Ladies and gentlemen, thank you for standing by. Welcome to the Weatherford International Fourth Quarter and Full Year 2021 Earnings Call. All participants will be in an only mode. I would now like to turn the conference over to Mohammed Topiwala, Director, Investor Relations and M&A. Sir, you may begin.

Welcome, everyone, to the Weatherford International Fourth Quarter and Full Year 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 with 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 fourth quarter and full-year press release, which can be found on our website. With that, I'd like to turn the call over to Girish.

Thank you, Mohammed, and thank you all for joining the call today. I am pleased with the results of the fourth quarter of 2021, which build on the momentum we have generated throughout the year. We faced significant challenges, including inflationary pressure, supply chain bottlenecks, and ongoing disruptions caused by the pandemic. Despite these headwinds, the Weatherford team delivered another quarter in line with our outlook and outperformed in some instances. In the fourth quarter, we achieved overall revenue growth of 2% sequentially and 15% over the prior year, with adjusted EBITDA margins of 16%. You will recall that in our prior earnings call, we explained the impact of several one-time items in the third quarter of 2021. We therefore expected Q4 to come in with lower margins. However, the team did a great job executing, which enabled margins to come in above our guidance and over 400 basis points above the fourth quarter of 2020, a remarkable achievement in just one year. In addition, we generated $49 million of free cash flow during the quarter and $278 million for the full year. We also achieved two consecutive years of positive free cash flow, the first time in 30 years that has happened in Weatherford. 2021 was a significant year for us with several notable milestones, and I think it is worthwhile to reflect on how far we have come in a relatively short period. We fully returned to the public market on the NASDAQ Stock Exchange as WFRD. This move was driven by confidence in our operating posture and commercial profile to create sustainable profitability. Our return allows a broader base of investors the opportunity to participate in that value creation. We also strengthened our capital structure by using the cash generated from the business to pay down debt and concluded a series of refinancing transactions. These actions significantly reduced our interest expense and favorably position the company for the long term. We were careful and deliberate in our actions on our 2021 focus areas, driving outperformance across the board on North America performance, organizational simplification, variable cost management, and inventory rationalization. In North America, we completely reorganized our operating structure. In doing so, we doubled our margins and grew revenues as we undertook several actions to address our footprint, business mix, and service delivery model under a new leadership team focused on returns. These actions resulted in our exiting non-profitable business lines in the United States, such as drilling services and wellheads, and switching to a new model in our wireline services portfolio. Next, on organizational simplification, we took critical steps to delayer our company, which created greater operational efficiency and accountability, resulting in support cost savings. In variable cost management, we galvanized cross-functional teams on several work streams, leading to improvements in diverse areas from contract management to sourcing of uniforms and telecom access. Lastly, in inventory rationalization, an area which we identified as crucial to achieving our profitability and cash flow objectives, I am pleased with the achievements made by the team as we reduced our DSI by 14 days, well ahead of our 10-day DSI reduction goal. In 2021, we also introduced our three strategic vectors and the actions on these are yielding positive outcomes that are positioning us well for the future. We have provided more clarity on our portfolio with our new reportable segments that underscore the importance of our market-leading offerings of managed pressure drilling, tubular running services, cementation products, and fishing and reentry. As evidenced by our commercial successes, these product offerings are gaining greater traction and also positioning us for pulling through additional services from the portfolio. In the digital space, we accelerated the adoption of our foresight production optimization platform and Reservoir Monitoring Solutions and received rewards for performance excellence from key customers. In the fall, we held the Weatherford Enterprise Software Conference and delivered a strong testimonial to the efficacy of our digital solutions across the well life cycle. In ESG and the energy transition, I recognize that our journey has just begun, but I'm encouraged by our progress. We have affirmed our commitment to being net zero by 2050 and have signed on to the UN Global Compact. Our offerings in geothermal, plug-in abandonment, and carbon capture utilization and storage are securing wins across multiple geographies. As I share this with you, I am simultaneously proud and humbled of everything our 17,000-plus team members have accomplished; and humbled by their commitment, sacrifice, and spirit to win in the marketplace. My sincere gratitude and appreciation go out to every single one of our employees for driving the successes of the new Weatherford. We set an intermediate goal of getting to 15% EBITDA margins and having delivered that in 2021, I'm confident that we can achieve that across cycles. We are now raising the bar for ourselves with the goal of continued margin expansion and believe that in the coming years, we can be a company delivering high-teens EBITDA margins while also driving a high degree of cash conversion. We continue to gain momentum in the market, led by the strength of our portfolio, and I'd like to share some of our fourth quarter commercial highlights with you, starting with our well construction and completions segment. We were awarded two five-year contracts with Abu Dhabi National Oil company with a combined value of more than $1 billion for downhole completions and liner hanger systems. The downhole completions contract is amongst the world's largest in this category. Tourmaline in Canada awarded Weatherford a one-year contract extension for