique value of integrating our offerings. We have laid out our strategy and approach in prior calls and our results this quarter are another important proof point of the tangible outcome of the daily efforts of the One Weatherford team. Getting into some specifics, I'll start with safety, which is a foundational element of our performance. Having the discipline, rigor and focus to continually ensure that our team goes home safely every day instills the same mindset across all operating processes. I'd like to recognize our team in Mexico, where we maintain a 100% safety record for 2021. This is an exemplary achievement and a great example of our continued commitment to safety. Turning to our financial results, we delivered outstanding performance with reported adjusted EBITDA margins of 19% and improvement of more than 380 basis points sequentially. Like prior quarters, where we have exceeded expectations, I will temper the enthusiasm with a reminder that we are still laser focused on fundamental operating performance improvement. We have talked in the past about our approach of improving our margin at baseline activity levels while capturing increasing activity at higher fall-throughs. This came through in spades in Q3 with a very favorable services mix on increased activity. We also had some one-time items during the quarter, which Keith will cover, but even without them, our margins ticked up significantly. We have also talked about 15% adjusted EBITDA margins as our intermediate goal over the next couple of years. And I am pleased that we are delivering at that level well ahead of our timeline. However, we do recognize that we still have work to do to ensure balanced and predictable performance consistently and through cycles. Our cash performance was remarkable with the company generating $111 million in free cash flow. This puts us on track for another full year of positive free cash flow, which is a notable achievement. We recently executed multiple financial transactions to address our capital structure and efficiencies. This basket of transactions resulted in achieving much-needed flexibility with our banking partners, reducing interest expense and extending of maturities. We appreciate investors for recognizing the underlying and improving capabilities of our company and recognize the current constructive tone towards energy services, which afforded us the window to accomplish these transactions. With these transactions, we are materially reducing interest expenses, improving our operating profile and enhancing balance sheet flexibility. We give the company a stable foundation to continually drive our focus on customers, technology and operations, which should deliver increased margins and free cash flow generation. None of the results were feasible without the tireless dedication and hard work of our entire One Weatherford team. And I'm incredibly proud of their commitment and achievements. As I reflect back on my first full year with the company, I am humbled and grateful at having the privilege to represent their efforts to all of you. Moving to Slide 4, I want to highlight progress on our strategic vectors, which we shared earlier in the year. Our first strategic vector is our product and service portfolio, and we continue to make technology commercialization and business model advancements across product lines. We have talked about our market-leading product lines and the Pressure Pro expansion and Managed Pressure drilling is a great example of enhancing our offerings to ensure that we have capability across the application and pricing spectrum. The slide highlights new offerings, expansions and technology-driven records in each of our market-leading product lines. However, where we get an amplification effect is when we are able to integrate our offerings to enhance the synergies among them. The single largest vehicle for this is our integrated services, which delivered outstanding results this quarter in Europe and Mexico. In one project in the North Sea we were able to leverage MPD and TRS to pull through our drilling services business. This enabled us to replace the competitor to drill three challenging large hole sections, ultimately saving the customer more than 13 days. In Mexico, our integrated services tripled efficiency from the exploration to the early development phase of a project to deliver early production in a new field development. In fact, we set a field record by drilling one well to total depth in approximately 22 days, a two-thirds improvement in drilling and well construction time. The solutions span several drilling and completion technologies, including advanced geosteering and logging-while-drilling or LWD tools. The strength of our industry-leading brands and technologies like the Magnus rotary steerable system and the central well construction optimization platform was evident in delivering these solutions. Our second strategic vector is around our evolution as part of the energy transition. For us to ensure a bright future in the new energy economy, we need to drive the same technology differentiation and solution creation as we have in traditional oil field services. We are actively pursuing opportunities in CCUS while working plug-and-abandonment projects for customers in multiple geographies. We also remain excited about geothermal as an important energy source, where we have been a leader for over 20 years. During the third quarter, we provided the technology and engineering needed to remove scale and enable installing an electrical submersible pump for the rejuvenation of a geothermal well in Germany. The final strategic vector for us, digitalization and automation, is critical to address our customers’ needs. And we continue to gain traction and increase adoption with customers across all our geozones. A large operating company in Colombia awarded Weatherford a three-year contract for the ForeSite production optimization platform. With this award, the ForeSite platform has a leading production monitoring market share in that part of the world. On top of that, an NOC in the Middle East recognized our production automation and software services for performance excellence and problem-solving in the face of extreme challenges. And following up on these accomplishments, Hart Energy declared ForeSite Edge the winner of the Special Meritorious Award for Engineering Innovation. This honor further solidifies it as a best-in-class technology with game-changing technical and economic potential for our industry. Digital solutions like ForeSite Edge were again the focus of our Weatherford Enterprise Software Conference or WESC for three days at the end of October 2021. WESC is Weatherford's largest customer event and the industry's preeminent digitalization forum. This year marked the 16th annual conference featuring advancements from well construction to production. The size and scope of the show expand year-after-year. In 2021, we had virtual participants from Houston to Abu Dhabi and Jakarta and we helped nearly twice the number of breakout sessions for customers. One thing that didn't change is the unique features where customers not only attend but also shared testimonials on Weatherford technologies in action. Our strategic vectors of the central teams in a long-term approach to preserve our ability to differentiate and create value. And with all of these moving in the right direction, we feel confident in their progress ahead. That same spirit of differentiation and value creation is evident in our operational highlights shown on Slide 5. We leveraged our industry-leading offerings to deliver differentiated services for our customers and pull through others across our portfolio. You'll notice that we help them deliver better wells, wealth with enhanced integrity from the start and improved reservoir productivity in the long run. These kinds of outcomes have not gone unnoticed by our customers, which has enabled us to gain market share, expand our margins and generate repeat business. Our market-leading product lines enable a beachhead offering with customers that then allows us to gain share of wallet by pulling through other product lines. As an example, an NOC in North Africa awarded the contract for MPD services in an onshore field. The win comes after multiple years of contracting with our competitors and was based on the strength of our technology. With this award, we not only gained share but also expanded the scope of our MPD work in the country beyond deep water to land. Additionally, in the same geography, a major customer awarded us a sole source contract to supply completion materials, reservoir monitoring systems, and associated services. This award enables us to replace vendors who historically provided the services. In addition, a major IOC in South America awarded us an offshore TRS contract for running completions on its next campaign. This opportunity again comes after years on the outside and let us introduce Vero technology with all of its benefits. As a premium offering, Vero technology provides immediate and lasting benefits to the crew, efficiency, safety, and integrity, all of which bring enormous value to our customers. With an operator in Australia, after serving as the incumbent on a range of deploying our other TRS services, we secured an inaugural contract for Vero. Upgrading the customer services has delivered significant rig time savings and reduced personnel on board. For a major operator in the Gulf of Mexico, we replaced conventional operations with a Vero trial, which allowed the customer to mitigate potentially detrimental connection issues. We are also driving the same returns-focused differentiation across our other product lines. We have seen significant commercial traction and margin expansion in our drilling services product line spearheaded by our Magnus rotary steerable system. In South America, we increased the adoption of these services by completing a successful field trial within NOC. Our Magnus RSS and RipTide drilling reamer, both achieved rates of penetration 30% faster than planned. As a result of the performance on the first well, the customer assigned us additional wells with the potential to expand further. For another customer, our services included the revolution RSS, which drilled about 13 days faster than planned and saved 27 operational days over the course of the entire campaign. Turning to Slide 6 for our view on the market. We continue to see improvement in the overall macro environment and believe we are in the early stages of a multi-year upcycle. In North America, market fundamentals continue to improve and we continue to see capital discipline from public EMPs. Our focus, however, continues to be on generating sustainable returns and going after work only where it makes sense for us to do so. Keith will talk more about that in relation to our fourth quarter outlook and our margin improvement, an area where we continue to see improvements. It is also important to note that our business in North America has changed significantly over the past couple of years. We no longer play in high volume, low-margin services and are focused on our four market-leading product lines, conventional lift, and other high-margin offerings including digital solutions. This has been a key driver of our continued margin improvement in North America, but does reduce our growth expectations relative to the rest of the industry. However, we strongly believe that the prioritization of margins and returns is the right call for us now. Internationally, we continue to see activity increases in most geographies, particularly the Middle East and South America. In an environment where we saw increasing signs of economic recovery and very tight oil and gas markets, tendering activity was about pre-pandemic levels and rig counts continued to trend up. We are very appreciative of our customer support as we have had wins during the quarter throughout every geozone. Additionally, we have deployed differentiating drilling and evaluation technologies to the North Sea and Middle East with very positive results. And we believe that they will be drivers for continued growth in future quarters. Looking ahead to 2022, we are now more confident in a growth scenario and despite inflationary headwinds expect to see continued improvement and profitability reflected in margin expansion on a year-over-year basis. Now, I'll hand it over to Keith for our financial update.

