Weatherford International plc Aktie

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The world has changed.

Indeed.

Our next question comes from Scott Gruber from Citigroup.

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

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

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

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

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

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

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

Our next question comes from James West from Melius Research.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Our next question comes from Doug Becker from Capital One.

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

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

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

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

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

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

Our next question comes from Derek Podhaizer from Piper Sandler.

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

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

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

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

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

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

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

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

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

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

Our next question comes from Jim Rollyson from Raymond James.

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

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

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

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

Our next question comes from Phillip Jungwirth from BMO.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Our next question comes from Josh Silverstein from UBS.

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

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

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

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

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

Our next question comes from Ati Modak from Goldman Sachs.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And now operator, please open the call for questions.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Anuj, you want to talk about the payments?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Our next question comes from Derek Podhaizer with Piper Sandler.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Ladies and gentlemen, thank you for standing by. Welcome to the Weatherford International Second Quarter 2025 Results. [Operator Instructions] As a reminder, this event is being recorded.

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

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

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

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

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

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

As illustrated on Slide 3, our second quarter results were in line with our expectations outlined in April. Despite significant market headwinds, the impact of divestitures in Argentina and minimal payments coming out of Mexico, the One Weatherford team delivered strong performance. I'm incredibly grateful for the team's unwavering spirit, customer focus and operating intensity that every single person brings every single day.

For context, normalizing for the Argentina divestitures, our revenue and adjusted EBITDA would have seen a noticeable improvement on a sequential basis. North America and Latin America performed as expected, with both geographies down sequentially. The former was driven by the seasonal spring breakup in Canada and the latter due to the effect of the Argentina divestitures.

In Latin America, our view on Mexico hasn't changed and we still expect this to be down approximately 60% this year. However, we believe activity levels have now stabilized, and simultaneously, we have rightsized our cost structure in the country. As expected, project start-ups in Europe contributed to the growth in the ESSR region, further amplified by FX.

I am very pleased with our team's performance in the Middle East, North Africa broader region with several noteworthy performances. The market in the Kingdom of Saudi Arabia has softened and will likely have a similar trajectory in the second half. However, we achieved sequential growth in the second quarter, underscoring our belief that we still have a longer-term growth opportunity. The market declines are primarily concentrated in the service-related segments, resulting in a higher decremental impact.

While we are seeing margin dilution from tariff cost pass-throughs and rising pricing pressure, we have mitigated these impacts through volume-based cost adjustments and structural cost reductions. This resulted in adjusted EBITDA margins for Q2 at 21.1%, which slightly declined relative to Q1. Adjusted free cash flow of $79 million in an interest paying quarter with minimal payments from Mexico is a testament to our unwavering focus on a North Star of cash generation.

As shown on Slide 6, we have now paid 4 quarterly dividends of $0.25 per share and repurchased approximately $186 million worth of shares over the past 4 quarters, which includes approximately $34 million during 2Q. While this amount may vary each quarter due to market conditions, we remain committed to our buyback program and still have ample capacity under our $500 million authorization.

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

In Offshore U.K., bp awarded Weatherford a 1-year contract to provide cementation products, completions, Drilling Services, Intervention Services and Drilling Tools and a 1-year contract to provide Liner Hanger systems for the Northern Endurance partnership CO2 storage project. In the Gulf of America, Shell awarded Weatherford a 3-year contract to provide Intervention Services and Drilling Tools. In Norway, Weatherford completed a successful field trial of TITAN RS technology for Equinor, following the acquisition of Ardyne.

The trial delivered a full casing cut and recovery solution for the plug and abandonment market, reinforcing Weatherford's leadership in advanced well abandonment. These highlights underscore the differentiated value of our technology across global operations.

Now turning to our outlook. Last quarter, we provided what we believe was a prudent view for the balance of 2025, and we continue to believe this outlook is reasonable in today's market. We have tightened the range a bit on both ends as the visibility window improves. The overall international market has softened over the past year, a trend that could continue well into 2026. While commodity prices remained relatively stable, they have led to increased caution and a slowdown in customer spending.

