Fresh Start Accounting (Tables)

12 Months Ended

Dec. 31, 2019

Reconciliation of Enterprise Value to Estimated Fair Value of Successor Common Stock

The following table reconciles the enterprise value to the estimated fair value of our Successor common shares as of the Fresh Start Reporting Date:



(Dollars in millions)	Fresh Start Reporting Date
Enterprise Value	$	4,516
Plus: Cash and Cash Equivalents (includes $25 million cash collateral released from restricted cash on 12/17/19)	518
Less: Fair Value of Debt	(2,103		)
Fair Value of Successor Equity	$	2,931

The following table reconciles the enterprise value to the reorganization value of the Successor’s assets to be allocated to the Company’s individual assets as of the Fresh Start Reporting Date:



(Dollars in millions)	Fresh Start Reporting Date
Enterprise Value	$	4,516
Plus: Cash and Cash Equivalents (includes $25 million cash collateral released from restricted cash on 12/17/19)	518
Plus: Current Liabilities Excluding Short-term Borrowings and Current Portion of Long-term Debt	1,707
Plus: Non-current Liabilities Excluding Long-term Debt	627
Reorganization Value of Successor’s Assets to be Allocated	$	7,368

Schedule of Fresh-Start Adjustments



	As of December 13, 2019
								Fresh Start
				Reorganization				Accounting
(Dollars in millions)	Predecessor			Adjustments (1)				Adjustments				Successor
Assets:
Cash and Cash Equivalents	$	641		$	(148	)	⁽²⁾	$	—			$	493
Restricted Cash	398			(137		)	⁽³⁾	—				261
Accounts Receivable, Net	1,274			—				—				1,274
Inventories, Net	1,071			—				(84		)	⁽¹⁷⁾	987
Other Current Assets	494			(4		)	⁽⁴⁾	(14		)	⁽¹⁸⁾	476
Total Current Assets	3,878			(289		)		(98		)		3,491

Property, Plant and Equipment, Net	1,838			—				289			⁽¹⁹⁾	2,127
Goodwill	—			—				239			⁽²⁰⁾	239
Intangible Assets, Net	166			—				957			⁽²¹⁾	1,123
Other Non-current Assets	336			25			⁽⁵⁾	27			⁽²²⁾	388
Total Assets	$	6,218		$	(264	)		$	1,414			$	7,368

Liabilities:
Debtor in Possession Financing	$	1,528		$	(1,528	)	⁽⁶⁾	$	—			$	—
Short-term Borrowings and Current Portion of Long-term Debt	319			(305		)	⁽⁷⁾	(1		)	⁽²³⁾	13
Accounts Payable	667			(4		)	⁽⁸⁾	—				663
Accrued Salaries and Benefits	263			—				—				263
Income Taxes Payable	214			—				—				214
Other Current Liabilities	618			(22		)	⁽⁹⁾	(39		)	⁽²⁴⁾	557
Total Current Liabilities	3,609			(1,859		)		(40		)		1,710

Long-term Debt	60			2,097			⁽¹⁰⁾	(6		)	⁽²⁵⁾	2,151
Other Non-current Liabilities	518			—				58			⁽²⁶⁾	576
Total Liabilities Not Subject to Compromise	4,187			238				12				4,437

Liabilities Subject to Compromise	7,634			(7,634		)	⁽¹¹⁾	—				—

Shareholders’ Equity (Deficiency):
Predecessor Ordinary Shares	1			(1		)	⁽¹²⁾	—				—
Successor Ordinary Shares	—			—			⁽¹³⁾	—				—
Predecessor Capital in Excess of Par Value	6,733			(35		)	⁽¹⁴⁾	(6,698		)	⁽²⁷⁾	—
Successor Capital in Excess of Par Value	—			2,897			⁽¹⁵⁾	—			⁽²⁸⁾	2,897
Retained Earnings (Deficit)	(10,682		)	4,271			⁽¹⁶⁾	6,411			⁽²⁷⁾	—
Accumulated Other Comprehensive Income (Loss)	(1,697		)	—				1,697			⁽²⁷⁾	—
Weatherford Shareholders’ Equity (Deficiency)	(5,645		)	7,132				1,410				2,897
Noncontrolling Interests	42			—				(8		)	⁽²⁸⁾	34
Total Shareholders’ Equity (Deficiency)	(5,603		)	7,132				1,402				2,931
Total Liabilities and Shareholders’ Equity (Deficiency)	$	6,218		$	(264	)		$	1,414			$	7,368

Reorganization Adjustments (Dollars in Millions)

Reorganization adjustments required in connection with the application of Fresh Start Accounting and the allocation of the enterprise value to our individual assets and liabilities by reporting unit resulted in the following Reorganization Adjustments.

(1)

Represent amounts recorded as of the Effective Date for the implementation of the Plan, including, among other items, settlement of the Predecessor’s liabilities subject to compromise, repayment of certain of the Predecessor’s debt, issuances of the Successor’s common shares, proceeds received from the Successor’s debt offering and transfer of restricted cash for the issuance of the Successor’s debt.


(2)	Net change in Cash and Cash Equivalents:



Proceeds from Exit Notes	$	1,600
Cash Collateral Released	167
Payment in full on the DIP Credit Agreement and related unpaid interest	(1,531		)
Payment in full on the A&R Credit Agreement and related unpaid interest	(306		)
Payment to Escrow Remaining Professional Fees	(30		)
Payment on Deferred Financing Fees for Exit Credit Agreements	(22		)
Payments on Other Liabilities	(18		)
Payment on Professional Fees not escrowed	(8		)
Net Change in Cash and Cash Equivalents	$	(148	)


(3)	Net change in Restricted Cash:



Payment to Escrow Professional Fees	$	30
Cash Collateral Released	(167		)
Net Change in Restricted Cash	$	(137	)


(4)	Represents the reclass of amounts to deferred financing fees on the Exit Credit Agreements.