Thank you, Girish. Please turn to Slide 7. Let's begin with a summary of our third quarter results, which continues to reflect the ongoing improvements in our operations despite an increasingly challenging cost environment. We continue to see rising inflation and as a company that deploys equipment to support our services, we are increasingly challenged by logistics and rising transportation costs. Consolidated revenues were $945 million, 5% better sequentially and 17% better year-on-year driven primarily by a 6% sequential increase in service revenues. Product revenues increased by 2% sequentially, and as our production-oriented products maintain pace with energy output levels. The sequential improvement in performance was seen across all geographies with above-average results from South America, which continues to reopen along with the Middle East region. The third quarter top-line performance primarily resulted from increased activity in our drilling evaluation and intervention business or DEI, which is increasingly being enabled by our integrated services and projects or ISP offering in the Middle East region. In South America, both our Completion and Production or C&P and DEI businesses benefited from increased call ups. The C&P business activity in Canada and in Europe, Sub-Saharan Africa, and Russia continued to trend well. Third quarter operating income was $71 million or 7.5% of revenues, which increased $46 million sequentially. Adjusted EBITDA for the quarter was $179 million and adjusted EBITDA margin of 19%, an improvement of 388 basis points sequentially and 605 basis points year-on-year. The operating income and adjusted EBITDA growth were driven by the growth in service revenues and improved mix of services, bad debt recovery, and lower inventory charges. Our EBITDA in the quarter was bolstered by approximately $20 million of one-time items. Without these items, our EBITDA margins were approximately 17%, still a significant step up reflecting favorable fall-through from the improved services and geographic mix. Free cash flow for the quarter was $111 million driven primarily by lower cash interest payments as our improved earnings was offset by working capital investments and asset dispositions that effectively funded increased capital expenditures. Let's look at our geographical breakdown starting with the Western Hemisphere on Slide 8. Western Hemisphere revenues of $441 million in the third quarter 2021 increased 4% sequentially and 40% year-on-year. North America revenues of $224 million increased by 2% sequentially, primarily due to increased C&P business activity in Canada. Third quarter revenues of $217 million in Latin America increased 6% sequentially driven by improved pricing, increased activity in both our C&P and DEI businesses in Colombia and increased DEI business activity and pricing in Brazil. Adjusted segment EBITDA of $75 million increased $17 million and associated margins of 17% improved 340 basis points sequentially and improved 780 basis points year-on-year. The growth in adjusted segment EBITDA was primarily driven by increased service sales and service mix improvement in North America and Latin America. Next on Slide 9. Eastern Hemisphere revenues of $504 million increased 5% sequentially and increased 3% year-on-year. Middle East, North Africa and Asia revenues of $312 million increased 8% sequentially driven by DEI business activity and ISP pull-through. In Europe, Sub-Saharan Africa and Russia revenues of $192 million increased 2% sequentially primarily due to increased activity in the C&P business and ISP partially offset by decreased activity in DEI businesses. Adjusted segment EBITDA of $118 million increased $25 million and associated margins of 23%, improved 390 basis points sequentially and increased 220 basis points year-on-year. The growth in adjusted segment EBITDA was primarily due to the increased activity and a favorable mix of services and sales in MENA, Asia, and Russia. Turning to Slide 10 for a summary of our liquidity. We continue to maintain our disciplined focus on running our business with the intention of generating operating cash flow. This has been demonstrated through the results of our underlying businesses and cost improvement initiatives. In the third quarter of 2021, we generated unlevered free cash flow of $141 million, an improvement of $34 million year-on-year from a 72% increase in adjusted EBITDA. Free cash flow was $111 million, which improves $63 million sequentially and $6 million year-on-year after $28 million more in interest payments versus the corresponding quarter a year ago. Total cash increased $59 million and we ended the quarter with approximately $1.45 billion of total cash. Capital expenditures were $20 million in the third quarter of 2021 compared to $9 million in the second quarter of 2021 and $27 million in the third quarter of 2020. Our capital expenditure has increased this quarter as we increased the focus on our growth capital requirements, given increasing activity levels. We expect to at least double our capital expenditures in the fourth quarter of 2021 to meet the increasing demand for our market-leading products and technologies. I wish to thank our One Weatherford team for the continuing cash flow improvements, which are the results of improved operating performance, disciplined capital expenditures, and working capital performance driven by a continuous focus on asset utilization. Slide 11 is a summary of our recent financial transactions. During the past few months, we made significant changes to our capital structure, which included not only refinancing our debt resulting in lower coupon rates and extended maturities, but also paying down $200 million for unsecured notes with cash on hand. After repaying $200 million of the exit notes, partially refinancing a majority of the remaining exit notes, and refinancing all the prior secured notes. Our annual interest payments will be approximately $204 million until their maturity, which is an annual cash interest savings of approximately $71 million. The major highlights of the completed transactions are the transactions began with the LC facility amendment to permit up to $500 million of debt repayment, and very importantly, allowing for an ABL or RCF to enter the debt stock and hold the prime position on key working capital assets if required. Repayment of $200 million of unsecured 11% notes, we generated free cash flow, extended maturities on both classes of debt. We refinanced $500 million of secured notes and extended the maturity to 2028. Then we refinanced $1.6 billion of the remaining $1.9 billion of the exit notes enabled by our tender process with the new tranche maturing in 2030. The end results can be summarized as improved metrics as weighted average cost of debt reduced to 8.5% versus 10.6% and maturity increased to 7.5 years versus 3.3 years. $300 million of exit notes remain maturing in 2024 with a 103 call option expiring December 2022. Girish and I are appreciative of the trust the capital markets have placed in the new Weatherford team and wish to thank all participants, agents, service providers, and the Weatherford team members that worked tirelessly over the past months. Special thanks go to Deutsche Bank and Morgan Stanley as the lead banks across this basket of transactions. Turning to Slide 12, I will share a few qualitative thoughts on the fourth quarter of 2021. We now expect our fourth quarter revenues to continue the upward trend and increase by low single digits from the third quarter as we continue to see activity improvements. Adjusted EBITDA margins are expected to be 25 basis points to 50 basis points above the year-to-date Q3 2021 levels of 15.6%. The seasonal mix shift created by a step-up in product sales will pull negatively on our margins as we continue to be challenged by material and labor inflation and the ongoing port and logistics challenges present delivery risks for product orders and service equipment. Our third quarter has several positive one-time items totaling approximately $20 million, which we do not expect to repeat in the fourth quarter. In the fourth quarter, we expect to see an increase in demand for products as activity levels continue to grow. Networking capital will continue to be an outflow as receivables continue to reflect revenue growth. We expect CapEx to be in the range of $40 million to $60 million in the fourth quarter. Thank you for your time today. I will now hand the call back to Girish for his closing comments.

