Good morning. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Weatherford International Fourth Quarter 2013 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator instructions) As a reminder, ladies and gentlemen, today’s call is being recorded. Thank you. I would now like to turn the conference over to Mr. Bernard Duroc-Danner, Chairman, President and Chief Executive Officer. Sir, you may begin your conference.

Thank you. Good morning, everyone. We have three speakers today. Krishna will have prepared comments, then Dharmesh and then myself. Then I’ll turn it to Q&A afterwards. Krishna?

Thank you, Bernard, and good morning, everybody. I would like to remind our audience that some of today’s comments may include forward-looking statements reflecting Weatherford views about future event and the potential impact on performance. These matters involve risk and uncertainties that could impact operations and financial results and cause our actual results to materially differ from our forward-looking statements. These risks are discussed in Weatherford’s Form 10-K for the year ended December 31, 2013 filed yesterday February 25, 2014. Our comments include non-GAAP financial measures. A reconciliations to the most directly comparable GAAP measures are included in our fourth quarter press release. With that out of the way, the first thing, I wanted to announce is that the long standing material weakness on our tax accounting has been remediated. This was an enormous burden on the company whose impact in prior years cannot be overstated. It is history now. Moving on to specifics, non-GAAP earnings per share for the fourth quarter before charges was $0.07. After-tax charges for the fourth quarter of $324 million included $171 million associated with the legacy lump sum contracts in Iraq, principally for the Zubair EPF contract, $96 million were charges related to losses on monetizing 2026 bond issued by PDVSA in Venezuela to settle part of our receivable and other accounts receivable write-offs and $57 million in severance, exit and other charges. My comments are going to address the fourth quarter of 2013 then the full year 2013 and then finally, the outlook for 2014. Starting with the fourth quarter, our operating margin before research and development costs and corporate expenses was 10.1%, down 310 basis points sequentially. The fourth quarter was a perfect storm with several factors collapsing to pressure our margins. These included activity shortages in North America, the North Sea…

Thank you Krishna and good morning everyone. I will provide an operations outlook for 2014. U.S., activity in the U.S. continues to be robust. Rig and well counts in oil-rich business such as the Permian point to a healthy market. Weatherford has one of the best industry portfolios for unconventional development and our footprint combined with market activity will play to our strengths in 2014. All five core segments will benefit with the increase in U.S. activity. Stimulation continues to show improvements and we enter 2014 with 85% of our available horsepower under some contract. Based on current activity, we expect to reach 100% utilization by mid year. Canada, traditional Canadian activity remains steady and is projected to be modestly up versus last year. An area in Canada that is seeing growth is the heavy oil and thermal market. Weatherford has a industry-leading thermal completion solutions and will benefit from the growth of the thermal market. Three technologies that will drive the improvement in North America performance are the following: Completion technologies such as i-ball, TruFrac and INVISIBALL. Successful three trials were completed for these technologies in the second half of 2013. They will drive customers with the best option for maximizing production from unconventional wells. Ongoing testing of our newest generation rotary-steerable system in the fourth quarter were successful. Commercial launch in 2014 to U.S. and other markets is progressing according to plan. New artificial lift capabilities such as guided sucker rods, rod rotators and others that target the growing horizontal oil market were successfully introduced in the second half of 2013. Combination of market activity contracted horsepower stimulation, commercialization of these technologies and the lower cost structure will ensure the North American performance in 2014 was significantly better when compared to 2013. Latin America, 2014 will be a…

