Weatherford International plc Q1 FY2022 Earnings Call

Ladies and gentlemen, thank you for standing by. Welcome to the Weatherford International First Quarter 2022 Earnings Call. All participants will be in listen-only mode. As a reminder, this event is being recorded. I would now like to turn the conference over to Mohammed Topiwala, Director, Investor Relations and M&A. Please go ahead, Sir.

Welcome, everyone, to the Weatherford International First Quarter 2022 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 and 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 first 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 the call today. I am very pleased with our first quarter results and incredibly proud of and grateful to the entire Weatherford team for their efforts and outcomes. We've made a solid start in Q1 that lays a firm foundation for our total year outlook of top line growth, margin expansion, and free cash flow generation. This quarter, along with the broader industry, we experienced several headwinds driven by inflation, supply chain issues, disruptions related to the COVID-19 pandemic, and unprecedented challenges caused by geopolitical events. Foremost in everyone's mind is the ongoing crisis in Ukraine caused by the invasion. We have over 100 employees in Ukraine and I am relieved, grateful, and glad that they're all safe and accounted for. The safety and wellbeing of all of our employees is our first priority and we have approached this situation with the same mindset. I want to acknowledge and recognize our employees globally for their support in many different forms for our team in Ukraine. This is a great example of the one Weatherford spirit in action. On the financial side, Ukraine represented approximately 1% of our revenue in 2021. In light of the current situation, we have taken an impairment charge on our assets and are not forecasting any revenue for the remainder of the year. As previously announced, we have suspended making any new investments or deploying new technology in Russia. Our operations in Russia are increasingly challenged as we ensure full compliance with the sanctions from relevant authorities. As everyone is aware, there has also been currency volatility that had an impact on our first quarter results and could likely have a further bearing on the remainder of the year. As this landscape continues to evolve, we expect additional operational complexities. The cumulative effect of currency volatility and operational complexities driven by sanctions is likely to create downward pressure on our financial results for the rest of the year in Russia, but it is difficult to quantify given the uncertainty. Despite the pressures from Ukraine and Russia, we see a robust demand growth in other parts of the world and our overall thesis for the year remains intact. We expect that we will be able to fully offset the impact of Ukraine and to a certain extent, potential Ruble volatility with pickup in other geographies. Energy security and supply have become an even greater priority in many countries leading to additional investment plans. As a result, we continue to anticipate 2022 to be our first year in five to generate top line growth in the high single to low double-digit range. More importantly, we believe we will generate at least 50 basis points of margin expansion and generate positive free cash flow in 2022. The first quarter is typically the lowest margin quarter and coming in at 16%, 40 basis points above our full year 2021, 380 basis points versus Q1 2021, and 10 basis points higher than Q4 2021 is a very encouraging sign of the progress and improvements we have made in our core operations. In the first quarter, overall revenue increased by 13% over the prior year with adjusted EBITDA margins over 16% on the high end of our guidance range. Outstanding execution on our focus areas, coupled with commercial initiatives to drive pricing and grow market share helped us achieve an industry-leading adjusted EBITDA margin expansion of 380 basis points compared to last year. In addition, we also won more than $1 billion of commercial awards during the quarter, excluding Russia, significantly ahead of our 2021 run rate. I am extremely pleased that we are delivering at this level and I'm truly excited about the growth potential we expect in the second half of the year. Over the past few quarters, we have shared how we have re-segmented our business and discussed the successes in our market-leading product offerings across the three segments. While these product offerings of managed pressure drilling, tubular running services, cementation products, and fishing and reentry continue, I wanted to spend some time today talking about the rest of the portfolio and the great strides we are making there. We have refined our portfolio and it is differentiated by innovation across the board, with an exaggerated focus on specialty services. We have also leveraged the strength in our market-leading product offerings to pull through other offerings in a discrete and integrated fashion. This has helped our customers achieve success in their core oil and gas operations and their energy transition activities. Some of the key commercial highlights from the first quarter are as follows; ADNOC in the UAE awarded us a five-year contract with an optional two-year extension to provide wireline logging and perforating services. We were selected based on our expertise in cased-hole reservoir characterization and monitoring, extensive pipe recovery capabilities, and world-class perforation services. In artificial lift, which has been a traditional strength and boasts a tremendous installed base, we received two awards from Tatweer Petroleum in Bahrain to deliver, install, and service beam pumping units and downhole pumps. In India, Caren awarded us a five-year integrated artificial lift and production automation contract across its work-over and rigorous activities in Western India. The contract, which will commence in the second half of the year will enable greater production optimization and help drive collaboration between the operator and its service partner. In our completion portfolio, we received a three-year contract to provide Siemens deadline hangers for a BP operated business in Azerbaijan with the potential for increased scope in the future. Superior run-in features combined with our high level of service quality and strong presence in the region were instrumental in securing this award. Supporting our success in the market is the emphasis we've placed on technology expansion in key markets and further innovating in spaces where we have the potential to deliver critical value to customers. For example, we recently formed a collaboration with subsea services that