Company Quick10K Filing
Quick10K
Weatherford
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.38 1,003 $381
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
8-K 2019-07-03 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-07-01 Enter Agreement, Bankruptcy, Off-BS Arrangement, Officers, Regulation FD, Other Events, Exhibits
8-K 2019-06-28 Regulation FD, Exhibits
8-K 2019-06-25 Shareholder Vote
8-K 2019-05-17 Enter Agreement, Regulation FD, Exhibits
8-K 2019-05-16
8-K 2019-05-13 Enter Agreement, Regulation FD, Exhibits
8-K 2019-04-30 Regulation FD, Exhibits
8-K 2019-04-02 Officers, Exhibits
8-K 2019-03-25 Other Events, Exhibits
8-K 2019-02-19
8-K 2019-02-12 Regulation FD
8-K 2019-02-01 Earnings, Regulation FD, Exhibits
8-K 2018-12-14 Regulation FD, Exhibits
8-K 2018-12-07 M&A, Exhibits
8-K 2018-11-27 Regulation FD
8-K 2018-10-29 Earnings, Regulation FD, Exhibits
8-K 2018-10-22 Enter Agreement, Regulation FD, Exhibits
8-K 2018-09-05 Regulation FD
8-K 2018-08-16 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-07-27 Earnings, Regulation FD, Exhibits
8-K 2018-07-11 Enter Agreement, Regulation FD, Exhibits
8-K 2018-06-06 Regulation FD
8-K 2018-05-22 Regulation FD
8-K 2018-04-30 Shareholder Vote
8-K 2018-04-24 Earnings, Regulation FD, Exhibits
8-K 2018-03-26 Regulation FD
8-K 2018-03-12 Officers, Regulation FD, Exhibits
8-K 2018-03-09 Officers
8-K 2018-03-05 Enter Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2018-02-23 Enter Agreement, Regulation FD, Exhibits
8-K 2018-02-21 Regulation FD, Exhibits
8-K 2018-02-13 Regulation FD
8-K 2018-02-02 Earnings, Regulation FD, Exhibits
8-K 2018-01-29 Regulation FD, Exhibits
FCNCA First Citizens Bancshares 5,100
STAY Extended Stay America 3,410
GRBK Green Brick Partners 471
BCLI Brainstorm Cell Therapeutics 119
NAII Natural Alternatives International 103
LONE Lonestar Resources 88
GMO General Moly 24
IHT Innsuites Hospitality Trust 15
LNGG Linn Energy 0
WLUC Zhong Ya 0
WFT 2019-06-30
Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 ex311ceo302certwft0630.htm
EX-31.2 ex312cfo302certwft0630.htm
EX-32.1 ex321ceo906certwft0630.htm
EX-32.2 ex322cfo906certwft0630.htm

Weatherford Earnings 2019-06-30

WFT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Wdesk | Document
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UNITED STATES
 
 
SECURITIES AND EXCHANGE COMMISSION
 
 
WASHINGTON, D.C. 20549
 
(Mark One)
 
Form
10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended
June 30, 2019
 
 
 
 
or
 
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from __________________________________to __________________________________
 
 
Commission file number
001-36504
 
 
Weatherford International public limited company
(Exact Name of Registrant as Specified in Its Charter)
Ireland
 
98-0606750
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
 
Westrasse 1
,
6340 Barr
,
Switzerland
 
CH 6340
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s Telephone Number, Including Area Code: 41.22.816.1500
 
N/A
 
 
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Ordinary shares, $0.001 par value per share
WFTIQ
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                      Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                                     Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
þ
 
Accelerated filer
 
Non-accelerated filer
 
Smaller reporting company
 
Emerging growth company
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No þ
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
As of July 29, 2019, there were 1,004,079,258 Weatherford ordinary shares, $0.001 par value per share, outstanding.




Weatherford International public limited company
Form 10-Q for the Second Quarter and Six Months Ended June 30, 2019

TABLE OF CONTENTS
PAGE
 
 
 
 
 


1


Table of Contents

PART I FINANCIAL INFORMATION
Item 1. Financial Statements.

WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(Dollars and shares in millions, except per share amounts)
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Products
$
498

 
$
462

 
$
994

 
$
963

Services
811

 
986

 
1,661

 
1,908

Total Revenues
1,309

 
1,448

 
2,655

 
2,871

 
 
 
 
 
 
 
 
Costs and Expenses:
 
 
 
 
 
 
 
Cost of Products
467

 
414

 
935

 
879

Cost of Services
552

 
729

 
1,166

 
1,409

Research and Development
36

 
37

 
72

 
75

Selling, General and Administrative Attributable to Segments
215

 
199

 
414

 
399

Corporate General and Administrative
32

 
34

 
64

 
70

Goodwill Impairment
102

 

 
331

 

Prepetition Charges
76

 

 
86

 

Asset Write-Downs and Other
41

 
70

 
78

 
88

Transformation, Facility Restructuring and Severance Charges
20

 
38

 
40

 
63

Gain on Sale of Businesses, Net
(114
)
 

 
(112
)
 

Total Costs and Expenses
1,427

 
1,521

 
3,074

 
2,983

 
 
 
 
 
 
 
 
Operating Loss
(118
)
 
(73
)
 
(419
)
 
(112
)
 
 
 
 
 
 
 
 
Other Income (Expense):
 
 
 
 
 
 
 
Interest Expense, Net
(160
)
 
(152
)
 
(315
)
 
(301
)
Warrant Fair Value Adjustment

 
10

 

 
56

Bond Tender and Call Premium

 

 

 
(34
)
Currency Devaluation Charges

 
(11
)
 

 
(37
)
Other Expense, Net
(1
)
 
(7
)
 
(10
)
 
(15
)
 
 
 
 
 
 
 
 
Loss Before Income Taxes
(279
)
 
(233
)
 
(744
)
 
(443
)
Income Tax Provision
(33
)
 
(26
)
 
(45
)
 
(58
)
Net Loss
(312
)
 
(259
)
 
(789
)
 
(501
)
Net Income Attributable to Noncontrolling Interests
4

 
5

 
8

 
8

Net Loss Attributable to Weatherford
$
(316
)
 
$
(264
)
 
$
(797
)
 
$
(509
)
 
 
 
 
 
 
 