Thank you, Dharmesh. We entered 2014 with four very constructive accomplishments, settlement of the 6-year running U.S. government agency’s investigation, remediation of the material weakness in tax accounting which was uncovered in 2011, a newly minted culture of cash and returns as guiding principle and value system, and a strong management team at the leadership level and across operating and support functions. These were achieved in 2013 a year of serious fundamental progress. Profitability in ’13 wasn’t enough as operations played with poor contractual commitments and unfavorable dilution of business mix. Two factors were responsible for this, a legacy culture of growth which became excessive and obsessive level of internal distraction of legal and accounting issues. It’s easy to forget our legacy of growth was born in 1987. The company and its core was built from nothing over 21 years. Growth in building defined who we were and what was for a very long time a very good thing. In spite of poor stock performance from 2009 to date, the shares of Weatherford and its predecessor company, EVI, delivered from inception in May ’87 to date in 2014, a CAGR compound annual growth rate of about 18.5% per annum over almost 27 years. Growth and relentless industrially focused building were good, were rewarding to shareholders, clients and employees for a long time. It went on to too long. We lost our industrial bearings while implications of scale were not managed well. If we lose our direction, it was just simply a lack of attention, the strategic clarity combined with insufficiency stemming from rapid growth. It’s probably a combination of both. I have been responsible for this company from inception in ’87, this is my responsibility. The turnaround in reengineering of the company on a long-term financially rewarding path is the…

Thank you. (Operator Instructions) Your first question comes from a line of James Crandell with Cowen. Please go ahead with your question.

Good morning, everyone.

Good morning, Jim.

Bernard, given your more selective strategy on pursuing growth, what do you think a reasonable target for a topline growth for Weatherford is for the full year? And can you comment giving your cost cutting and taking the growth into account, what’s a reasonable target for overall margin improvement for the product lines that you’re keeping?

I think, 2014 being a year, which we’ll see a lot of internal work, I would say the core growth should probably be constrained to about 10%, not more. I think beyond the target, if all goes well, 15%, 15% thereon. With respect to the margin improvement, I will turn to Krishna to see what, how he would like to express that.

So, just the core businesses, this year as we said earlier, the core businesses made an operating income margin of 16.3%. Going into 2014, with the revenue growth that Bernard just put out there, it should definitely be very high teens, just pushing 20% in the fourth quarter on the exit rate with that kind of growth.

Okay. I had a question about the cost reduction efforts that you’re making. I mean, 7,000 heads, I realized on a 49,000 basis, a lot of people. But it made great progress so far. I guess two questions around this. Number one, does this put your -- and I understand most of this people are in non-revenue generating areas. Does this put your ratio of sort of non-revenue generating employees to revenue generating employees, where you want it to be? And if not, should we view this as maybe there’s another, shoe to drop or another step to take in terms of the cost reduction process?

I will let, Dharmesh give you some substance on that. But I will say this Jim. I think the heavy lifting in terms of finding the positions to close is happening now. We will try and get it done very quickly. Afterwards, there is pruning, pruning is not heavy lifting. With that, I’ll turn it to Dharmesh.

Sure. So first of all Jim, there is no second phase of cost cuts planned. The push out we have taken is a very intense effort, scrubbing it country-by-country, function-by-function. We don’t have to go second best. So from a perspective of how we will run the whole program, it has taken up a lot of time, lot of focus of our management in the last five to six weeks to scrub everything. Now, the only thing that we have not finished is the location that we will exit and consolidation of manufacturing locations and those two will be identified on the next call. So from your answer perspective, the cost cuts really is a one cash process. The second question you ask, which is the ratio of indirect to direct. One thing we are not at all stopping is the hiring of people for locations where we are contracted with. So, a large percentage of our revenue because of the contracts we won in the second half of the last year, we are hiring people, we are hiring direct headcounts in our regions and almost every part of the world to support the contracts we have. So the combination of hiring from a revenue generating position with the prospects will get our ratio pretty much in line to where we wanted to be by the end of the year.

I will add one last thing, which is very focused on R&D and technology. The R&D spend on the core or R&D spend in general, even after there non-cores are gone, we will not drop, our commitments and technology will remain the same.

Okay. But one last quick question. Are you in your asset divestiture program, are you keeping the international pieces of fluids in testing?

So, Jim, this is Krishna. First, I’d like to answer the earlier question you had on the ratio…

Okay.