Thanks, Keith. Our results in the third quarter were terrific. But we are firmly focused on the future and the work ahead of us. We continue to make progress on our four key focus areas for 2021 as shown in Slide 13. As demonstrated over the last few quarters, we have made significant and meaningful changes to our business as we strengthened our product and service offering, optimized our global footprint, enhanced customer relationships and began to instill a performance-driven culture throughout our organization. These results form a foundation for us to build on. We will continue to see seasonal shifts in our margin performance based on mix, transient challenges and inflation as Keith highlighted for Q4. However, over a longer timeframe, our efforts and focus should continue to create a company with increasing margins and greater value creation. We are excited about our progress but have the humility to recognize that it is just the first step and a lot more needs to be done. We believe that Weatherford has the technology, offerings, coverage relationships, and most importantly, the people who will propel our journey to further improvements in profitability and free cash flow generation. We are at the early phases of a multi-year upcycle. And as we institutionalize our operating improvements, Weatherford is well positioned to remain a key player in the industry and capitalize on increased activity. We will continue to focus our offerings in geographies where they are clearly profitable and continue to focus on margin improvement from internal efficiencies. With the increased activity, the combination of these two items should continue to provide margin expansion and sector-leading EBITDA rate growth. Thank you all for joining us today. And with that operator, let's open it up for Q&A, please.