 
Loss Per Share Attributable to Weatherford:
 
 
 
 
 
 
 
Basic & Diluted
$
(0.31
)
 
$
(0.26
)
 
$
(0.79
)
 
$
(0.51
)
 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding:
 
 
 
 
 
 
 
Basic & Diluted
1,004

 
997

 
1,003

 
995


The accompanying notes are an integral part of these condensed consolidated financial statements.
2


Table of Contents

WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions)
2019
 
2018
 
2019
 
2018
Net Loss
$
(312
)
 
$
(259
)
 
$
(789
)
 
$
(501
)
 
 
 
 
 
 
 
 
Currency Translation Adjustments
30

 
(166
)
 
63

 
(161
)
Defined Benefit Pension Activity

 
1

 

 
1

Other Comprehensive Income
30

 
(165
)
 
63

 
(160
)
Comprehensive Loss
(282
)
 
(424
)
 
(726
)
 
(661
)
Comprehensive Income Attributable to Noncontrolling Interests
4

 
5

 
8

 
8

Comprehensive Loss Attributable to Weatherford
$
(286
)
 
$
(429
)
 
$
(734
)
 
$
(669
)

The accompanying notes are an integral part of these condensed consolidated financial statements.
3


Table of Contents

WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
June 30,
 
December 31,
(Dollars and shares in millions, except par value)
2019
 
2018
 
(Unaudited)
 
 
Current Assets:
 
 
 
Cash and Cash Equivalents
$
618

 
$
602

Accounts Receivable, Net of Allowance for Uncollectible Accounts of $120 at June 30, 2019 and $123 at December 31, 2018
1,226

 
1,130

Inventories, Net
1,081

 
1,025

Other Current Assets
476

 
428

Assets Held for Sale
5

 
265

Total Current Assets
3,406

 
3,450

 
 
 
 
Property, Plant and Equipment, Net of Accumulated Depreciation of $6,048 at June 30, 2019 and $5,786 at December 31, 2018
1,984

 
2,086

Goodwill
403

 
713

Other Non-Current Assets
588

 
352

Total Assets
$
6,381

 
$
6,601

 
 
 
 
Current Liabilities:
 
 
 
Short-term Borrowings and Current Portion of Long-term Debt
$
930

 
$
383

Accounts Payable
735

 
732

Accrued Salaries and Benefits
263

 
249

Income Taxes Payable
186

 
214

Other Current Liabilities
775

 
722

Total Current Liabilities
2,889

 
2,300

 
 
 
 
Long-term Debt
7,366

 
7,605

Other Non-Current Liabilities
515

 
362

Total Liabilities
10,770

 
10,267

 
 
 
 
Shareholders’ Deficiency:
 
 
 
Shares - Par Value $0.001; Authorized 1,356 shares, Issued and Outstanding 1,004 shares at June 30, 2019 and 1,002 shares at December 31, 2018
$
1

 
$
1

Capital in Excess of Par Value
6,724

 
6,711

Retained Deficit
(9,468
)
 
(8,671
)
Accumulated Other Comprehensive Loss
(1,683
)
 
(1,746
)
Weatherford Shareholders’ Deficiency
(4,426
)
 
(3,705
)
Noncontrolling Interests
37

 
39

Total Shareholders’ Deficiency
(4,389
)
 
(3,666
)
Total Liabilities and Shareholders’ Deficiency
$
6,381

 
$
6,601

 

The accompanying notes are an integral part of these condensed consolidated financial statements.
4


Table of Contents

WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
Six Months Ended June 30,
(Dollars in millions)
2019
 
2018
Cash Flows From Operating Activities:
 
 
 
Net Loss
$
(789
)
 
$
(501
)
Adjustments to Reconcile Net Loss to Net Cash From Operating Activities:
 
 
 
Depreciation and Amortization
239

 
291

Goodwill Impairment
331

 

Employee Share-Based Compensation Expense
14

 
27

Long-Lived Asset Impairments
20

 
92

Inventory Write-off and Other Related Charges
18

 
64

Asset Write-Downs and Other Charges
40

 
17

Gain on Sale Businesses, Net
(112
)
 

Bond Tender and Call Premium

 
34

Currency Devaluation Charges

 
37

Warrant Fair Value Adjustment

 
(56
)
Other, Net
28

 
(45
)
Change in Operating Assets and Liabilities, Net of Effect of Businesses Acquired:
 
 
 
Accounts Receivable
(84
)
 
(78
)
Inventories
(87
)
 
(7
)
Other Current Assets
(93
)
 
(35
)
Accounts Payable
(3
)
 
(81
)
Accrued Litigation and Settlements
(9
)
 
(23
)
Other Current Liabilities
(25
)
 
(28
)
Other, Net
34

 
(23
)
Net Cash Used in Operating Activities
(478
)
 
(315
)
 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Capital Expenditures for Property, Plant and Equipment
(114
)
 
(86
)
Acquisitions of Businesses, Net of Cash Acquired

 
4

Acquisition of Intellectual Property
(9
)
 
(7
)
Proceeds from Sale of Assets
45

 
50

Proceeds from Sale of Businesses, Net
301

 
25

Net Cash Provided by (Used in) Investing Activities
223

 
(14
)
 
 
 
 
Cash Flows From Financing Activities:
 
 
 
Borrowings of Long-term Debt

 
588

Repayments of Long-term Debt
(17
)
 
(455
)
Borrowings of Short-term Debt, Net
298

 
87

Bond Tender Premium

 
(34
)
Other Financing Activities
(12
)
 
(14
)
Net Cash Provided by Financing Activities
269

 
172

Effect of Exchange Rate Changes on Cash and Cash Equivalents
2

 
(41
)
 
 
 
 
Net Increase (Decrease) in Cash and Cash Equivalents
16

 
(198
)
Cash and Cash Equivalents at Beginning of Period
602

 
613

Cash and Cash Equivalents at End of Period
$
618

 
$
415

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Interest Paid
$
224

 
$
273

Income Taxes Paid, Net of Refunds
$
51

 
$
66

 

The accompanying notes are an integral part of these condensed consolidated financial statements.
5


Table of Contents
WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.  General