(5)	Net change in Other Non-current Assets include the following:



Payment on Deferred Financing Fees, Including Professional Fees, on the Exit Credit Agreements.	$	22
Reclass of amounts from Other Current Assets to deferred financing fees on the Exit Credit Agreements.	4
Accrual of Deferred Financing Fees on the Exit Credit Agreements	1
Write-off of Deferred Financing Fees on the A&R Credit Agreement	(2		)
Net Change in Other Non-current Assets	$	25


(6)	Represents the payment in full on the DIP Credit Agreement Principal.


(7)	Represents the payment in full on the A&R Credit Agreement Principal.


(8)	The decrease in Accounts Payable represents the payment on professional fees offset by the accrual of deferred financing fees.


(9)	Net change in Other Current Liabilities include the following:



Payments of Other Liabilities	$	(18	)
Payment of Interest on the DIP Credit Agreement	(3		)
Payment of Interest on the A&R Credit Agreement	(1		)
Net Change in Other Current Liabilities	$	(22	)


(10)	Changes in Long-term debt include the issuance of the unsecured 11.00% Exit Notes Due 2024 which is comprised of $1.6 billion of the Exit Rights Offering Notes and $500 million of the Exit Takeback Notes, offset by the accrual of deferred financing fees.


(11)	Liabilities Subject to Compromise to be settled in accordance with the Plan and the resulting gain were determined as follows:



Liabilities Subject to Compromise	$	7,634
Distribution of equity to creditors	(2,837		)
Issue Exit Takeback Notes to creditors	(500		)
Gain on Settlement of Liabilities Subject to Compromise	$	4,297


(12)	Represents the cancellation of Predecessor Ordinary Shares at Par Value.


(13)	Represents the issuance of New Ordinary Shares to Creditors and Prior Ordinary Share Holders at Par Value.


(14)	Net change in Predecessor Capital in Excess of Par Value include the following:



Acceleration of share-based compensation	$	24
Cancellation of Predecessor Ordinary Shares	1
Issuance of New Ordinary Shares to Prior Ordinary Share Holders	(29		)
Issuance of New Warrant to Prior Ordinary Share Holders	$	(31	)
Net Change in Predecessor Capital in Excess of Par Value	$	(35	)


(15)	Net change in Successor Capital in Excess of Par Value include the following:



Issuance of New Ordinary Shares to Creditors	$	2,837
Issuance of New Warrant to Prior Ordinary Share Holders	31
Issuance of New Ordinary Shares to Prior Ordinary Share Holders	29
Net Change in Successor Capital in Excess of Par Value	$	2,897


(16)	Net Change in Retained Deficit include the following:



Gain on Settlement of Liabilities Subject to Compromise	$	4,297
Acceleration of share-based compensation	(24		)
Write-off of deferred financing fees on the A&R Credit Agreement	(2		)
Net Change in Retained Deficit	$	4,271

Fresh Start Adjustments (Dollars in Millions)


(17)	Changes in Inventories, Net reflect the fair value adjustment of $84 million.



	Successor Fair Value		Predecessor Historical Value
Raw Materials, Components and Supplies	78		$	78
Work in Process	51		55
Finished Goods	858		938
Totals	$	987	$	1,071


(18)	Reflects the elimination of current deferred costs associated with contracts with customers of $10 million and the elimination of certain prepaid taxes of $4 million due to the adoption of Fresh Start Accounting.


(19)	Changes in Property, Plant and Equipment, Net reflect the fair value adjustment of $289 million.



	Successor Fair Value		Predecessor Historical Value
Land, Buildings and Leasehold Improvements	$	569	$	1,205
Rental and Service Equipment	1,280		4,697
Machinery and Other	278		1,543
	2,127		7,445
Less: Accumulated Depreciation	—		(5,607		)
Property, Plant and Equipment, Net	$	2,127	$	1,838


(20)	Reflects the recognition of Goodwill.


(21)	Changes in Intangible Assets reflect the fair value adjustment of $957 million.



	Successor Fair Value		Predecessor Historical Value
Developed and Acquired Technology	$	728	$	74
Trade Name	395		—
Customer Relationships and Contracts	—		39
Other	—		53
Totals	$	1,123	$	166


(22)	Reflects the fair value adjustment to the increase the Company’s Right of Use Assets by $13 million and Non-current Deferred Tax Asset by $14 million.


(23)	Reflects the fair value adjustment to the Company’s current portion of financed lease obligations.


(24)	Reflects the fair value adjustments to (i) increase the current portion of operating lease obligations by $5 million, (ii) decrease deferred revenues associated with contracts with customers by $29 million, and (iii) decrease intangible liability by $15 million.


(25)	Reflects the fair value adjustment to the Company’s long-term portion of financed lease obligations.


(26)	Reflects the fair value adjustment to (i) increase the long-term portion of operating lease obligations by $22 million, (ii) decrease the intangible liability by $7 million, and (iii) record a Non-current Deferred Tax Liability of $43 million.


(27)	Reflects the cumulative impact of Fresh Start Accounting adjustments discussed herein and the elimination of Predecessor accumulated other comprehensive loss and Predecessor accumulated deficit.

(28)

Reflects the fair value adjustment to noncontrolling ownership interests in certain subsidiaries.