e424b3
The
information in this prospectus supplement is not complete and
may be changed. This prospectus supplement and the accompanying
prospectus are not an offer to sell these securities and they
are not soliciting an offer to buy these securities in any state
where the offer or sale is not
permitted.
|
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-116655
SUBJECT TO
COMPLETION, DATED FEBRUARY 14, 2006
Preliminary Prospectus Supplement
February , 2006
(To prospectus dated July 7, 2004)
$350,000,000
Weatherford International
Ltd.
% Senior
Notes due 2016
Fully and Unconditionally
Guaranteed By Weatherford International, Inc.
We will pay interest on the notes on February 15 and
August 15 of each year, beginning August 15, 2006. The
notes will mature on February 15, 2016. We may redeem some
of the notes from time to time or all of the notes at any time
at the redemption prices set forth in this prospectus supplement.
The notes will be our unsecured senior obligations and will rank
equally with all of our other unsecured senior indebtedness from
time to time outstanding.
The notes are fully and unconditionally guaranteed on a senior
unsecured basis by one of our operating subsidiaries,
Weatherford International, Inc. The guarantee by Weatherford
International, Inc. will rank equal in right of payment to all
of Weatherford International, Inc.s existing and future
unsecured and unsubordinated indebtedness. This guarantee may be
terminated and reinstated under certain circumstances as
described in this prospectus.
Investing in the notes involves risks. Please read Risk
Factors beginning on
page S-6 of this
prospectus supplement and page 6 of the accompanying
prospectus.
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Public offering price(1)
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Underwriting discount
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Proceeds, before expenses, to us
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(1) |
Plus accrued interest from
February , 2006, if settlement
occurs after that date. |
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The notes will be ready for delivery in book-entry form only
through The Depository Trust Company on or about
February , 2006.
Joint Book-Running
Managers
Banc of America Securities
LLC
Morgan Stanley & Co.
Incorporated
UBS Investment Bank
Co-Manager
Merrill Lynch &
Co.
TABLE OF CONTENTS
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Prospectus Supplement |
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S-iii |
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S-i
ABOUT THIS PROSPECTUS SUPPLEMENT
In this prospectus supplement, unless otherwise indicated, when
we refer to Weatherford Bermuda or use words such as
we or us, we are generally referring to
Weatherford International Ltd. and its subsidiaries as a whole
or on a division basis, depending on the context in which the
statements are made. When we refer to Weatherford Delaware, we
are referring to Weatherford International, Inc., our
predecessor company and our wholly owned, indirect subsidiary,
which has irrevocably and unconditionally guaranteed the notes
on a senior unsecured basis.
This prospectus supplement is part of a registration statement
that we have filed with the Securities and Exchange Commission,
or SEC, using a shelf registration process. Under
this shelf registration process, we are offering to sell the
notes using this prospectus supplement and the accompanying
prospectus. This prospectus supplement describes the specific
terms of the note offering. The accompanying prospectus gives
more general information, some of which may not apply to this
offering. If the description of the offering varies between this
prospectus supplement and the accompanying prospectus, you
should rely on the information in this prospectus supplement.
Consent under the Exchange Control Act of 1972 (and its related
regulations) has been obtained from the Bermuda Monetary
Authority for the issue and transfer of our loan notes to and
between non-residents of Bermuda for exchange control purposes,
provided our shares remain listed on an appointed stock
exchange, which includes the New York Stock Exchange. This
prospectus supplement and the accompanying prospectus will be
filed with the Registrar of Companies in Bermuda in accordance
with Bermuda law. In granting such consent and in accepting this
prospectus supplement and the accompanying prospectus for
filing, neither the Bermuda Monetary Authority nor the Registrar
of Companies in Bermuda accepts any responsibility for our
financial soundness or the correctness of any of the statements
made or opinions expressed in such documents.
You should rely only on the information contained or
incorporated by reference in this prospectus supplement and the
accompanying prospectus. We have not, and the underwriters have
not, authorized any other person to provide you with different
information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not,
and the underwriters are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in
this prospectus supplement, the accompanying prospectus and the
documents incorporated by reference is accurate only as of their
respective dates. Our business, financial condition, results of
operations and prospects may have changed since those dates.
S-ii
WHERE YOU CAN FIND MORE INFORMATION
We file reports and other information with the SEC. You may read
our SEC filings at the SECs website at www.sec.gov. You
may also read and copy documents at the public reference room
maintained by the SEC at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for
further information on the public reference room.
The SEC allows us to incorporate by reference the
information we file with them, which means that we can disclose
to you important information contained in other documents filed
with the SEC by referring you to those documents. The
information incorporated by reference is an important part of
this prospectus supplement and the accompanying prospectus.
Information we later file with the SEC will automatically update
and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 (the Exchange Act) after the date of this
prospectus supplement through the termination of the
registration statement of which this prospectus supplement is a
part. Please read the following documents incorporated by
reference to this prospectus supplement and accompanying
prospectus:
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our annual report on
Form 10-K for the
year ended December 31, 2004 filed with the SEC on
March 11, 2005; |
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the amendment, on
Form 10-K/ A, to
our annual report for the year ended December 31, 2004
filed with the SEC on June 14, 2005; |
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our quarterly report on
Form 10-Q for the
quarter ended March 31, 2005 filed with the SEC on
May 6, 2005; |
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our quarterly report on
Form 10-Q for the
quarter ended June 30, 2005 filed with the SEC on
August 1, 2005; |
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our quarterly report on
Form 10-Q for the
quarter ended September 30, 2005 filed with the SEC on
November 9, 2005; |
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our current reports on
Form 8-K filed
(but only to the extent filed, and not to the extent
furnished within the meaning of SEC regulations) on
the following dates in 2005: January 20 and 25,
February 18, March 7 and 11, June 6 (as amended
June 9), July 8 and 28, August 29,
September 7 (as amended November 2), October 5,
27 and 31, and December 2, 12 and 28; and |
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all documents we file under Section 13(a), 13(c), 14, or
15(d) of the Exchange Act between the date of this prospectus
supplement and the termination of the registration statement of
which this prospectus supplement is a part. |
If the information in incorporated documents conflicts with
information in this prospectus supplement, you should rely on
the most recent information. If the information in an
incorporated document conflicts with information in another
incorporated document, you should rely on the most recent
incorporated document.
You may request a copy of these filings at no cost, by writing
or telephoning us at the following address: Weatherford
International Ltd., 515 Post Oak Boulevard, Suite 600,
Houston, Texas 77027, Attention: Investor Relations (telephone
number:
(713) 693-4000).
If you have any other questions regarding us, please contact our
Investor Relations Department in writing at the above address or
at the above telephone number or visit www.weatherford.com.
Information on our website is not incorporated by reference in
this prospectus supplement or the accompanying prospectus.
S-iii
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights information appearing in other
sections of this prospectus supplement or the accompanying
prospectus. It may not contain all of the information that you
should consider before investing in our notes. You should read
the entire prospectus supplement, the accompanying prospectus
and the documents incorporated by reference carefully, including
the financial statements and the footnotes to those financial
statements contained in those documents.
Weatherford
Our Business
Weatherford is one of the largest global providers of innovative
mechanical solutions, technology and services for the drilling
and production sectors of the oil and gas industry. We operate
in over 100 countries and employ more than 25,100 people
worldwide.
Our principal executive offices are located at 515 Post Oak
Boulevard, Suite 600, Houston, Texas
77027-3415. Our
telephone number at that location is
(713) 693-4000.
Recent Developments
On August 25, 2005, we entered into a revolving credit
agreement with UBS Loan Finance LLC, Bank of America, N.A.
and Morgan Stanley Senior Funding, Inc., under which we may
borrow up to $1.2 billion outstanding at any time. The
facility matures August 23, 2006, and is subject to
mandatory commitment reductions if we undertake certain types of
capital markets transactions, including this offering. In this
prospectus supplement, we refer to this agreement as our
bridge facility.
On August 29, 2005, we redeemed all of our remaining
outstanding Zero Coupon Convertible Senior Debentures due 2020.
On August 26, 2005, an aggregate of $367.4 million
principal amount at maturity of those debentures were tendered
for conversion, at the option of the holders, into an aggregate
of approximately 3.7 million of our common shares. We
redeemed the remaining $531.6 million aggregate principal
amount at maturity. At the redemption price of $642.91, the
aggregate redemption cost to us was $341.8 million. We
funded $240 million of that amount through a borrowing on
our bridge facility and the remaining $101.8 million with
available cash.
On August 31, 2005, we acquired Precision Drilling
Corporations Energy Services Division and International
Contract Drilling Division for US$942.7 million in cash
(based on then current exchange rates) and 26 million of
our common shares. In this prospectus supplement, we refer to
this transaction as the Precision acquisition The
cash portion of the Precision acquisition was funded through
borrowings under our bridge facility.
On October 25, 2005, we initiated a commercial paper
program for the issuance of short-term unsecured notes in an
aggregate amount not to exceed $1.5 billion. In this
prospectus, we refer to this program as our CP
program. We have used the CP program to repay all
borrowings under the bridge facility.
On December 9, 2005, we sold 6.75 million shares of
Universal Compression Holdings, Inc.s common stock for a
net price of $41.00 per share or total net proceeds of
$276,750,000, constituting our entire holdings of Universal.
On December 28, 2005, we announced that our Board of
Directors had approved a share repurchase program that
authorizes us to repurchase up to $1 billion of our common
shares from time to time as market conditions warrant.
S-1
On February 3, 2006, we reported fourth quarter 2005 income
from continuing operations of $164 million before
non-recurring items on revenues of $1,461 million. The
non-recurring items in the fourth quarter results include a gain
of $115 million relating to the sale of Universal
Compression Holdings, Inc.s common stock (with no tax
effect), offset by exit costs and restructuring charges of
$17 million ($12 million net of tax) and tax expense
of $24 million associated with acquisition integration and
related activities. Income from continuing operations, excluding
the non-recurring items noted above, was $244 million for
the quarter.((1))
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(1) |
We report our financial results in accordance with generally
accepted accounting principles (GAAP). However,
Weatherfords management believes that certain non-GAAP
performance measures and ratios may provide users of this
financial information additional meaningful comparisons between
current results and results in prior operating periods. One such
non-GAAP financial measure we may present from time to time is
operating income or income from continuing operations excluding
certain charges or amounts. This adjusted income amount is not a
measure of financial performance under GAAP. Accordingly, it
should not be considered as a substitute for operating income,
net income or other income data prepared in accordance with
GAAP. Non-GAAP financial measures should be viewed in addition
to, and not as an alternative for, the Companys reported
results prepared in accordance with GAAP. |
S-2
THE OFFERING
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Issuer |
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Weatherford International Ltd. |
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Guarantor |
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Weatherford International, Inc. will fully and unconditionally
guarantee the notes. If at any time Weatherford Delaware has no
outstanding debt, as defined in the indenture governing the
notes, (exclusive of any guarantee that has a provision
substantially similar to this provision such that by its terms
it will be automatically released and discharged simultaneously
with the release and discharge of this guarantee and exclusive
of debt owed to us and our other subsidiaries), the guarantee
will terminate. Weatherford Delawares guarantee of the
notes will be reinstated if Weatherford Delaware incurs or
guarantees any debt other than debt to us or our subsidiaries.