…from non-revenue earning employees to revenue earning employees. For the longest time in an international oil and gas services company, the standard ratios for this sort of business with our international exposure should be between 30% and 35%, which is non-revenue generating employees divided by revenue generating. So the 7,000 cut that we are talking about will bring us in-line with that range. Now, on the divestments, right now, we’re working on the assumption that the testing and production of course, we will sell the old local business. And on the drilling fluids business, we are considering whether to sell the U.S. piece separately and retain the international piece as it is quite embedded with our project revenue, our integrated project management efforts.

Okay. Good answer. Thank you and great rundown.

Your next question comes from the line of Jim Wicklund with Credit Suisse. Please go ahead with your question.

Good morning, guys.

Good morning, Jim.

Good morning, Jim.

That was so incredibly extensive and thorough and detailed that we’re all scrambling to come up with the good question. So that’s a compliment by the way.

Thank you.

And if I recall was in the acknowledgment of what’s went gone wrong in the past and what’s going to fix this is good. The question that leads to mind is and I don’t mean to rude with this, but what makes you think you can affect all these changes now and you haven’t been able to for the last couple of years?

Well, I think to give you an answer and then Dharmesh will fill it. I think in the prior years, I am referring to ’11 and ’12, not ’13 well, already a lot of what we’re doing now and the seeds were placed. ‘11 and ’12, I think the company was, to say was distracted as to put it mildly. So I will leave it at that. It was unable to handle anything and such thing a lot. This is our number one. Two, with respect to making the changes that we need to make, it’s simple, divest the court, change the cost structure, that is on core, change the cost structure. Dharmesh will give you some more detail.

Jim, two parts to my answer. I remember a wise young man asking Bernard the question that’s implementing a culture of cash is very difficult. How do you expect to do it so quickly? And Bernard had answered that question with a very simple answer, which is the character of the organization. Weatherford has a history of when it makes its mind up to do something, it will do it well. If you look at the cash and implementation of the culture of cash and the 14 days of working capital in one year, by any standard for a company that never generated free cash flow, working capital, that’s a various staggering achievement.

No argument.

The second one I will say is the following which is that you cannot underestimate the distraction of the tax and the lawyers and the freeing up of that by an organization from the distraction. So the combination of no distractions, the character of the organization and to some extent the groundwork that has been laid in ’13 makes us very optimistic about getting what we need to get done in ’14.

Okay, guys. I was married to a lawyer once I know they can’t be distracting. There was the comment you made Bernard, when you’re talking about completing the strategic view and understanding guidance in the past hadn’t been good. And you mentioned measures have been put in place to ensure that you’re good at it, and this is also to Krishna, because Krishna, you’re new there and you’ve got credibility to earn. Are there any things in place that carrots and sticks that give us confidence that future guidance and statements made get done?

Well, the first thing I would say is that the forecasting process within Weatherford certainly can do with some improvement and we’re working in all the building blocks to improve the forecasting process, so that we can hold our field managers much more accountable than they have been in the past. The second thing on the guidance, I'd like to say here is that when you look at the separation of the core business and the non-core business and the granularity that we have not only provided on this call but also the granularity of the cost production efforts that we have exposed today, can give us quite a lot of confidence. In three or four weeks to identify 6,200 thereabout positions for termination, galvanizing the whole organization to participate in this mammoth effort in such a short space of time speaks volumes for itself. So I think the confidence with which we are approaching the strategic directions to the company is very, very heartening to see, given the efforts of the field managers. So I think we can execute on what you're saying and the guidance that they have given for us, given where we are today based on the costs cuts and the speed of divestitures. We think it's a pretty good guidance, pretty solid.

Okay, gentlemen impressive. Thank you very much.

Thank you.

Your next question comes from the line of James West with Barclays. Please go ahead with your question.

Good morning, guys.

Good morning, James

Good morning.

Quick one for me and then a couple follow-ups. It was great to see the core margins broken out. I think a lot of people were surprised that how hard those margins actually were. Do you intend to as we go through this year why are you doing the divestures to report that those numbers each quarter so we can track progress?

