Good day ladies and gentlemen and welcome to the fourth quarter 2008 Weatherford International earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s conference, Mr. Bernard Duroc-Danner, Chairman and CEO.

Good morning everyone. First the prepared comments from Andy and myself.

Good morning. For our fourth quarter of 2008 we report fully diluted earnings of $0.53 per share. This number excludes approximately $16.0 million of costs incurred in connection with our ongoing government investigations. Field finished the year strong despite a general weakening in market conditions during the quarter. Continuing growth in the Middle East, North Africa, and Latin America more than offset pullbacks in North America and Russia, as well as the unfavorable impact of an usual strengthening in the U.S. dollar. The $0.53 understates the strength of our operating performance. First, above the line of $0.04 improvement in regional EBIT was entire offset by $0.03 of asset write-offs and facility moving costs, as well as a $0.01 increase in corporate and R&D expenses. The write-offs and moving costs are included in the reported regional EBIT. Second, below the line items took down earnings by $0.02 in the aggregate. The main culprit was a foreign exchange loss on our non-U.S. dollar net monetary assets. This is separate and distinct from the revenue impact mentioned above. This expense alone increased $24.0 million sequentially, although it was partially offset by improvement in minority interest and dilute share count. Consolidated overview of operating performance, on a consolidated basis revenue grew $94.0 million sequentially, or 4%, with the growth coming from our Latin America and Middle East/North Africa/Asia Pacific regions. The strengthening of the U.S. dollar handicapped company-wide top line growth by $130.0 million sequentially, or 5%. Consolidated EBIT, before corporate R&D, was $637.0 million, up $5.0 million sequentially, with operating margins at 24.2%. Before moving to the details of our Q4 performance, let’s consider our report card for all of 2008, both from an income statement and a cash flow perspective. At this time last year we communicated to you that we expected…

Summing up the forces in motion, six comments on Q4. One, the company posted the highest revenues in its history, posting a $10.5 million revenue mark on an annualized basis. Two, the quarter’s reported loss was good but understates the actual performance. The quarter was affected by $0.03 of write-offs, $0.04 of non-cash forex losses. Remeasurement of monetary assets, from an operational level we view the quarter as more than $0.53. That’s not all. Reported international revenues and operating income were suppressed by foreign exchange. This is separate and distinct from the non-cash adjustments of monetary assets mentioned in two above. A shift of 10% to 25% in foreign exchange values of energy-related currencies understated the translation of international revenue growth and earnings performance. Foreign exchange understated revenues specifically by about $130.0 million at Q3’s exchange rates. It suppressed international reported revenues by about $90.0 million, or over 7% sequentially. Canada’s reported revenues were similarly affected, suppressing revenues by about $40.0 million. The quarter was obviously good. Without write-offs in forex the quarter would have been much better yet. The point here isn’t to suggest a highly-adjusted EPS number. The point is to highlight the strength of our field level execution and underlying profitability on an apples-to-apples basis with Q3. The strength in Latin America/Middle East/Asia carried the quarter with combined $110.0 million of growth, or 11.6%, sequentially. The incrementals were strong at 35% in the Middle East and 26% in Latin America. Europe, West Africa, and CIS slowed with a $16.0 million decline. That’s not reflective of the field reality. Adjusting for Q3 forex the region would have been up close to $30.0 million, or $0.07, sequentially. And the reason the apparent high operating income decrementals were caused by write-offs. Andy touched on it, which was Borets, primarily. North…

(Operator Instructions) Your first question comes from James Crandell - Barclays Capital.

In the environment that you outlined for international E&P spending growth, I think you said double-digit, what would you expect to happen to your overall profit margins in that scenario?

I don’t think we know. We have different forces in motion. On the one hand there are some pricing declines that are occurring on one-third business that rolls forward and gets renegotiated. On the other hand we have absorption effects and the lower cost structure. I don’t think we know what will happen to the international margins. Not within the ability as in North America.