approximately 200 wells with increased scope for our completion products. A European supermajor awarded Weatherford a five-year contract to deploy fiber optics intelligent screen solutions in the North Sea. This award reinforces our leadership position in delivering reservoir monitoring at the Norwegian continental shelf. In tubular running services, we achieved several big wins, including an award from Saudi Aramco for a five-year contract to support onshore and offshore operations. Weatherford was selected based on its technology, safety record, quality performance, and commitment to local content and partnerships. Moving on to our drilling and evaluation segment, we continue to score wins and made headway in its adoption across our geozones. For example, following a successful implementation of Weatherford's managed pressure drilling system, Shell awarded Weatherford a two-year multi-rig contract extension for MPD operations in deepwater to continue the well delivery benefits offered by this technology. We had several other meaningful wins in this space this quarter with notable awards in Latin America and Asia. Our digital presence continues to grow across our segments as evidenced by the commercial success in our production and intervention segment in the fourth quarter, including an award from Kuwait Oil Company, which awarded Weatherford a three-year contract to support its digital transformation strategy in the North Kuwait heavy oilfield and deploy its integrated enterprise excellence platform. The award includes instrumentation, real-time monitoring, and production optimization, enabling KOC to advance its production and workover plans. Weatherford signed a global collaboration agreement with Light, a digitally-led business backed by BP Launchpad. The agreement combines Light's proprietary sensing insights with Weatherford's expertise in distributed fiber optic sensing deployed through our industry-leading foresight platform to help customers revitalize and optimize their energy assets. Moving on to some of our wins in our energy transition platforms, a European supermajor selected Weatherford to provide liner hanger products and services in its first carbon capture utilization and storage pilot project as it endeavors to achieve carbon neutrality for its operations. Another European customer selected Weatherford to help with their carbon sequestration operations using our downhole sealing technology for a well recompletion project. And in the United States, we mobilized a 50-well offshore plug and abandonment project for a major operator. I am encouraged by the traction we are seeing in these areas and I'm confident in our growing role in the energy transition as we leverage the capabilities inherent to our portfolio. Now turning to our view on the markets. The overall macro environment continues to improve, and we are now in the early stages of a multiyear upcycle. In North America, U.S. land markets continue to see the trend of robust growth with increased activity and spending. At the same time, we are also seeing some of the same trends from last year continue as public exploration and production companies remain committed to capital discipline, while we are seeing private exploration and production companies increasing investments. Our focus, however, continues to be on generating sustainable returns and going after work only where it makes sense for us to do so. Internationally, we expect capital spending to continue increasing, building on last year's strong finish. I am particularly excited by the growth prospects in the Middle East and Latin America as capital gets deployed to restore production levels and lay the groundwork for longer-term expansion. The past year's results show that Weatherford has firmly improved its financial and operational profile. We will continue to focus on the work necessary to further strengthen our capabilities. We are now more confident in the growth scenario we highlighted in our third-quarter call and expect to see continued improvement in 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. Before I review our fourth quarter and full-year 2021 results, I will remind us all of the segment changes implemented in the fourth quarter. We recently announced realigning how we report our results to three product lines: Drilling and Evaluation, or DRE; well construction and completions or WCC; and Production & Intervention, or PRI. The updated reporting structure better aligns with the company's focus and business strategy around the well life cycle, designed to drive improved customer collaboration and growth opportunities. All segments provide services to core oil and gas and new energy markets. Aligning our management strategy and reporting structure further drives organizational priorities into our operating processes and investment choices. The market-leading offerings in each segment reflect the strength and differentiation of our technology and innovation. These product offerings serve as the foundation to drive growth and pull-through across our portfolio. Additionally, the seamless integration of our digital offerings and the ability to provide integrated solutions across our segments would enable continued growth in our core operations and the energy transition. Our fourth quarter results were the perfect capstone to our 2021 performance. Fourth quarter and full-year 2021 results reflect the ongoing improvements in our operations and go-to-market strategies as we navigate an environment of inflation and increasing complexity. Consolidated fourth quarter 2021 revenues were $965 million, an improvement of 15% year-over-year and 2% sequentially, primarily driven by a 27% year-over-year increase in service revenues as we saw improvements across all of our segments. Seasonally higher product revenues drove a 2% increase in revenue sequentially, partially offset by the seasonal slowdown in service-related activity. Fourth quarter operating income was $33 million or 3% of revenues, increasing $140 million year-over-year and decreasing $38 million sequentially. Adjusted EBITDA for the fourth quarter was $154 million and adjusted EBITDA margin of 16%, representing a 440 basis point improvement year-over-year, driven primarily by growth in service revenues and improved mix of services and lower operational expenses resulting from our cost improvement initiatives. Adjusted EBITDA margins declined by 290 basis points sequentially, reflecting a change in the revenue mix and non-repeat