Trade discussions continue to cause significant uncertainty and may lead to demand destruction in the short to midterm. In the first half, tariff impacts were modest as most inventory remained at pre-tariff levels. However, we expect a greater impact on both margins and demand in the second half. Concurrently, OPEC+ continues adding supply back to the market, increasing pressure on the global oil supply demand balance. While some customers have signaled future spending cuts, others have not, leaving the outlook uncertain.

We continue to believe we are in a distinctly different phase of the cycle with some markets in a clear downturn. Uncertainty remains a defining feature for this market and downturn. While the shape and timing of a recovery are unclear, we anticipate market headwinds will persist for at least another 12 months.

While we haven't seen clear direction from all customers yet, it's reasonable to expect sluggish activity levels in the second half of 2025 and first half of 2026. If global trade reductions and increased supply create a need for customers to reduce CapEx. That said, we remain hopeful that the industry discipline of recent years will result in a milder global downturn than the last 3 cycles. We have continued to adapt our cost structure over the past 3 quarters, and this will further evolve as the market unfolds.

Since Q3 of 2024 and excluding divestitures, we have reduced our head count by over 1,500 and lowered our annualized personnel expenses by more than $125 million. While much of this is offset by revenue declines, our swift actions have positioned us to continue operating efficiently. We continue to believe we are very well positioned to capitalize on stable or improving activity levels, but we are also taking proactive steps to ensure we can respond swiftly in the event of a more pronounced slowdown.

Even with the potential annualized double-digit revenue decline, we expect to deliver EBITDA margins in the low 20s this year, which remarkably is still better than where we were 3 years ago. Giving precise outlooks on geo markets and product lines remains challenging in this market. However, our overall outlook remains unchanged.

With this in mind, we expect that 2025 North America revenues will decline by high single digits year-on-year and international will decline low double to mid-double digits. Adjusting for Mexico activity declines and our Argentina divestitures, we believe our 2025 international revenues will likely be down low to mid-single digits.

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

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

Turning to Slide 22 for cash flows and liquidity. For the second quarter, we generated $79 million of adjusted free cash flow at a 31.1% free cash flow conversion rate versus 26.1% in Q1 2025. As you know, our free cash flow is generally weighted towards the second half of the year. We do not expect 2025 to be any different but there is a significant expectation of payments from Mexico that we do not have precise visibility on.

Net working capital efficiency, measured by net working capital as a percentage of revenues moved slightly from 26.3% in Q2 2024 to 26.7% in Q2 2025 due primarily to a lower revenue base and minimal collections in the quarter from Mexico. We expect our net working capital efficiency to improve going forward. And regardless of the stage of the cycle, we continue to work towards our goal of maintaining net working capital efficiencies levels at 25% or better. We have continued to execute on and initiated a series of cost reduction actions across the company.

In this context, we took an additional restructuring and severance charge of $11 million in Q2 following the $29 million in Q1. Several actions have already been completed, and we expect to implement additional measures throughout the remainder of the year as we stay agile and adapt to evolving market conditions. While many of our actions are tied to volume, we're also using this moment to drive long-term productivity through shared services, automation and generative AI.

At the core of this effort, is our continued investment in infrastructure systems as a non-negotiable priority. These systems are critical enablers of efficiency, scalability and bottom line impact and we remain firmly committed to protecting and advancing them. We have always maintained that it is critical for us to invest in the future, but at the same time, that will never be a crutch to not perform. I'm very pleased to see both of them happening.

During the second quarter, CapEx was $54 million versus $77 million in the first quarter, driven by adjustments to align with market conditions and completion of spending related to our Brazil Sub-sea intervention contract. We expect CapEx to decline further and fall within our targeted range by year-end.

In Q2, we repurchased approximately $34 million worth of shares and paid a $0.25 per share quarterly dividend. In addition, we also bought back $27 million of our 8.625% notes and will continue to do so opportunistically in the market. Our net leverage ratio is less than 0.5x. We have approximately $1 billion of cash and restricted cash. We reduced our trapped cash by over half during the quarter, and our liquidity is approximately $1.3 billion, which is the highest level since emergence.

With this, we feel very confident in the strength of our balance sheet and the corresponding flexibility it provides to manage the company through this cycle.