will change managed pressure drilling, or MPD, from an add-on to a seamlessly integrated part of the drilling rate. The collaboration will integrate field-proven Weatherford technologies, that are rotating control device and the annular isolation device with a remotely operated pulling system from subsea services. The results will be an industry-first complete integration of MPD and typical riser auxiliary lines into a single automated connection for all drilling operations. As we continue to drive innovation in this space, we took our more than five decades of leadership in MPD and expanded those capabilities to every part of the well life cycle with our recent commercialization of managed pressure wells. These new solutions enable our customers to apply the same field-proven technology of MPD to deliver high-quality wells with fewer surprises by ensuring a stable wellbore with a comprehensive pressure management strategy. With robust pressure control capabilities for every well phase, we increase production while lowering well construction costs and well control risks. Following the commercialization of our managed pressure well solution, we integrated and deployed it on the Maersk Viking ultra-deep water drill ship, securing the rig's attractive position in the region where MPD capabilities are in high demand. The Maersk Viking is currently drilling with the Weatherford MPD system for a major operator in Malaysia. This integration shows the strategic importance of collaboration with drilling contractors and provides significant MPD benefits to customers. Similarly in tubular running services or TRS, we've taken our industry-leading position and field-proven technologies such as our premier offering of Vero Automated Connection Integrity, and continue to deliver innovative and differentiated technology offerings. Our Soloist torque turn monitoring solution is the latest enhancement to our market-leading services to enable single-person operation and simplified remote viewing while running tubing or casing in the hole. Traditional torque turn monitoring systems require longer rig-up time and personnel must remain near the control cabinet on the rig floor, significantly reducing efficiency. With our Soloist solution customers get the same accurate torque monitoring without the hassle of rig-up, all from a single Wi-Fi enabled tablet. Our enhanced service offering enables cross-functional work on the rig floor by freeing up personnel to monitor torque while performing other essential rig operations. This enhancement to our service offerings showcases our commitment to investing in innovation and technology throughout our portfolio. It also provides incredible cost savings and safety improvements to our customers while increasing our margins to drive growth and profitability. We've also focused on leveraging our portfolio to support our customer's energy transition and ESG needs, where we continue to gain traction and prove our ability to adapt to changing industry needs. We've supported geothermal activity for more than two decades and a recent project on a geothermal valve with Hamburg Energy reinforces our competitive advantage. I had the opportunity to personally visit the site a few weeks ago and came away with even greater excitement about the potential for geothermal in the future. We deployed our Magnus Rotary Steerable system from surface to total depth of the well, during all three sections, a first for the system on this well type. We also used market-leading evaluation tools to analyze and log both case and open hole sections and ponds. This operation is positive proof that our existing market-leading portfolio can help drive the energy transition forward. I'm encouraged by the traction we are seeing in these areas, and I'm confident in our growing role as a service provider of choice. Our unique position in the marketplace is demonstrated by industry-leading and differentiated technologies across the well life cycle and our ability to deliver integrated solutions to our customers, leveraging those capabilities, which separates us from our peers. Now turning to our view on the markets, the multi-year upcycle is firmly underway, driven by limited supply and increasing commodity prices. The overall macro-environment continues to improve and we anticipate growing demand for oil field services from our customers. It is encouraging to note that this cycle has thus far been characterized by the prudent deployment of capital by operators and service providers alike. This pertains well for the ability to generate returns, not just over this cycle, but also on a longer-term basis. In North America, we are strengthening our commercial focus to help drive market share and pricing gains. We continue to see strong activity growth and increased customer spending supported by a favorable commodity price environment. However, a combination of capital discipline by public EMPs, global supply chain bottlenecks, and a tight labor market will constrain growth somewhat. For example, as seen in our predominantly product-driven production intervention segment in the US, we continue to experience acute supply chain issues. Nevertheless, we still expect to deliver positive top line and bottom line growth as our focus remains on going after work where it makes the most economic sense. We recognize that there has been a significant increase in drilling activity in the US and associated services over the past year. However, we are not chasing previously unprofitable work as we remain committed to our goal of only pursuing activity where we believe we can generate margins across cycles. Turning to international markets, we continue to see the trend of robust growth with increased activity and spending consistent with what we have stated before. As activity increases in the Middle East and Latin America continue to drive international growth, we also see accelerating demand for our products and services and contract awards in Asia and Sub-Saharan Africa. We expect the international markets to continue their expansion as we witness capital deployments by a growing number of operators. We have put a significant focus on our Latin America performance, including structure, operations, and business model, and our first quarter revenue growth of 29% year-over-year reflects the excellent progress we have made. I'm also encouraged by the acceleration of activity in Asia and Sub-Saharan Africa. These two markets were among the toughest hit during the pandemic and pent-up demand is being driven forward now. Our focus continues to be on driving directed growth in our key markets and on the work necessary to drive execution excellence as we scale up for growth. Now I'll hand it over to Keith for our financial update.