Yes, certainly James. This is Krishna. Of course, the idea was to open this call with those margins and then to keep it going right through every quarter to give you run down and how that progresses during the year. You will see that as we divest the non-core businesses, the core profitability will emerge in the total company profitability as well. But we will give the breakdown every quarter.

Right, okay, great. And then as we go through divesture process here, what are the accounting triggers which need to meet before you can start putting these businesses into discontinued operations?

It’s the usual accounting triggers. We would have to have a data pack ready, had bankers, start showing the data sets to buyers and had offers in -- indicative offers from buyers and extended level of due diligence should be ongoing before we get confidence of taking this out as difficult. So we will look to that as they go forward.

Okay.

Usual -- that's a base treatments.

Right. And that would imply than the first half that package that you're closes to selling or even close to -- that were pretty close to seeing that going to discounted ops. Is that a fair statement?

Yes, that's a fair statement in the first quarter. You most likely see that business going out in discontinued events.

Okay, okay. And has there been any change -- last one from me, is there any change to the senior management compensation structure linked more to the divestitures and the cost reduction effort to this point?

Yeah there has been throughout the company, but the office of compensation plan is probably not a bad one to look at. Simply because of this the company is not the same but it has the same sort of philosophy. I will turn again to Krishna to give you details but it is made up of bonus plan It is made up of four different metrics plus safety which remains -- it remains something which is in our DNA. This is one area we've done well safety but never well enough. It matters a great deal in all the respects. The four metrics are either going to be profitability based or they're going to be return based. And they are very, very specific. Do you understand one of the offices?

Yes, the one -- the four metrics for the offices are split between earnings as one of the four, the second one is cost reduction.

Specifically cost reductions for math.

Yes, the third one is free cash flow generation and the fourth one is reduction in net debt, which is of course completely relied on divestitures. So there is a double accounting free cash flow reliance on debt except the other components are net debt, divestments and also there are some exogenous uses of cash, the U.S. government payments and/or we're trying to bring down as much as possible the non-recurrent expenses and/or uses of cash that's actually one area where cash can leak out, we are trying to stop that. That's one of the measurements therefore, net debt addresses that also.

So the management and the plan is completely in line with the strategy that we spoke about and then safety is the fifth component which remains.

Right, right, perfect. Okay, thanks guys.

Thank you, James.

Your next question comes from the line of Byron Pope with Tudor, Pickering Holt. Please go ahead with your question.

Good morning.

Good morning, Byron.

Good morning, Byron.

I appreciate the color on the core product and service lines. Bernard, as you think about the opportunities there across your geo markets over the next couple of years. Just curious as to which of those core product service line do you see driving -- really driving the top line growth. You commented earlier about the 10% top line growth in 2014 for your core but I am just wondering for those areas of businesses in the core which ones do you see have been particularly robust in 2014?

Well construction, well construction for sure. It’s an easy pick. It being the largest one but it’s one construction based on the contracts. Remember that when one looks at the year in the international markets, North America is different. You should enter the year with 80% or 90% typically if things are running well or your revenue is booked already. And you can see the weight of the various product lines, well construction has the disproportionate portion of weight in terms of delta in 2014. I am not saying the others ones won’t do well also but disproportionately so at the revenue line. Dharmesh, do you want to add to that?

Sure. Byron, there are already three secular teams that drive our growth. The mature field and reservoirs has done as large, unconventional and really what I call well integrity across all types of wells. So if you look at the nature of the wells, artificial lift, completion, well construction, they all benefit. And so Latin America and North America, those product lines will be driving the growth in those geo market. As we start going east, those wells are aging. The wells are more complex sometimes. Deep water activity is higher. Well construction has bigger role to play and formation, evaluation has a bigger role to play. So it is relevantly driven by each of the more dominant secular team and each of the geo markets will drive each product line the time they contributed to growth in that geo market.

Okay. That’s it from me. Thanks, I appreciate it.

Your next question comes from the line of Kurt Hallead with RBC. Please go ahead with your question.

Hey, good morning.

Good morning, Kurt.

Good morning.