Thank you. We'll now begin the question-and-answer session. Today's first question comes from Ian MacPherson with Piper Sandler. Please go ahead.

Thanks. Good morning. Congratulations everyone and the team for the strong results. I understand that you had some outperformance from integrated services during Q3. Keith, you also mentioned that you had about two points of favorable one-offs in the third quarter that took you down from 19% to 17% adjusted margins without those favorable one-offs. Could you elaborate on those and also just speak to what the spectrum of possibilities with margin above or below your base case guidance for Q4 entails with regard to integrated services exposure or other items?

Good morning, Ian. So good questions. First, when it comes to the $20 million of one-time items, they fall into three buckets. There's about $7 million of asset sales, so gains on asset sales. We have probably an equal or slightly greater amount, probably eight, which were recovered bad debts that were written off prior. We collected on those. So we had to bring that back. And then the final component was a one-time price adjustment in Latin America from a contract that had a catch-up component and that rounded it out. And then we also had some E&O that were lower in the quarter. And so those were the four parts of the 20, but the first three were the major components. With respect to ISP and its ability to increase margins. I wouldn't say that we look at it from that perspective. I'll also invite Girish into the conversation. But what it does do is it allows us to pull through various product lines when we are the lead projects provider in the region or whatever region we're working in. So if we have an ISP opportunity that we are delivering and there's a need for an ancillary product line that we also offer, sometimes it allows us to pull through things that was not in our forecast.