Thank you, Girish. Good morning everyone and thank you for joining us. As Girish mentioned earlier, despite challenges from inflation, logistics, supply chain issues, and geopolitical events in Europe, we are satisfied with our first quarter results. I will mainly compare the results to the first quarter of 2021. Consolidated revenues reached $938 million, marking a 13% increase. Our operating income was $18 million, a significant improvement from an operating loss of $13 million. The net loss was $80 million, down from a net loss of $116 million. Adjusted EBITDA was $151 million, which is a 48% increase. Before I discuss the performance of our reporting segments, I'd like to make a few brief comments regarding the ongoing situation in Russia and Ukraine and its impact on this quarter and future outlook. We've taken a $19 million charge that mainly concerns the write-downs of our assets in Ukraine, excluding cash. Ukraine accounted for 1% of our revenues in 2021 and has now been removed from our 2022 guidance. In Russia, we continue to comply with all sanctions and are closely monitoring the situation. Following our historical range of 5% to 7%, revenues in Russia constituted 6% of our total revenues in the first quarter of 2022. Our net book value for primary assets in Russia, excluding cash and accounts payable as of March 31, 2022, was approximately $140 million. Our outlook for the year still includes Russia, but with reduced expectations from our original guidance due to ongoing uncertainties. As mentioned in our previous call, we are focused on enhancing our operational profile. We believe we can structurally improve our margins by consolidating manufacturing plants and relocating our global repair and maintenance facilities. This strategy aims to create a more efficient infrastructure, improving product and service delivery, which in turn should boost customer satisfaction and growth. Consequently, we recorded a restructuring charge of $20 million during the quarter for this initiative. Now, let’s review our segment performance. In the first quarter, drilling and evaluation (DRE) revenues totaled $292 million, an increase of $56 million or 24% year-over-year, mainly due to a surge in demand for managed pressure drilling and wireline services, particularly in Latin America and the Middle East, North Africa, and Asia. The adjusted EBITDA for this segment was $59 million, reflecting a year-over-year increase of $30 million or 103%, driven by higher demand for drilling services primarily in Latin America. Well construction and completion (WCC) showed revenues of $344 million, up by $21 million or 7% compared to the previous year, mainly due to increased demand for cementation products and activities in North America. The adjusted EBITDA for this segment reached $67 million, rising by $17 million or 34% year-over-year, largely due to heightened demand for cementation and completion products, especially in the Middle East, North Africa, and Asia. Production intervention (PRI) revenues amounted to $286 million, increasing by $27 million or 10% year-over-year, due to rising demand for pressure pumping services, particularly in the Middle East, North Africa, Asia, and Latin America. The adjusted EBITDA for this segment decreased by $2 million or 5% year-over-year, primarily affected by higher logistics costs and supply chain challenges impacting delivery schedules in North America, though this was somewhat mitigated by increased activity in the Middle East, North Africa, and Asia. Regarding liquidity and cash flow, we ended the first quarter of 2022 with total cash of approximately $1.1 billion as of March 31, 2022, a decrease of $57 million sequentially. The unlevered free cash flow was negative $47 million, a decrease of $194 million sequentially, and free cash flow was negative $64 million, down $113 million from the fourth quarter of 2021, mainly due to working capital needs. The demands of an up-cycle were reflected in this quarter’s working capital requirements, as cash flow shifted by approximately $140 million compared to the first quarter of 2021. Nonetheless, we have confidence in our team’s ability to manage working capital in line with our operating performance, which should help us achieve positive earnings and continued margin growth in this cycle. While we invest in our business, we're committed to utilizing our assets more efficiently, so the timing of capital investments may vary between forecast periods. Looking ahead, I want to share our expectations for the second quarter of 2022 and the full year. We anticipate consolidated revenues to grow by mid to high single digits compared to the first quarter of 2022, driven by growth in all our geographic markets. For the segments, we expect DRE to achieve mid-single digits growth, WCC to deliver mid to high single digits, and PRI to grow in the high single digits. Expected adjusted EBITDA margins are between 16% and 16.5%. We project unlevered free cash flow to be positive, with a goal of breakeven free cash flow under the current activity forecast, which could turn negative if activity levels in the second half of the year exceed our current expectations. For CapEx, we expect to spend between $30 million and $40 million in the second quarter. For the full year of 2022, we forecast consolidated revenue to grow by high single to low double digits above 2021 levels. By segment, DRE is expected to deliver low teens growth, WCC high single digits, and PRI in the mid to high teens. We project adjusted EBITDA margins for the full year to be between 16% and 17%, with expected margin expansion of at least 50 basis points for 2022. As we mentioned in our fourth quarter remarks, CapEx for the year will be at least double that of 2021, ranging between $175 million and $200 million. We still expect full year free cash flow to decline compared to 2021, as increased working capital, cash taxes, and CapEx linked to heightened activity will only be partially balanced by reduced cash interest payments for the year. However, we project to generate positive free cash flow for the third consecutive year, mainly in the second half of 2022. This outlook considers the impacts of the changes in Ukraine and Russia previously discussed. Importantly, our outlook highlights the resilience of our business and the growing demand for oilfield services, which has allowed us to maintain our initial guidance while offsetting these impacts with increased demand from our other regions. Thank you for your time today. I will now return the call to Girish for his closing remarks.

