Welcome to the first quarter 2009 Weatherford International earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today's call, Mr. Bernard Duroc-Danner, Chairman, President and Chief Executive Officer.

Good morning. We'll do as we normally do. Andy and I will read prepared comments and then we'll take Q&A. Andy, why don't you get started.

Good morning. For our first quarter of 2009, we report fully diluted earnings of $0.27 per share. This performance excludes $13 million of cost incurred in connection with our ongoing government investigations and $12 million for severance charges incurred mainly due to North American head count productions. Compared to our record Q4 performance, earnings per share declined $0.26 with a $0.21 decline in North American and a $0.05 internationally. Below the line items were flat in the aggregate as our interest expense was offset by a sequentially lower tax rate, 15.5% and lower FX losses. We still incurred $10 million of FX losses in the quarter. Operating performance; company wide revenue declined $378 million sequentially or 14% with North America retreating $340 million and international operations down $38 million or 3%. This matches the sequential international decline experienced last year. Seasonal declines and product sales reduced international revenue by $26 million while the continued strengthening of the U.S. dollar handicapped growth by another $26 million. Absent these factors, international revenue was up $14 million or 1% on a 6% decline in rig count ex Russia and China. Consolidated EBIT before corporate R&D was $424 million, down $212 million sequentially with operating margins at 18.8%. North America was responsible for the brunt of the decline as expected, with a margin deterioration slightly over 1,000 basis points. International margins proved far more resilient to pricing and volume pressures, giving way to Q4 levels by 210 basis points. Compared to Q1 '08, company wide revenue increased $60 million or 3% despite a 19% decline in global rig count. International growth of $313 million or 28% was largely offset by a $253 million pull back in North America. This international growth was against a 2% decline in rig count. On a constant currency basis,…

Q1 was a difficult quarter. It is more constructive on each two '09 and 2010. The outlook includes magnitude and speed of market declines to date to what we perceive as early crafting in a number of important markets, three, planned indications in other markets, and four early evidence of accelerating reservoir decline rates. We'll address Q1 and then move on to our outlook. With respect to Q1, we saw seven moving parts; collapse in North American activity, volume and price, collapse of Russia and Continental European activity, volume and price. In both cases the word collapse is correctly calibrated. Three very weak U.K. and North Sea, Caspian, Saudi Arabia, Australia and Latin America ex Brazil and Mexico included pull backs for somewhere between 10% and 20%. Weak pockets in the Middle East, North Africa, Egypt, Oman, Indian and Asia Pacific adding up to pull backs of 10%. A few markets were mercifully flat; Norway, part of Persian Gulf, West Africa and Brazil. Across the board integrative project mobilization was slowed down or altogether delayed until second half of '09 or first half of 2010. Finally, Mexico bucked the trend for idiosyncratic reasons. Markets moved at different rates of decline, but they shared varying degrees of the same factors; one, seasonality. Traditionally Q1 sees a drop in international business driven by weather and customer buying patterns through product sales. There's a powerful factor in the Eastern Hemisphere and this Q1 was no exception. Two, aggressive action. IOC has inflected NOE's hammered volume and price and they did so early and hard. A large number of industry projects onshore and offshore are cancelled, cut back in size or forestalled. Thirdly, and different from aggressive action, plan paralysis. On the back of the October/December events of the financial markets and other subsets…

(Operator Instructions) Your first question comes from Michael LaMotte – J.P. Morgan. Michael LaMotte – J.P. Morgan: Quick question on Latin America. Revenue looked a little light to me relative to the degree of activity. Is that just offsets from Argentina and Venezuela?

Yes. Michael LaMotte – J.P. Morgan: And $200 million in incremental CapEx Bernard, can you comment more specifically on where that's going either by parts and services or geography?

It's going to North Africa and Asia Pac so I would say about 75% of the $200 million is going there. The balance is other areas of the Eastern Hemisphere. Michael LaMotte – J.P. Morgan: And the catalyst being Q1 contract wins?

Yes. Michael LaMotte – J.P. Morgan: Can you comment on the status of the rotary steerable tool and the introduction for this year?