Yes. Morning, Ian. I think just to add to a couple of things to round out your question. I think, look for us as we look at Q4 really on the downside, what we are probably looking at as Keith mentioned in his remarks is things like supply chain disruptions and product deliveries, as everyone's aware and just about every company is talking about right now, logistics issues are really the biggest gating item. And so that presents the biggest risk for us in making sure that we can get product to customers. We think we've got a solid game plan and we've got everything lined up, contingency plans, etc. But that's something that could drag us down a little bit. On the upside scenario, what it really comes down to is look at the services business, and depending upon the nature of interventions that we require across our portfolio on a geographic basis, we have some events that cause greater service pull through that could create a little bit more upside. So what we've really tried to do is make sure that we have presented a balanced view of all of that in terms of where we expect Q4 to land.

Also Ian, I know that while we are indicating that we will have increased revenue, sequentially going from Q3 to Q4, buried in there is seasonality. We have significant step down in Latin America seasonality. We have significant step down in Europe, Africa seasonality as well. It's just that we have geographies that continue to show activity increases, but also we have to consider the mix in Q4. Q4 is traditionally a stronger products quarter. And so with both seasonality mix shift, we think that the margins should be in line with our threshold numbers. But it's going to be an interesting quarter.

Okay. That's very helpful. Thank you both. Keith also on the balance sheet, you have, I believe another $100 million of the 11% unsecureds that you would wish to take out upon arrival of the ABL. Just wanted to confirm that as well, and then ask really what sort of flexibility you've retained for another sweeping refinancing between now and 2030, just given the trajectory of the business. It looks like this should not be an 8.5% cost of debt company in two or three years. So what flexibility do you have to go back to the well to improve that if the leverage improves, as we think that it probably will?

So first we have a $300 million stub remaining from the exit notes that will still mature in 2024. It has a 103 call option on it that expires in December of 2022. We continue dialogue with our banks to see what is the right structure for us between an ABL and an RCF. And with that, we may then choose to address the stub or depending on how free cash flow generation is occurring. The weighted average cost of debt at 8.5%, I think is a big improvement from where it was. I think the market has already priced in a lower effective yield for our debt; we will continue to deliver and if we are delivering enough operationally, and that pricing continues to reflect a better and better credit profile and business trajectory, then liability management is always a way to further improve our weighted average cost of debt. So we have a little bit more runway, as you said, we have until 2028 to think it through. So hopefully there's enough in the cycle and this one and probably one after that, that we can all think about how to readdress the debt of the debt stock.

Good stuff. Thank you, Keith. I will pass it over.

Thanks, Ian. And our next question today comes from Gregg Brody with Bank of America. Please go ahead.

Good morning guys.

Hi, Gregg.

Just since you’re just entering debt questions, I'll just pick up from there. So how are you – how are things progressing with the credit facility? Do you have a sense of timing of when that will be in place and any updates on potential size?

Sure. So the change we made in the LC facility, I think accommodates up to a $400 million facility. We are – we continue to dialogue with the banks on two fronts. The first is can we get a secured RCF in place because Weatherford as a company given their – our asset profile and our business profile with 75% of our business being outside North America. We are less favorable towards the old ABL format because of the re-measurement of the availability based upon where the assets are. And so we'd much rather have – we would – we are considering an RCF, but that's because given our still credit rating, it becomes a difficult dialogue for our banking partners. And so we are working through that because we'd rather not have the re-measurement of availability. And then we're working through the ABL dialogue on how can we include more assets into the asset base, more geographies, given our ownership structure and different types of assets, whether we can bring in more rental assets and so forth. So the dialogue continues and we think that it is a constructive dialogue. I say that because if you look at what we were able to achieve, which is a major milestone that facilitated this transaction is for the banks to accept that what if it needs an ABL or an RCF for them to give us the increase in the RP basket to repay debt, and also to accept that they can be primed by an ABL and RCF. And so we have very constructive dialogue, but I don't have a timeline.

Does the expiration of the call on the 11% at $300 million that you can call 103? Can you exercise that without a credit facility put in place, are you comfortable doing something like that?

It depends on how much cash we've generated. We've exercised $200 million of it without a credit facility in place, because that was the cash we generated through the end of the second quarter. It's all a question of the cycle. It's a question of many things. So we are comfortable with the liquidity that we have on our balance sheet. We’ve – our business hasn't changed that much. We are not going to do anything, whether on the balance sheet side or on the P&L side, that gets ahead of the activity levels that we see. We've approached this in a very cautious manner. And so, I know that the stub is still out there and lots of calls have come in as to when and how to address it. But at this point in time, we see that as a small thing. I think we feel that we've addressed the major components of the balance sheet and we'll address that in an orderly manner. Girish?