of certain one-time items from the third quarter of 2021. Now let's look at our segment breakdown. Drilling and Evaluation, or DRE, revenues of $287 million in the fourth quarter of 2021 increased 34% year-over-year and 3% sequentially. The year-over-year improvement was driven by higher business activity across all product lines, led by NPD and wireline services with significant growth in the Middle East and Latin America. Segment-adjusted EBITDA of $55 million increased $33 million and associated margins of 19%, improved 890 basis points year-over-year and decreased 90 basis points sequentially. Segment-adjusted EBITDA and margins declined sequentially primarily due to product mix. The year-over-year growth in segment-adjusted EBITDA and margins were driven mainly by improved services revenue mix, pricing and geographic mix. Lower operational expenses related to our cost improvement initiatives and lower inventory charges help expand margins and offset supply chain headwinds. Well Construction and Completions, or WCC, revenues of $348 million increased 3% year-over-year and 1% sequentially, driven by improved demand primarily for cementation products with North America delivering the most significant growth. Activity increases in North America and Latin America were partially offset by a decline in Europe, sub-Saharan Africa and Russia. Segment-adjusted EBITDA of $72 million increased $15 million year-over-year and associated margins of 21% improved 380 basis points year-over-year and decreased 220 basis points sequentially. Sequentially, segment-adjusted EBITDA and margins declined primarily due to non-repeated one-time items in the prior quarter. The growth in segment-adjusted EBITDA and margins year-over-year was primarily driven by an improved service revenue mix, improved product volumes, lower operational expenses related to our cost improvement initiatives and reduced inventory charges. Production & Intervention, or PRI, revenues of $298 million increased 10% year-over-year and 2% sequentially, driven by increased demand for intervention services and production automation software globally. Segment-adjusted EBITDA of $47 million increased $8 million and associated margins of 16% improved 140 basis points year-over-year and decreased 370 basis points sequentially. Segment-adjusted EBITDA and margins declined sequentially, primarily due to non-repeat of one-time items in the prior quarter and the seasonal shift of products and services. The year-over-year adjusted EBITDA growth was mainly due to increased activity, lower operational expenses related to our cost improvement initiatives and lower inventory charges. Turning to liquidity and cash flow. We continue to maintain the focus of managing our business to generate operating cash flow. This is demonstrated through the results of our underlying business and cost improvement initiatives. For the full year of 2021, operating cash flow was $322 million, and free cash flow was $278 million. Free cash flow increased $200 million compared to the full year 2020, primarily due to increased earnings, driven by increased margins and lower capital expenditures, partially offset by higher interest expense. In the fourth quarter of 2021, we generated unlevered free cash flow of $147 million, an improvement of $52 million year-over-year from a 57% increase in adjusted EBITDA. Free cash flow in the quarter was $49 million, which improved $72 million year-over-year. Total cash on hand as of December 31, 2021, was approximately $1.1 billion, down $333 million sequentially, reflecting the repayment of $200 million of exit notes and the redemption costs, our exit notes with our 2030 senior notes. Capital expenditures were $41 million in the fourth quarter compared to $54 million in the fourth quarter of 2020 and $20 million in the third quarter of 2021. Our capital expenditures increased sequentially as we focused on our growth capital requirements given increasing activity levels. Capital expenditures for the full year were $85 million compared to $154 million in 2020. We expect to at least double our capital expenditures in 2022 to meet the increasing demand for our services and technologies, while continuing to be vigorous and rigorous about driving redeployment, reuse, and productivity. We successfully completed Phase 1 of our efforts to restructure our debt by refinancing $2.1 billion and repaying $200 million of debt during the fourth quarter, resulting in a significantly improved debt maturity profile and reducing cash interest by approximately $71 million per year. In the fourth quarter, Standard & Poor's upgraded the company's corporate credit rating to B-. I wish to thank our One Weatherford team for the continuing cash flow improvements resulting from the outstanding operating performance, disciplined capital expenditures and capital management driven by a continuous focus on asset utilization. Shifting our focus to the current year, I will now share some of our qualitative thoughts on the first quarter of 2022 and the full year. As we look ahead to the first quarter, we expect consolidated revenues to decline by low single digits, driven in part by lower contract consumption, currency weakness, and supply chain challenges, which we expect to recover in later quarters. Adjusted EBITDA margins are currently expected to be 15% to 16%. Unlevered free cash flow is expected to decline driven by working capital investments and we expect CapEx to be in the range of $20 million to $30 million in the first quarter. Full year 2022 consolidated revenues are expected to grow by high single to low double digits. Across the segments, DRE is forecasted to deliver low double-digit growth. WCC is forecasted to deliver in the high single digits, and PRI is forecasted in the mid to high double digits. Consolidated adjusted EBITDA margins are expected to be 16% to 17% as we expect margins to expand by at least 50 basis points for the full year 2022. As stated earlier, CapEx will be at least double 2021's spending and will range from $175 million to $225 million. Full year free cash flow is expected to decline compared to 2021 as increases in net working capital, cash taxes, and CapEx, driven by an increase in revenue will only be partially offset by lower cash interest payments for the year. However, we expect to continue generating positive free cash flow for our third consecutive year. Thank you for your time today. I will now pass the call back to Girish for his closing comments.