Please read Description of the Notes The
Guarantee. |
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Notes Offered |
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$350,000,000 aggregate principal amount
of % Senior
Notes due 2016. |
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Maturity Date |
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February 15, 2016. |
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Interest Rate |
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The notes will bear interest at the rate
of % per
year from February , 2006 to,
but excluding, February 15, 2016. |
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Interest Payment Dates |
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February 15 and August 15 of each year, commencing
August 15, 2006. Interest payments will be made to the
person in whose name the notes are registered on February 1
and August 1 immediately preceding the applicable interest
payment date. |
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Covenants |
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We will issue the notes under an indenture entered into with
Deutsche Bank Trust Company Americas, as trustee dated
October 1, 2003. The indenture contains limitations on,
among other things, our ability to: |
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incur indebtedness
secured by certain liens; and |
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engage in certain
sale-leaseback transactions. |
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The notes will contain certain events of default including
cross-default provisions on certain other indebtedness. |
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Optional Redemption |
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We may redeem the notes at our option, in whole or in part, at
any time, at the redemption price described in Description
of Notes Optional Redemption. |
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Ranking |
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The notes will be our senior, unsecured obligations ranking
equally in right of payment with our other senior, unsecured
indebtedness. Please read Description of Notes
General. The guarantee will be a senior, unsecured
obligation of Weatherford Delaware, ranking equally in right of
payment with other senior, unsecured indebtedness of Weatherford
Delaware. Please read Description of Notes
General and The Guarantee. |
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Use of Proceeds |
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We estimate that the net proceeds from the offering will be
approximately
$ million
(after deducting underwriting discounts but before deducting
other expenses of the offering). We expect to use the proceeds
for the repayment of borrowings under our CP program.
Please read Use of Proceeds. |
S-3
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Ratings |
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The notes have been assigned ratings of BBB+ by
Standard & Poors Rating Services and Baa1 by
Moodys Investors Service, Inc. A rating reflects only the
view of a rating agency and is not a recommendation to buy, sell
or hold the notes. These ratings may not continue, and they may
be revised downward or upward or withdrawn entirely at any time. |
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Risk Factors |
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You should carefully consider the information under the heading
Risk Factors and all other information in this
prospectus supplement and the accompanying prospectus, including
the information incorporated by reference, before investing in
the notes. |
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Additional Issuances |
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We may, at any time, without the consent of the holders of the
notes, issue additional notes having the same ranking and the
same interest rate, maturity and other terms as these notes. Any
additional notes having such similar terms, together with these
notes, will constitute a single series of notes under the
indenture. |
For additional information regarding the notes, please read
Description of Notes in this prospectus supplement
and Description of Our Debt Securities in the
accompanying prospectus.
S-4
SUMMARY FINANCIAL INFORMATION
The following tables present certain summary historical and pro
forma condensed consolidated financial data and selected
historical cash flow and balance sheet data. Our summary
financial data as of and for the year ended December 31,
2004 is derived from our audited consolidated financial
statements, which are incorporated herein by reference. Our
summary financial data as of and for the nine months ended
September 30, 2005 is derived from our unaudited condensed
consolidated financial statements, which are incorporated herein
by reference. The unaudited pro forma summary financial data as
of and for the year ended December 31, 2004 and the nine
months ended September 30, 2005 is derived from our
unaudited pro forma condensed combined financial statements
which are incorporated herein by reference and included herein,
respectively. The pro forma presentation reflects the
Precision acquisition. The pro forma information does not
reflect the impact of the proposed offering of senior notes
pursuant to this prospectus supplement and the accompanying
prospectus.
Our summary financial data should be read in conjunction with
Capitalization, Managements Discussion
and Analysis of Financial Condition and Results of
Operations and our consolidated financial statements and
notes related thereto, included in, or incorporated by reference
into, this prospectus supplement and the accompanying prospectus.
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Year Ended | |
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Nine Months Ended | |
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December 31, 2004 | |
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September 30, 2005 | |
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Pro | |
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Pro | |
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Actual | |
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Forma | |
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Actual | |
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Forma | |
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(in millions) | |
Revenues
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$ |
3,131.8 |
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$ |
4,034.5 |
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$ |
2,871.8 |
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$ |
3,615.7 |
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Income from Continuing Operations(1)(2)(3)
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337.3 |
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340.6 |
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222.5 |
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238.8 |
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Depreciation & Amortization
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255.9 |
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368.9 |
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222.4 |
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310.9 |
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Interest Expense(3)
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63.6 |
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100.4 |
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59.7 |
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84.4 |
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Ratios of Earnings to Fixed Charges
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6.03 |
x |
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4.22 |
x |
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4.75 |
x |
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3.93 |
x |
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(1) |
Includes $77.6 million gain on sale of shares of Universal
Compression Holdings, Inc. for the period ended
December 31, 2004. |
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(2) |
Includes $104.0 million of exit and restructuring charges
associated with the Precision acquisition and debt restructuring
costs related to our equity investment in Universal Compression
Holdings for the nine months ended September 30, 2005. |
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(3) |
Includes $4.7 million of debt redemption expense incurred
with the settlement of our Zero Coupon Convertible Debentures
due 2020 for the nine months ended September 30, 2005. |
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Year Ended | |
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Nine Months Ended | |
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December 31, 2004 | |
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September 30, 2005 | |
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(in millions) | |
Cash Flow from Continuing Operations
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$ |
496.1 |
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$ |
255.4 |
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Cash Flow from Investing Activities
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(105.3 |
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(1,299.9 |
) |
Cash Flow from Financing Activities
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(139.6 |
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908.0 |
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Capital Expenditures
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310.9 |
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320.3 |
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Total Debt
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1,426.7 |
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1,896.3 |
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Total Debt/ Capitalization
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30.1 |
% |
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25.8 |
% |
S-5
RISK FACTORS
An investment in the securities to be offered by this
prospectus may involve a high degree of risk. Before you make a
decision to invest in the notes, you should read the risk
factors discussed below. You should also read and consider the
risks, uncertainties and factors that are discussed in the
accompanying prospectus under the captions Forward-Looking
Statements on page 3 and Risk Factors on
page 6 of the accompanying prospectus and in our other
current filings with the SEC under the Exchange Act,
particularly under Business Forward-Looking
Statements, Business Risk Factors
and Managements Discussion and Analysis of Financial
Condition and Results of Operations in our Annual Report
on Form 10-K for
the year ended December 31, 2004, as amended, and
Managements Discussion and Analysis of Financial
Condition and Results of Operations Exposures
and Managements Discussion and Analysis of Financial
Condition and Results of Operations Forward-Looking
Statements in our Quarterly Report on
Form 10-Q for the
quarters ended March 31, June 30 and
September 30, 2005, which are incorporated by reference in
this prospectus supplement.
International Exposure
Like most multinational oilfield service companies, we have
operations in certain international areas, including parts of
the Middle East, North and West Africa, Latin America, the Asia
Pacific region and the Commonwealth of Independent States, that
are subject to risks of war, political disruption, civil
disturbance, economic and legal sanctions (such as restrictions
against countries that the U.S. government may deem to
sponsor terrorism) and changes in global trade policies. We
participated in the United Nations oil-for-food program
governing sales of goods and services into Iraq. The SEC has
asked us to provide them copies of certain documents relating to
our participation in that program in connection with a
fact-finding inquiry related to that program. We are complying
with that request. Our operations may be restricted or
prohibited in any country in which the foregoing risks occur. In
particular, the occurrence of any of these risks could result in
the following events, which in turn, could materially and
adversely impact our results of operations:
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disruption of oil and natural gas exploration and production
activities; |
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restriction of the movement and exchange of funds; |
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inhibition of our ability to collect receivables; |
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enactment of additional or stricter U.S. government or
international sanctions; and |
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limitation of our access to markets for periods of time. |
Currency Exposure
As of September 30, 2005, 45.2% of our net assets are
located outside the United States and are carried on our books
in local currencies. Changes in those currencies in relation to
the U.S. dollar result in translation adjustments, which
are reflected as accumulated other comprehensive income in the
shareholders equity section in our condensed consolidated
balance sheets. We recognize remeasurement and transactional
gains and losses on currencies in our condensed consolidated
statements of income. Such remeasurement and transactional
losses may adversely impact our results of operations.
In certain foreign countries, a component of our cost structure
is U.S. dollar denominated, whereas our revenues are
partially local currency based. In those cases, a devaluation of
the local currency would adversely impact our operating margins.
Litigation and Environmental Exposure
In the ordinary course of business, we become the subject of
various claims and litigation. We maintain insurance to cover
many of our potential losses and we are subject to various
self-retentions and deductibles with respect to our insurance.
Although we are subject to various ongoing items of litigation,
we do not believe any of our current items of litigation will
result in any material uninsured losses to us. However, it is
S-6
possible an unexpected judgment could be rendered against us in
cases in which we could be uninsured and beyond the amounts we
currently have reserved or anticipate incurring.
We are also subject to various federal, state and local laws and
regulations relating to the energy industry in general and the
environment in particular. Environmental laws have in recent
years become more stringent and have generally sought to impose
greater liability on a larger number of potentially responsible
parties. While we are not currently aware of any situation
involving an environmental claim that would be likely to have a
material adverse effect on our business, it is always possible
that an environmental claim with respect to one or more of our
current businesses or a business or property that one of our
predecessors owned or used could arise and could involve
material expenditures.
Industry Exposure
The concentration of our customers in the energy industry may
impact our overall exposure to credit risk as customers may be
similarly affected by prolonged changes in economic and industry
conditions. Further, laws in some jurisdictions in which we
operate could make collection difficult or time consuming. We
perform ongoing credit evaluations of our customers and do not
generally require collateral in support of our trade
receivables. While we maintain reserves for potential credit
losses, we cannot assure such reserves will be sufficient to
meet write-offs of uncollectible receivables or that our losses
from such receivables will be consistent with our expectations.
Terrorism Exposure
The terrorist attacks that took place in the United States on
September 11, 2001 were unprecedented events that have
created many economic and political uncertainties, some of which
may materially impact our businesses. The potential for future
terrorist attacks, the national and international responses to
terrorist attacks, and other acts of war or hostility have
created many economic and political uncertainties that could
adversely affect our businesses.
Tax Exposure
On June 26, 2002, the stockholders and Board of Directors
of Weatherford International, Inc. approved our corporate
reorganization, and Weatherford International Ltd., a newly
formed Bermuda company, became the parent holding company of
Weatherford International, Inc. The realization of the tax
benefit of this reorganization could be impacted by changes in
tax laws, tax treaties or tax regulations or the interpretation
or enforcement thereof or differing interpretation or
enforcement of applicable law by the U.S. Internal Revenue
Service or other taxing jurisdictions. The inability to realize
this benefit could have a material impact on our financial
statements.
Acquisition Integration Exposure
In August of 2005, we completed the Precision acquisition. The
divisions purchased are substantial businesses, and integrating
those businesses with our other operations and product lines
will take significant focus and effort from our management and
employees. The integration of this or any other acquisition we
make may include unexpected costs and temporarily divert
attention from our normal operations. We also cannot be certain
that we will realize anticipated synergies or other benefits
from any acquisition. The Precision acquisition is subject to a
post-closing purchase price adjustment to reflect changes in
working capital and related items. We are negotiating with
Precision regarding this adjustment, but at this point we cannot
determine how much, if any, we will be required to pay to
Precision or Precision will be required to pay to us in
connection with this adjustment.
S-7
Bermuda Governance Risks
We are a Bermuda exempted company, and it may be difficult
for you to enforce judgments against us or our directors and
executive officers.
We are a Bermuda exempted company. As a result, the rights of
holders of our shares will be governed by Bermuda law and our
memorandum of association and bye-laws. The rights of
shareholders under Bermuda law may differ from the rights of
shareholders of companies incorporated in other jurisdictions.
One of our directors and some of the named experts referred to
in this report are not residents of the United States, and a
substantial portion of our assets are located outside the United
States. As a result, it may be difficult for investors to effect
service of process on those persons in the United States or to
enforce in the U.S. judgments obtained in U.S. courts
against us or those persons based on the civil liability
provisions of the U.S. securities laws. Uncertainty exists
as to whether courts in Bermuda will enforce judgments obtained
in other jurisdictions, including the United States, against us
or our directors or officers under the securities laws of those
jurisdictions or entertain actions in Bermuda against us or our
directors or officers under the securities laws of other
jurisdictions.