Chicontepec project seems to be to date, both an operational and financial success for you despite your critics. Do you agree? What are the risks from here, and given the scope of what Pemex has planned, do you believe you can take on more work during 2009 than what you are contracted to do now?

I think we count our blessings. The project is successful operationally, so far, and the project appears to be successful financially, so far. Time will tell if between now and year end it is a success. I think before year end you will have the full results of the project. So within Latin America, so you will be able to judge. Insofar as growing the scale and scope of Chicontepec, and I think we have to leave it to Pemex to decide whether it’s something that is in their interest, insofar as we are concerned, Mexico is a place of great focus for us so we would welcome that.

This coming year, 2009, seems to be one in which you are starting up a lot of integrated, bundled projects. Will it be a year in which you will have a marked increase in start-up costs for those projects, and if so, when will that hit the P&L?

I think you have a lot of start-up costs in Q3, I think you have a lot of start-up costs in Q4. I don’t think you will have any higher rate of start-up costs in Q1. I think it will be about the same. I think just about everything that we were hoping to operate will be started up, at least in part if not in full, by the end of the second quarter. So I think by the middle of the year, for at least the projects that we are working on, you will be pretty much done. And I don’t think the rate will be any different than it has been in terms of start-up costs.

A few months ago you outlined a very aggressive schedule for new tool development in your LWD rotary-steerable product line. Are you still going forward with the vast majority of that, and once that is completed, where do you think you will stand in terms of capabilities versus your competition at that time?

The answer to the first question is yes. And I would add to that that we are not going to diminish in any way or form the commitment to our technology at Weatherford, throughout this cyclical down. On the second part of the question, I will pass. I do not want to increase competitive fury any further. So I just want to say that we are focused on delivering the best technology that our clients can possible want and I will leave it at that.

Your next question comes from William Herbert - Simmons & Company International. William Herbert - Simmons & Company International: In your prepared commentary you mentioned that this adjustment in North America will avail you the opportunity to implement permanent reductions to the North American cost base. What does that entail and how do we do that?

It addresses, essentially, fixed costs. Fixed costs comes in the form of structure costs and overhead costs. The third cost is regional-specific and corporate-specific. I think the intent is to lower all three as systematically as we can. Some of it means some physical things. For example, consolidation of facilities. That will take a few quarters. It has to be timed, it has to be done in a manner that is not only efficient but also organized. The other two aspects, that’s in a way faster. One has to assess what do our clients need, long term, what does the region need long term. In terms of fixed-cost support. And from there, act. William Herbert - Simmons & Company International: Do we have a specified game plan and what is the targeted reduction with regard to costs?

We do have a very specific, a bit more than a plan but let’s call it a plan. As to the dollar amounts ,I would rather not say on the call. William Herbert - Simmons & Company International: You also mentioned that the international markets were softening and that you were being confronted with contract vulnerabilities, if you will, with regard to clients wanting to reset existing contracts and yielding some price erosion. You said there were significant regional differences. Where are you seeing the most duress with regard to pricing vulnerability internationally and where are you seeing pricing hold up the best?

I was making a theoretical point. More a general point rather than Weatherford-specific, which is that if I look at the international market then what comes up, you’ve got two situations. You’ve got the normal sort of rolling of contracts. I think the industry norm is a three-year sort of cycle. So about one-third of the contracts, a few months ahead of time, the negotiations suggest that the primary issue is essentially pricing. So that should be clear, it should be obvious, it’s not a Weatherford issue, it’s an industry issue. The second point I was trying to make is that there are a few instances, it’s not generalized at all, in fact I think it’s more the exception than the rule, there are a number of instances where clients will ask for help on the basis that economic conditions are different and so forth and so on. And in that sort of situation I was just making the point that pricing concessions are likely to be far less than on the sort of renegotiation of a contract that comes to expiration. I will not conclude, that would be a mistake, that in the international market there is a generalized renegotiation of contracts. That’s not true. There are just are a few instances. And some of them are well publicized. I think Saudi Arabia Aramco, where many of the existing contracts, at the request of the clients, are being looked at. That’s basically an act of agreed up negotiations. It’s not a sort of an end-of-a-contract situation. That being said, differences that are regionally, I would say that Russian is obviously a prime market for renegotiations and request for renegotiations of contracts. That shouldn’t surprise you. I think it does occur much in the Middle East, with the exception of Saudi Arabia. Nor do I know of any instances with any significance in Asia. I would say it is the North Sea, it is the Russia, and there are a couple of instances in Latin America and you can guess easily where they would be, by the profit. William Herbert - Simmons & Company International: To sort of close the loop here, if you would, identify what you expect to be the best three markets for Weatherford in 2009 and the worst three, ex-North America.