Thanks, Keith. Our 2021 focus areas have yielded terrific results, but even more importantly, have laid the groundwork for improved processes and procedures in the organization. We will continue to drive rigor and discipline in those areas, but recognize that we have new demands and needs and our 2022 focus areas will drive our growth and execution strategy. We have four key themes for 2022 for Weatherford: fulfillment, directed growth, excellence in execution, and simplification. We refer to all of our customer delivery mechanisms as fulfillment, and this is a core area of how we operate. We are evolving from a set of independent product lines with their own fulfillment mechanisms to a globally-integrated business with a contemporary and industrialized network of factories and repair and maintenance centers. This will drive excellence in service delivery and customer satisfaction while significantly improving efficiencies. This is a significant change that is a multiyear journey, but we are starting on our first important steps this year. It will affect multiple aspects of the company from how we manage inventories to our supply chain and logistics functions. We have demonstrated that we can take on significant challenges and deliver operating improvements in a deliberate and focused fashion and I am confident this effort will be the same. Our second focus area is directed growth. For the first time in five years, we are going to grow the top line of Weatherford, but in a focused fashion with an emphasis on profitability. Our growth strategy for the year will be driven by technology differentiation and we will increase investment in innovation. We believe that innovation is the best option for pricing and share increases and will arm our commercial teams to drive those imperatives, starting with our market-leading offerings. In a growth scenario, our third focus area of excellence in execution is even more critical. We are building a new quality function and recognize that we must win our customers' trust every day by delivering on our commitments. At the same time, we need the same process discipline to ensure we execute with a lean mindset and drive accountability through the organization. Finally, simplification is an enduring theme for us, both organizationally and operationally. Our focus is on improving information flows and reducing complexity with minimal disruption. We believe the industry is in a multi-year growth cycle driven by global demand and exacerbated by underinvestment. Increasing activity levels, tightening OFS capacity, and green shoots on pricing give us confidence in our 2022 growth. There are always balancing dynamics in the market and the current situation is no different. A confluence of rising commodity prices, inflationary pressure, and supply chain issues could significantly restrict margin expansion. Additionally, we think the combination of the pandemic and certain geopolitical situations are a legitimate threat that could result in demand destruction. Conversely, we see positive momentum across diverse themes, including the regulatory environment, commercial wins, and traction in the uptake of our market-leading offerings. In balance, we are positively biased and 2022 marks the first time in the last five years where we are poised to grow consolidated revenues and are well-positioned to take advantage of the market dynamics as our hard work on expanding margins and being selective on growth takes hold. Our 2021 adjusted EBITDA margins were over 400 basis points better on 30% lower revenue than 2019 pre-pandemic performance. As exciting as our 2021 performance and results were, we believe our journey has just begun. Thank you for joining us today. And with that, Operator, let's please open it up for Q&A.