Yes. Look, I think Gregg, the only thing I'd add to what Keith said, this whole notion of we are really trying to be prudent and responsible about this. If you sort of rewind about 60 days, the whole discussion was around, what are you guys going to do? And all of the things that we have done in 60 days is pretty remarkable, given where we were. So for us, it's really about making sure we take it step by step. We do the thing that is optimal for the company in the longer term without taking undue risks while we are continue to be very focused on making sure that we don't let our eye off the ball on generating operating improvements in the company that will lead to cash flow generation. And look, as we build up more cash flow that gives us another lever to go after the debt.

So what I think I heard, because, I mean, it's a month away.

It’s 2022. It’s December 2022.

December 2022 – the expiry on the call is December 2022.

And 103. All right, thank you. I guess I had that confused there for a second. So…

No problem.

Leave it to the credit analyst to get that messed up.

So yes, it's a month then a year, so 13 months.

All right. Thank you for clarifying. Maybe just switching back to some of your free cash flow numbers. So you pointed out the CapEx is doubling more than – potentially more than doubling versus this quarter. Yet it is coming in below where you thought it would for the year. I'm trying to figure out how you're thinking about CapEx going forward from here. And it keeps at 3% maintenance of revenues, but I think 5% to 7% on growth. If you're in a growth mode, maybe you can help us think through how we should be thinking about it going forward after this year?

So I think after this year, we believe that our CapEx is going to start to step back up given activity levels, just given the requirements to support the asset base that delivers our services. We see the first half of 2022, probably still being in the 3% range of revenues. We think that, however, the second half of 2022, it should move back to the 4% to 5% range as we inch back into refining the asset base that delivers our services and make changes to our infrastructure. So we've been lucky enough that during most of 2020, as we went through the COVID step down and through most of 2021, we were able to do a lot of asset redeployment and repositioning and didn't have to spend as much. Yes, we are slightly below our overall guidance of 3% on full year 2021. But we think we're close enough. And we are still being effective and delivering everything that our customers need.

Yes. And I think Gregg, look, if I could add to this. Just, I think it's really important to understand the ethos and the philosophy that we're driving. It's a very, very significant focus on making sure that we are exhausting every avenue to redeploy equipment, to reuse equipment, to repair equipment before we go out and purchase new equipment. You've also got to sort of take a step back and look at the business where it used to be. And we had a much broader asset base. As Keith pointed out, we have had the luxury to go back and basically harvest from that. So what this is really about is us, again, being very mindful of where we spend our cash and being very mindful of driving a higher set of returns on the asset base that we have rather than hey, we're not going to spend as much on CapEx. So we are being very, very specific about how we drive it.

Great. And then the other one items free cash flow cash taxes and severance payments. I think they were a little lower this quarter as well. And then I would have expected based on sort of your annual guidance. I'm curious how we should be thinking about that for fourth quarter and then any of the severance payments/restructuring go into next year?

So I think that when we think about cash taxes this year, I think it's quite possible that we could probably see the same level or a little bit higher in Q4 that we saw in Q3. So I think we're probably be around 60 to 65 number for cash taxes on a full year basis. Severance and restructuring has slowed because we are using a lot more of the things that we thought we may not have needed. And so as the activity picks up, I think that when we think about severance and restructuring in terms of overall spending, we did spend $5 million in Q3. We could probably spend between $5 million and $10 million in Q4. So that will bring us to a number that is inside or starting guidance for the year. But overall, when you think about free cash flow for the quarter – for the upcoming quarter EBITDA margins, as we talked about, will be lower than Q3. That lower margin will fall through and impact our unlevered free cash flow. Interest payments will step up by another roughly $60 million. So, free cash flow is going to be at best break-even and probably more likely to be slightly negative overall. We still think the full year will deliver a strong free cash flow number.

Great. And then there was a positive benefit from the E&O inventory charges increasing – decreasing accruals this quarter. I'm curious if, how should we be thinking about that going forward?

So the E&O accrual is always there in the add back is in the other. We took the nudge, or I should say the feedback from the group that we speak to every quarter to break up other into its components. So we could all see it better. E&O is usually there. What we are seeing this quarter or what we saw this past quarter, it was E&O stepped down. So even though if you look at the earnings press release and there's a table in there, one of the supplemental tables on the back that shows the progression of E&O from Q2 to Q3, you'll see that it's stepped down by five. And so as we manage our inventory better, we harvest what we have. We get into those stale dated bins of things and start to push us. We particularly think about Q4 being a stronger product sale quarter. E&O will probably be in that range of about a $10 million for the charge which will be lower than it was over the past quarters. And we are still working through the model for 2022. So then we'll come back in the start of the year and tell you where we think that will be.