The accompanying unaudited Condensed Consolidated Financial Statements of Weatherford International plc (the “Company,” “Weatherford” or “Weatherford Ireland”) are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and include all adjustments, consisting of normal recurring adjustments, which in our opinion, are considered necessary to present fairly our Condensed Consolidated Balance Sheets at June 30, 2019 and December 31, 2018, Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2019 and 2018 and Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018. When using phrases such as “we,” “us,” and “our,” the intent is to refer to Weatherford International plc, a public limited company organized under the law of Ireland, and its subsidiaries as a whole or on a regional basis, depending on the context in which the statements are made.
Although we believe the disclosures in these financial statements are adequate, certain information relating to our organization and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in this Form 10-Q pursuant to U.S. Securities and Exchange Commission (“SEC”) rules and regulations. These financial statements should be read in conjunction with the audited Consolidated Financial Statements for the year ended December 31, 2018 included in our Annual Report on Form 10-K. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results expected for the year ending December 31, 2019 for which we expect to file the related Annual Report on Form 10-K as an accelerated filer, our first period affected by the change in filing status based on our public float as of the last business day of our second fiscal quarter of 2019.
Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, the reported amounts of revenues and expenses during the reporting period, and disclosure of contingent assets and liabilities.

On an on-going basis, we evaluate our estimates and assumptions, including those related to uncollectible accounts receivable, lower of cost or net realizable value of inventories, assets and liabilities held for sale, derivative financial instruments, intangible assets and goodwill, property, plant and equipment (“PP&E”), right-of-use (“ROU”) lease assets, income taxes, accounting for long-term contracts, self-insurance, foreign currency exchange rates, lease liabilities, pension and post-retirement benefit plans, disputes, litigation, contingencies and share-based compensation. We base our estimates on historical experience, adjusted for current conditions if necessary, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Principles of Consolidation

We consolidate all wholly owned subsidiaries and controlled joint ventures. All material intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

Certain reclassifications of the financial statements and accompanying footnotes for the three and six months ended June 30, 2018 have been made to conform to the presentation for the three and six months ended June 30, 2019. See “Note 3 – New Accounting Pronouncements” for additional details regarding accounting changes impacting the Condensed Consolidated Financial Statements.


6


Table of Contents

2. Chapter 11 Proceedings and Ability to Continue as a Going Concern

Voluntary Reorganization Under Chapter 11 of the U.S. Bankruptcy Code

On July 1, 2019, Weatherford Ireland, Weatherford International Ltd. (“Weatherford Bermuda”), and Weatherford International, LLC (“Weatherford Delaware”) (collectively, “Weatherford Parties,” or “Debtors”), filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code (“Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”). The Debtors have obtained joint administration of their Chapter 11 cases under the caption In re Weatherford International plc, et al., Case No. 19-33694 (“Cases”). On June 28, 2019, the Debtors commenced a solicitation for acceptance of their prepackaged plan of reorganization (“Plan”) by causing the Plan and the corresponding disclosure statement to be distributed to certain creditors of the Company.

Weatherford Ireland anticipates filing a petition under the Irish Companies Act 2014 in Ireland (“Irish Examinership Proceeding”) following confirmation of the Plan by the Bankruptcy Court to seek approval for its scheme of arrangement. The filing of the Irish Examinership Proceeding will commence a 100 calendar day protection period under Irish law, during which Weatherford Ireland will have the benefit of protection against enforcement and other actions by its creditors. Weatherford Ireland intends to continue operating its business in the ordinary course during the protection period.

Weatherford Bermuda has commenced provisional liquidation proceedings (“Bermuda Proceedings”) pursuant to the Bermuda Companies Act 1981 by presenting a winding up petition to the Supreme Court of Bermuda (“Bermuda Court”). The Bermuda Court appointed a provisional liquidator who acts as an officer of the Bermuda Court, and is required under the Bermuda Court’s order to report from time to time on the progress of the Bermuda Proceedings. The provisional liquidator will have the power to oversee Weatherford Bermuda’s restructuring process. The Debtors’ management team and board of directors will remain in control of Weatherford Bermuda’s day-to-day operations and its Cases. The appointment of the provisional liquidator provided an automatic statutory stay of proceedings in Bermuda against Weatherford Bermuda and its assets. On the return date of September 6, 2019 for the Bermuda petition – similar to a second day hearing in a Chapter 11 proceeding – Weatherford Bermuda will seek to postpone its petition for a specified period, while the U.S. Bankruptcy Court and the Irish Examiner administer its Cases. Before the Debtors emerge from Chapter 11, Weatherford Bermuda may, along with the provisional liquidator and subject to the direction of the Bermuda Court, convene meetings of the impaired creditors in order to consider and approve, if appropriate, a scheme of arrangement pursuant to the Bermuda Companies Act 1981. It is anticipated that a the terms of the scheme will mirror the terms of the Plan and once properly approved, is a mechanism for ensuring that all of  the impaired creditors of Weatherford Bermuda are bound by the terms of the Plan.

Our remaining non-debtor affiliates that have not filed voluntary petitions under the Plan will continue operating their businesses and facilities without disruption to customers, vendors, partners or employees. The Plan and requested first day relief provide that vendors and other unsecured creditors who continue to work with the non-debtor affiliates on existing terms will be paid in full and in the ordinary course of business (in the case of creditors of the Debtors, following consummation of the Plan). All existing customer and vendor contracts are expected to remain in place and be serviced in the ordinary course of business.

Subject to certain exceptions, under the Bankruptcy Code, the filing of the Cases automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the date of the Cases. All of the Debtors’ prepetition unsecured senior notes are subject to compromise and treatment under the Bankruptcy Code. Since the commencement of the Cases, the Debtors have continued to operate their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

Restructuring Support Agreement

On May 10, 2019, the Debtors entered into the Restructuring Support Agreement (“RSA”) with certain holders of our unsecured notes (“Consenting Creditors”). The RSA sets forth, subject to certain conditions, the terms of the capital financial restructuring of the Company (“Transaction”) and, as of July 12, 2019, includes the commitment of Consenting Creditors holding over 80% in aggregate principal amount of our outstanding unsecured notes.

The Transaction will be approved through the confirmation of the Plan filed in the Cases.