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, gentlemen.

Good morning, Ian.

Girish, I appreciate you balancing the multi-year cyclical tailwinds with the lingering inflation and disruptive headwinds in the market with supply chain, et cetera. But when we look at your full year outlook of around 10% growth, it would not appear to reflect much gross or net pricing traction in your international markets. And we know that the pricing climate is heating up earlier domestically in the U.S. than it is internationally. That's intuitive. But when you see the building pipeline of contract tenders internationally, can you discuss how receptive your international customers are to the need for Weatherford and peers to raise pricing in this inflationary environment?

Sure. Ian, I think it's a really important point. A couple of things that are at play here: it's really long-term contracts versus the transactional pricing model in the U.S. So part of our evolution here is that we have a number of contracts in place. As we get new contracts in, that's where the pricing increases typically take hold and those are typically back-end loaded for us. So we'll see that more in the second half of this year and then going into 2023. So that's one big effect of why you see some of the numbers lay out the way you do. On your question about receptiveness, I don't think generally any customer is that open to saying, 'Come in pricing,' but I think everyone understands the situation. They want to be within reason. I think they're having constructive dialogues and conversations. We are looking at ways to both cut costs to increase margins but also to raise prices, so it's a combination of both. There is a sense of rationality and constructive dialogue, but at the same time, especially in the international markets, there are local players that tend to compete at a different level of thresholds that we've just got to surmount.

Makes sense. One element of your outlook caught my attention, and that was the trajectory that's indicated for production and intervention, which appears to have more of a sequential decline in Q1, but also guided the highest full year growth rate, which implies more of an upward sloping trajectory for those businesses. I wanted to ask if that is related more to specific contract backlog that informs that trajectory or if you're expecting more of a geographic evolution within that business as the year unfolds?

Yes. So I think there are a couple of things. As we pointed out a couple of times in our prepared remarks, the whole industry is facing supply chain and logistics headwinds impacting us in Q1. We're working hard to mitigate this. As we progress into the rest of the year, we expect improvements starting in Q2 and especially towards the second half. This situation affects both the production business and intervention services. As we have more wells coming on stream and increased drilling operations, the intervention services portion will also pick up, and we expect that to be back-end loaded. So that's really what it is. We have fantastic products and service offerings in this space, so we're excited about that. We also have a significant portion of our digital offerings in this realm; our production automation software will play a crucial role later in the year, which is why we are more bullish on that for the remainder of the year.

I think you nailed it well, Girish. Ian, we have some very specific things related to logistics and supply chain that will impact the PRI business more significantly due to the size of the equipment there. As that works through our fulfillment organization, we have to balance what we planned for Q1 and what flows into Q2. We also need to consider the FX impact of the European currencies that have weakened against the dollar given the geopolitical situation. That's a translation effect and some of our slower contract consumption. Some contracts have encountered customer delays, but we still expect strong growth in PRI across the year.

Thank you, gentlemen.

Thanks, Ian.

Thanks. The previous question kind of touched on this, but I wanted to get more color on the margin guidance by reporting segment and just the thoughts on the trajectory by reporting segment as we go through the year.

Sure. We haven't given margin guidance by segment; we provided consolidated margins. We've looked at how we think the revenue will unfold across these segments more so. If there is something specific you want to ask about a particular segment, we're happy to try to feel that.

Would just be fair to characterize that we see pretty consistent margin progression through the year in each of the segments. Maybe that's a high-level way of framing it.

Yes, I think to a certain extent, Doug, we will. Obviously, there will be some impacts of mix and how that unfolds within the segments because we have a balanced approach. But I broadly expect to see margin expansion each quarter; similar to last year. Last year was very different in magnitude, and we had the effect of several one-time items in Q3. However, last year, we made steady progress and improvements as we implemented our initiatives. We expect to see continued improvement over the course of the year with hopefully a better exit rate, which is why our overall blended effect for the year is outlined in the guidance.

Okay. And then you highlighted that EBITDA conversion should be pretty high as we go through the cycle. Just any way to frame that EBITDA conversion to cash flows? We think, say, three years out?