Thanks Keith. We are excited about our growth prospects as we continue to see strong macro trends and are gearing up on our commercial focus to drive pricing and share gain in the coming quarters. And I want to update you on our 2022 focus areas, which will continue to drive rigor and discipline across the organization. We are on a multi-year journey to evolve our fulfillment mechanisms. Currently, each product line has a fulfillment network that has developed independently over several years. We are moving away from that and rethinking our inventory supply chain and logistics functions as we contemporize our network to serve customers more efficiently. Throughout the quarter, we continued the work of evaluating our business and making critical and essential changes that resulted in a one-time restructuring charge to help us evolve our operations further and create efficiencies in our organizational structure. We have been very clear that we treat restructuring as an investment and have a roadmap to drive improvements over the coming quarters and years. In our directed growth focus area, we are leveraging our technology differentiation, increasing investment in innovation and value proposition to drive pricing and market share growth where it makes economic sense. Rather than pursuing share at a global level, we are focused on areas of critical mass and driving the intersection of geography and product line to have each be economically independent. A third focus area is excellence in execution, a critical component of supporting our growth. We've built a new quality function to instill the discipline and accountability needed to execute with a lean mindset throughout our enterprise. Finally, simplification remains an enduring focus area for our company. We continue to evaluate our organizational and operational structure to maximize efficiencies. We believe, like our peers, that we are in a multi-year upcycle driven by global energy security concerns and economic growth. While there are clear risks posed by inflation, increasing interest rates, supply chain bottlenecks, isolated serious COVID-19 lockdowns, and geopolitical conflict, we believe energy security and supply will remain a focus priority. As a result, we should see further momentum in the second half of 2022 and into 2023. Weatherford's unique position in the marketplace creates a competitive advantage that will allow us to capture additional market share and to successfully deliver on our goals of sustainable profitability and positive free cash flow. Thank you for joining us today and with that operator, let's please open it up for Q&A.