Actually following the original CapEx we had had a large allocation for the RSS and some of the other directional tools and will allow us to introduce it. That's proceeding as scheduled. I think most of the early market penetration will be in Q3.

Your next question comes from James Crandell – Barclays Capital. James Crandell – Barclays Capital: Andy can you comment on the, give more detail on the fixed costs rate down in North America, to what extent is it service locations, manufacturing facilities and then also how much further you see margins going down in North America in the second quarter.

On the fixed cost side it's not just really mainly service facilities, not so much, it's very light on the manufacturing side where we've been able to load shift if you will across various plants just based on total delivery cost that we can get out of each facility and obviously we have a global footprint on the manufacturing side. In terms of margins, I would expect at this point, don't know, but given the impact of a decline in Canada which is more of a very seasonal thing as opposed to continued activity declines, exacerbating it a bit this quarter will be additional pull back that we see probably in the U.S. I would expect something on the order of 500 basis points of additional decline from Q1 to Q2 and from there I see us building back up on the margin side with 200 to 300 basis points each quarter and subsequently margin expansion in each of Q3 and Q4. James Crandell – Barclays Capital: Bernard, certainly Russia has dropped precipitously here in the last six months. What makes you confident that Russian activity has bottomed and will turn up over the rest of the year?

I think first, it's what we hear from our clients. Our clients are saying that the level of pull back went too far and there will be a correction going the other way through the balance of the year. Second, an observation which is indeed the decisions that were made by much of our client base in the USSR was to the extreme. In a way, the decline in activity and the pull back on budgetary operations was more sudden, more vertical and more extreme than what you see in North America and partly I think it really has to do with a real fear in October, November, December in that particular market of no liquidity at all. And so in essence, no liquidity, I think one tends to go to extreme decisions. But at this point there's a realization that the extreme decisions may not be necessary so you're coming to more of a mid point that's more reasonable. Still down a lot, especially to where we were in '08, but not as quite as dramatically as we were in late Q4 and Q1. Then the last aspect of the equation as best I can tell and this is just anecdotes. Anecdotes should be viewed as such and you can't generalize from it, but they are what they are. There's enough anecdotes of significant volume declines in oil reservoirs that also from a current perspective is something that one wants to rest by whatever means one can use. And one of the means is obviously a greater number of work orders, greater expenditures on production and greater expenditures on drilling, not exploration and development, but on drilling. So some of all three which as of about a month ago made us believe that the European market, the Central European markets have been as bad as the FSU market, and also I think this is what I would describe as surprised at some of the markets in Latin America. Obviously not Mexico and Brazil, they fall into a different category, but the other markets in Latin America also are not quite as perfectly but they fall into the same category as markets perhaps reacted too sharply, too fast and we may be experiencing now a bottoming out and if not a bit of a recovery, at least no deterioration. James Crandell – Barclays Capital: Do you think that given the sharper flow here in the first quarter in some of those markets that Eastern Hemisphere revenues as a whole would increase in Q2 over Q1?

It's always hard to tell from one quarter to the other. The answer is yes.

Certainly Q3 and Q4 but then also in Q2, the answer is most likely yes. James Crandell – Barclays Capital: Can you comment on the operational and financial performance of Chicontepec to date versus what you expected going in?

I'll just say I think it's good or better than we expected when we went into it, and of course we had some exogenous help in so far as the number of input costs were lower than when we got into it, and also with time operational efficiencies come to bear simply because we've been running a large operation, running it successfully. We've learned a lot along the way, and as the operation grows, we'll see better economies of scale. All of that comes to bear.

The drilling results for March were fantastic and it's clear that we've continued to progress along the learning curve and we're not giving up. We think that there's still more efficiency to be squeezed out of it. The increase in scale due to the addition of the new contract and some expansion of the scope of what we're currently working on also helps on the financial side. So we're very pleased net net.

And a closing comment, every well is different. Not all wells call for the same number of days to drill the well. But if you look at the performance on a per well basis, the number of days drilled, you find that for similar shaped wells, we've done increasingly well month on month on month, and in the end, the only thing that matters is how fast you can drill those wells and we seem to be doing very well on that score card.