Well, I don't know if I can give a three-year outlook. However, when we think about 2022, we anticipate strong conversion, but we also think we will have less free cash flow than in 2021, simply because of the need to invest in working capital, doubling our CapEx expenditures, additional cash taxes due to increased revenue in certain geographies, as well as maintaining our restructuring investment. That said, we will still be positive on free cash flow this year due to the interest savings we've created to help fund these expansionary investments. We hope to maintain that trajectory, given the stability of our margin profile over the next two to three years.

And just to be clear, I wasn't trying to get a specific number three years out. We live in an uncertain world. But maybe what do you consider a high conversion or just a target to think about over the longer term?

Over the longer term, I estimate that EBITDA to operating cash flow currently falls within the 60% to 70% range. On a full-year basis, we should be able to maintain that, assuming our working capital mechanics function efficiently. In 2021, we reduced our net working capital cycle by 26 days, with 14 days from inventory and 11 from accounts receivable. While we are pushing boundaries, we continue to encourage our teams to improve their performance.

Fair enough. Thank you.

Hey, guys. Good morning.

Hey Greg.

First question. I didn't hear an update on the credit facility. Curious if you could tell us where that stands or how you're thinking about that today?

Sure. We are working diligently with our banks. We are still in the process. They were waiting to see our Q4 print, which is out today. We will get back into the dialogue and discussion regarding that process. We've looked across the industry as a whole and have seen little loosening of banking facilities for OFS companies, but we have positive conversations happening. We should have an update in the coming quarters.

Got it. So, nothing imminent here. It sounds like you said it could be a couple of quarters until we get a resolution.

I think it comes down to getting terms and conditions that we find acceptable. We could probably sign a facility tomorrow, but it might not be in the best interest of Weatherford.

That's really the focus here, Greg. As we've demonstrated last year, we are focused on reducing interest expenses. We know we must address the capital structure. We took significant steps toward that last year and improved our standing. We are aware of the $300 million stub we need to address, but our aim is to ensure the company is set up for the long term versus just securing a facility for its own sake.

Yes, and the stub will be addressed as we generate free cash flow that we don't need to reinvest in the business. We will address the stub. Last year, we generated $278 million of free cash flow, $200 million of which went to repaying the stub, and the rest funded the refinancing fees. We are very focused on improving our capital structure.

I appreciate the update on that. Maybe just shifting gears. You've mentioned inflation in the first question, and you've highlighted that you have several long-term contracts. So, you're not necessarily going to see revenues increase as a result today. You did guide to better margins this year. So, what I'm trying to figure out is whether you can pass inflation through to customers on these older contracts or if you are addressing it solely through operating cost savings?

Yes. It's a mix, Greg. We've got labor inflation we typically can pass along, and we do in most circumstances. Material inflation depends on various factors. Our portfolio is service-oriented, making us relatively well-protected. When it comes to longer-term contracts, those start kicking in later in the year.

All right. And then just on the free cash flow line items. You usually get this from me, so I'll just run through the ones. Restructuring, I think you said it would be at a similar level of investment this year. Does that mean we should see a $30 million number for this year?

I would think it would be higher than the $30 million, but I don't anticipate it being much higher than that. I would estimate between $30 million and $50 million at this time. We're still working on our plans. One of our major strategic focuses this year is our fulfillment system, which may necessitate some restructuring investment.

Again, Greg, as we've said multiple times, our focus on restructuring is dramatically different. We're looking at a rigorous set of business cases that emphasize payback. We want to ensure that we do it in a metered approach where we fund a bit, see benefits, and then proceed to the next piece. We're being thoughtful, careful, and deliberate in our actions.

All right. Just a few others here. So working capital; that's a trend we should expect to align with revenues and reflect where you've been seeing payables and just receivable days? Right?

Yes.

The E&O inventory charge, is there some number we should consider as an add-back or deduction? Or is that included in your margins?

It's included in our margins. We just have to adjust it for cash flow purposes.

Is there going to be an adjustment we should consider this year when we run our free cash flow numbers?

Currently, I think about it in terms of where we are with the run rate. I would consider the second half of 2021 run rate to be reflective of where we should start 2022. We can then reassess as we work on our inventory planning and fulfillment initiatives further.

Can you remind us what the second half of 2021 was?