Effective January 1, 2005, we are no longer registered to
operate as an International Business Company for Barbados tax
purposes, so the information on page 28 of the accompanying
prospectus under Certain Tax Considerations
Barbados Tax Considerations is no longer applicable.
Guarantee Risks
The guarantee of the notes may be terminated while the
notes remain outstanding.
The guarantee of the notes by Weatherford Delaware will be
terminated if Weatherford Delaware has no outstanding debt
(including guarantees of other Weatherford Bermuda debt, but
excluding debt to us or our subsidiaries). We intend to insert a
similar provision in any future debt of Weatherford Bermuda that
Weatherford Delaware guarantees with the aim of eventually
removing Weatherford Delaware guarantees from all of Weatherford
Bermuda debt.
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately
$ million
after deducting the underwriting discount and expenses related
to this offering, net of the settlement of hedging transactions.
We expect to use all of the net proceeds from this offering for
the repayment of borrowings under our CP program.
Borrowings under our CP program to be repaid with these
proceeds currently bear interest at rates ranging from 4.54% to
4.56% and have maturities of less than one week. Borrowings
under the CP program initially were used to repay
borrowings under the bridge facility, which were incurred to
finance the Precision acquisition and to pay a portion of the
redemption of our Zero Coupon debentures. We intend to reduce
the size of our CP program to match available commitments
from our credit facilities, including the bridge facility. As
commitments under the bridge facility will be reduced by the
amount of the net proceeds of this offering, we will reduce the
size of our CP program by a corresponding amount.
S-8
CAPITALIZATION
The following table sets forth our capitalization as of
September 30, 2005, (i) on an actual basis,
(ii) on an as adjusted basis to give effect to the issuance
and sale of the notes and the application of the estimated net
proceeds in the manner described in Use of Proceeds.
This table should be read in conjunction with our historical
condensed consolidated financial statements, including the notes
to those statements, which are incorporated by reference in this
prospectus supplement and the accompanying prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2005 | |
|
|
| |
|
|
Actual | |
|
As Adjusted | |
|
|
| |
|
| |
|
|
(in thousands) | |
Cash and Cash Equivalents
|
|
$ |
183,201 |
|
|
$ |
183,201 |
|
|
|
|
|
|
|
|
Short-term Borrowings and Current Portion of Long-term Debt
|
|
|
1,271,803 |
|
|
|
926,424 |
|
|
|
|
|
|
|
|
Long-term Debt:
|
|
|
|
|
|
|
|
|
|
65/8% Senior
Notes due 2011
|
|
|
347,959 |
|
|
|
347,959 |
|
|
Other Long-term Debt(1)
|
|
|
26,919 |
|
|
|
26,919 |
|
|
4.95% Senior Notes due 2013
|
|
|
249,604 |
|
|
|
249,604 |
|
|
|
% Senior Notes due 2016
|
|
|
|
|
|
|
350,000 |
|
|
|
|
|
|
|
|
|
|
|
Total Long-term Debt
|
|
|
624,482 |
|
|
|
974,482 |
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity
|
|
|
5,456,651 |
|
|
|
5,456,651 |
|
|
|
|
|
|
|
|
Total Capitalization
|
|
|
7,352,936 |
|
|
|
7,357,557 |
|
|
|
|
|
|
|
|
|
|
(1) |
Other Long-term Debt includes foreign bank and other debt
denominated in foreign currencies, amortized gain on terminated
derivative activity and obligations under capital leases. See
the notes to our historical condensed consolidated financial
statements. |
S-9
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratios of earnings to fixed
charges for the periods shown. The pro forma ratios are
presented to illustrate the estimated effects of the Precision
acquisition. Our actual and pro forma ratios of earnings to
fixed charges for the year ended December 31, 2004 and the
nine months ended September 30, 2005 are not materially
affected by the proposed offering of senior notes; therefore the
ratios of earnings to fixed charges on an as adjusted basis are
not presented.
You should read these ratios of earnings to fixed charges in
connection with our consolidated financial statements, including
the notes to those statements, incorporated by reference in this
prospectus supplement and the accompanying prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended | |
|
Nine Months Ended | |
Year Ended December 31, | |
|
December 31, 2004 | |
|
September 30, 2005 | |
| |
|
| |
|
| |
2000 | |
|
2001 | |
|
2002 | |
|
2003 | |
|
Actual | |
|
Pro Forma | |
|
Actual | |
|
Pro Forma | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
1.98 |
x |
|
|
4.76 |
x |
|
|
|
|
|
|
2.99 |
x |
|
|
6.03 |
x |
|
|
4.22 |
x |
|
|
4.75 |
x |
|
|
3.93 |
x |
For the year ended December 31, 2002, earnings before fixed
charges were inadequate to cover fixed charges by
$33.8 million. This reflects our $217.1 million
write-down of our investment in Universal Compression Holdings,
Inc. as it was determined that the decline in the market value
of the investment was other than temporary.
For purposes of computing the ratio of earnings to fixed
charges, earnings are divided by fixed charges.
Earnings represent the aggregate of (a) our
earnings (loss) before income taxes, minority interest,
extraordinary charges, discontinued operations and equity in
earnings of unconsolidated investees and (b) fixed charges,
net of interest capitalized plus (c) distributed income
from equity investments. Fixed charges represent
interest (whether expensed or capitalized), the amortization of
capitalized debt costs and original issue discount and that
portion of rental expense on operating leases deemed to be the
equivalent of interest.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
We previously announced that on August 31, 2005, we
completed the Precision acquisition. This prospectus supplement
contains pro forma financial information for us and the acquired
business. For additional pro forma financial information you
should read our current report on
Form 8-K filed on
November 2, 2005.
The following unaudited pro forma condensed combined financial
information and explanatory notes are presented to illustrate
the estimated effects the transaction would have had on our
historical results of operations, for the nine months ended
September 30, 2005. The September 30, 2005 historical
balance sheet includes the impact of the Precision acquisition;
therefore, no pro forma information is provided.
The unaudited pro forma condensed combined statement of income
was prepared as if the acquisition had occurred as of
January 1, 2005. The historical financial information has
been adjusted to give effect to pro forma items that are:
(1) directly attributable to the acquisition,
(2) factually supportable, and (3) expected to have a
continuing impact on the consolidated results.
The unaudited pro forma adjustments are based upon available
information and assumptions that we believe are reasonable. The
notes to the unaudited pro forma condensed combined statement of
income provide a more detailed discussion of how such
adjustments were derived.
As of September 30, 2005, the Company had incurred
approximately $97.3 million, $67.0 million net of tax
in exit and restructuring costs. These costs consist of the
write off of in-process
research and development purchased in the Precision acquisition,
and, with respect to our operations, facility closures, asset
and inventory impairment and severance. The $17.2 million
of inventory write downs have been recorded as Cost of Sales in
the unaudited pro forma condensed combined statement of income.
S-10
Such financial statements have been compiled from historical
financial statements and other information, but do not purport
to represent what our financial position or results of
operations actually would have been had the transactions
occurred on the dates indicated, or to project our financial
performance for any future periods. The unaudited pro forma
condensed combined statement of income and related notes thereto
should be read in conjunction with our historical consolidated
financial statements as previously filed on our Annual Report on
Form 10-K, as
amended on
Form 10-K/ A, for
the year ended December 31, 2004, our Quarterly Report on
Form 10-Q for the
period ended June 30, 2005, our Quarterly Report on
Form 10-Q for the
period ended September 30, 2005, and our Current Report on
Form 8-K dated
November 2, 2005.
S-11
WEATHERFORD INTERNATIONAL LTD.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Nine Months Ended September 30, 2005
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted | |
|
|
|
|
|
|
Weatherford | |
|
Precision | |
|
Pro Forma | |
|
Weatherford | |
|
|
Historical | |
|
Historical(a) | |
|
Adjustments | |
|
Pro Forma | |
|
|
| |
|
| |
|
| |
|
| |
Revenues
|
|
$ |
2,871,817 |
|
|
$ |
727,590 |
|
|
$ |
16,310 |
(b)(c) |
|
$ |
3,615,717 |
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
1,964,928 |
|
|
|
456,405 |
|
|
|
95,479 |
(b)(d)(e) |
|
|
2,516,812 |
|
|
Research and Development
|
|
|
72,062 |
|
|
|
24,650 |
|
|
|
2,742 |
(d) |
|
|
99,454 |
|
|
Selling, General and Administrative Attributable to Segments
|
|
|
376,091 |
|
|
|
72,579 |
|
|
|
18,678 |
(d)(f) |
|
|
467,348 |
|
|
Corporate General and Administrative
|
|
|
56,136 |
|
|
|
|
|
|
|
|
|
|
|
56,136 |
|
|
Equity in Earnings of Unconsolidated Affiliates
|
|
|
(13,611 |
) |
|
|
|
|
|
|
|
|
|
|
(13,611 |
) |
|
Depreciation and Amortization
|
|
|
|
|
|
|
70,838 |
|
|
|
(70,838 |
)(d) |
|
|
|
|
|
Exit Costs and Restructuring Charges
|
|
|
80,018 |
|
|
|
|
|
|
|
|
|
|
|
80,018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
336,193 |
|
|
|
103,118 |
|
|
|
(29,751 |
) |
|
|
409,560 |
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Redemption Expense
|
|
|
(4,733 |
) |
|
|
|
|
|
|
|
|
|
|
(4,733 |
) |
|
Interest Expense, Net
|
|
|
(45,834 |
) |
|
|
(182 |
) |
|
|
(24,499 |
)(g) |
|
|
(70,515 |
) |
|
Other, Net
|
|
|
11,565 |
|
|
|
(20,134 |
) |
|
|
|
|
|
|
(8,569 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations Before Income Taxes
|
|
|
297,191 |
|
|
|
82,802 |
|
|
|
(54,250 |
) |
|
|
325,743 |
|
Provision for Income Taxes
|
|
|
(74,732 |
) |
|
|
(31,151 |
) |
|
|
18,988 |
(h) |
|
|
(86,895 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
222,459 |
|
|
|
51,651 |
|
|
|
(35,262 |
) |
|
|
238,848 |
|
Income from Discontinued Operation, Net of Taxes
|
|
|
1,211 |
|
|
|
|
|
|
|
|
|
|
|
1,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$ |
223,670 |
|
|
$ |
51,651 |
|
|
$ |
(35,262 |
) |
|
$ |
240,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From Continuing Operations
|
|
$ |
0.78 |
|
|
|
|
|
|
|
|
|
|
$ |
0.72 |
|
|
Income (Loss) From Discontinued Operations
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$ |
0.79 |
|
|
|
|
|
|
|
|
|
|
$ |
0.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income From Continuing Operations
|
|
$ |
0.74 |
|
|
|
|
|
|
|
|
|
|
$ |
0.69 |
|
|
Income (Loss) From Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$ |
0.74 |
|
|
|
|
|
|
|
|
|
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
284,824 |
|
|
|
|
|
|
|
46,160 |
(i) |
|
|
330,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
311,416 |
|
|
|
|
|
|
|
46,160 |
(i) |
|
|
357,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-12
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
General
The historical consolidated statement of income of Weatherford
International Ltd. (Weatherford or the
Company) have been prepared in accordance with
U.S. generally accepted accounting principles.
The Precision acquisitions historical combined statement
of income has been prepared in accordance with Canadian
generally accepted accounting principles. Appropriate pro forma
adjustments have been made in order for the financial statements
to be in compliance with accounting principles generally
accepted in the United States and to conform to the applicable
accounting policies of Weatherford.
Transactions between Weatherford and the Precision acquisition
were not material individually or in the aggregate and have not
been eliminated in the pro forma condensed combined statement of
income.
Pro Forma Adjustments
The following notes set forth the assumptions used in preparing
the unaudited pro forma combined statement of income. The pro
forma adjustments are based on estimates made by the
Companys management using information currently available.