Your next question comes from Ole Slorer – Morgan Stanley. Ole Slorer – Morgan Stanley: Just following up on the international side again you mentioned revenues may be up sequentially. Can you talk a little bit also about margins and the key drivers of margin. The scale is your own cost structure, pricing on contracts whether its been renegotiated pricing or whether it is pricing that you might benefit from this year that might roll over to another price level for next year relative to what you mentioned on the paralysis and to what extent you might have had contracts but rig activity work over, things grind to a halt and you get sort of killed both ways and helped the other way on the process relative to the cost structure.

It's a complicated question. I have so many different variables. Of course, the ones that are most advertised is the fact that there has been, this is not new, a push led by IOC, very local about it and also by some IOC, pushing down pricing and some of the percentages one reads are ones that make the headlines but our impression is they are mostly applied to different classes of services on the off shore rigs. But nonetheless it's been a major push by IOC's and a lot of that has been negotiated already. But there's the perception that it only applies to new contracts. Well traditionally that's correct. In an environment where there is extreme economic stress and we are in an environment of extreme economic stress, about as extreme that anybody on this call has probably ever seen, the negotiations tend to apply to everything, and of course there's some give and take. In other words, if you have a contract which is good for another year or two years and you're asked to give a concession, which contractually you don't have to, you're in a different position than if you just want some more business volume and you're expected to take it at a lower price. So negotiations have been held pretty much on the entire book of business. Much of it was done in December, January, February and March. There's still some more going on now, but our perception is that much of the price negotiation, much, not all, but much of the price negotiation will be finished, completed by the end of the second quarter in the international markets. There are always exceptions. Remember all of you listening on this call, there's how many countries are we operating in? How many countries do we…

For all we know, and we're just telling you what we know without holding anything back or moving it up or down, that's pretty much how we feel. Ole Slorer – Morgan Stanley: It's steeper in the second quarter and then a rebound.

The second quarter we'll see. I do think that NAM will trough in third quarter. I think that's not a controversial statement. I don't see how margins do any worse than actually detract from taking half the year off, with the cost catching up with the price curve. The international margins will be up in Q2, make no bones about it, but they will be much stronger in Q3, Q4. But international margins will either, if they decline they'll either decline in Q2 or Q3, but that's it. I'm not even sure that they will. It's too many factors. Any kind of sort of simplistic, ah well, the IOC will reduce price, that's why margins go down. It's true, but it's not enough. You can't draw that conclusion. It is not enough of an analysis. I think that in terms of volume up international markets at least for us, two, three, four. The margins may very well be flat; if they are down I would suspect they would trough in two or three. That's my best guess. Ole Slorer – Morgan Stanley: So in other words, volumes coming back.

That's an elegant way to put it, yes.

Your next question comes from William Herbert – Simmons & Company. William Herbert – Simmons & Company: I think it's pretty straightforward how you get the double digit growth in Latin America in 2010. Walk us through the bridge for the double digit growth in Eastern Hemisphere for next year.

It is easy in Latin America isn't it? Eastern Hemisphere is harder. It comes essentially from Middle East and North Africa. The premise is predominantly that FSU and European Markets and West African markets don't deteriorate any further, I think is correct. I think if anything, they do a little bit better and then I think there is on the horizon for us volume that we expect to get through Middle East, South Africa and also Asia, which let me pause here for a second. Much of the delta comes from essentially four countries and often smaller places of course, up and down, four countries. I'd rather not tell you the countries for competitive reasons, but the two countries that are in the Middle East and North Africa and one in Asia and one in the other parts of the Eastern Hemisphere. Of those four and we shall see because there are many, many things that ought to be concluded in terms of studying or in terms of mobilizing by the end of the second quarter. The four secure enough volume and even being reasonably conservative with assumptions and everything else that I think it would make our assessments come true. William Herbert – Simmons & Company: I would presume, it's not exactly at state secret that one of those would be Algeria given the huge ramp in the budget?

Yes. William Herbert – Simmons & Company: And with regard to Russia, can you bring up us to date with regard to the project?