Today's first question comes from Ian MacPherson with Piper Sandler. Please go ahead.

Thank you. Good morning.

Good morning, Ian.

Girish, we've heard more commentary from your peers this quarter that the improved pricing environment internationally is certainly not on the same frequency as the very big price increase that we're seeing in the more cyclical US service lines, but there has been a change, a more positive change in tone with international OFS prices. And I just wanted to get your perspective on that. It would seem to me that you're still not dialing in at least from surface appearances, significant price increases into the margin guidance that you've given us for this year. So is that, I guess, true or false and then what do you think maybe the upside could be as we get deeper into the cycle and maybe in the second half of this year, as that environment seems to run through into the system more broadly?

Sure. So Ian, I think the overall tone is becoming more positive. We've been observing some improvement since the second half of last year into the first quarter. We're having numerous discussions with customers, and the general sentiments are encouraging. There is a supply crunch, particularly in critical specialty services where we have a competitive edge, allowing us to raise prices. However, as I mentioned earlier, the margin growth we've noticed in Q1 results partly from pricing, though we haven't isolated it completely due to various factors; pricing has definitely played a role and we anticipate it will continue to do so. Additionally, we face significant inflation challenges across the board, which everyone is navigating. Our approach has been to remain cautious and responsible because the full extent of inflation is still uncertain. This has been a concern for at least nine months, and rather than easing, it has intensified. Coupled with supply chain bottlenecks, this creates a difficult situation, especially regarding logistics costs. Therefore, we expect that the upward pricing trends may be partly offset by inflation, which is included in our guidance, which aims for at least 50 basis points of margin growth. Lastly, as we revised our guidance moving from the first to the second quarter, it remains largely unchanged, but we must acknowledge the significant headwinds from the situation in Ukraine and Russia. We've factored that in and accounted for additional pricing benefits to ensure our overall outlook remains solid.

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

Thanks. I want to touch base on the DRE revenue guidance, just taking a look at it, full year guidance for low teens growth seems to imply very modest growth from the second quarter level the rest of the year. Is there anything in particular you'd point to that drives that outlook because achieving mid-teens seems very realistic if second quarter revenue grows say mid-single digits?

So I think it's a function of this business has done very well over the past year. It is probably one of our widest expanding margin businesses. We've done a fair bit to reposition this business outside the US and remove the assets as you know particularly for our drilling services businesses. So it's not that we are forecasting it to stop growing. It's just a higher base and so we have taken that into consideration. We've also seen that the MPD assets in DRE are now almost fully deployed. The ones that we have, we have a fair bit of CapEx in the pipeline to come through, which will then, get deployed more towards Q4 and Q1 of 2023. So yes, I think we appreciate that we stepped up and really improved the DRE business, but we're also looking to maintain that through the year, which won't be the same kind of growth rate as you've seen.

Yeah. And if I could just add Doug look, I think, first of all, I think living in a world where low teens growth is considered modest is kind of a nice change, but look, we have been very clear and deliberate on the fact that we are not going to go chase volume and what we are not doing in the company anymore is building up CapEx with the expectation that we will get the volume and we certainly could, but we recognize that we've got to map the business through the cycle. So we are being very, very prudent about where we deploy capital and we really want to make sure it's profitable. To me, the more interesting part about DRE is the year-on-year margin expansion, a 750 basis point margin expansion year-over-year is what I would like everyone to focus on and that's what we are focusing the company on.

No. And that's fair. Jumping to PRI margins, they were down year-over-year. Just hoping you could expand on the logistical challenges you're seeing, particularly in North America, just to try and get a better perspective for the trajectory of margins over the course of the year.