Turning to guidance, let me start with Q3. Third quarter revenues are expected to be modestly down with U.S. land in Saudi as the primary headwinds. This should be partially offset by the seasonal rebound in Canada. We are expecting $1.165 billion to $1.195 billion in revenues. Looking at the broader second half 2025 versus the first half of 2025, we believe Brazil, North America offshore, UAE, Kuwait, Iraq, Australia, Azerbaijan, and Indonesia will experience notable growth. And while we are hopeful for a slight uptick in Q4, we remain very cognizant of the broader slowdown and hence, expecting a generally flattish revenue trajectory in the second half as well.

Adjusted EBITDA for Q3 is expected to be between $245 million and $265 million, and margins should tick up slightly from Q2 levels, driven by cost stabilization. We expect free cash flow to be flat to slightly up from Q2 levels, followed by another increase in Q4. Payments from Mexico will be the differential factor on timing of cash flows, and these are not substantially included in our Q3 free cash flow guidance.

For 2025, we've tightened the guidance range with the midpoint of revenue and EBITDA guidance remaining unchanged. We expect revenues of $4.7 billion to $4.9 billion, adjusted EBITDA of $1.015 billion to $1.06 billion and free cash flow conversion to increase 100 to 200 basis points year-on-year. Our effective tax rate can vary quarter-to-quarter depending on the geographic mix, and we still anticipate this will be similar to 2024 in the 20% range for 2025. CapEx is expected to trend down over the course of the year and land in the 3% to 5% of revenues for the full year.

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

Thanks, Anuj. I remain highly optimistic about Weatherford's future over the next several years. As market conditions continue to evolve, we are staying agile and ready to pivot as needed. The market has changed, and our approach must continue to adapt. Despite the headwinds, we remain focused on defending margins and maximizing cash generation.

Over the past several years, we have been preparing the company to navigate potential market disruptions. First, our balance sheet is stronger than ever before with total liquidity of $1.3 billion, and we have approximately $1 billion of cash. Second, our cost structure has radically transformed since 2020 with further value creation opportunities ahead. Third, we remain committed to our shareholder return plan. We set the dividend at a level that is sustainable through the cycle, and we intend to remain opportunistic, disciplined and thoughtful in our share repurchase program.

Moving forward, we will be flexible with our operating structure, support costs and CapEx, adjusting as needed to align with market conditions. Our cost optimization program is being designed to go beyond volume adjustments. It's a multiyear program focused on achieving sustainable productivity gains through technology and lean processes, not just flexing head count due to market conditions. Also, working capital efficiency remains a core focus area to drive free cash flow conversion to a sustainable 50%. The new Weatherford transformation is an ongoing journey, and the initiatives already position us to navigate this part of the cycle far better than in the past.

It's now clear that the market will be more challenging than many expected just 6 months ago. However, I'm confident that our team will stay agile, adapt effectively and emerge as a stronger company through this period.

And now, operator, please open the call for questions.

[Operator Instructions] The first question comes from David Anderson with Barclays.

I'm doing well. I wanted to focus a little bit on Saudi. It's your largest international market, it's been going through quite a bit of transition this year. The rig counts fallen [indiscernible] potentially ramping up. You're expecting further softness in the second half. I was wondering if you could provide some more color around some of the moving parts in the Kingdom. And you mentioned you're growing against this backdrop. Maybe talk about how you're doing that. And then while we're here, if you could maybe talk about kind of when you see this start to turn positive again in KSA and potentially kind of what does international start to look like in 2026. So recognizing it's very, very early, all sorts of moving, all sorts of challenges out there, but a little bit of color on that would be very helpful as well.

Sure, Dave. So look, I'm incredibly pleased with how our teams operated and executed in the Kingdom. We have talked for the past several quarters about the softness in the market, really starting with an inflection point in Q1 last year when Saudi changed the direction a little bit and dropped from the $13 million to back to the $12 million. And since then, we've seen a bit of a steady decline in rig count, a lot of announcements. And there was another round recently that will sort of bleed itself out through third quarter. So there's clearly a downdraft. But we've always maintained through that, that we are underpenetrated in several businesses. And as we have transformed the company and really driven a significant amount of transformation of the portfolio, new technology introduction, there's an opportunity.