Now you've two out of four. You've got the first rig spouting as we speak. The second rig is on location and is being prepared. When I say rig, I'm talking about strings now, but the second rig is on location, different location I might add, and is being readied to spout. One would presume that it would spout before the end of the second quarter. And you've got two others that are being mobilized, meaning they are in transportation to Orenburg as we speak and presumably they will arrive on location before the end of the second quarter, meaning they should be spouting in the second quarter, in Q2 and Q3. There's another four behind which have to be, you get into delays there. You have to be authorized to mobilize and hopefully for those four, the other four will be authorized to be mobilized sometime soon and then that progresses. William Herbert – Simmons & Company: And we're still envisioning $600 million over five years.

That's correct. It runs about $120 million or so per annum. William Herbert – Simmons & Company: Latin America revenue in the quarter, how much was Mexico?

Let's just leave it that it's a substantial share of the business at this point in light that it's likely to become a lot more significant share of Latin America as the year progresses. William Herbert – Simmons & Company: We spent $558 million in CapEx in the quarter, and we're going to $1.4 billion for the year. Walk me through how we generate $500 million in free cash flow.

Let's do it the simple way. If you look at on a net income basis, you're somewhere between $600 million and $650 million if you want to use that number. It seems to be where people are and it's not unreasonable. And depreciation of $900 million, give you $1.5 billion to $1.55 billion, less the $1.4 billion CapEx and we see $350 million coming out of working capital, we're about $50 million so we're better on that thus far. With a bit of improvement thus far on the receivable side, not on inventory due to on the product side we've had a decent build there in preparation for chunks of business that are still good, and we'll see the inventory levels improve as we move through the year.

Your next question comes from Robert Mackenzie – Fbr Capital Markets. Robert Mackenzie – Fbr Capital Markets: I want to get some perspective comments out of you with over capacity and pretty much everything be it manufacturing, directional drilling tools and what not in the U.S. and other markets, how do you see that over capacity affecting not just the U.S. market but global markets and how long does that weigh on pricing everywhere? I know it's a very broad question, but one of my concerns is the over capacity due to huge reductions in activities is going to affect not just the U.S. but everywhere. Can you give me some color on that?

Certainly things like, you put your finger on one which I think is affected which is directional. To the extent that the overcapacity in directional equipment, because of the demise of NAM is in the hands of the companies that have also large infrastructure internationally where they can move it. It doesn't mean that every single directional company in NAM is going to move it with equipment overseas. No, because they don't have the infrastructure. But the four companies that have large shares of directional in North America can indeed move that equipment in the international markets. That means the glut of equipment is spreading around the world in that particular class of service. That's absolutely true. Are the tools in North America usable around the world? Not always, but often, so that is a very legitimate concern and all things being equal, it will tend to depress the pricing in directional for as long as NAM is down or for as long as the tools takes to be assimilated. But that doesn't apply to every single class of service simply because of their services where the equipment is not movable or where simply the people who control the equipment don't have an infrastructure overseas. All this applies across the board to everything at all. And be mindful also that the few pockets of great strength in the international market that will also absorb quite a bit of that equipment. Think Mexico, think pockets of the Middle East, just to name two. Robert Mackenzie – Fbr Capital Markets: Can you also calibrate your comments for manufacture items such as bits etc.?

We don't really get involved in bits. In completion tools and liner hangers, it's not really for example which would be our equivalent, not equivalent to bits, but manufactured items, it's much less of an issue because you bring manufacturing down. I think all of our peers are bringing it down hard. Volumes are being put out at or below market requirements. Inventories get liquidated rather quickly and you're done. The tools are consumables and they're entirely different than tools that are service tools, like directional. It is much longer for them to be absorbed. Therein lies the difference. That's why I tend to agree with your point. I do not feel quite the same about lift or completion. I can't speak to bits because we are not in it, or tubular. Tubulars have the same issue, but you bring manufacturing levels down which is one of the reasons why people have a fair amount of manufacturing like us have strained economics when you bring the levels down, but once you bring them down, you put out less than the market requires, utilize inventory. It's no fun, but of course when the market turns, it's that much better. The service items, like directional rigs is another example, is a much harder thing to absorb. Robert Mackenzie – Fbr Capital Markets: How much of the material cost deflation, i.e. steel prices and everything else did you recognize in the first quarter and how much more do you expect to see in the second and third quarters this year?