That’s straight-forward. It’s Mexico, the Middle East, and North Africa, if you would distinguish them as two separate markets. The ones that would be the most strained, definitely Russia, North Sea, the third one, Venezuela. But I am careful there because it’s not a given.

Your next question comes from Ole Slorer - Morgan Stanley.

Guidance, I understand it’s very difficult to have any crystal ball and definition right now, but if we look at the first quarter, the earnings appear to be absolutely all over the place. And if I take your comments of a rapid decline to about 1,000 rigs and your comments on North America pricing, would something on an EPS in the mid-thirties be a reasonable guesstimate for the first quarter?

I hate to get dragged into a game about estimates here. What I can say is that North America, we expect it to be just a precipitous decline into Q1. It will be an extremely challenging quarter. If you look at how we have typically performed from Q4 to Q1 sequentially, the Middle East/North Africa/Asia Pacific region really struggles to keep its chin on the bar because there is traditionally a pull back from Q4 to Q1 in Asia Pacific. And I think Europe/West Africa/CIS is going to, in general, be weak. And so wrapping those things together, I think if you’re thinking of a mid-thirties, I wouldn’t argue with you about it.

On the relation of your top performing sub-segments it was a little bit surprising. Could you explain what drove that performance? Was it international penetration or was it something related to North America?

I think North America did all right but I think what probably added to it was international stem and chemical, too, incidentally. It’s two separate segments. Stem in particular was helped by projects which were just piggy-backed and had growth both in revenues and in margins in projects that covered the entire drilling through completion end of the field. That’s what made the difference.

Bernard, you have been through a series of cycles now, and could you give some color on how confident you feel that the organization is totally ready for what might come their way in 2009 compared to previous down cycles?

I don’t think one is ever totally ready for anything. One is ready for something after the event, by definition. But I think, it is said to say, we are far more ready, both in terms of understanding our business and also in terms of being individually ready, than we were certainly in 1999 or in 2002 or 2003. The company is also very different. So comparisons are hard to make. It’s probably hard to make for everyone but it’s particularly hard for us.

Your next question comes from Michael LaMotte - JP Morgan.

On the working capital, I would have assume that maybe receivables grew in the fourth quarter but with the change in working capital, which suggests that maybe that inventories were worked down pretty aggressively in order to generate that kind of delta from Q3 in terms of cash, is that a correct read?

We did. We only consumed $11.0 million on the working capital side for the quarter. And so, taking that 750 of EBITDA and 600 of capex, and obviously you can carve out interest and cash taxes, we were almost free cash flow neutral. Our target was to try to hit there by Q1 and we thought that that would be good performance so we’re really pleased that that’s where we are at the end of Q4 this soon and we expect to now be positive in Q1.

That’s where I was going with it, a big positive shift, and as I look at the $500.0 million target for free cash flow this year, first is, on the surface it looks like it could be exceeded, especially given the improvements in working capital, and the second point to that is how firm do you expect to be with that target? I mean, if you get acquisition opportunities that come up or growth opportunities, how should we think about that?

I think on the organic side, if the client is right, if the project is right, yes, we will pursue that if there is incremental organic that we don’t have today. Now in this environment it is probably reasonably unlikely, but you can expect that. On the acquisitions, we do not want, I think, to let go of our free cash flow priorities so it would have to be a very compelling situation for us to want to relax our objective. It really would. I think one should never say never, I think it’s just not right. But there is a strong bias against pursuing acquisitions unless they are compelling.