7


Table of Contents


The RSA contemplates a comprehensive deleveraging of our balance sheet and a reduction of approximately $5.85 billion of our funded debt and provides, in pertinent part, as follows (as further described in later paragraphs):

Our existing unsecured notes will be cancelled and exchanged for 99% of the ordinary shares of the reorganized Company (“New Common Stock”) and $1.25 billion of new tranche B senior unsecured notes to be issued by the reorganized Company with a seven-year maturity. Holders shall have the option to convert up to $500 million of the tranche B unsecured notes to New Common Stock at the mid-point of plan equity value. The tranche B unsecured notes will be pari passu with the tranche A senior unsecured notes.

Our existing secured funded debt and unsecured revolving credit facility debt will be repaid in full in cash in connection with the Transaction. The secured funded debt was repaid in full on July 3, 2019.

All trade claims against the Company whether arising prior to or after the commencement of the Cases will be paid in full in the ordinary course of business.

Our existing equity will be cancelled and exchanged for 1% of the New Common Stock and three-year warrants to purchase 10% of the New Common Stock.

Our DIP Credit Agreement will be repaid or refinanced in full upon completion of the Transaction through the Company’s entry into a first lien exit revolving credit facility in the principal amount of up to $1.0 billion and issuance of up to $1.25 billion of new tranche A senior unsecured notes with a five-year maturity (the “Tranche A Notes”), which will be fully backstopped by the Consenting Creditors. On July 1, 2019, the Weatherford Parties entered into the backstop commitment agreement and on July 3, 2019, the Weatherford Parties entered into the DIP Credit Agreement.

The RSA includes certain milestones for the progress of the Cases, which include the dates by which the Weatherford Parties are required to, among other things, obtain certain court orders and complete the Transaction. In addition, the parties to the RSA will have the right to terminate the RSA and their support for the Transaction under certain circumstances, including, in the case of the Weatherford Parties, if the board of directors of any Weatherford Party determines in good faith that performance under the RSA would be inconsistent with its fiduciary duties. Accordingly, no assurance can be given that the Transaction described in the RSA will be completed.

Payments Due on Certain Indebtedness

The Debtors’ 7.75% Senior Notes due 2021, 8.25% Senior Notes due 2023 and 6.80% Senior Notes due 2037 (together, “Certain Senior Notes”) provide for an aggregate $69 million interest payment that became due on June 15, 2019. The applicable indenture governing the Certain Senior Notes provides a 30-day grace period that extended the latest date for making this interest payment to July 16, 2019, before an event of default would occur under the applicable indenture. The Debtors elected to not make this interest payment on the due date and to utilize the 30-day grace period provided by the indentures. As of June 30, 2019, there was no event of default. As a result of filing the Cases on July 1, 2019, an event of default occurred under each indenture governing these unsecured notes, which automatically accelerated maturity of the principal, plus any accrued and unpaid interest, on such series of unsecured notes and certain other obligations of the Debtors. Any efforts to enforce such payment obligations under the unsecured notes or other accelerated obligations of the Debtors are automatically stayed as a result of the Cases, and the creditors’ rights of enforcement in respect of the unsecured notes and other accelerated obligations of the Debtors are subject to the applicable provisions of the Bankruptcy Code. The interest and principal on this indebtedness remains unpaid as of this report date.

The Debtors’ Term Loan Agreement required a quarterly payment of $12.5 million plus interest that became due on June 30, 2019 and was unpaid as of June 30, 2019. On July 1, 2019, the Debtors and the Term Loan Lenders entered into a Term Loan Forbearance Agreement where the lenders agreed to forbear from exercising their rights and remedies available to them, including the right to accelerate any indebtedness, for a specified period of time. As of July 3, 2019, all unpaid principal and interest under the Term Loan Agreement were repaid in full. See discussion below.


8


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Forbearance Agreements

On July 1, 2019, the Debtors and the Credit Agreement Lenders under the Amended and Restated Credit Agreement (the “A&R Credit Agreement”), dated as of May 9, 2016, among WOFS Assurance Limited and Weatherford Bermuda, as borrowers, the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto entered into a forbearance agreement (the “Credit Agreement Forbearance Agreement”) with respect to certain defaults under the A&R Credit Agreement, including those arising from the Debtors’ commencement of the Cases. Specifically, under the Credit Agreement Forbearance Agreement, the Credit Agreement Lenders agreed to forbear from exercising their rights and remedies available to them due to the Specified Defaults defined in the agreement, including the right to accelerate any indebtedness, for a specified period of time. Under the terms of the Credit Agreement Forbearance Agreement, the Debtors paid a fee for the ratable account of the Credit Agreement Lenders in an amount equal to 0.25% on the outstanding principal amount of the loans and total letter of credit exposure under the A&R Credit Agreement. Additionally, (i) to the extent such entities were not already guarantors under the Credit Agreement, all subsidiaries of the Company who are guarantors under the DIP Credit Agreement (defined below) joined as guarantors under the Credit Agreement and (ii) all U.S. and Canadian subsidiaries of the Company granted a second lien security interest in favor of the Credit Agreement Lenders in the same assets that such U.S. and Canadian subsidiaries pledged a first lien security interest in under the DIP Credit Agreement; provided that the aggregate amount of the guaranteed obligations to be secured under the Credit Agreement did not exceed $100 million; and provided, further, that if the obligations under the A&R Credit Agreement are not paid in full by November 30, 2019, such second lien security interest of the Credit Agreement Lenders shall automatically transition from second liens to pari passu liens with the liens under the DIP Credit Agreement.

On July 1, 2019, the Debtors and the Term Loan Lenders under the Term Loan Agreement, dated as of May 4, 2016, among Weatherford Bermuda, as borrower, the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto (the “Term Loan Agreement”) entered into a forbearance agreement (the “Term Loan Forbearance Agreement”) with respect to certain defaults under the Term Loan Agreement. Specifically, under the Term Loan Forbearance Agreement, the Term Loan Lenders agreed to forbear from exercising their rights and remedies available to them due to the Specified Defaults defined in the agreement, including the right to accelerate any indebtedness, for a specified period of time. On July 3, 2019, the Company repaid its outstanding indebtedness under the Term Loan.