With the way inventories are moving, you've started benefiting from it really in the last month of the first quarter, so I think you could say one third of Q1 was helped, and I think all of Q2 will be helped.

Your next question comes from Michael Urban – Deutsche Bank. Michael Urban – Deutsche Bank: Going back to the question on the Eastern Hemisphere growth, certainly some of those projects are already under way. How much confidence do you have in those numbers given your conversation with clients? In other words, you've spoken to delays and integrated projects, how much of the growth that you're counting on in the Eastern Hemisphere is already underway versus we think and we hope the contract begins as planned but there could be a risk of pushing it back further.

Part of me would like to say that what we're engaged in is not a balance in nuclear physics where we have a molecule too many, so one has to take it with a grain of salt. Having said that, we try to provide you the best guidance we can. We don't try to simply put out things that are either too high or too low and hope to get there. No, we really try to give you the best information we have. If it was any different, we would tell you. When we look at the volume of things, and we've had a lot of delays. We have some scale backs, some things that were supposed to be confirmed have not been confirmed. I could go down the list. We have a very, very long list of disappointments, and not a surprise, they started in October and it's been a rough five months. It's not a surprise to anyone. But if we look at where we are and what we still have left which is definitely confirmed, add the numbers and it strikes us that although Latin America is not controversial because of the very large scale development in Mexico that we benefit from, Eastern Hemisphere should when the full year is counted, should show as we said double digit growth year on year. It if it doesn't we'll be disappointed. If it does, we'll be happy. But it's the way it looks right now. Michael Urban – Deutsche Bank: Shifting back to North America, you've done a great job in recent years of picking up share, especially in some of your newer product lines. I realize it's difficult to make any judgments based on one quarter given the seasonality that you have with Canada, but you did lose a little bit more on the top line of the rig count after a number of years doing better in rig count, where do you feel like you are in your share positions? Is that somewhat anomalous on a one quarter basis? Give us a sense of where you're headed.

It's something that we're tracking obviously as we've become very customer focused by customer as opposed to by product lines in terms of our sales efforts in North America. But the market was down 28%. Don't forget about pricing in that and what we gave up in pricing in essence, a little bit less than what we gave up in pricing, we make up for in share improvement. So if I look at about half of the market decline was regained due to share improvements, things like lift, and I could name others but I don't really want to get into all the details, but on balance we probably gave up about 15% in pricing for the quarter. So weigh that against the results. 15% down in price, 20% decline in volumes and you think about the delta there is what you did on share.

Your next question comes from Mark Brown – Pritchard Capital. Mark Brown – Pritchard Capital: One question regarding the inventory of wells that have been drilled and not completed pertaining to North America, do you have a sense of how many wells there are that would fit that description?

I'm afraid I don't. It's a good question though and I could understand what you're after but I don't and I don't know that Andy does either. Unfortunately, we can't help you. Mark Brown – Pritchard Capital: Another question on tax rate. I think you said 15.5% guidance. If you could give any color for why that was lower than previously?

If you look at distribution of earnings by our geographic segment, and the different rates both statutory rates versus effective rates that we've been able to achieve and incremental tax planning that we undertook during the quarter in connection with our move to Geneva, all of those helped and obviously we feel a lot more confident about putting our thumb on exactly where we'll be by the end of the year in terms of earnings given the prognosis that Bernard just went through, and so I feel a lot more confident in that rate than where we were heading into Q1. Mark Brown – Pritchard Capital: In terms of your potential M&A activity going forward, you mentioned two that you did in the past quarter and about $2 billion worth of liquidity available, is that something that you're actively canvassing the market to do going forward?