Good morning. Well done, well done, congratulations on the turnaround, sounds to be very impressive. The question that I have as we move forward here is the -- can you guys identify the specific product line areas with explicit detail. I am just kind of looking at the stimulation where you mentioned the 2013 operating margin was negative 7.8%. I would like to get a handle on what that exit rate was in the fourth quarter. And as you look at into 2014, where do you see that stimulation margin for the year.

This is actually a question which I will gladly hand over to Dharmesh. He will be more specific than I will be and I know it directionally not specifically.

So Q4 2013 was a best quarter from a margin perspective for stimulation. Q1 and Q2 were the worst and as the year progress the margin started doing better. From EBITDA perspective, we ended almost had a breakeven EBITDA in the fourth quarter of last year and the expectation would be in the high single digit sometimes by the third quarter of this year.

Okay. Then what, that’s really helpful and when you think about that, if you are going to be high single digits by the third quarter then fairly you are not going to have average high digits for the full year, obviously, right?

That’s correct.

Okay. Now when we look at the regional the geo-market dynamics you provided an overall revenue growth for your core businesses and how do you think about, right, trying to make it a little bit easier for us to following, I appreciate the fact, you are providing updates throughout each quarter? But at this point, what do you think non-core revenue growth and what are you thinking about core margin dynamics in non-core, excuse me, non-core revenue, non-core margin dynamics for 2014?

Well (inaudible)

Yeah. Yeah.

On the core, Kurt, I think the growth for year actually be around 10%...

Right.

… rather not the, I think, you have to assume there will be some measure of distraction earlier in the year and so the growth will be little bit less and it would, I would anticipate it being beyond that or just to get the secular demand. On the margin side, I’ll let Krishna, what would you like to share for the core?

Well, the core margins, as I said earlier was 16.3% operating income margin for 2013 and it will start climbing upwards with the growth that Bernard has spoken about to approach close to 20% by the end of Q4 of 2014. Now the non-core businesses which you asked about, they will grow at the much slower rate then the core businesses, although some parts of it like testing are growing nicely, the testing and production business is growing pretty strongly.

The margins on non-core are likely to heal to some degree, you saw some of it clearly not enough on the U.S. stimulation but it is going in the right direction. You should have a non-core that the margins would be significant going from seriously negative to not so negative and positive in some case.

That’s right. I mean, for the year 2014, the non-core business is, if they were not divested at all on that assumption which makes up our $1.10 to $1.20 guidance the non-core businesses are expected to make a single -- low single-digit operating income margin for 2014, which implies a growth rate of some measure and the repairing of the business is the non-core business is which will continue relentlessly through this year.

Yeah. That’s fantastic and helpful. And maybe if I just could round up that discussion and because, I think everybody, some of already probably done the math, but the, if you take the non-core out and you look at 2014 on a pro forma basis, what’s the earnings, the core earnings power in 2014 for Weatherford?

So I said touch on it…

It’s a bucks 10 or bucks 20, and a bucks 10 to bucks 20 is your guidance, you take out the non-core, what are we looking at?

As oppose to, I am not going through the numbers I shared with you when I read my comments on the, what happens to the margins and the core, you take out U.S. stimulation, because it’s a bit of an outlier and you add the cost cuts, which end up giving you operating income margin which are in excess of 20% the core. Let me, Krishna, what we would like to share on that?

Well, I would say, the vast majority of the $1.10 to $1.20 will come from the core businesses.

Yeah.

Right. Just as a data point, just for 2013, the year just passed, we made, we declared earnings of $0.60 for the year. The breakup of that between the core and the non-core is $0.85 of earnings for the core business and a negative $0.25 for the non-core. So, from what I have said just now, what we have been saying about the non-core, repairing the non-core, we can assume that you know, we are going to bring that back to breakeven to slightly positive in 2014. So the bulk of the earnings will come from the core.

Yeah. That’s extremely helpful and congrats again on structuring this turnaround.

Thank you.

Thank you, Kurt.

Thank you, Kurt. I think we have been call is 10 minutes overdue, we will take one last question if there is one Operator and then we will close down the call.