On July 1, 2019, the Debtors and the 364-Day Lenders under the 364-Day Revolving Credit Agreement, dated August 16, 2018, among Weatherford Bermuda, as borrower, the other borrowers party thereto, the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto (“364-Day Credit Agreement”) entered into a forbearance agreement (the “364-Day Revolving Forbearance Agreement”) with respect to certain defaults under the 364-Day Credit Agreement. Specifically, under the 364-Day Revolving Forbearance Agreement, the 364-Day Lenders agreed to forbear from exercising their rights and remedies available to them due to the Specified Defaults defined in the agreement, including the right to accelerate any indebtedness, for a specified period of time. On July 3, 2019, the Company repaid its outstanding indebtedness under the 364-Day Revolving Credit Agreement.

On July 1, 2019, the Debtors and three lenders under the DIP Credit Agreement (the “Swap Counterparties”) each party to a hedging agreement with Weatherford Bermuda for the purpose of hedging foreign currency exposure incurred by the Weatherford Parties (each, a “Swap Agreement” and, collectively, the “Swap Agreements”) entered into a consent to swap agreement termination forbearance (the “Swap Forbearance Agreement”) with respect to certain defaults under the Swap Agreements. Specifically, under the Swap Forbearance Agreement, the Swap Counterparties agreed to forbear from exercising their rights and remedies available to them due to certain Events of Default and Termination Events defined in the agreements for a specified period of time. On July 3, 2019, the Weatherford Parties entered into amended and restated Swap Agreements with such Swap Counterparties to govern existing and future foreign currency transactions entered into with such Swap Counterparties.

Backstop Commitment Agreement

On July 1, 2019, the Weatherford Parties and the commitment parties thereto (the “Commitment Parties”) entered into a Backstop Commitment Agreement. Pursuant to the terms of the Debtors’ Plan, and subject to approval by the Bankruptcy Court in connection with confirmation of the Plan, the Company intends to offer to holders of its existing unsecured notes, including the Commitment Parties, subscription rights to purchase the Tranche A Notes in aggregate principal amount of $1.25 billion, upon the Company’s emergence from bankruptcy.

Subject to the terms and conditions contained in the Backstop Commitment Agreement, the Consenting Creditors have committed to purchase any Tranche A Notes that are not duly subscribed for pursuant to the rights offering at a price equal to $1,000 per $1,000 in principal amount of the Tranche A Notes purchased by such Commitment Party. As consideration for the

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commitment by the Commitment Parties, the Weatherford Parties made an aggregate payment in an amount equal to $62.5 million in cash to the Commitment Parties. Except under certain circumstances set forth in the Backstop Commitment Agreement, such payment is non-refundable, regardless of the principal amount of unsubscribed Tranche A Notes (if any) purchased by the Commitment Parties.

The transactions contemplated by the Backstop Commitment Agreement are conditioned upon the satisfaction or waiver of customary conditions for transactions of this nature, including, without limitation, that (i) the Bankruptcy Court shall have approved the rights offering, (ii) the Bankruptcy Court shall have confirmed the Plan and (iii) the rights offering shall have been conducted, in all material respects, in accordance with the approval of the Bankruptcy Court, the Plan and the Backstop Commitment Agreement attached as an exhibit thereto.

Debtor-in-Possession Credit Agreement

On July 3, 2019, the Weatherford Parties entered into a senior secured superpriority debtor-in-possession credit agreement (the “DIP Credit Agreement”). The DIP Credit Agreement has two debtor-in-possession (“DIP”) facilities to provide liquidity during the pendency of the Cases. The facilities consist of (a) a DIP revolving credit facility in the principal amount of up to $750 million provided by banks or other lenders and (b) a DIP term loan facility in the amount of up to $1.0 billion, which is fully backstopped by the Consenting Creditors. The DIP Credit Agreement will mature on the earlier of (i) the date that is 12 months after the Weatherford Parties’ entry into the DIP Credit Agreement or (ii) the date of completion of the Transaction. The DIP Credit Agreement bears interest (i) with respect to Eurodollar borrowings, based on an adjusted LIBOR rate plus an applicable margin of 3.00%, with a 0.00% LIBOR floor and (ii) with respect to alternate base rate borrowings, a base rate plus an applicable margin of 2.00%. In addition to paying interest on outstanding principal amounts under the DIP Credit Agreement, the Debtors will be required to pay an unused commitment fee to the revolving facility lenders in respect of the unutilized DIP revolving facility commitments at a rate equal to 0.375% per annum on the average daily amount of the unutilized revolving facility commitments.

The DIP Credit Agreement has a minimum liquidity covenant of $150 million and is secured by substantially all the personal assets and properties of the Debtors and certain of their subsidiaries. The DIP Credit Agreement is also guaranteed on an unsecured basis by certain other subsidiaries of the Debtors.

On July 3, 2019, the Debtors borrowed approximately $1.4 billion under the DIP Credit Agreement and the proceeds of the borrowings under the DIP Credit Agreement were used to repay certain prepetition indebtedness, cash collateralize certain obligations with respect to letters of credit and similar instruments and finance the working capital needs and general corporate purposes of the Debtors and certain of their subsidiaries. On July 3, 2019, the Company repaid all outstanding amounts due under the secured Term Loan Agreement and 364-Day Credit Agreement totaling approximately $616 million with borrowings from our DIP Credit Agreement. In addition, we cash collateralized approximately $271 million of letters of credit and similar instruments with borrowings from the DIP Credit Agreement. See “Note 11 – Short-term Borrowings and Other Debt Obligations” for additional details.

Prepetition Charges

Expenses, gains and losses that are realized or incurred before July 1, 2019 and in relation to the Cases are recorded under the caption “Prepetition Charges” on our Condensed Consolidated Statements of Operations. These charges were $76 million in the second quarter ended June 30, 2019 and $86 million for the six months ended June 30, 2019, and primarily consisted of professional and other fees related to the Cases.
   
Liquidity Concerns and Actions to Address Liquidity Needs; Going Concern

Our bond and share price decline, as well as our declining credit ratings, have over time increased the level of uncertainty in our business and have impacted various key stakeholders, including our employees, our customers and suppliers, and our key lenders. Continued weak industry conditions have negatively impacted our results of operations and cash flows and may continue to do so in the future. In order to decrease our level of indebtedness and maintain the liquidity at levels we believed would be sufficient to meet our commitments, we undertook a number of actions, including minimizing capital expenditures and further reducing our recurring operating expenses. Ultimately, we concluded, even after taking these actions, we would not have sufficient liquidity to satisfy our debt service obligations and meet other financial obligations as they came due. As a result, on May 10, 2019, we announced the Company’s execution of the RSA and on July 1, 2019 the Debtors filed the Cases. We expect the DIP Credit Agreement should provide sufficient liquidity for the Company during the pendency of the Cases.