If I could address the organic side, are there integrated wellboard construction contracts now? Has that market seized up like a lot else?

The tone of everything is weaker and people are not in a hurry any more. I think that applies to everything. However, if you look at the world of opportunities that we have, it is a more sparsely populated world obviously today than it was six months ago. If you look at the world of opportunities you will find that, no, the well construction project management bundle, in all of its forms, is doing best of all. In other words, on a relative basis. It is possible that we add to our backlog of projects and so forth in the next one or two quarters. I wouldn’t go and guarantee it but it is very possible.

So it’s not a total freeze up?

No, it is not.

Is there an opportunity to reallocate some of the rigs currently not in the IWC contracts to those contracts?

Most definitely. Of all the rigs we got when we bought Precision that are just rigs, just rigs working on rig contracts and pursuing the rig business, in a perfect world we would like to convert, move, or sign those rigs on projects so that we use rigs purely as a product line that is adjunct to project management. The answer is yes, most definitely. I think there are about 10 to 15 rigs that will roll forward in 2009, of the Precision rigs, and so there you are. You will have 10 to 15 rigs that of course could be just renewed by the clients where they are and we’re not going to turn that down. But if we had an alternative, most definitely that would be the priority, to move them to the alternative which is work on projects together with all the other product lines.

And the step up, if they were to go bundled, is it two-to-one in terms of revenue for Weatherford in an integrated?

Do you mean $2 a down hole for $1 a day rate?

Yes.

Of course it varies a great deal but that is a reasonable yard stick.

And so the capital infusion to get that kind of growth would be significantly less than perhaps what we say in 2008?

Yes, because a big chunk of the capital infusion in 2008 was on and around drilling and specifically on and around rigs, to be fair.

Your next question comes from Dan Pickering - Tudor Pickering.

To come back to the cost reduction focus in North America, I understand your hesitancy to talk about specifics in terms of dollar target. At this point, given your plan, is this mostly a manufacturing focus? How big a component is headcount? I’m just trying to get a feel for the split. And what level generally of long-term rig count are you going to size the business for?

It’s not manufacturing particularly, it’s facilities, as in services facilities. Of which we have a great many in the United States. That’s the first thing. The second thing is overhead, which comes in all form and fashion. Again, regional overhead and corporate overhead, as it pertains to the United States. It follows the same pattern that we executed in Canada. Remember, Canada fell through very hard times the past two, three years. In isolation, for reasons of its own. You will remember, also, that we were intensely Canadian as a whole. And so we had a mini version of what we are faced with today, already back then. We were growing everywhere but we had to retrench dramatically in Canada. And we did it in two ways. In variable costs, obviously, which you should expect, but also in lowering our cost structure in Canada. Now one is never finished doing things like that but we did achieve a number of thresholds in Canada and we achieved them very quickly. We are applying the same methodology in the United States now. It’s rig facilities and it’s overhead. As to what we are sizing it for, actually the notion is to size it where we could operate in the market we had in 2008. Again, by just moving the variable cost sides. Again it’s the fixed cost side and the facilities infrastructure side where we are hoping to make leaner. So when we talk about a permanent cost reduction, it addresses, really, all the costs that, in theory, and in practice also, do not move up or down much with activity levels. So in a sense, we should be able to operate in a 2008 level, or even higher, at this time moving the variable cost side. That’s sort of the thinking.

If you recall, last year about this time we were thinking about targets for North America on margin expansion. We met the 100 basis point expansion target in Canada, against a very weak market. And that was really on the back of trimming the cost structure, more than anything else. We didn’t make it in the United States but we made it in Canada.