We always are but we always are not meaning it depends what there is. The things that we're interested in are not that many and they're typically not available. So it depends when things cross our screen or cross our desk that fit that category of assets we think would benefit Weatherford, and there may be nothing. We're quite agnostic otherwise on the timing. Let me rephrase it. It's less things are cheap now, let's buy them in our case. It's more an issue of things we really are interested in. Very, very few. Either they're available or they're not. And obviously if they're not, it's academic. If they are, we try to make things happen. It's more that really than things are cheap. I would remind you that the things that are cheap and are plentiful are in North America, and we're not particularly interested in adding North American assets to our basket.

Your next question comes from Dan Pickering – Tudor Pickering. Dan Pickering – Tudor Pickering: Coming back to the IPM projects for just a second, could you give us a snapshot of what the rough percentage of your revenues or your dollar revenues came from IPM in the quarter and then if this ramps as you suggest, where would our exit rate for this year or number for next year be in terms of IPM?

Right now it's around 10%. I'm not sure it captures all of the dollars that go to those projects, so I'll tell you what I think I know. Again, a lot of the dollars stay within the product lines even though they are sold through projects, so we don't do a very good job necessarily of accounting for it. I'll stick at 10%. That's a number which I can support, but I think it's a bit higher than that. I think by year end we'll be around 15% on the same basis meaning also understating, also to the same degree from the revenues that might be hiding in the product lines. I don't want to change the methodology. Otherwise, I'm not going to compare anything that's comparable. So we go from 10% to 15% by year end. That's pretty safe. Dan Pickering – Tudor Pickering: Is that 10% to 15% of total company or the international revenue?

Total company. It's 10% of total company today, probably a little bit understated. We go to 15% of total company by year end, probably understated to the same degree. Dan Pickering – Tudor Pickering: I assume that given some project delays etc., you probably have some carrying costs?

Yes we do. I was trying in my long David answer on the margin thing which probably the longest answer I've given on any conference call, God help me, what I was trying to convey is that part of the moving parts have to do precisely with negative margins experienced by having those holding costs, and they presumably go away when you start getting active. But I wish we'd gotten active before. Unfortunately, you can't go against the will of your clients. Dan Pickering – Tudor Pickering: Are those costs do you think tens of millions, twenties of millions?

Between $10 million and $20 million a quarter. Dan Pickering – Tudor Pickering: If we look at the U.S. margin discussion, I guess I was struck by the fact that just doing the simple math that you talked us through that sort of implies that Q4 exit rates are very close to the numbers we saw here in Q1, maybe even above. Does that math work?

Close, a little bit shy, but close. You're in the ball park. Dan Pickering – Tudor Pickering: And then if as you think through that process, how much of that is cost driven versus activity recovery?

I'm not assuming any recovery off of 800 to 900 rigs. Dan Pickering – Tudor Pickering: So that is going to be an ongoing flow through of your cost reduction efforts.

Yes, we fully expect about a six month lag to get, the variable costs come about three months after perfectly if you do a good job. Fixed costs come about six months after, again if you do it very well. Dan Pickering – Tudor Pickering: So the $340 million number that you talked about, $256 million and another $80 million that you're doing here in the second quarter, we view those as actual cash. That's not just avoidance of cost of goods sold. That's actual cash cost reduction.

Actual cash cost reduction is correct. And it was $110 million on the fixed cost side and the balance on the variable, and something I didn't comment on, but we have preliminarily tagged another $100 million on the fixed cost side that we're going after. It will depend on whether we can achieve it is going to depend on how long this downturn lasts. Dan Pickering – Tudor Pickering: And that will be a 2010 impact potentially? Dan Pickering – Tudor Pickering: The incremental capital that you've added to the budget, is that all international?

Yes, I said 85% of the overall CapEx. The 85% will be non NAM. The $200 million incremental, is 100% international, but 85% of the overall $1.4 billion, but 100% of the incremental $200 million from 1.2% to 1.4% is international. It will predominantly be NAP. Dan Pickering – Tudor Pickering: So it looks like given cost reductions in North America, your international growth projects, it would seem to me like 2010 is clearly an up earnings year for you. It may not be for the industry, but it looks like it is an up earnings year for you guys. Does my math roughly work here?

That is correct. That is what we're trying to communicate. That is correct. Which concludes our conference call. Thank you very much.