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Industry conditions and the risks and uncertainties associated with the Cases, raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements have been prepared in conformity with U.S. GAAP which contemplate the continuation of the Company as a going concern. There are no assurances that the Transaction as described in the RSA and the Plan will be completed successfully.

As of June 30, 2019, our unaudited Condensed Consolidated Financial Statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. In addition, our unaudited Condensed Consolidated Financial Statements do not reflect any adjustments related to bankruptcy or liquidation accounting.

Appeal of New York Stock Exchange Determination to Delist our Ordinary Shares

Our ordinary shares are registered on the New York Stock Exchange (the “NYSE”) and were previously traded on the NYSE under the symbol “WFT.” As a result of our failure to satisfy the continued listing requirements of the NYSE, on May 13, 2019, the NYSE suspended trading in our ordinary shares and commenced procedures to delist us, which the Company has appealed. Following the NYSE’s suspension of trading of our ordinary shares, the Company’s ordinary shares commenced trading on the OTC Bulletin Board or “pink sheets” market on May 14, 2019 under the symbol “WFTIF.” After filing the Cases on July 1, 2019, our ordinary shares began trading under the symbol “WFTIQ.”

3. New Accounting Pronouncements

Accounting Changes

Effective January 1, 2019, we adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) issued by the Financial Accounting Standards Board (“FASB”) in February 2016 and the series of related updates that followed (collectively referred to as “Topic 842”), which requires a lessee to recognize a ROU lease asset and lease liability for all qualifying leases with terms longer than twelve months on the balance sheet, including those classified as operating leases under previously existing U.S. GAAP. The ASU also changes the definition of a lease and requires expanded quantitative and qualitative disclosures for both lessees and lessors.

We elected to adopt Topic 842 using the modified retrospective approach. As such, comparative financial information for prior periods has not been restated and continues to be reported under the previous accounting guidance for those periods. We did not elect the hindsight practical expedient. See “Note 10 – Leases” for additional lease information and practical expedients elected.

The impact of Topic 842 on our consolidated balance sheet beginning January 1, 2019 was through the recognition of ROU assets and lease liabilities for operating leases, while our accounting for finance leases (previously referred to as capital leases) remains substantially unchanged. Amounts recognized at January 1, 2019 for operating leases were as follows:
(Dollars in millions)
Balance at January 1, 2019
Assets and Liabilities:
 
Other Non-Current Assets
$
288

Other Current Liabilities
92

Other Non-Current Liabilities
219



In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. We adopted this standard in the first quarter of 2019 and an election was not made to reclassify the income tax effects of the Tax Cuts and Jobs Act from Accumulated Other Comprehensive Income to retained earnings.
 
In July 2017, the FASB issued ASU 2017-11, Part I Accounting for Certain Financial Instruments with Down Round Features, which amends the accounting for certain equity-linked financial instruments and states a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. For an equity-linked financial instrument no longer accounted for as a liability at fair value, the amendments require a down round to be treated as a dividend and as a reduction of income available to ordinary shareholders in basic earnings per share. We adopted this standard in the first

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quarter of 2019 on a retrospective basis and the adoption did not have a significant impact on our Condensed Consolidated Financial Statements.

Accounting Standards Issued Not Yet Adopted

In August 2018, the FASB issued ASU 2018-14, Compensation — Retirement Benefits — Defined Benefit Plans — General (Subtopic 715-20): Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans, which makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and other postretirement benefit plans. The ASU is effective for the fiscal year ending December 31, 2020, but early adoption is permitted. The ASU is required to be applied retrospectively. This new standard will not have a significant impact on our Condensed Consolidated Financial Statements.
    
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The ASU is effective beginning with the first quarter of 2020, and early adoption is permitted. The ASU is required to be applied retrospectively, except the new Level 3 disclosure requirements which are applied prospectively. We evaluated the impact of this new standard and concluded that the adoption of the ASU will not have a significant impact on our Condensed Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. The guidance requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The updated guidance applies to (i) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (ii) loan commitments and other off-balance sheet credit exposures, (iii) debt securities and other financial assets measured at fair value through other comprehensive income, and (iv) beneficial interests in securitized financial assets. The amended guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We will adopt the new standard on the effective date of January 1, 2020 and are evaluating the effect, if any, that the guidance will have on our Condensed Consolidated Financial Statements and related disclosures.

4.  Accounts Receivable Factoring

From time to time, we participate in factoring arrangements to sell accounts receivable to third-party financial institutions. In the first six months of 2019, we sold accounts receivable of $162 million and recognized a loss of $1 million on these sales. We received cash proceeds totaling $152 million. In the first six months of 2018, we sold accounts receivable of $188 million and recognized a loss of $1 million. We received cash proceeds totaling $181 million. Our factoring transactions in the first six months of 2019 and 2018 were recognized as sales, and the proceeds are included as operating cash flows in our Condensed Consolidated Statements of Cash Flows.

Our accounts receivable factoring arrangements are subject to additional limitations as result of entering into the DIP Credit Agreement and Credit Agreement Forbearance Agreement, where (a) net cash proceeds from U.S. and Canadian entities will pay down the DIP Credit Agreement and (b) net cash proceeds from other countries up to $75 million in a calendar quarter can be retained for the Company (with any excess to prepay the DIP Credit Agreement). This factoring limitation begins in the third quarter of 2019.


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5.  Inventories, Net

Inventories, net of reserves, by category were as follows:
(Dollars in millions)
June 30, 2019
 
December 31, 2018
Raw materials, components and supplies
$
146

 
$
131

Work in process
64

 
47

Finished goods
871

 
847

 
$
1,081

 
$
1,025



6.  Business Combinations and Divestitures

Acquisitions

In the first six months of 2019, we made no acquisitions of businesses.