So the way we've been able to drive that performance is really working very closely with Aramco showcasing and highlighting where we can bring value in. A couple of years ago, we announced the LSTK contract, but that's fully baked in. And on a comp basis, that's not a delta this year, it was last year. But it's really all about technology introduction and making sure we're staying very close to our customers there as well as very strong execution. So -- look, as I mentioned in my prepared remarks, we think it will continue to be soft as we go through the rest of this year. There will be a decline in Q3 versus Q2, and I'm -- well, I'm still pretty confident about our performance. There will likely be a decline for us as well.

The rig count is something that affects everyone. And we think that will sort of play itself out through the end of the year. We are hopeful that there will be a little bit of a transition in 2026, but not counting on that, and it really is more likely to be the second half of '26. And then if you extrapolate that, that's sort of what we are seeing across the international markets. Mexico stabilized a little bit. So I think that will be -- that won't be an inflection next year on the negative like it was this year. But the rest of the markets, including especially the offshore side, we see softness through '25, probably into early '26. And really, the earliest recovery we see in the second half of '26. But again, we don't expect it to be a dramatic decline. I think that's really important to understand.

Our next question comes from Scott Gruber with Citigroup.

I want to ask about the implied 4Q guide, solid guide overall, but the implied 4Q has a 3% to 4% bump in sales close to 100 basis points better margin. Is this largely year-end sales -- that looks normal for year-end sales but just in a softer crude environment, those can be a little bit lighter? Or are you seeing some improvement in those countries which are still growing?

Yes. Scott, really, a couple of things. We have talked in the past about the 2 ramps that -- Scott, we lost you there for a second, but I think I got the gist of the question. So look, we have talked in the past about the ramps that we had built in, in the course of the year. And again, as we pointed out, if you look at set of Q2 performance versus Q1, we actually did have a ramp that was really based on project start-ups -- so if you exclude the Argentina divestitures, we had a pretty interesting ramp, I would say, order of magnitude sort of mid-single digits.

And very similarly, we've got a ramp from Q3 to Q4, and it's really driven by 2 factors. The first, as you pointed out, is seasonality, we typically see year-end sales. We expect that to be a little bit more muted this year, though. And there's a lot of uncertainty on that given tariffs. But in addition, we have actually got a couple of significant project start-ups. So we've got very good visibility, very strong line of sight to those. And that's really what that guidance is based upon. So there's still some degree of uncertainty as there always is, but we feel pretty good about that ramp based on having orders in hand.

Our next question comes from Jim Rollyson with Raymond James.

Girish, going back to U.S. land, has obviously been a challenging area for the last couple of years, and it seems like it's only gotten a bit worse this year with the macro situation. Maybe just my recollection is for Weatherford, you guys have been more tied here recently to the production side versus drilling or completions but maybe you could refresh kind of that mix and what you're seeing. And also if there's any quantification you might have, you mentioned tariffs, if there's any quantification you have on the impacts you're seeing there, too.

Yes. Jim, U.S. land has been a very steady sort of decline. You're absolutely right. We are far more product oriented in U.S. land as well as far more production product oriented. So artificial lift, obviously, is a very big part of that for us. So U.S. land was actually up, just the core U.S. land piece was actually up just a tad going from Q1 to Q2, obviously, the broader North America, offset by the Canada spring breakup and the decline.

Now look, what we see happening in Q3 is a further decline, and that's really driven by the tariff impact. We were able to consume a significant amount of free tariff inventory that we had in Q2. Interestingly enough -- it created actually a bit of a rush to get some of the orders filled before the tariffs potentially hit. So it's still a lot of uncertainty on how exactly that will play out.

And so if we do see an uptick on that, it will be because we've got more certainty there. But more than likely, we'll also have a little bit of dilution because of that tariff impact. Look, we don't really see the U.S. land market changing dramatically over the next few quarters. Our focus sort of as we get into Q4, we'll have clarity on tariffs, and we'll get into more of a stable situation versus sort of the continual decline that we've seen. And our focus has remained to be on improving our cost position, defending margins, and we're really not going to chase price. It is a hypercompetitive market. We will continue to focus on margins, drive value and then manage that through, but it is a challenging market, no question at this point.

The next question comes from Saurabh Pant with Bank of America.

Girish, maybe I want to touch on Mexico a little bit. I think it was good to hear about stability in that market. That market has moved quickly. Obviously, we know that. But maybe talk to that a little bit, Girish, that stability, how -- how you're seeing at that market? Do you think we improve in the near term? Medium term? Your line of sight to that market? And then also on the cash side of the equation, right?