Your next question comes from the line of Angie Sedita with UBS. Please go ahead with your question.

Great. Good morning, guys.

Good morning, Angie.

Could you talk a little bit about where you stand in the active sale and clearly, we have seen other players in the service sectors try to sell assets have unsuccessfully done so, given what they are selling and who the buyers are, and what the prices are? So can you just talk through the four tranches of assets that you are looking to sale and where you stand in the process of each of those group, what do you think as far as interest and do you have a minimum sales size you would like to sale those assets for, let’s start there?

Okay. I would say first, Angie, that we are organized, very particular and a lot of the management data, whatever process is necessary is already set and behind us and ready to go to auction. Out of the four, because the rig company is which is going to be around the balance of the year, we are comparing the audits and then spin-off IPO, build an IPO in Q4 and Q1 which is separate issue. Of the four, the first of the four is, under discussion now with interested bidders now, so the process is well engage and it will work or it won’t, indications are that the bidders obviously are quite a few are interested and they are serious, that much I can tell you.

Yeah. Thanks, Bernard. I would like to add that, Angie, there are a numbers of interest buyers for each one of these businesses. We are actually holding them back to be perfectly honest till we get ready for each package, data package for each of the businesses which is ongoing. So the first data package began to be socialized with buyers on January the 17th and we are in an advance stage of discussion today on that business. So in a very rapid space of time we are coming close to one of the business divestitures. The others, one will come online on the 1st of April and the other two will come online roughly around the beginning of the third quarter. And if, the long list of bidders that we have is that is any indication of the interest that we are seeing, I have no doubt in my mind that we will be able to execute on most of these sales at a fairly reasonable price.

Only the comment I would add Angie is, one of the hottest spot of selling business, is the extraction of business, and one of the thing we are doing very well upfront is making sure every buyer understands what the extraction issues are by location, by country, by area, by personal, by support function, so that is not an issue for -- that doesn’t delay the process.

What I was trying to allude to when I said we are organized, the identification of what we are trying to sell, Angie, is actually other simple matter when you have 1,100 basis, et cetera, et cetera operating so many countries and you operate in a commingle manner. So identification of assets, identification of people is actually something that we have done and by when I mentioned we were organize that’s what I was referring to.

All right. And then as far as the assets sales, and obviously, you are bidders that bidding could be obviously range of prices? So do we have minimum that you expect or you need to have in each of these tranches of assets sale for us to execute, or are you more focus on getting the assets out of the company, number one? And then finally, number two, is on the land IPO spin when we will have more clarity on how that data will be structured as far as IPO versus spin, potentially spin, potentially over 100% of spend and just little clarity there?

So let me take the first part, Angie, we have a good range of evaluation that we are willing to accept for each one of the four businesses, excluding the land drilling rig business which we’ll come to separately. And we are not in a fire-sale mode. We think these businesses are pretty solid businesses but better owned by other owners who -- for whom these businesses will be core. So that’s the first part. The second part, I’m going to refer to Bernard.

Whether it is a full spin-off or partial spin-off with IPO or an IPO followed by secondary, Angie, it is the same, same, same process between now and then. So I don’t think the Board has decided which of the three will be the final option. My particular guess is that when the time comes, we’ll probably do an IPO followed by the spin-off of the rest of the shareholders but again do not hold me to that. Remember it is exactly the same process. Between now and the time of whether it’s spin, IPO, then spin or IPO and then secondary, you are going to organize independent company with independent management, audited statements. If you remember more than 10 years ago, we did the same with grand cycle that was a full spin-off. This is the same process except that was a spin-off. That could have been an IPO there. It would have been the same process. So in many respects, we don’t have to decide now and the Board doesn’t have to decide now but we will. And the decision will be made probably towards the second half of the year.

Okay, thanks. I do appreciate the granularity on the rest of the call and I’ll turn it over.

Thank you very much. I think this concludes our call and thank you every one for your time and attention.

Thank you. This concludes today’s conference call. You may now disconnect.