The adjustments to the accompanying unaudited pro forma
condensed consolidated statement of income for the nine months
ended September 30, 2005 are described below:
|
|
|
(a) The functional currencies of
certain foreign Precision entities were changed from the
Canadian dollar to the respective entities local currency.
A reconciliation has been provided in Functional Currency
Adjustments to adjust the functional currency and
translate the historical Canadian financial statements to
U.S. dollars. |
|
|
(b) To reflect the
gross-up of revenues
and cost of sales associated with rebillable sales and
lost-in-hole sales in
the amounts of $20.2 million and $8.2 million,
respectively, to conform to Weatherfords historical
financial statement presentation. |
|
|
(c) To reflect a $12.1 million
adjustment for revenues improperly recognized prior to
acquisition. |
|
|
(d) To reclassify depreciation and
amortization expense to conform to Weatherfords historical
financial statement presentation. Approximately
$57.3 million, $2.7 million and $10.8 million was
reclassified to Cost of Sales, Research and Development and
Selling, General and Administrative, respectively. |
|
|
(e) To reflect the net adjustment
of $9.8 million to depreciation expense for the increase in
estimated fair value of acquired assets offset by the change in
depreciation method from units of production to straight line
for the drilling rigs acquired. |
|
|
(f) To record amortization expense
for the increase in acquired intangibles assets resulting from
the purchase price allocation. |
|
|
(g) To reflect the interest expense
at 4.0% per annum related to the utilization of the
Companys available 364 Day Revolving Credit
Agreement to satisfy approximately $921.0 million of the
cash purchase price obligation. |
|
|
(h) To record the income tax
benefit related to the effect of the pro forma adjustments at
the applicable statutory rate (approximately 35.0%). |
|
|
(i) Pro forma weighted average
shares outstanding have been adjusted to reflect the
52.0 million shares, as adjusted for the November 2005
two-for-one share split, issued in the acquisition assuming the
transaction was consummated at the beginning of the period
presented. |
S-13
Functional Currency Adjustments
The Company changed the functional currencies of certain foreign
acquired entities from the Canadian dollar to the respective
entities local currency. The following tables and
corresponding notes reconciles the historical Canadian financial
statements to the adjusted U.S. financial statements.
WEATHERFORD INTERNATIONAL LTD.
CONSOLIDATED STATEMENT OF INCOME ADJUSTED FOR
CURRENCY CHANGE
For the Nine Months Ended September 30, 2005
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revised | |
|
|
|
Adjusted | |
|
|
Precision | |
|
Functional | |
|
Precision | |
|
Exchange | |
|
Precision | |
|
|
Historical | |
|
Currency Adj(1) | |
|
Historical(2) | |
|
Rate | |
|
Historical | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Revenues
|
|
$ |
894,307 |
|
|
$ |
|
|
|
$ |
894,307 |
|
|
|
0.81358 |
|
|
$ |
727,590 |
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
560,983 |
|
|
|
|
|
|
|
560,983 |
|
|
|
0.81358 |
|
|
|
456,405 |
|
|
Research and Development
|
|
|
30,298 |
|
|
|
|
|
|
|
30,298 |
|
|
|
0.81358 |
|
|
|
24,650 |
|
|
Selling, General and Administrative Attributable to Segments
|
|
|
89,209 |
|
|
|
|
|
|
|
89,209 |
|
|
|
0.81358 |
|
|
|
72,579 |
|
|
Corporate General and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.81358 |
|
|
|
|
|
|
Equity in Earnings of Unconsolidated Affiliates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.81358 |
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
91,179 |
|
|
|
(4,109 |
) |
|
|
87,070 |
|
|
|
0.81358 |
|
|
|
70,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
122,638 |
|
|
|
4,109 |
|
|
|
126,747 |
|
|
|
0.81358 |
|
|
|
103,118 |
|
Other Income (Expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net
|
|
|
(224 |
) |
|
|
|
|
|
|
(224 |
) |
|
|
0.81358 |
|
|
|
(182 |
) |
|
Other, Net
|
|
|
(11,889 |
) |
|
|
(12,859 |
) |
|
|
(24,748 |
) |
|
|
0.81358 |
|
|
|
(20,134 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations before Income Taxes
|
|
|
110,525 |
|
|
|
(8,750 |
) |
|
|
101,775 |
|
|
|
0.81358 |
|
|
|
82,802 |
|
Provision for Income Taxes
|
|
|
(38,289 |
) |
|
|
|
|
|
|
(38,289 |
) |
|
|
0.81358 |
|
|
|
(31,151 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
72,236 |
|
|
|
(8,750 |
) |
|
|
63,486 |
|
|
|
0.81358 |
|
|
|
51,651 |
|
Income (Loss) from Discontinued Operation, Net of Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.81358 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$ |
72,236 |
|
|
$ |
(8,750 |
) |
|
$ |
63,486 |
|
|
|
0.81358 |
|
|
$ |
51,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
To reflect the translation adjustments resulting from applying
the current rate method to certain assets that had been
translated using historical rates. |
|
(2) |
To reflect the translation of Canadian dollar balances to
U.S. dollar balances using the average exchange rate for
the nine months ended September 30, 2005. |
S-14
DESCRIPTION OF NOTES
The following description of the notes supplements, and to the
extent inconsistent, replaces, the description of the general
terms and provisions of the senior debt securities set forth in
the accompanying prospectus. The notes are to be issued as a
separate series of senior debt securities under an indenture
dated as of October 1, 2003, among us, Weatherford
Delaware, as guarantor, and Deutsche Bank Trust Company
Americas, as trustee, which is more fully described in the
accompanying prospectus. We will issue the notes pursuant to
resolutions of the board of directors and a special pricing
committee of the board of directors and an officers
certificate setting forth specific terms applicable to the
notes. The statements under this caption relating to the notes,
the indenture and the officers certificate are brief
summaries only, are subject to, and are qualified in their
entirety by reference to, all of the provisions of the indenture
and the notes, forms of which are available from us. Capitalized
terms used in this section have the meaning set forth in the
accompanying prospectus or the indenture.
General
The notes offered by this prospectus supplement will be our
unsubordinated, unsecured obligations and will rank equally in
right of payment with all of our other unsubordinated, unsecured
indebtedness from time to time outstanding. The notes will not
limit other indebtedness or securities that we or any of our
subsidiaries may incur or issue or, except as described below in
Covenants, contain financial or similar restrictions
on us or any of our subsidiaries. The notes do not have a
sinking fund. We may, without the consent of the holders of the
notes, issue additional notes having the same ranking, interest
rate, maturity and other terms, and the same CUSIP number, as
the notes. Any additional notes having such similar terms,
together with the notes, will constitute a single series of
notes under the indenture.
Principal and Maturity
The aggregate principal amount of the notes offered under this
prospectus supplement is $350,000,000. The notes will mature on
February 15, 2016.
Interest
The notes will bear interest
at % per
year (computed based on a
360-day year consisting
of twelve 30-day
months) for the period from
February , 2006 to, but
excluding, February 15, 2016. Interest on the notes will be
payable semi-annually
on February 15 and August 15 of each year, beginning
August 15, 2006 for interest accruing from
February , 2006. Interest
payments will be made to the persons in whose names the notes
are registered on February 1 and August 1 (whether or
not a business day) immediately preceding the related interest
payment date.
The Guarantee
The notes are fully and unconditionally guaranteed on a senior
unsecured basis by one of our operating subsidiaries,
Weatherford Delaware, pursuant to a guarantee included in the
indenture. Pursuant to the guarantee, Weatherford Delaware
guarantees the due and punctual payment of the principal of, and
interest and premium on, the notes, when the same shall become
due, whether by acceleration or otherwise. The guarantee is
enforceable against Weatherford Delaware without any need to
first enforce the notes against us. If at any time Weatherford
Delaware has no outstanding debt, as defined in the indenture
governing the notes, (exclusive of any guarantee that has a
provision substantially similar to this provision such that by
its terms it will be automatically released and discharged
simultaneously with the release and discharge of this guarantee
and exclusive of debt owed to us and any of our other
subsidiaries), the guarantee will terminate. Weatherford
Delawares guarantee of the notes will be reinstated if
Weatherford Delaware incurs or guarantees any debt other than
debt to us or our subsidiaries.
S-15
The guarantee:
|
|
|
|
|
is Weatherford Delawares unsecured, unsubordinated general
obligation; and |
|
|
|
ranks on parity with all of Weatherford Delawares other
unsecured, unsubordinated indebtedness. |
As of September 30, 2005, Weatherford Delaware had
approximately $555.4 million of indebtedness outstanding
and approximately $583.6 million of indebtedness
outstanding on a consolidated basis. The guarantees will be
effectively subordinated to all existing and future obligations
of Weatherford Delawares subsidiaries. As of
September 30, 2005, Weatherford Delawares
subsidiaries had approximately $28.1 million of
indebtedness.
Form
The notes will be issued only in fully registered form, without
coupons, in minimum denominations of $1,000 or integral
multiples of $1,000 in excess of $1,000. The notes will be
initially issued as global securities. Please read
Book-Entry, Delivery and Form for additional
information concerning the notes and the book-entry system. The
Depository Trust Company (DTC) will be the depositary with
respect to the notes. Settlement of the sale of the notes to
Banc of America Securities LLC, Morgan Stanley & Co.
Incorporated and UBS Securities LLC, on behalf of the
underwriters will be in immediately available funds. The notes
will trade in DTCs Same-Day Funds Settlement System until
maturity or earlier redemption, as the case may be, and
secondary market trading activity in the notes will therefore
settle in immediately available funds. We will make all payments
of principal and interest in immediately available funds to DTC
in The City of New York.
Optional Redemption
We may redeem the notes at our option, in whole or in part, at
any time and from time to time, at a redemption price equal to
the greater of:
|
|
|
|
|
100% of the principal amount of notes then outstanding to be
redeemed, plus accrued and unpaid interest thereon to the
redemption date; or |
|
|
|
the sum of the present values of the remaining scheduled
payments of principal and interest on the notes then outstanding
to be redeemed (not including any portion of such payments of
interest accrued as of the redemption date) discounted to the
redemption date on a semi-annual basis (computed based on a
360-day year consisting
of twelve 30-day
months) at the Adjusted Treasury Rate,
plus basis points
(0. %), as calculated by an
Independent Investment Banker, plus accrued and unpaid interest
thereon to the redemption date. |
Adjusted Treasury Rate means, with respect to
any redemption date:
|
|
|
|
|
the yield, under the heading which represents the average for
the immediately preceding week, appearing in the most recently
published statistical release designated H.15(519)
or any successor publication which is published weekly by the
Board of Governors of the Federal Reserve System and which
establishes yields on actively traded United States Treasury
securities adjusted to constant maturity under the caption
Treasury Constant Maturities, for the maturity
corresponding to the Comparable Treasury Issue (if no maturity
is within three months before or after the remaining life, as
defined below, yields for the two published maturities most
closely corresponding to the Comparable Treasury Issue will be
determined and the Adjusted Treasury Rate will be interpolated
or extrapolated from such yields on a straight line basis,
rounding to the nearest month); or |
|
|
|
if such release (or any successor release) is not published
during the week preceding the calculation date or does not
contain such yields, the rate per year equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such redemption date. |
S-16
The Adjusted Treasury Rate will be calculated on the third
business day preceding the redemption date.
Comparable Treasury Issue means the United
States Treasury security selected by an Independent Investment
Banker as having a maturity comparable to the remaining term of
the notes to be redeemed that would be used, at the time of
selection and in accordance with customary financial practice,
in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such notes.
Comparable Treasury Price means (1) the
average of five Reference Treasury Dealer Quotations for the
redemption date, after excluding the highest and lowest
Reference Treasury Dealer Quotations, or (2) if an
Independent Investment Banker obtains fewer than five such
Reference Treasury Dealer Quotations, the average of all such
quotations.
Independent Investment Banker means Banc of
America Securities LLC, Morgan Stanley & Co.