I think you said you've got minimal payments coming out of Mexico, but then you do expect a ramp towards the end of the year, right? And we are seeing headlines coming out of the country saying the government might be raising money for PEMEX to just meet their balance sheet and operational obligations. So maybe just talk to those two aspects in Mexico a little bit.

Sure. Yes. Look, first of all, it's exciting that we get to the fourth question before Mexico comes up. So I think that's a [indiscernible. Look Saurabh, obviously, we've had a very significant decline in Mexico, and that's reflected in the Latin America numbers. It's reflected in the broader enterprise numbers. And then finally, the share of Mexico, right? Mexico used to be 11%, 12% of the company, and has dropped by more than 50%. So look, as we pointed out, this year, we expect it to be down 60%, but we think activity levels have now stabilized. So we really don't see a significant inflection from here to the end of the year. Given the nature of the Mexico business, there's always the sort of 1 well moves from 1 month or one quarter to the other. It causes a little bit of a variation given our size. But in sort of a broader aggregate sense, we feel pretty good about the stability of the business, and we feel very good about now how we have structured our team to respond to that activity level.

And we are now getting into a much more of an operating cadence and rhythm working very closely with our customer base, PEMEX and multiple other customers in the country to drive the operational effectiveness. On the cash side, it has been a very challenging period, as everyone understands. So as we've pointed out multiple times in our remarks, the team -- our team has done an outstanding job across the rest of the world and managing working capital to deliver the results with very few payments coming in.

We are hopeful that the second half will see a significant change. We are extremely heartened by some of the commentary coming out, and we have a high degree of confidence both in the government as well as in PEMEX that they will continue to work with us and the rest of the industry in managing the payment stream and getting everyone paid. Having said all of that, it is very unclear as to the precision of timing, which is why we thought it's prudent to provide guidance but be more explicit that it really did not anticipate a significant bolus of payment. So we do expect that sometime in the second half, and we'll update you as we come back with Q3 earnings on where that really lies.

Our next question comes from James West with Melius Research.

So Girish, very curious on the -- now that your balance sheet in such great shape and you've got a kind of cash and we've got some market volatility, the M&A environment should be picking up and pricing should be better. So I'm curious to hear about kind of the pipeline, kind of what's your thinking, what you're seeing in regards to technologies that are out there or businesses that are out there that might be nice tuck-ins or bolt-ons or maybe even somewhat transformational?

And then maybe if I can throw in a second to Anuj, I'd love to get your thoughts as you're new to the company -- your initial -- these thoughts on Weatherford and its position and how you feel about the company kind of going forward? And what drove you?

Thanks, James. First of all, congratulations on the new role. So welcome back [indiscernible] in this capacity. So James, look, I think the M&A landscape is really interesting. There's some very interesting opportunities and all of you have heard me on this call for now a couple of years with my view that I think the industry has an opportunity to improve returns through consolidation. But it has to be done sensibly and it has to be done with the right returns focused. So that's what we have focused on. We've got a very robust pipeline.

And look, our predominant focus is really going to be far more probably on the well construction leading into the production segments. And if we do something in the drilling side of it, it will really be something that is augmenting our leadership position in where we've got -- where we've already got leadership. So -- but we see a very robust pipeline but these things are always a function of several variables. And most importantly, we are focused on the rigor of the length that we have put forward on making sure that it truly creates value through cash flow accretion and we have sensible valuations.

So obviously, with the way the markets evolved over the past few months, that's become a tad bit more challenging. But look, there's plenty of different opportunities. And I think what we will see over the next few quarters, hopefully, is the ability to progress on some of those conversations. But again, with the intent that it has to have a strategic fit and the ability to create exaggerated value beyond just sort of the obvious math. So that's kind of how we look at it. I'll let Anuj take the second part.

Sure. Thanks for the question, James. So today is my 3-month anniversary and so very happy to be celebrating here on this call with you all.