So that the $10 million charge, that's a – that would be, in this case, it will be a benefit to you in your free cash flow from where is it actually?

Add back, it’s just a non-cash add back, right.

Got it. Got it.

It was one of those non-cash add back that was buried in other, and as we went through a few quarters that we've been here, as people tried to peel it back, we decided to open it up and so it's not something we love to talk about in this level of detail, but it's hopefully helpful.

I will not ask about it again on a call, but I appreciate it. Just you have been even clicking off some small asset sales every quarter, curious if there's much more or less to do?

Those are a lot more infrastructure-type assets as we've consolidated manufacturing sites as we've moved to a super central model in the U.S. where we have more product lines on a single basis. So we can deploy and do some other things. This company was much larger a few years back, right. Even though up to 2019, this was a $5 billion revenue business going back even five to seven years. This was in the $14 billion, $15 billion of revenues. So there's a fair bit of infrastructure assets that as we coalesced around being a $3.5 billion to $4 billion business that we are exiting strategically that doesn't make sense for the new footprint. And that's really what it is, how much more depends on what we're going to do without repair and maintenance facilities and our fulfillment centers. We are working through that. And we'll have a better profile of that as we get into 2022.

Got it. And really the last question for me. So obviously fantastic last couple of months or month plus of refinancing your debt and lowering your costs of congrats there. I think the next question is how do you think about your return to shareholders strategy going forward? Obviously, you've talked about pivoting to strict growth CapEx in the second half of next year, which will require some more capital. But I'm curious how you think about leverage target and potentially actually paying a dividend and how you're thinking about that?

Yes. So let me start and then I'll ask Keith to follow that to the more specifics, Gregg. So look, I think number one in terms of shareholder returns that is a very important priority for us. But the way we are really thinking about that is operating performance of the company. So as we really show that we can generate better margins, we can consistently generate free cash flow. We think that we should get the recognition for that as the operating profile of the company shifts. And that should have an effect on the shareholder value. At this point in time, that really is the main focus is the operating profile. And then of course addressing the capital structure right after that, which we have taken a very, very big chunk out of, and really made a big difference in the past couple of months as you pointed out. So there's a few other things to do there that will get after. But beyond that, look, we don't have any specific plans right now on any other specific type of return of dividends or buybacks or anything like that.

Yes.

Thank you. I'm sorry. I mean…

No, no, no. I was just going to add to what Girish said is that by saying that I think it's a little early for us to be thinking about returning capital to shareholders in the form of either dividends or share repurchases. We do need to continue the trajectory of delivering positive free cash flow. And then as we get there and move towards our objective of being an earnings-positive company overall, I think then we can come back to that conversation.

Got it. No, I appreciate that's not necessarily tomorrow just thinking about how you're trying to get there. And that was really helpful. Thanks for the time guys. I appreciate it.

Thanks, Gregg.

Thank you. And our next question today comes from Doug Baker of Benchmark Research. Please go ahead.

Thanks. Girish, you mentioned more confidence in growth scenarios for next year. Some of the larger service companies have talked about spending next year, growing low to mid single digit keen type growth in North America closer at 20%. How do you see that playing out for Weatherford given the different business mix as well as focus – strategic focus on margins more so than growth?

Sure. Appreciate the question, Doug. Look, I think what you will notice is over the past several quarters, we've been characterized by being a little bit more I'll call it prudent and a little less aggressive about the growth prospect. I think that comes from a couple of things. One is we really want to see it play out before we commit to it. Second, as you pointed out, look, we've got a very different business mix today. So we are not as broad as we used to be. And certainly not as broad as some of our larger peers. So for us, it's really about where do we want to go after the growth. And it's really that intersection of geography and product line that creates a favorable mix of profitability that's accretive to the company. So that's what we are more focused on. We do see the international markets, especially in the Middle East and South America, seeing a lot more activity. So we are confident that that will persist over a significant period of time. And then we are seeing more in North America, but then North America, as I pointed out in my prepared remarks, it's really much more of a focus strategy. So, again, for us, we expect our top-line to be a little bit more muted, but we expect that our profitability will continue to grow and has a much more progressive stance.

No, that makes sense. Now within that outlook, does that assume services revenue is growing faster than product revenue next year as well?