Incorporated or UBS Securities LLC or any of their respective
successors, as designated by us, or if all such firms are
unwilling or unable to serve as such, an independent investment
and banking institution of national standing appointed
by us.
Reference Treasury Dealer means:
|
|
|
|
|
Banc of America Securities LLC, Morgan Stanley & Co.
Incorporated and UBS Securities LLC and each of their respective
successors; provided that, if any such Reference Treasury Dealer
ceases to be a primary U.S. Government securities dealer in
the United States (Primary Treasury Dealer), we will substitute
another Primary Treasury Dealer; and |
|
|
|
up to two other Primary Treasury Dealers selected by us. |
Reference Treasury Dealer Quotations means,
with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by an Independent
Investment Banker, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to an
Independent Investment Banker at 5:00 p.m., New York
City time, on the third business day preceding such redemption
date.
We will mail a notice of redemption at least 30 days but no
more than 60 days before the redemption date to each holder
of notes to be redeemed. If we elect to partially redeem the
notes, the trustee will select in a fair and appropriate manner
the notes to be redeemed.
If we plan to redeem the notes, before the redemption occurs, we
are not required to:
|
|
|
|
|
issue, register the transfer of, or exchange any note during the
period beginning 15 days before the notice of redemption is
mailed and ending on the day the notice is mailed; or |
|
|
|
after the notice of redemption is mailed, register the transfer
of or exchange any note selected for redemption, except, if we
are redeeming only a part of a note, we are required to register
the transfer of or exchange the unredeemed portion of the note
if the holder so requests. |
Unless we default in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the
notes or portions thereof called for redemption.
Covenants
Except to the extent described below, the indenture does not
limit the amount of indebtedness or other obligations that we
may incur. The indenture contains two principal material
financial covenants:
|
|
|
|
|
Limitation on Liens. This covenant limits our ability,
and that of our subsidiaries, to permit liens to exist on our
principal assets; and |
|
|
|
Limitations of Sale-Leaseback Transactions. This covenant
limits our ability to sell or transfer our principal assets and
then lease back those assets. |
In addition, the notes will contain certain events of default
including cross-default provisions on certain other indebtedness.
S-17
Please read Description of Our Debt Securities
Covenants in the accompanying prospectus.
Ratings
The notes have been assigned ratings of BBB+ by
Standard & Poors Rating Services and Baa1 by
Moodys Investors Service, Inc. A rating reflects only the
view of a rating agency and is not a recommendation to buy, sell
or hold the notes. These ratings may not continue and they may
be revised downward or upward or withdrawn entirely at any time.
S-18
BOOK-ENTRY, DELIVERY AND FORM
The Depository Trust Company (DTC), New York,
NY, will act as securities depository for the global notes. The
notes will be issued in fully-registered form registered in the
name of Cede & Co. (DTCs partnership nominee) or
such other name as may be requested by an authorized
representative of DTC. One or more fully-registered certificates
will be issued as global notes for the notes in the aggregate
principal amount of the notes. These global notes will be
deposited with DTC.
DTC has advised us and the underwriters of the following
matters. The information in this section concerning DTC and
DTCs book-entry system has been obtained from sources that
we believe to be reliable (including DTC), but we take no
responsibility for the accuracy thereof.
DTC, the worlds largest depository, is:
|
|
|
|
|
a limited-purpose trust company organized under the
New York Banking Law; |
|
|
|
a banking organization within the meaning of the
New York Banking Law; |
|
|
|
a member of the Federal Reserve System; |
|
|
|
a clearing corporation within the meaning of the
New York Uniform Commercial Code; and |
|
|
|
a clearing agency registered pursuant to the
provisions of Section 17A of the Securities Exchange Act
of 1934. |
DTC holds and provides asset servicing for over 2 million
issues of U.S. and
non-U.S. equity
issues, corporate and municipal debt issues, and money market
instruments from over 85 countries that DTCs
participants (Direct Participants) deposit with DTC.
DTC also facilitates the post-trade settlement among Direct
Participants of sale and other securities transactions in
deposited securities, through electronic computerized book-entry
transfers and pledges between Direct Participants
accounts. This eliminates the need for physical movement of
securities certificates. Direct Participants include both U.S.
and
non-U.S. securities
brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is a
wholly-owned subsidiary of The Depository Trust &
Clearing Corporation (DTCC). DTCC, in turn, is owned
by a number of Direct Participants of DTC and Members of the
National Securities Clearing Corporation, Government Securities
Clearing Corporation, MBS Clearing Corporation, and Emerging
Markets Clearing Corporation (NSCC, GSCC, MBSCC, and EMCC, also
subsidiaries of DTCC), as well as by the New York Stock
Exchange, Inc., the American Stock Exchange LLC, and the
National Association of Securities Dealers, Inc. Access to the
DTC system is also available to others such as both U.S. and
non-U.S. securities
brokers and dealers, banks, trust companies, and clearing
corporations that clear through or maintain a custodial
relationship with a Direct Participant, either directly or
indirectly (Indirect Participants). DTC has
Standard & Poors highest rating: AAA. The DTC
rules applicable to its Participants are on file with the
Securities and Exchange Commission. More information about DTC
can be found at www.dtcc.com.
Purchases of notes under the DTC system must be made by or
through Direct Participants, which will receive a credit for the
notes on DTCs records. The ownership interest of each
actual purchaser of notes (Beneficial Owner) is in
turn to be recorded on the Direct and Indirect
Participants records. Beneficial Owners will not receive
written confirmations from DTC of their purchase. Beneficial
Owners are, however, expected to receive written confirmations
providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interests in the notes are
to be accomplished by entries made on the books of Direct or
Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing
their ownership interests in the notes, except in the event that
use of the book-entry system for the notes is discontinued.
To facilitate subsequent transfers, all notes deposited by
Direct Participants with DTC are registered in the name of
DTCs partnership nominee, Cede & Co., or such
other name as may be requested by an authorized representative
of DTC. The deposit of notes with DTC and their registration in
the name of Cede & Co. or such other DTC nominee do not
effect any change in beneficial ownership. DTC has no
S-19
knowledge of the actual Beneficial Owners of the notes;
DTCs records reflect only the identity of the Direct
Participants to whose accounts such notes are credited, which
may or may not be the Beneficial Owners. The Direct and Indirect
Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants,
and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in
effect from time to time. Beneficial Owners may wish to take
certain steps to augment the transmission to them of notices of
significant events with respect to the notes, such as
redemption, tenders, defaults, and proposed amendments to the
documents governing the notes. For example, Beneficial Owners of
Securities may wish to ascertain that the nominee holding the
notes for their benefit has agreed to obtain and transmit
notices to Beneficial Owners. In the alternative, Beneficial
Owners may wish to provide their names and addresses to the
registrar and request that copies of notices be provided
directly to them.
Redemption notices shall be sent to DTC. If less than all the
notes within an issue are being redeemed, DTCs practice is
to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee)
will consent or vote with respect to the global notes unless
authorized by a Direct Participant in accordance with DTCs
procedures. Under its usual procedures, DTC mails an omnibus
proxy to the issuer as soon as possible after the record date.
The omnibus proxy assigns Cede & Co.s consenting
or voting rights to those Direct Participants to whose accounts
the notes are credited on the record date (identified in the
listing attached to the omnibus proxy).
Principal and interest payments on the global notes (including
any redemption payments) will be made to Cede & Co., or
such other nominee as may be requested by an authorized
representative of DTC. DTCs practice is to credit Direct
Participants accounts upon DTCs receipt of funds and
corresponding detail information from us, or the trustee, in
accordance with their respective holdings shown on DTCs
records. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in
bearer form or registered in street name, and will
be the responsibility of such Participant and not of DTC nor its
nominee, us or the trustee, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Principal and interest payments (including any redemption
payments) on the global notes made to Cede & Co. (or
such other nominee as may be requested by an authorized
representative of DTC) is the responsibility of us or the
trustee, disbursement of such payments to Direct Participants
will be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners will be the responsibility of
Direct and Indirect Participants.
DTC may discontinue providing its service as depository with
respect to the notes at any time by giving reasonable notice to
us or the trustee. Under such circumstances, in the event that a
successor depository is not obtained, certificates representing
the notes in fully-registered form are required to be printed
and delivered to Beneficial Owners.
We may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In
that event, certificates representing the notes in
fully-registered form are required to be printed and delivered
to Beneficial Owners.
Neither we, the trustee nor the underwriters will have any
responsibility or obligation to Direct or Indirect Participants,
or the persons for whom they act as nominees, with respect to
the accuracy of the records of DTC, its nominee or any Direct or
Indirect Participant with respect to any ownership interest in
the notes, or payments to, or the providing of notice to Direct
or Indirect Participants or Beneficial Owners.
The notes will trade in DTCs Same-Day Funds Settlement
System, and secondary market trading activity in the notes will,
therefore, settle in immediately available funds. We will make
all applicable payments of principal, premium (if any) and
interest on the notes issued as global notes in immediately
available funds.
S-20
UNDERWRITING
We intend to offer the notes through the underwriters named
below. Banc of America Securities LLC, Morgan Stanley &
Co. Incorporated and UBS Securities LLC are acting as
representatives of the underwriters named below. Subject to the
terms and conditions contained in an underwriting agreement
between us and the underwriters, we have agreed to sell to the
underwriters and the underwriters, severally have agreed to
purchase from us, the principal amount of the notes listed
opposite their names below.
|
|
|
|
|
|
|
Principal | |
Underwriter |
|
Amount | |
|
|
| |
Banc of America Securities LLC
|
|
$ |
|
|
Morgan Stanley & Co. Incorporated
|
|
|
|
|
UBS Securities LLC
|
|
|
|
|
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
350,000,000 |
|
The underwriters have agreed to purchase all of the notes sold
pursuant to the underwriting agreement if any of these notes are
purchased. If an underwriter defaults, the underwriting
agreement provides that the purchase commitments of the
nondefaulting underwriters may be increased or the underwriting
agreement may be terminated.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or
to contribute to payments the underwriters may be required to
make in respect of those liabilities.
The underwriters are offering the notes, subject to prior sale,
when, as and if issued to and accepted by them, subject to
approval of legal matters by their counsel, including the
validity of the notes, and other conditions contained in the
underwriting agreement, such as the receipt by the underwriters
of officers certificates and legal opinions. The
underwriters reserve the right to withdraw, cancel or modify
offers to the public and to reject orders in whole or
in part.
Commissions and Discounts
The underwriters have advised us that they propose initially to
offer the notes to the public at the public offering price on
the cover page of this prospectus supplement, and to dealers at
that price less a concession not in excess
of %
of the principal amount of the notes. The underwriters may
allow, and the dealers may reallow, a discount not in excess
of %
of the principal amount of the notes to other dealers. After the
initial public offering, the public offering price, concession
and discount may be changed.
The expenses of the offering, net of the settlement of hedging
transactions but not including the underwriting discount, are
estimated to be
$ million
and are payable by us.
New Issue of Notes
The notes are a new issue of securities with no established
trading market. We do not intend to apply for listing of the
notes on any national securities exchange or for quotation of
the notes on any automated dealer quotation system. We have been
advised by the underwriters that they presently intend to make a
market in the notes after completion of the offering. However,
they are under no obligation to do so and may discontinue any
market-making activities at any time without any notice. We
cannot assure the liquidity of the trading market for the notes
or that an active public market for the notes will develop. If
an active public trading market for the notes does not develop,
the market price and liquidity of the notes may be adversely
affected.
S-21
Price Stabilization and Short Positions
In connection with the offering, the underwriters are permitted
to engage in transactions that stabilize the market price of the
notes. Such transactions consist of bids or purchases to peg,
fix or maintain the price of the notes. If the underwriters
create a short position in the notes in connection with the
offering, i.e., if they sell more notes than are on the cover
page of this prospectus supplement, the underwriters may reduce
that short position by purchasing notes in the open market.