Sure. So look, I think a couple of things on that. First is the whole industry is having supply chain bottleneck and we are not immune to that. We have had a couple of specific things regarding our operations as well. One is the lockdowns in China that have affected some of our sources of supply and has caused a bit of a perturbation. Look secondly, freight and getting ships booked and ships sailing has been a challenge and that has been something that affected us fairly significantly. In the first quarter, we had one particular incident that was fairly significant hit that has pushed shipments out to the second quarter and beyond. So it's really a combination of China lockdowns, logistics and then just sort of broader industry challenges. But look, we hope that by the second half of the year, these do get alleviated. We have looked at alternative sources where possible getting, more of a longer range forecast in and working with our customers to prioritize shipments and manage through that.

Yeah. And then the final one just on working capital, I think it's very understandable that it was a sizable use of cash in the first quarter, just given the seasonality and expected growth. Just hoping to get some context, how to frame the potential outcomes for working capital and free cash flow for the year.

Our outlook remains positive, and we still expect to generate net positive free cash flow for 2022. Like others in the industry, we are investing in working capital during the first quarter. As we gain more insights into the second half of the year, we may also anticipate further investments in the second quarter, though likely not to the same extent as the first quarter. Looking at the entire year, we expect working capital to be a net use of cash, estimating a range of $20 million to $40 million for the year. We are actively working on managing our inventory effectively and have initiated a fulfillment initiative aimed at realigning our nodes, which should begin to show results in the latter half of the year. Overall, we remain optimistic about the organization as these activities represent growth opportunities.

So it sounds like free cash flow could still approach $100 million for the year. Is that a fair characterization?

I think that's where we're looking at it. We've kind of set that target out there. Our models say that we should be able to achieve it. It's now a question of who do we grow with? It depends on, of course, NOC versus IOC growth. Those are different payment terms. So there's a range of things that affect us, but we still see at a range of towards the $100 million of cash flow for the full year of '22.

Yeah. And again Doug, what I would say is, look, again, we've got to factor in that we have considered Ukraine and Russia, which is obviously significant downward pressure. And so we are still aiming to make that up. So I think the range is still accurate, but some of the pieces might move a little bit, but look, what we want to be very conscious about is the growth that we expect to see in the second half as well as in 2023, as we put in our prepared remarks. We've got to really modulate that and be careful about it. We are still very committed to positive free cash flow for the year. We are confident we are going to get there but a little bit of that timing, Q2 to Q3 might get affected just a tab bit.

Today's next question comes from Gregg Brody at Bank of America. Please go ahead.

Good morning. This is Anna Leonard on for Gregg Brody. Thanks for taking my questions. So, first question, do you guys have any update on refinancing the credit facility and the remaining 2024? Or could you just give us some details on how you're thinking about that today?

Sure. Anna, that's a great question as always. We're more confident than ever that we're getting closer to the type of facility we want. We're working with our banks, and the structure of the industry has shifted, leading to increased demand and supply for the underlying commodity. Investments are coming back to enhance energy security, which makes energy a compelling area for investment. We feel optimistic about this. The key concern, however, is whether Weatherford can effectively participate in this positive cycle, and the answer is yes. We are progressing toward the facility we desire, and even without it, we have sufficient liquidity to fund and grow during this cycle. For 2024, our plan regarding the stub is connected to free cash flow generation. We prefer to manage it through free cash flow over the next few years if that's feasible. However, if the market revalues us based on performance as it did last fall, and we see an opportunity for liability management, we will definitely consider that. Our top priority remains debt reduction, and we aim to achieve this either through free cash flow or by utilizing cash from our balance sheet if the revolver becomes available. The overall strategy has not changed.

Yeah. And so Anna, this is Girish. Look, I think, as we've pointed out, I know you're all aware, but I think it's worth repeating. We've been very, very clear about where we are going to use the cash. That remains our first priority. We're going to drive that. We've seen a demonstrable proof of that last year and at the same time, look, we are very, very clear that we are not going to put in place an instrument that doesn't work for the company longer term. So this is not a question of, hey, we can just go get something in. We want to make sure that we are really getting something in place that works for us, cross cycles, fits the profile of the company that we are today, which is predominantly an international company with a lot more focus there, but operates a significant portion in North America as well. So it has to work but we are in a much better place today where we are not in a position where we have a forcing function to drive that. So we want to make sure that we are on the long term and getting the best outcome for everyone from that standpoint.