It's – look, we have not gotten down to that specific of guidance for 2022. We'll come back in the early part of next year to lay that in a bit more detail. But my overall sense is, look, I think both have to, right. What we will see as production increases and as production ramps up, especially on the OPEC plus front, some of our production-oriented businesses are typically a bit more product-oriented. And so, and even in the U.S. that's very true. So we will see that drive product sales, whereas more of the drilling types of businesses are much more services oriented. So that'll drive the services piece. So we expect to see growth on both sides, the exact specifics of what is that relative proportion that mix effect we'll have a little bit of an impact on the overall profitability for sure.

That makes sense again. And then just a housekeeping item. You mentioned weather supply chain inflation. Do you have any quantification associated with that just as we think about 4Q versus 3Q?

Look. Not specifically as we pointed out in the third quarter. Everyone experienced those, but the team did an outstanding job and we were also a little bit fortunate and just the way some of the timing played out. So we can't take all the credit that we didn't really feel the impact like a lot of other people did feel. So for us in the fourth quarter, it's really the supply chain issues, the logistics constraints getting material into the ports and off of ships. That could be probably the limiting factor as we look at it. But it's a little bit hard to quantify exactly how much that’s going to be, but I'll ask Keith to jump in with a bit more color.

So Doug, I think the way to think of it is, we – when we normalize Q3, we're probably a 17% EBITDA margin threshold. But going into Q4, when you put everything that we're faced with, whether it's seasonality inflation, the mix changes. We think that that will have probably a 150 basis points to 200 basis points impact on EBITDA margins, bringing us back to our Q3 year-to-date average of about 15.5%. So that's a way to think about it. We haven't quantified each of those components, but in the forecast, it is a cost-impactful getting into Q4.

Got it. Thank you.

Thanks, Doug.

Our next question today comes from Scott Levine of Bloomberg Intelligence. Please go ahead.

Hey, good morning guys.

Good morning, Scott.

Good morning, Scott.

So just following up on that last question, even with like a 15.5% to maybe pushing 16% margin in the fourth quarter, are you guys effectively declaring victory on the 15% intermediate term EBITDA margin target? Number one. And number two, just wonder if there's any other maybe guideposts you can put out there, it sounds like you're expecting margin expansion next year as well. Any other targets you're willing to communicate with regards to your margin expectations coming forward?

Yes. Hey Scott. So, look, as for those that know me really well, I'm always a little bit reluctant to declare victory until it is absolutely signed and sealed. But look, as I pointed out in my prepared remarks, we feel very good about the progress. We are ahead of schedule, but again, I think it would be a little bit imprudent to say that until we've actually delivered a full year and then another full year with that. So, but I think all of the signs are there that we should be a company at these activity levels that can deliver that, and then build more importantly build from there to get better. In terms of look, the next target again, as we come out with 2022 guidance and give you a little bit more of a flavor early next year, we lay out a bit more of a product, a longer-term roadmap, but what we really strongly believe is that there is a ton of opportunity at Weatherford to create more margin expansion.

Got it. Fair enough. And then maybe one follow-up, I think earlier on you were asked about possible divestitures, I mean, how do you feel about your business portfolio as a whole, I guess I'd ask you, are there any, or are you happy with what you have or do you see any room for potential subtractions or maybe even additions as we go forward?

Sure. Look, I'll start with just overall we are happy with the portfolio. What we don't see is the need for massive surgery to take out big chunks or anything like that. What we are focused on and we have been and done this over the past year is what I'll call surgical tweaks, which is again, intersection of product line and geography. We've got to make sure that every product line is able to stand on its own feet and be accretive to the company on a cash basis in every single geography we cannot have unless it's something supremely strategic, we really can't have a product line subsidizing each other. So every single one of them needs to be self-sufficient. And we got to figure out how to run the company that way. So that's what we've been doing on. And as a result, that's why we've exited the drilling services business in the U.S., changed our business model on wireline, and exited the wellhead business. Those are some examples of what we have done. Now in terms of additions, look, they really revolve around our strategic vectors. So one is, as we look at our market-leading product lines, if we see opportunities to fortify to enhance that we cannot do organically that's something that we will look at, but we again feel very strongly about those four product lines that we have. And then what, where we look is on the energy transition piece and on the digitalization piece where there are certainly opportunities, but our predominant focus is really focused on organic growth and on operating efficiencies within the company.

Got it. Great. Thank you. Thanks for taking my question.

Happy to.

And ladies and gentlemen this concludes the question-and-answer session. I'd like to turn the conference back over to management for final remarks.

Great. Hey, thank you all for joining today. We really appreciate your interest and support of the company. And look forward to speaking to all of you in the New Year. Thank you.

Thank you, sir. 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.