Purchase of a security to stabilize the price or to reduce a
short position could cause the price of the security to be
higher than it might be in the absence of such purchases.
Neither we nor any of the underwriters makes any representation
or predictions as to the direction or magnitude of any effect
that the transactions described above may have on the price of
the notes. In addition, neither we nor any of the underwriters
makes any representation that the underwriters will engage in
these transactions or that these transactions, once commenced,
will not be discontinued without notice.
Other Relationships
In the ordinary course of business, certain of the underwriters
and their respective affiliates have provided, and may in the
future provide, financial advisory, investment banking and other
financial and banking services, and the extension of credit, to
us or our subsidiaries. These underwriters and their affiliates
have received, and may in the future receive, customary fees and
commissions for their services. UBS Loan Finance LLC, an
affiliate of UBS Securities LLC, Bank of America, N.A., an
affiliate of Banc of America Securities LLC, and Morgan Stanley
Senior Funding, Inc., an affiliate of Morgan Stanley &
Co. Incorporated are lenders under our bridge facility and will
receive their respective share of any repayment by us of amounts
outstanding under our bridge facility from the proceeds of this
offering.
We intend to use more than 10% of the net proceeds from the sale
of the notes to repay indebtedness owed by us to affiliates of
Banc of America Securities LLC, Morgan Stanley & Co.
Incorporated and UBS Securities LLC. Accordingly, the offering
is being made in compliance with the requirements of
Rule 2710(c)(8) of the Conduct Rules of the National
Association of Securities Dealers, Inc.
LEGAL MATTERS
The validity of the issuance of the notes offered by this
prospectus supplement and the accompanying prospectus will be
passed upon for us by Andrews Kurth LLP, Houston, Texas,
with respect to U.S. legal matters, and by Conyers
Dill & Pearman, our special Bermuda counsel, with
respect to Bermuda legal matters. Certain legal matters relating
to the notes offered by this supplement and the accompanying
prospectus will be passed upon for the underwriters by
Fulbright & Jaworski L.L.P., Houston, Texas, with
respect to U.S. legal matters, and by Appleby
Spurling & Kempe, underwriters Bermuda counsel,
with respect to Bermuda legal matters. Fulbright &
Jaworski L.L.P. provides services to us on matters unrelated to
the offering of the notes.
S-22
EXPERTS
The consolidated financial statements and the related financial
statement schedule of Weatherford International Ltd., and
Subsidiaries appearing in Weatherford International Ltd.s
Annual Report
(Form 10-K) for
the year ended December 31, 2004 and Weatherford
International Ltd. managements assessment of the
effectiveness of internal control over financial reporting as of
December 31, 2004 included therein, have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their reports thereon included
therein, and incorporated herein by reference. Such consolidated
financial statements, and the related financial statement
schedule and managements assessment, have been
incorporated herein by reference, in reliance upon such reports
given on the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements and the related
consolidated financial statement schedule of Universal
Compression Holdings, Inc. (UCH) and Universal
Compression, Inc. as of March 31, 2005 and 2004, and for
each of three years in the period ended March 31, 2005 and
UCH managements report on the effectiveness of internal
control over financial reporting as of March 31, 2005,
incorporated in this prospectus by reference from Universal
Compression Holdings, Inc.s and Universal Compression,
Inc.s Annual Report on
Form 10-K for the
year ended March 31, 2005 incorporated by reference in the
Annual Report on
Form 10-K/A of
Weatherford International Ltd. for the year ended
December 31, 2004, have been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as
stated in their reports, which are incorporated herein by
reference, and have been so included and incorporated in
reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The combined balance sheets of Energy Services and International
Contract Drilling, Divisions of Precision Drilling Corporation,
as at December 31, 2004 and 2003, and the related combined
statements of earnings and equity and cash flow for the years
then ended appearing in exhibit 99.2 to our Current Report
on Form 8-K/ A
filed November 2, 2005 have been audited by KPMG LLP as
stated in their report therein, which is incorporated herein by
reference, and have been so incorporated in reliance upon the
report of such firm given upon their authority as experts in
accounting and auditing.
S-23
PROSPECTUS
$750,000,000
Weatherford International Ltd.
Senior Debt Securities
Subordinated Debt Securities
Preference Shares
Common Shares
Warrants
Units
Guarantees
Weatherford International, Inc.
Senior Debt Securities
Subordinated Debt Securities
Guarantees
Weatherford International Ltd. may offer and sell from time to
time in one or more offerings:
(1) unsecured debt securities consisting of senior notes
and debentures, subordinated notes and debentures and/or other
unsecured evidences of indebtedness, whether senior or
subordinated, in one or more series (including medium-term
notes, or MTNs), which may be convertible into or exchangeable
for preference shares or common shares;
(2) preference shares, in one or more series, which may be
convertible into or exchangeable for debt securities or common
shares;
(3) common shares;
(4) warrants to purchase our common shares, preference
shares, debt securities, or units, or debt securities of
Weatherford International, Inc., or to purchase or sell
securities of a third party, currencies or commodities;
(5) units consisting of any combination of our common
shares, preference shares, debt securities, or warrants, or debt
securities of Weatherford International, Inc.; and/or
(6) guarantees of debt securities issued by Weatherford
International, Inc.
Weatherford International, Inc. may offer and sell from time to
time in one or more offerings:
(1) unsecured debt securities consisting of senior notes
and debentures, subordinated notes and debentures and/or other
unsecured evidences of indebtedness, whether senior or
subordinated, in one or more series (including medium-term
notes, or MTNs), which may be convertible into or exchangeable
for preference shares or common shares; and
(2) guarantees of debt securities issued by Weatherford
International Ltd.
The aggregate initial offering price of the securities that we
and Weatherford International, Inc. may offer will not exceed
$750,000,000. We and/or Weatherford International, Inc. will
offer the securities in amounts, at prices and on terms to be
determined by market conditions at the time of our offerings.
We and/or Weatherford International, Inc. will provide the
specific terms of the securities in supplements to this
prospectus. You should read this prospectus and the related
prospectus supplement carefully before you invest in any of our
or Weatherford International, Inc.s securities. This
prospectus may not be used to consummate sales of our or
Weatherford International Inc.s securities unless it is
accompanied by a prospectus supplement.
The common shares of Weatherford International Ltd. are listed
for trading on the New York Stock Exchange under the symbol
WFT. On June 17, 2004, the last reported sales
price for the common shares on the New York Stock Exchange was
$44.50 per share.
You should carefully review and consider the information
under the headings Forward-Looking Statements
beginning on page 2 and Risk Factors beginning
on page 6 of this prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is July 7, 2004.
TABLE OF CONTENTS
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About this Prospectus
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Where You Can Find More Information
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Forward-Looking Statements
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Weatherford International Ltd.
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Weatherford International, Inc.
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Risk Factors
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Use of Proceeds
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Ratios of Earnings to Fixed Charges
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10 |
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Description of Our Debt Securities
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Description of Weatherford Delawares Debt Securities
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Description of Share Capital
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20 |
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Description of Warrants
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24 |
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Description of Units
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Certain Tax Considerations
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26 |
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Plan of Distribution
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37 |
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Legal Matters
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39 |
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Experts
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39 |
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i
About this prospectus
In this prospectus, unless otherwise indicated, when we refer to
Weatherford Bermuda or use words such as we and
us, we are generally referring to Weatherford
International Ltd. and its subsidiaries as a whole or on a
division basis depending on the context in which the statements
are made. When we refer to Weatherford Delaware, we are
referring to Weatherford International, Inc., our predecessor
company and our wholly owned, indirect subsidiary.
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission, or SEC, using
a shelf registration process. Under this shelf
registration process, we may sell different types of securities
described in this prospectus in one or more offerings up to a
total offering amount of $750,000,000. This prospectus provides
you with a general description of the securities we may offer.
Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the
terms of that offering and the securities offered by us in that
offering. The prospectus supplement may also add, update or
change information in this prospectus. You should read both this
prospectus and any prospectus supplement together with
additional information described below under the heading
Where You Can Find More Information.
Consent under the Exchange Control Act 1972 (and its related
regulations) has been obtained from the Bermuda Monetary
Authority for the issue and transfer of Weatherford
Bermudas common and preference shares, up to the amount of
its authorized capital from time to time, to and between
non-residents of Bermuda for exchange control purposes, and the
issue of options, warrants, depository receipts, rights, loan
notes and other securities of Weatherford Bermuda and the
subsequent free transferability thereof, provided our shares
remain listed on an appointed stock exchange, which includes the
New York Stock Exchange. This prospectus will be filed with the
Registrar of Companies in Bermuda in accordance with Bermuda
law. In granting such consent and in accepting the prospectus
for filing, neither the Bermuda Monetary Authority nor the
Registrar of Companies in Bermuda accepts any responsibility for
our financial soundness or the correctness of any of the
statements made or opinions expressed in this prospectus.
Under no circumstances should the delivery to you of this
prospectus or any exchange or redemption made pursuant to this
prospectus create any implication that the information contained
in this prospectus is correct as of any time after the date of
this prospectus.
1
Where you can find more information
We file reports and other information with the SEC. You may read
our SEC filings at the SECs website at
http://www.sec.gov. You may also read and copy documents
at the public reference room maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330 for
further information on the public reference room.
We and Weatherford Delaware have filed with the SEC a
registration statement on
Form S-3 covering
the securities offered by this prospectus. This prospectus is
only a part of the registration statement and does not contain
all of the information in the registration statement. For
further information on us, and the securities that may be
offered, please review the registration statement and the
exhibits that are filed with it. Statements made in this
prospectus that describe documents may not necessarily be
complete. We recommend that you review the documents that we
have filed with the registration statement to obtain a more
complete understanding of those documents.
The SEC allows us to incorporate by reference the
information we file with them, which means that we can disclose
to you important information contained in other documents filed
with the SEC by referring you to those documents. The
information incorporated by reference is an important part of
this prospectus. Information we later file with the SEC will
automatically update and supersede this information. We
incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934 (the
Exchange Act) after the date of this prospectus through the
termination of the registration statement of which this
prospectus is a part. Please read the following documents
incorporated by reference in this prospectus:
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our annual report on
Form 10-K for the
year ended December 31, 2003 filed with the SEC on
March 10, 2004;
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the amendment, on
Form 10-K/ A, to
our annual report for the year ended December 31, 2003
filed with the SEC on June 14, 2004;
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our quarterly report on
Form 10-Q for the
quarter ended March 31, 2004 filed with the SEC on
May 6, 2004;
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our current reports on
Form 8-K filed on
January 30, 2004, April 21, 2004 and May 28, 2004;
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The description of our common
shares contained in our Registration Statement on
Form S-4, filed
with the SEC on April 5, 2002, as amended by Pre-Effective
Amendment No. 1 filed with the SEC on May 22, 2002
(Registration
No. 333-85644); and
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all documents we file under
Section 13(a), 13(c), 14, or 15(d) of the Exchange Act
between the date of this prospectus supplement and the
termination of the registration statement of which this
prospectus supplement is a part.
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If the information in incorporated documents conflicts with
information in this prospectus you should rely on the most
recent information. If the information in an incorporated
document conflicts with information in another incorporated
document, you should rely on the most recent incorporated
document.
You may request a copy of these filings at no cost, by writing
or telephoning us at the following address: Weatherford
International Ltd., 515 Post Oak Boulevard, Suite 600,
Houston, Texas 77027, Attention: Investor Relations
(telephone number:
(713) 693-4000).
If you have any other questions regarding us, please contact our
Investor Relations Department in writing at the above address or
at the above telephone number or visit our world wide web site
at www.weatherford.com. Information on our website is not
incorporated by reference in this prospectus.