Okay. Thank you so much. Sounds good. I also have some questions on cash flow items. On the last earnings call, you had said a number between $30 million to $50 million for restructuring charges. Is that still how we should be thinking about it for the full year?

I think when we think about it, it's still the right number for the full year. I think you can keep that there. We've gone out this quarter and taken a $20 million charge for a new restructuring program. It's a smaller charge when compared to prior years, cause there's probably less to fix, but probably more targeted fixing in our fulfillment areas. So with the $20 million charge, we don't see the need to step up the cash forecast outflow for that. So I think that our original numbers still hold as we march towards the $100 million of positive free cash flow.

Okay. Thank you. And then my last question on cash taxes, how should we think about that for the rest of the year?

So I think we haven't changed our viewpoint. We do see it stepping up year to year. Last year, I think we spent about $60 million, $65 million on cash taxes. This year, I think we've said it's going to be somewhere in the $80 million to $100 million range in terms of the step-up. So and that was a function of the way our cash taxes flow in terms of deemed profit taxes off revenues in some of the markets that we operate. So as we expand, that should go up, but I think it should be commensurate where when, if it won't go up, unless there's more revenues for people to withhold from.

Okay. Awesome. Thank you guys so much.

And ladies and gentlemen, our next question is a follow-up from Ian MacPherson with Piper Sandler. Please go ahead.

Thanks for bringing me back. I'm sorry. My line dropped when you were in the middle of answering my first question. Girish, I was interested in your comments around the integrated MPD approach and I wanted to ask if you could expound on that and what the upside is to Weatherford in going with MPD as an integrated component of the rig as opposed to an à la carte add on and how that changes and how much you capture of that upside.

Yeah. Look, great question, Ian, and something that we are very excited about. One of the things about services like MPD is they've always been one of the challenges with adoption for customers has been, it's been a complete discrete add-on and especially when you're talking about an offshore kind of environment, it's something that they have to buy separately. It's more people that need to go with limited accommodation. It just, the whole thing becomes a significant challenge and it's a significant capital deployment. There's also been this sort of commercial construct between drilling operators, the end user, and service providers like ourselves on, sort of how do you manage that whole thing. So I think the integration solves a lot of issues, and it really becomes a better customer outcome. First of all, you've got rigs that are already deployed with the right capital out there. You can now cross train personnel to reduce the demands of that and you've got the ability to really engineer and design the product, so that you set it up in a way that is most conducive for longer-term efficiencies for the customer. And look for us, we really think this is a great approach and it is incremental to the way we think about MPD from a financial standpoint. It reduces our capital outlay because you've got a better planning around it. You've got an ability to share to a certain extent and the commercial construct becomes one of efficiency sharing. And so, we are really creating a different value proposition for customers. So we think this will pay off in significant dividends over the next coming quarters and years. And we are excited just given some of the examples we've seen so far.

Super, thanks for expanding on that. Last one for me, Keith you have a few adjustments on EBITDA this quarter. I think we've identified obviously the restructuring and the $19 million that was mainly the impairment in Ukraine, but the other one was the $16 million other expense. I wanted to ask about that. And if you could guide on any other exceptional add backs that we should think about for the rest of the year. Thanks.

Sure. So the other expense went up a little bit from the prior quarter was where we're on a roughly a 10 to a 16. And part of that was driven by a few more charges for LCs and other things and also we had some FX volatility that had to flow through that line.

Got it. Thanks. And then going forward that should be, I guess, a less material item.

It is a less material item. I think if we look at where it was a year ago quarter at four, we closed the year with a 10 interest model. It's a small line item, but it should not surprise us going forward.

Got it. Thank you, gentlemen. Appreciate it.

Thanks, Ian.

And then ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to management for any closing comments.

All right. Well, hey thank you everyone for joining the call. Hopefully, you've got a good sense of where the company's position and share our excitement about the path forward and we look forward to updating you again next quarter. Thank you.

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