In the first quarter of 2018, we acquired the remaining 50% equity interest in our Qatari joint venture that we previously accounted for as an equity method investment and consolidated the entity. The joint venture was established in 2008 to provide energy related services required for the drilling and completion of oil and gas wells at onshore and offshore locations within the State of Qatar. The total consideration to purchase the remaining equity interest was $87 million, which is comprised of a cash consideration of $72 million and an estimated contingent consideration of $15 million related to services the Qatari entity will render under new contracts. Of the $72 million in cash consideration, $48 million was paid in accordance with closing terms through the joint venture, with the remaining payment of $24 million to be paid two years from closing, in 2020. As a result of this step acquisition transaction with a change in control, we remeasured our previously held equity investment to fair value and recognized a $12 million gain. The Level 3 fair value of the acquisition was determined using an income approach.

Divestitures

On April 30, 2019, we completed the sale of our Reservoir Solutions business, also known as our laboratory services business to Oil & Gas Labs, LLC, an affiliate of CSL Capital Management, L.P., for an aggregate purchase price of $206 million in cash, subject to escrow release and customary post-closing working capital adjustments. The business disposition included our laboratory and geological analysis business, including the transfer of substantially all personnel and associated contracts related to the business. We recognized a gain of $117 million and divested a carrying amount of $61 million in net assets previously included in held for sale.

On April 30, 2019, we completed the sale of our surface data logging business to Excellence Logging for $50 million in total consideration, subject to customary post-closing working capital adjustments. The business disposition included our surface data logging equipment, technology and associated contracts related to the business. We recognized an insignificant loss and divested a carrying amount of $34 million in net assets previously included in held for sale.

In the first quarter of 2019, we completed the final closings in a series of closings pursuant to the purchase and sale agreements (“Agreements”) entered into with ADES International Holding Ltd. (“ADES”). We entered into the Agreements in July of 2018 to sell our land drilling rig operations in Algeria, Kuwait and Saudi Arabia, as well as two idle land rigs in Iraq, for an aggregate purchase price of $287.5 million. We received gross proceeds of $72 million in the first quarter of 2019. The ADES sale was subject to regulatory approvals, consents and other customary closing conditions, including potential adjustments based on working capital, net cash, loss or destruction of rigs and drilling contract backlog. The $11 million ADES advance of the purchase price held in escrow as of December 31, 2018 was released in the first quarter of 2019 as a credit towards the purchase price. The loss on the sale of land drilling rigs operations recognized in the first quarter of 2019 was $6 million and divested a carrying amount of $66 million in net assets previously included in held for sale. The Agreements divest a majority of our land drilling rig operations.

In the first quarter of 2018, we completed the sale of our continuous sucker rod service business in Canada for a purchase price of $25 million and recognized a gain of $2 million. The carrying amounts of the major classes of assets divested total $23 million and included PP&E, allocated goodwill and inventory.

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Held for Sale

During the second quarter of 2019, we reclassified remaining land drilling rigs held for sale assets of $53 million to assets held for use. We continue to pursue options to sell all of our remaining land drilling rigs operations however the time required to close the recent land drilling rigs sales indicate that we may not be able to conclude that a sale is probable to occur in an appropriate timeline. At June 30, 2019, assets qualifying as held for sale were insignificant.

At December 31, 2018, assets qualifying as held for sale totaled $265 million and liabilities held for sale totaled $17 million. These amounts primarily consisted of our surface data logging and laboratory services business held for sale (which was completed as of April 30, 2019) and our remaining land drilling rigs operations held for sale (which the unsold portions were reclassified back to held for use in the second quarter of 2019).

7.  Long-Lived Asset Impairments

We recognized long-lived asset impairments of $13 million and $20 million, respectively, for the three and six months ended June 30, 2019, and $92 million for the three and six months ended June 30, 2018, to write-down our assets to the lower of carrying amount or fair value less cost to sell for our land drilling rigs. The impairments were primarily related to our Western Hemisphere segment in the second quarter of 2019 and Eastern Hemisphere in the first quarter of 2019. The impairments recognized for the three and six months ended June 30, 2018, were comprised of $37 million from our Western Hemisphere segment and $55 million from our Eastern Hemisphere segment. During the second quarter of 2019, we reclassified our remaining land drilling rigs assets back into held for use.

The impairments were due to the sustained downturn in the oil and gas industry that resulted in us having to reassess our disposal groups for our land drilling rigs. The change in our expectations of the market’s recovery, in addition to successive negative operating cash flows in certain disposal asset groups represented an indicator that those assets will no longer be recoverable over their remaining useful lives. The Level 3 fair values of the long-lived assets were determined using a combination of the market and income approach. The market approach considered market sales values for similar assets. The unobservable inputs to the income approach included the assets’ estimated future cash flows and estimates of discount rates commensurate with the assets’ risks.

8.  Goodwill

For the second quarter ended June 30, 2019, our interim goodwill impairment tests indicated that goodwill for our Asia and Middle East/North Africa (“MENA”) reporting units were impaired and as a result we incurred a goodwill impairment charge of $102 million. In the first quarter ended March 31, 2019 our interim goodwill impairment tests indicated that goodwill for our North America reporting unit was impaired and as a result we incurred a goodwill impairment charge of $229 million. The impairment indicators during the first and second quarters of 2019 were a result of lower activity levels and lower exploration and production capital spending that resulted in a decline in drilling activity and forecasted growth in North America, Asia and MENA reporting units. Our cumulative impairment loss for goodwill was $3.0 billion at June 30, 2019. The changes in the carrying amount of goodwill by reporting segment at June 30, 2019, are presented in the following table.
(Dollars in millions)
Western Hemisphere
 
Eastern Hemisphere
 
Total
Balance at December 31, 2018
$
494

 
$
219

 
$
713

Impairment
(229
)
 
(102
)
 
(331
)
  Reclassification from held for sale
4

 

 
4

  Foreign currency translation adjustments
12

 
5

 
17

Balance at June 30, 2019
$
281

 
$
122

 
$
403



Goodwill Impairment Assessment Factors
  
We perform an impairment test for goodwill annually as of October 1 or more frequently if indicators of potential impairment exist that would more likely than not reduce the fair value of the reporting unit below its carrying value. In assessing the possibility that a reporting unit’s fair value has been reduced below its carrying amount due to the occurrence of events or circumstances

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between annual impairment testing dates, we consider all available evidence, including, but not limited to, (i) the results of our impairment testing at the prior annual impairment testing date, in particular the magnitude of the excess of fair value over carrying value, (ii) changes in market conditions, (iii) downward revisions to internal forecasts, and the magnitude thereof, if any, (iv) decline in our market capitalization below our book value, and the magnitude and duration of those declines, if any.