2
Forward-looking statements
This prospectus, our filings with the SEC and our public
releases contain statements relating to our future results,
including certain projections and business trends. These
statements may constitute forward-looking statements
as defined in the Private Securities Litigation Reform Act of
1995. Certain risks and uncertainties may cause actual results
to be materially different from projected results contained in
forward-looking statements in this prospectus and in our other
disclosures. These risks and uncertainties include, but are not
limited to, the following factors, as well as the factors
discussed in the documents incorporated by reference into this
prospectus:
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A downturn in market conditions
could affect projected
results. Any material
changes in oil and gas supply and demand, oil and gas prices,
rig count or other market trends would affect our results and
would likely affect the forward-looking information provided by
us. The oil and gas industry is extremely volatile and subject
to change based on political and economic factors outside our
control. Through the beginning of 2002, prices for oil and
natural gas decreased, reflecting diminished demand attributable
to political and economic issues. In the latter part of 2002,
prices for oil and natural gas increased. However, with the
exception of Canada, producers did not increase drilling due to
the political and economic uncertainty. During 2003, North
American drilling activity increased; however, if an extended
regional and/or worldwide recession would occur, it would result
in even lower demand and lower prices for oil and gas, which
would adversely affect our revenues and income. At this time, we
have assumed increases in worldwide demand will continue
throughout 2004.
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Our future success depends upon
our ability to adapt to the changing market environment in North
America. There is an
excess investment in capital assets in our industry in the North
American market. In addition, there are low barriers to entry.
Our success depends on our ability to lower our cost structure.
Our forward-looking statements assume we will be successful in
reducing our cost structure and adapting to the changing
environment.
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A material disruption in our
manufacturing could adversely affect some divisions of our
business. We have
undertaken an initiative to consolidate and outsource certain of
our manufacturing operations. Our forward-looking statements
assume any manufacturing consolidation and outsourcing will be
completed without material disruptions. If there are disruptions
or excess costs associated with manufacturing changes, our
results could be adversely affected.
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Availability of a skilled
workforce could affect our projected
results. The workforce
and labor supply in the oilfield service industry is aging and
diminishing such that there is an increasing shortage of
available skilled labor. Our forward-looking statements assume
we will be able to maintain a skilled workforce.
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Our long-term growth is
dependent upon technological innovation and
commercialization. Our
ability to deliver our long-term growth strategy depends in part
on the commercialization of new technology. A central aspect of
our growth strategy is to innovate our products and services, to
obtain technologically advanced products through internal
research and development and/or acquisitions, and to expand the
markets for new technology through leverage of our worldwide
infrastructure. Key to our success will be our ability to
commercialize the technology that we have acquired and
demonstrate the enhanced value our technology brings to our
customers operations. Our major technological advances
include, but are not limited to, those related to underbalanced
drilling, expandable solid tubulars, expandable sand screens and
intelligent well completion. Our forward-looking statements have
assumed successful commercialization of, and above-average
growth from, these new products and services.
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Nonrealization of expected
benefits from our 2002 corporate reincorporation could affect
our projected results.
We expected to gain certain business, financial and strategic
advantages as a result of our reincorporation, including
improvements to our global tax position and cash flow. An
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inability to realize expected benefits of the reincorporation
within the anticipated time frame, or at all, would likely
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Nonrealization of expected benefits of our recent change in
divisional structure could adversely affect our projected
results. In 2003, we realigned our operational structure
from three divisions to two divisions. Our forward-looking
statements assume there will be no material disruption to our
operations and we will realize anticipated cost savings. |
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A decline in the fair value of our investment in Universal
that is other than temporary would adversely affect our
projected results. In the third quarter of 2002, we
determined the decline in Universals stock price was other
than temporary and recorded a write-down in the carrying value
of the investment. In connection with the reduction in the
carrying value, we recognized a tax benefit related to the
difference between the book carrying value and the tax basis of
the investment. We can make no assurances there will not be an
additional decline in value of our investment in Universal and
that any such decline would be temporary. Any decline may result
in an additional write-down in the carrying value of our
investment in Universal and would adversely affect our results. |
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The cyclical nature of or a prolonged downturn in our
industry could affect the carrying value of our goodwill. As
of March 31, 2004, we had approximately $1.6 billion
of goodwill. Our estimates of the value of our goodwill could be
reduced in the future as a result of various factors, some of
which are beyond our control. Any reduction in the value of our
goodwill may result in an impairment charge and therefore
adversely affect our results. |
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Currency fluctuations could have a material adverse financial
impact on our business. A material decline in currency rates
in our markets could affect our future results as well as affect
the carrying values of our assets. World currencies have been
subject to much volatility. Our forward-looking statements
assume no material impact from future changes in currencies. |
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Political disturbances, war, or terrorist attacks and changes
in global trade policies could adversely impact our
operations. We have assumed there will be no material
political disturbances or terrorist attacks and there will be no
material changes in global trade policies. Any further military
action undertaken by the United States or other countries could
adversely affect our results of operations. |
Finally, our future results will depend upon various other risks
and uncertainties, including, but not limited to, those detailed
in our other filings with the SEC. For additional information
regarding risks and uncertainties, please read our other current
filings with the SEC under the Exchange Act and the Securities
Act, particularly under Item 2. Managements
Discussion and Analysis of Financial Condition and Results of
Operations in our Quarterly Report on
Form 10-Q for the
quarter ended March 31, 2004 and Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations in our Annual Report on
Form 10-K for the
year ended December 31, 2003. These filings are available
free of charge at the SECs website at www.sec.gov.
All subsequent written and oral forward-looking statements
attributable to us or any person acting on our behalf are
expressly qualified in their entirety by the cautionary
statements contained or referred to in this section. We
undertake no obligation to publicly release the result of any
revisions to any such forward-looking statements that may be
made to reflect events or circumstances after the date of this
prospectus or to reflect the occurrence of unanticipated events.
4
Weatherford International Ltd.
Weatherford International Ltd. is one of the worlds
leading providers of equipment and services used for drilling,
completion and production of oil and natural gas wells. We
conduct operations in approximately 100 countries and have
service and sales locations in nearly all of the oil and natural
gas producing regions in the world. We are among the leaders in
each of our primary markets, and our distribution and service
network is one of the most extensive in the oil and natural gas
industry.
Our business is divided into two principal operating divisions:
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Drilling Services; and
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Production Systems.
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In June 2002, Weatherford International Ltd., a Bermuda exempted
company, became the parent holding company of Weatherford
International, Inc., a Delaware corporation, following a
corporate reorganization. Each share of common stock of
Weatherford International, Inc. automatically converted into the
right to receive a common share of Weatherford International
Ltd. Thus, the stockholders of Weatherford International, Inc.
became shareholders of Weatherford International Ltd., which,
together with its subsidiaries, continues to be engaged in the
same business that Weatherford International, Inc. and its
subsidiaries were engaged in before the reorganization. The
reorganization has been accounted for as a reorganization of
entities under common control and, accordingly, did not result
in any changes to our consolidated amounts of assets,
liabilities or shareholders equity.
Our principal executive offices are located at 515 Post Oak
Boulevard, Suite 600, Houston, Texas
77027-3415. Our
telephone number at that location is
(713) 693-4000.
Weatherford International, Inc.
Weatherford Delaware is an indirect, wholly owned subsidiary of
Weatherford Bermuda. Weatherford Bermuda currently conducts
substantially all of its operations through Weatherford Delaware
and its subsidiaries.
5
Risk factors
The securities to be offered by this prospectus may involve a
high degree of risk. When considering an investment in any of
these securities, you should consider carefully the following
factors, and any risks that may be set forth in the prospectus
supplement relating to a specific security, as well as the other
information set forth or incorporated by reference in this
prospectus, (including the risks and other disclosure that are
presented in (i) our Annual Report on
Form 10-K for the
year ended December 31, 2003, (ii) our Quarterly
Report on
Form 10-Q for the
quarter ended March 31, 2004, and (iii) our definitive
proxy statement, filed with the SEC on April 7, 2004, under
the headings Forward-looking Statements, Risk
Factors and Exposures.
Changes in tax laws could adversely impact our results.
On June 26, 2002, the stockholders and Board of Directors
of Weatherford International, Inc. approved our corporate
reorganization and Weatherford International Ltd., a newly
formed Bermuda company, became the parent holding company of
Weatherford International, Inc. The realization of the tax
benefit of this reorganization could be impacted by changes in
tax laws, tax treaties or tax regulations or the interpretation
or enforcement thereof or differing interpretation or
enforcement of applicable law by the U.S. Internal Revenue
Service or other taxing authorities.
Our results of operations are impacted by Universal
Compressions results of operations.
We own approximately 44% of Universal Compression Holdings,
Inc.s outstanding common stock as a result of the merger
of our compression services division with a Universal subsidiary
in February 2001. We account for this ownership interest using
the equity method of accounting, which requires us to record our
percentage interest in Universals results of operations in
our consolidated statement of operations. Accordingly,
fluctuations in Universals earnings will cause
fluctuations in our earnings.
Nonrealization of expected benefits from our business
division realignment and other initiatives will affect our
projected results.
Our projected results of operations include the expected
benefits of our business division realignment and our
productivity and cost reduction initiatives. We may experience
unexpected delays or incur excess costs in connection with the
realignment of our business and the productivity initiatives. We
may not fully realize the expected benefits of the business
realignment and our productivity initiatives. The ultimate
timing and success of the business realignment and our
initiatives will depend upon a number of factors, some of which
are beyond our control. We may not realize any of these expected
benefits.
We are a Bermuda exempted company, and it may be difficult
for you to enforce judgments against us or our directors and
executive officers.
We are a Bermuda exempted company. As a result, the rights of
holders of our shares will be governed by Bermuda law and our
memorandum of association and bye-laws. The rights of
shareholders under Bermuda law may differ from the rights of
shareholders of companies incorporated in other jurisdictions.
Some of our directors and some of the named experts referred to
in this prospectus are not residents of the United States, and a
substantial portion of our assets are located outside the United
States. As a result, it may be difficult for investors to effect
service of process on those persons in the United States or to
enforce in the United States judgments obtained in
U.S. courts against us or those persons based on the civil
liability provisions of the U.S. securities laws.
Uncertainty exists as to whether courts in Bermuda will enforce
judgments obtained in other jurisdictions, including the United
States, against us or our directors or officers under the
securities laws of those jurisdictions or
6
Risk factors
entertain actions in Bermuda against us or our directors or
officers under the securities laws of other jurisdictions.
Our bye-laws restrict shareholders from bringing legal action
against our officers and directors.
Our bye-laws contain a broad waiver by our shareholders of any
claim or right of action, both individually and on our behalf,
against any of our officers or directors. The waiver applies to
any action taken by an officer or director, or the failure of an
officer or director to take any action, in the performance of
his or her duties, except with respect to any matter involving
any fraud or dishonesty on the part of the officer or director.
This waiver limits the right of shareholders to assert claims
against our officers and directors unless the act or failure to
act involves fraud or dishonesty.
Low oil and gas prices adversely affect demand for our
products and services.
Low oil and gas prices adversely affect demand throughout the
oil and natural gas industry, including the demand for our
products and services. As prices decline, we are affected in two
significant ways. First, the funds available to our customers
for the purchases of goods and services decline. Second,
exploration and drilling activity declines as marginally
profitable projects become uneconomic and either are delayed or
eliminated. Accordingly, when oil and gas prices are relatively
low, our revenues and income will be adversely affected.
The market price of our common shares may fluctuate.
Historically, the market price of common shares of companies
engaged in the oil and gas industry has been highly volatile.
Likewise, the market price of our common shares has varied
significantly in the past. News announcements and changes in oil
and natural gas prices, changes in the demand for oil and
natural gas exploration and changes in the supply and demand for
oil and natural gas have all been factors that have affected the
price of our common shares.
Customer credit risks could result in losses.
The concentration of our customers in the energy industry may
impact our overall exposure to credit risk, in that customers
may be similarly affected by prolonged changes in economic and
industry conditions. We perform ongoing credit evaluations of
our customers and do not generally require collateral in support
of our trade receivables. While we maintain reserves for
potential credit losses, we cannot assure that our reserves will
be sufficient to meet write-offs of uncollectible receivables or
that our losses from those receivables will be consistent with
our expectations.