It's in the back of the deck. I believe we recorded $12 million for the quarter, probably about the same in Q3, which makes it about $24 million or $25 million for the half.

And we should annualize that number? Or should we just assume?

Just annualize that number for now.

And that's going to be a benefit to cash flow this year?

That's a benefit because it's an add-back.

Awesome. So I add $50 million back. And then the cash taxes, how should we consider that this year?

I believe cash taxes this year will total around $65 million or $70 million and should step up closer to between $80 million and $100 million.

Got it. And then last question for me. Any thoughts on additional asset sales? Or what do you categorize as a disposition?

We don't forecast that. Most covering analysts tend to remove it from the cash flow calculation anyway, so we simply don't focus on that.

And maybe just the last one strategically. How are you looking at the M&A environment? Are there opportunities for you to add to your portfolio?

Yes. We'll look at it opportunistically, Greg. Our focus is on stabilizing the ship. We have significant opportunities within the company to improve our operating processes and drive innovation and organic growth within our portfolio; that's our priority. If something compelling comes along from a shareholder value perspective, we will consider it. We are open to engaging in conversations.

Yes, thanks. Two higher-level questions that are pretty related here. As you think about your CapEx budget that you're increasing, where are you deploying most of your incremental capital? Is there a noticeable directional trend within the businesses? And then, more structurally long-term; as you look at the cycle, where do you see the greatest opportunity for growth?

Thank you, Connor. Really great question. If you think about our business and its current setup, Drilling and Evaluation or DRI is heavily service-oriented, where we take our tools out and perform work. Well construction has a good mix of services and product sales; liner hangers and cementation products fit here. The production and intervention business leans more toward products. We expect that 35% to 40% of our CapEx is focused on the Drilling and Evaluation segment as we need new tools for operations. The remaining 60% will be shared between the other two product lines. However, we must rethink how we change our fulfillment practices, which may necessitate larger investments in altering our plants' footprint.

No, I completely agree. To the second part of your question about long-term growth, part of the reason we segmented as we did reflects how our business operates, highlighting traction in each one of these segments. In the short to mid-term, we expect growth in both our production and drilling business, though there is often a lag effect following the well life cycle. Long-term, we believe oil and gas will continue to be a significant part of the energy supply, making production crucial. We're excited about growth prospects in all segments, including our digital solutions and energy transition offerings.

That's all helpful context. Thanks very much for the color. I'll jump back.

Hey guys, thanks for taking the question. Obviously, in the U.S., we were seeing a huge problem with labor, especially with a shortage of truck drivers and whatnot. You mentioned in your opening narrative that you're seeing supply chain issues and bottlenecks internationally as well. Given your exposure to international markets, can you talk a little bit more about supply chain, bottleneck, or labor issues that you're seeing in those markets? Are they similar to the U.S. situation or do you observe different dynamics?

Sure. Look, the supply chain issues are truly global; it's not restricted to the U.S. The logistics challenges differ slightly—U.S. transportation infrastructure and trucking capabilities certainly play roles. That said, we are facing significant shortages globally regarding shipping lanes and freight charges. From a labor perspective, the U.S. labor market is more fluid compared to the rest of the world, which tends to be more stable. We've observed functional variances in unionization and inflation factors that affect each country differently.

Ladies and gentlemen, our next question comes from Ian MacPherson with Piper Sandler. Please go ahead.

Thanks for the follow-up, Keith. I'm sorry to put you back in the hot seat with the model questions. The one we didn't revisit was regarding the step-up in stock comp that was in your EBITDA during the fourth quarter. Could you just rebaseline that for us for our free cash flow estimates for 2022? Thanks.

Sure. Thank you, Ian. The fourth quarter experienced a confluence of a few factors. The step-up was due to two primary catch-up calculations: one involved a phantom share program that was supposed to pay out over two years; however, the target was hit early, necessitating an accelerated second payment into 2021. We also had to true up some long-term incentive compensation programs based on revised outlooks for 2022, which we now feel confident will achieve the targets. On the stock compensation, the equity adjustment back to EBITDA for the quarter should normalize back to the four or five range where we usually stand each quarter in Q1 of this year.

Perfect. Thanks, Keith. I appreciate it, guys.

Thank you, Ian.

Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn this conference back over to management for final remarks.

Great. Thank you, everyone, for joining us today. I appreciate the engagement and dialogue, and I look forward to speaking to you again at the conclusion of the first quarter.

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.