Our share price has historically experienced volatility as a result of industry-wide and macroeconomic factors, including global oil prices and rig counts. In addition, our financial results and our inability to meet our Transformation Plan (as defined in “Note 9 – Transformation, Facility Restructuring and Severance Charges”) initiatives in the magnitude and desired time-frame, contributed to the NYSE suspension of the trading in our ordinary shares and commencement of procedures to delist our shares, which the Company has appealed. These circumstances, along with the filing of the Cases, prompted us to evaluate whether circumstances had changed that would more likely than not reduce the fair value of one or more of our reporting units below their carrying amount as of June 30, 2019. While conducting this evaluation, we considered macroeconomic and industry conditions, including the outlook for exploration and production spending by our customers, the magnitude and declines in our market capitalization and overall financial performance of each of our reporting units. We also considered whether there were any changes in our long-term forecasts, which are impacted by assumptions about the future commodity pricing and supply and demand for our goods and services, all of which require considerable judgment in estimation.

For the second quarter ended June 30, 2019, our interim goodwill impairment tests indicated that goodwill for our Asia and MENA reporting units were impaired and as a result we incurred a goodwill impairment charge of $102 million. We impaired our entire balance of our MENA reporting unit by recognizing a $43 million impairment charge.

While we believe that we will continue to operate in the ordinary course during our bankruptcy process and upon emergence from Chapter 11 bankruptcy proceedings, our estimates of fair values are sensitive to inputs to the valuation approaches, including our forecasts of revenues and earnings growth. There can be no assurances that changes to our inputs would not result in a material impairment of goodwill.

9. Transformation, Facility Restructuring and Severance Charges

Due to the highly competitive nature of our business and the continuing losses we incurred over the last few years, we continue to reduce our overall cost structure and workforce to better align our business with current activity levels. The ongoing transformation plan, which began in 2018 and is expected to extend significantly beyond the originally planned year-end 2019 target (the “Transformation Plan”), includes a workforce reduction, organization restructure, facility consolidations and other cost reduction measures and efficiency initiatives across our geographic regions.

The cost reduction plans before the Transformation Plan (“Prior Plans”) included a workforce reduction and other cost reduction measures initiated across our geographic regions due to the ongoing low levels of exploration and production spending. The plans were initiated to reduce our overall cost structure and workforce to better align with current activity levels of exploration and production.

In connection with the Transformation Plan, we recognized restructuring and transformation charges of $20 million and $40 million in the second quarter and first six months of 2019, respectively, which include severance charges of $1 million and $3 million, respectively, other restructuring charges of $15 million and $29 million, respectively, and restructuring related asset charges of $4 million and $8 million, respectively. Other restructuring charges in both periods included contract termination costs, relocation and other associated costs.

In the second quarter and first six months of 2018 we recognized restructuring charges of $38 million and $63 million, respectively, which included severance charges of $29 million and $40 million, respectively and other restructuring charges of $9 million and $23 million, respectively.


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The following tables present the components of restructuring charges by segment for the second quarter and first six months ended June 30, 2019 and 2018.
 
Three Months Ended June 30, 2019
 
 
 
Total
(Dollars in millions)
Severance
Other
Severance and
Transformation Plan
Charges
Charges
Other Charges
Western Hemisphere
$
1

$
9

$
10

Eastern Hemisphere

2

2

Corporate

8

8

  Total
$
1

$
19

$
20


 
Three Months Ended June 30, 2018
 
 
 
Total
(Dollars in millions)
Severance
Other
Severance and
Transformation Plan
Charges
Charges
Other Charges
Western Hemisphere
$
11

$
2

$
13

Eastern Hemisphere
14

4

18

Corporate
4

3

7

  Total
$
29

$
9

$
38



 
 
 
 
 
Six Months Ended June 30, 2019
 
 
 
Total
(Dollars in millions)
Severance
Other
Severance and
Transformation Plan
Charges
Charges
Other Charges
Western Hemisphere
$
2

$
13

$
15

Eastern Hemisphere
1

6

7

Corporate

18

18

  Total
$
3

$
37

$
40


 
 
 
 
 
Six Months Ended June 30, 2018
 
 
 
Total
(Dollars in millions)
Severance
Other
Severance and
Transformation Plan
Charges
Charges
Other Charges
Western Hemisphere
$
15

$
2

$
17

Eastern Hemisphere
18

9

27

Corporate
7

12

19

  Total
$
40

$
23

$
63



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The severance and other restructuring charges gave rise to certain liabilities, the components of which are summarized below, and largely relate to liabilities accrued as part of the 2016-17 and 2016 Plans that will be paid pursuant to the respective arrangements and statutory requirements.
 
At June 30, 2019
 
Transformation Plan
 
Prior Plans
Total
 
 
 
 
 
 
Severance
 
Severance
Other
 
Severance
Other
and Other
(Dollars in millions)
Liability
Liability
 
Liability
Liability
Liability
Western Hemisphere
$
3

$
2

 
$
1

$
2

$
8

Eastern Hemisphere
2


 
1

2

5

Corporate

6

 
3


9

  Total
$
5

$
8

 
$
5

$
4

$
22


The following table presents the restructuring liability activity for the first six months of 2019. In the first quarter of 2019, we reclassified $12 million of restructuring cease-use liability to the initial ROU asset in accordance with the adoption of Topic 842.
 
 
 
Six Months Ended June 30, 2019
 
 
(Dollars in millions)
Accrued Balance at December 31, 2018
 
Charges
 
Cash Payments
 
Other 
 
Accrued Balance at June 30, 2019
Transformation Plan
 
 
 
 
 
 
 
 
 
Severance liability
$
18

 
$
3

 
$
(14
)
 
$
(2
)
 
$
5

Other liability
16

 
29

 
(34
)
 
(3
)
 
8

 
 
 
 
 
 
 
 
 
 
Prior Plans
 
 
 
 
 
 
 
 
 
Severance liability
6