So you asked 2 questions, James. I'll maybe take the second one first, why Weatherford? And so in the spirit of brevity, I'll say there's a solid foundation in place. We have a very strong balance sheet here. We have a hard work and culture. There's a lot going on in the company to improve upon and ensure, I think, significant opportunity exists. And so really focusing now on your first question around what are my key priorities. I'd say there's 4 key items. First is capital allocation and long-term balance sheet strength. You heard me talk in Q1 and my second day here on the fortress balance sheet that we have here. This gives us flexibility and optionality, and this view is unchanged.

Second, it's to drive free cash flow and margins. And right now, there's a lot of focus on cost -- cyclical costs, but we're also looking at structural cost improvements to drive longer-term efficiencies. I'd say as part of the free cash flow initiatives, there's numerous other initiatives underway in the company on optimizing working capital. And essentially, the aim is to further create a cash and margin mindset throughout the company. As Girish mentioned, this is our North Star.

Third, I'd say, simplification. So further building out our processes, utilizing systems and technology. I tell my team that speed is a strategy. And by improving these technologies and systems, it essentially allows us to move with speed and remain nimble. And then lastly, the key for me is to be a very strong business partner and to create more operational bandwidth, which ultimately will enable greater bandwidth for Girish as well to spend more time to focus on broader strategic themes.

Our next question comes from Doug Becker with Capital One.

Girish, you mentioned pricing pressure, which countries and what product lines is this most acute? And then separately, how would you frame the benefits from the incremental cost out measures being taken?

Yes. Doug, look, pricing we've talked about in the past, North America is clearly some place where we're seeing that. We see a lot of pressure, especially as the volumes come down, the rate count goes down. But that's something that we are very used to. On the international side, I would say we are starting to see a few pockets, and it's in multiple regions, but I am continuously hopeful that the discipline that the industry has had over the past few years will maintain.

And I think given the fact that as an industry, we didn't build up a whole ton of spare capacity, I think should keep us in good stead as we go through it. But clearly, there is a little bit greater emphasis on that. But look, we remain very focused on maintaining margins and really, pricing is the first and most significant lever on that.

From a segment standpoint, it's probably most noticeable, I would say, on the service businesses, which have seen the most decline. So really the DRE segment -- and it's natural because with some of the activity declines in some regions, you've got excess tool capacity for multiple players, and they can get re-deployed into other parts of the world. So that's really what's happening.

To your other question, Doug, look, what we are doing right now, as we mentioned on the call, we're really driving our cost focus in a very thoughtful and systematic fashion and making sure that whatever we end up with is also scalable in addition to giving us the margin benefit. So look, up until now, I would say, so far, the first 6 months, it's really been an offset to the revenue declines. And given the detrimentals on the service piece, we haven't been able to quite match that. So we've seen a little bit of that margin degradation. But I would say, look, going forward, what we really get into with these cost reductions is the thesis of order of magnitude, 25 to 75 bps per year on an annualized basis of productivity. And I think we'll start to see that as we get into '26 and beyond on sort of flattish volumes.

Our next question comes from Derek Podhaizer with Piper Sandler.

So you highlighted the $1.3 billion of liquidity, $1 billion of cash. You continue to reduce debt opportunistically. Can you maybe expand on your strategy with the balance sheet from here, just thinking about continued debt reduction and potentially refinancing? Just maybe expand on balance sheet liquidity strategy, if you could.

Yes, sure. Look, for us, it's really not changed, but I'll let Anuj, maybe talk a little bit more about the specifics if you want to [indiscernible].

Sure. Thanks. So I'll take the time again to emphasize the comments you just made, Derek, around our balance sheet. As mentioned on the call, we have $1.3 billion of liquidity, which is the greatest or most liquidity we've had on our balance sheet since emergence. We have over $1 billion of cash. The team has done a great job over the last several years to bring down our net debt-to-EBITDA ratio. We currently sit at 0.49x. So all in all, we have a very robust balance sheet. It gives us optionality. It gives us flexibility as well.

From a metric standpoint, taking a step back, we have communicated that our intent in the long run is to target a gross leverage ratio -- gross leverage to EBITDA ratio of about 1 turn. And so we will continue to be opportunistic in the market to continue reducing debt as we see feasible and economical. If you look at our current actions in H1, we repurchased around $61 million of our 8.625% notes already. And we're in the market to just continuing to be opportunistic to see when we will do more open market repurchases.