International, in our mind, is in a secular growth mode. It is going through a cyclical down. Being in secular growth does not shelter you from cyclical downs but in our minds the international market is in a very long-term secular uptrend. Therefore, in the international market, both the infrastructure and in a way the overhead support, it’s not an open check book but we are more generous in those markets because we are, in the next ten years, in a growth mode. North America is different. North America does not have a [inaudible] quite the contrary. It doesn’t have the same long-term secular up that we see internationally. This is at least our view. Therefore the North American market is also the most expensive market, from a reservoir exploration standpoint. We make the point that we need technology and cost. Lower cost and technology. We mean it. And lower cost simply means that you are able to deliver your variable costs with as little fixed cost infrastructure as possible, without missing out on quality. It is a theoretical point, but we mean it.

If we could talk about Mexico, again big focus by the Street. I know you are on percentage of completion accounting there. Can you give us an update on where you are in terms of percentage of completion and have there been any changes in terms of your assumptions for the projects over the past three months or so?

Andy will comment on the accounting of it, but in general I think the project is going well. I think in general the amount of attention on it is being driven by competitive fury. But having said this, we are grateful the project is going well.

We are on percentage of completion so that part of the project that we have completed, we have recognized both the revenue and the cost for it. Other than that I don’t want to encourage everybody to continue to focus on this project. It has become completely blown out of proportion relative to what else we are trying to accomplish at the company. So I will leave it at that. Just allow us the time to show you that we are performing. We’ll see whether we do in our financial performance in 2009 in Latin America.

And it is going to be over with, at least this particular contract, before the year is over. So you’ll see it by definition through the Latin America regional P&L line.

As we look at your capex flexibility, you have targeted $1.2 billion. How much of that is committed? Is that a $300.0 million run rate every quarter? How do we think about the flexibility if things get better or worse?

The amounts of money that one has to spend at Weatherford to keep things in good shape is around $500.0 million a year, solid maintenance capex. That’s first. Second, the commitments are pretty much over in Q1. In other words, we did what we did in Q4 because you can only slow things down so fast. Now, there is a little bit more coming in Q1 but far less. The number will be already materially less in Q1. So I would say that Q1 plus the amounts of maintenance capex for the year, that’s about all that is really committed.

Your next question comes from Brad Handler - Credit Suisse.

In the past you have mentioned the discrete number of bundled projects you have. I think it was eight in the Eastern Hemisphere at one point and then the one in Chicontepec. Where do you stand today, and with some rolling off, where do you stand by the first half of 2009?

We’re still very young. Of the eight in the East, you’ve got six which will be at different stages of operations in the course of this quarter, two which are still being mobilized. So you are very young. You will exit the year, obviously, with all eight operating and with a couple of years on average behind of what further, meaning that they will operate through the end of 2011, if my math is correct. You’re very young in these projects.

Can you talk a bit more about what happened at Borets? I know we’re not talking about a big deal, but I recall that the facility move was back in the second quarter of 2008. Is my memory right and has something sort of lingered there?

It’s a very big plant. Your memory is actually correct. It was initiated in the early part of 2008. It took the balance of the year and it was completed in the last weeks of Q4. And many costs came through in Q4, severance and the final moving and some of the dismantling costs and so forth. I think some costs also came through in Q2 and Q3, particularly in efficiencies and operating a plant that’s declining and where people know it’s going to be shut down and starting up a new plant elsewhere. But the bulk of the moving costs were really captured in Q4, by Borets. The move is not complete and what was a very large client in Moscow is essentially a cut down.

So you would anticipate that those costs have been accounted for in Q4 and you are going forward without any baggage there?

I think so. We don’t run Borets, although we like the way it’s being run, but my sense, from what I have seen is that if there is anything left in Q1 it should be a fraction of what it was in Q4.

In terms of your exit and restructuring costs, can you give some color on that? Maybe on the exiting side of it. You are finished at this point? Or how much more is there? I know it’s more complicated on some of the investigation costs.

We can’t comment on that on the call. What I would say is that it will take whatever course it needs to take, and that’s as much as I can tell you.

Well, in terms of the exiting countries, perhaps that’s less sensitive, is there still work that’s tailing off there or is that mostly done?

No, we are pretty much finished, best I can tell, with the exiting process.

There are no further questions in the queue.

Thank you very much for your time. We’ll take now questions on a separate line.

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