With regards to more of our long-term structural notes, we are in a position of strength. We have ample time before 2030 to go and address our notes. However, we do have a step down in October of this year. And so it will be even more attractive to potentially pursue refinancing thereafter. But there's really 4 key things that we look for when it comes to refinancing our 2030 notes. First, it's to reduce our overall tower size from $1.6 billion to towers that are a bit smaller and a bit more manageable.

Second is to manage our maturity profile by pushing out the towers a bit further and breaking out the size. Third, it's the lower our interest expense, and this ties back to our focus on free cash flow and driving cash outcomes. And lastly, it's to review and really eliminate and revise some of the covenants we had in place since emergence on the notes going forward.

Our next question comes from Ati Modak with Goldman Sachs.

Argentinian asset sales, is there a way to quantify that? And then are there other parts of the portfolio that could be optimized as you think about the strategic aspects of cost in the business?

Yes. I'll talk for the second part first, Ati, if that's okay. So look, we've talked about this multiple times, and it's sort of the philosophy we took of -- we really want to focus on the intersection of product line and country. And that's what we've been doing and really driving businesses that are sustainable over the long term from a cash generation standpoint. So we've been systematically over the past 5 years working through businesses that were unprofitable, that were thought to be strategic, but didn't make money, and we said there's nothing strategic about losing money.

So we've got an out of most of those. And now we are sort of on these last few things that are a significant cash [indiscernible]. So Argentina was the most significant one. The pressure pumping business as well as some of the slickline and wireline businesses in Southern Argentina that were atrophying. So we executed on that earlier this year. There's, I would say, a few more that we have that are not anywhere close to the size of the Argentina divestiture but much smaller ones that we continue to have a dialogue on and determine the best path forward on whether we sort of simply exit or we find a optionality for sale of the business or something like that, but they're much, much smaller.

Now the combined set of divestiture on Argentina, it's a little bit of a difficult thing because it didn't exist in Q2, and those then get into projections of how much we thought it would be. So probably the best comparison is sort of the sequential impact, sort of normalizing, so taking it out of Q1 as well. If we had done that, then the delta between Q1 and Q2 would have been an order of magnitude at a 5-ish percent of our sequential revenue increase and sequential EBITDA increase. So that's sort of the order of magnitude of the business.

But look, ultimately, again, the reason we decided to make this change was: one, it was an important strategic action for the customers that we ended up selling the business to. And secondly, this was a business that was going to be extremely capital intensive as we went into 2026. And so from an economic basis, on a cash flow basis, made a lot of sense for us.

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

I wanted to focus my question on MPD. And as it pertains to deepwater, could you talk about the opportunity set today for Weatherford. You highlighted a 3-year deepwater development project in Mexico and then also in Aramco awarded for onshore and offshore. Are customers still evaluating incremental opportunities that MPD equipment at the same pace they have been? And could you speak to how MPD equipment is evolving and how you expect it to improve going forward?

Yes, sure, Josh. Look, it's just a product line we continue to be extremely bullish on and a lot of the case studies and literature that we put out on this papers that we're putting out really point to the efficacy of MPD as a mechanism, not just to improve drilling outcomes, but in additional areas, so this concept of transitioning from managed pressure drilling to really a more holistic concept of managed pressure wells, we think is very significant for the industry.

So on the deepwater side, we have a very strong leadership position and we are very committed to maintaining that. What we are seeing is a fair degree of interest and a lot of different tender and quotation activity. So essentially, what that really means is multiple systems that have been quoted a combination of capital sales and rentals. Now what we don't really see is any of this coming to fruition from a revenue standpoint, if you will, up until, I would say, the second half of next year, but certainly into the second half of next year, then going into 2027, we think there will be a significant uptick in activity.

So we are seeing MPD become a differentiator for rig operators to make sure that they've got the capability and upgrading systems from Gen 1 to Gen 2, potentially Gen 3 and we've got very strong technology leadership there. So a big push on that, lots of different activity, but it will take a little bit more time for that to come to fruition. But we are seeing some things like the project that we announced in Mexico with an IOC, which look is critical, not just for -- it's a 3-year contract to provide MPD services, it's very significant, but it's also a testament to the diversification of the revenue base in Mexico.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Great. Thank you all for joining. Again, I appreciate all of the interest, and we look forward to coming back in 90 days with an update on the third quarter. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.