Uninsured judgments or a rise in insurance premiums could
adversely impact our results.
Although we maintain insurance to cover potential claims and
losses, we could become subject to a judgment for which we are
not adequately insured. Additionally, the terrorist attacks that
occurred in the U.S., as well as other factors, have generally
increased the cost of insurance for companies, including ours.
Significant increases in the cost of our insurance and more
restrictive coverages may adversely impact our results of
operations.
Uninsured claims and litigation could adversely impact our
results.
In the ordinary course of business, we become the subject of
various claims and litigation. We maintain insurance to cover
many of our potential losses, and we are subject to various
self-retentions and deductibles with respect to our insurance.
Although we are subject to various ongoing items of litigation,
we do not believe that any of the items of litigation that we
are currently subject to will
7
Risk factors
result in any material uninsured losses to us. However, it is
possible that an unexpected judgment could be rendered against
us in cases in which we could be uninsured and beyond the
amounts that we currently have reserved or anticipate incurring.
We are also subject to various federal, state and local laws and
regulations relating to the energy industry in general and the
environment in particular. Environmental laws have in recent
years become more stringent and have generally sought to impose
greater liability on a larger number of potentially responsible
parties. While we are not currently aware of any situation
involving an environmental claim that would be likely to have a
material adverse effect on our business, it is always possible
that an environmental claim with respect to one or more of our
current businesses or a business or property that one of our
predecessors owned or used could arise and could involve
material expenditures.
A terrorist attack could have a material adverse effect on
our businesses.
The terrorist attacks that took place in the U.S. on
September 11, 2001 were unprecedented events that have
created many economic and political uncertainties, some of which
may materially impact our businesses. The potential for future
terrorist attacks, the national and international responses to
terrorist attacks, and other acts of war or hostility have
created many economic and political uncertainties, which could
adversely affect our business.
We have significant foreign operations that would be
adversely impacted in the event of war, political disruption,
civil disturbance or changes in global trade policies.
Like most multinational oilfield service companies, we have
operations in international areas, including parts of the Middle
East, North and West Africa, Latin America, the Asia-Pacific
region and the Commonwealth of Independent States that are
subject to risks of war, political disruption, civil disturbance
and changes in global trade policies that may:
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disrupt oil and gas exploration
and production activities;
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negatively impact results of
operations;
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restrict the movement and exchange
of funds;
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inhibit our ability to collect
receivables;
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lead to U.S. government or
international sanctions; and
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limit access to markets for
periods of time.
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Our significant operations in foreign countries expose us to
currency fluctuation risks.
As of March 31, 2004, approximately 31.2% of our net assets
were located outside the U.S. and were carried on our books in
local currencies. Changes in those currencies in relation to the
U.S. dollar result in translation adjustments, which are
reflected as accumulated other comprehensive income (loss) in
the shareholders equity section on our condensed
consolidated balance sheets. We recognize remeasurement and
transactional gains and losses on currencies in our condensed
consolidated statements of operations. Such remeasurement and
transactional losses may adversely impact our results of
operations.
In certain foreign countries, a component of our cost structure
is U.S. dollar denominated, whereas our revenues are
partially local currency based, therefore a devaluation of the
local currency would adversely impact our operating margins.
8
Use of proceeds
Unless otherwise specified in a prospectus supplement, we will
use the net proceeds received by us from the sale of the
securities offered by this prospectus to finance acquisitions,
refinance certain existing indebtedness and for general
corporate purposes. We may invest funds not required immediately
for such purposes in marketable securities and short-term
investments.
9
Ratios of earnings to fixed charges
The following table sets forth our and Weatherford
Delawares ratios of earnings to fixed charges for the
periods shown. As Weatherford Delaware is our predecessor
company, the ratios presented reflect only Weatherford
Delawares ratios of earnings to fixed charges for periods
ended on or prior to December 31, 2001, and our ratio of
earnings to fixed charges on a consolidated basis for periods
ended after December 31, 2001.
You should read these ratios of earnings to fixed charges in
connection with our and Weatherford Delawares consolidated
financial statements, including the notes to those statements,
incorporated by reference in this prospectus supplement and the
accompanying prospectus.
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Year ended December 31, | |
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ended | |
1999 | |
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2000 | |
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2001 | |
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2002 | |
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2003 | |
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March 31, 2004 | |
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1.52x |
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1.99x |
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4.79x |
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2.94x |
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4.06x |
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For the year ended December 31, 2002, earnings before fixed
charges were inadequate to cover fixed charges by
$32.0 million. This reflects our $217.1 million
write-down of our investment in Universal Compression Holdings,
Inc. as it was determined that the decline in the market value
was other than temporary.
For purposes of computing the ratio of earnings to fixed
charges, earnings are divided by fixed charges.
Earnings represent the aggregate of (a) our
earnings (loss) before income taxes, minority interest,
discontinued operations and equity in earnings of unconsolidated
investees and (b) fixed charges, net of interest
capitalized (c) plus distributed income from equity
investments. Fixed charges represent interest
(whether expensed or capitalized), the amortization of
capitalized debt costs and original issue discount and that
portion of rental expense on operating leases deemed to be the
equivalent of interest.
10
Description of our debt securities
Any debt securities we offer under a prospectus supplement will
be our direct unsecured general obligations. The debt securities
will be either senior debt securities or subordinated debt
securities (and may include medium-term notes, or MTNs). The
debt securities will be issued under one or more separate
indentures between us and a banking or financial institution, as
trustee. Senior debt securities will be issued under an
Indenture dated as of October 1, 2003 among us, Weatherford
Delaware and Deutsche Bank Trust Company Americas, as trustee.
Subordinated debt securities will be issued under a subordinated
indenture. Together, the senior indenture and the subordinated
indenture are called indentures.
We have summarized selected provisions of the indentures below.
The following summary is a description of the material
provisions of the indentures. It does not restate those
agreements in their entirety. We urge you to read each of the
indentures because, each one, and not this description, defines
the rights of holders of debt securities. A senior indenture and
a subordinated indenture have been filed as exhibits to this
registration statement.
GENERAL
The debt securities will be our direct, unsecured obligations.
The senior debt securities will rank equally with all of our
other senior unsecured and unsubordinated debt. The subordinated
debt securities will have a junior position to all of our senior
debt.
We conduct a substantial part of our operations through our
subsidiaries. To the extent of such operations, holders of debt
securities will have a position junior to the prior claims of
creditors of our subsidiaries, including trade creditors,
debtholders, secured creditors, taxing authorities and guarantee
holders, and any preference shareholders, except to the extent
that we may ourself be a creditor with recognized claims against
any subsidiary. Our ability to pay the principal, premium, if
any, and interest on any debt securities is, to a large extent,
dependent upon the payment to us of dividends, debt principal
and interest or other charges by our subsidiaries.
A prospectus supplement and an indenture relating to any series
of debt securities being offered will include specific terms
relating to the offering. These terms will include some or all
of the following:
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The title and type of the debt
securities;
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The total principal amount of the
debt securities;
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The percentage of the principal
amount at which the debt securities will be issued and any
payments due if the maturity of the debt securities is
accelerated;
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The dates on which the principal
of the debt securities will be payable;
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The interest rate which the debt
securities will bear and the interest payment dates for the debt
securities;
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Any conversion or exchange
features;
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Any optional redemption periods;
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Any sinking fund or other
provisions that would obligate us to repurchase or otherwise
redeem some or all of the debt securities;
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Any provisions granting special
rights to holders when a specified event occurs;
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Any changes to or additional
events of default or covenants;
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11
Description of our debt securities
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Any special tax implications of
the debt securities, including provisions for original issue
discount securities, if offered; and
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Any other terms of the debt
securities.
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None of the indentures will limit the amount of debt securities
that may be issued. Each indenture will allow debt securities to
be issued up to the principal amount that may be authorized by
us and may be in any currency or currency unit designated by us.
Debt securities of a series may be issued in registered, coupon
or global form.
GUARANTEE BY WEATHERFORD DELAWARE
If the applicable prospectus supplement relating to a series of
our senior debt securities provides that those senior debt
securities will have the benefit of a guarantee by Weatherford
Delaware, payment of the principal, premium, if any, and
interest on those senior debt securities will be unconditionally
guaranteed on an unsecured, unsubordinated basis by Weatherford
Delaware. The guarantee of senior debt securities will rank
equally in right of payment with all of the unsecured and
unsubordinated indebtedness of Weatherford Delaware.
If the applicable prospectus supplement relating to a series of
our subordinated debt securities provides that those
subordinated debt securities will have the benefit of a
guarantee by Weatherford Delaware, payment of the principal,
premium, if any, and interest on those subordinated debt
securities will be unconditionally guaranteed on an unsecured,
subordinated basis by Weatherford Delaware. The guarantee of the
subordinated debt securities will be subordinated in right of
payment to all of Weatherford Delawares existing and
future senior indebtedness (as defined in the related prospectus
supplement), including any guarantee of the senior debt
securities, to the same extent and in the same manner as the
subordinated debt securities are subordinated to our senior
indebtedness (as defined in the related prospectus supplement).
See Subordination below.
The obligations of Weatherford Delaware under any such guarantee
will be limited as necessary to prevent the guarantee from
constituting a fraudulent conveyance or fraudulent transfer
under applicable law.
DENOMINATIONS
The prospectus supplement for each issuance of debt securities
will state that the securities issued in registered form will be
issued in registered form of $1,000 each or multiples
thereof.
Subordination
Under a subordinated indenture, payment of the principal,
interest and any premium on the subordinated debt securities
will generally be subordinated and junior in right of payment to
the prior payment in full of all senior debt. The subordinated
indenture will provide that no payment of principal, interest
and any premium on the subordinated debt securities may be made
in the event:
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of any insolvency, bankruptcy or
similar proceeding involving us or our property; or
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we fail to pay the principal,
interest, any premium or any other amounts on any senior debt
when due.
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The subordinated indenture will not limit the amount of senior
debt that we may incur.
Senior debt includes all notes or other unsecured
evidences of indebtedness, including guarantees given by us, for
money borrowed by us, not expressed to be subordinate or junior
in right of payment to any of our other indebtedness.
12
Description of our debt securities
In addition, our assets consist primarily of the capital stock
of our subsidiaries. Accordingly, we will depend on dividends
and other distributions from our subsidiaries in order to make
payments on our debt securities and any guarantees we issue. As
a result, our indebtedness will be effectively junior to the
debt and other liabilities of our subsidiaries, including
Weatherford Delaware.
MERGERS AND SALE OF ASSETS
Each indenture will provide that we may not consolidate or
amalgamate with or merge into any other person or convey,
transfer or lease our properties and assets substantially as an
entirety to another person, unless:
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the successor or resulting person
assumes all of our obligations under the indentures; and
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we or the successor or resulting
person will not immediately be in default under the indentures.
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Upon the assumption of our obligations by a successor or
resulting person, subject to certain exceptions, we will be
discharged from all obligations under the indentures.
MODIFICATION OF INDENTURES
Each indenture will provide that our rights and obligations and
the rights of the holders may be modified with the consent of
the holders of a majority in aggregate principal amount of the
outstanding debt securities of each series affected by the
modification. No modification of the principal or interest
payment terms, and no modification reducing the percentage
required for modifications, will be effective against any holder
without its consent.
EVENTS OF DEFAULT
Event of default, when used in an indenture, will
mean any of the following:
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failure to pay the principal of or
any premium on any debt security when due;
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failure to deposit any sinking
fund payment when due;
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failure to pay interest on any
debt security for 30 days;
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failure to perform any other
covenant in the indenture that continues for 90 days after
being given written notice;
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certain events in bankruptcy,
insolvency or reorganization of us; or
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any other event of default
included in any indenture or supplemental indenture.
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An event of default for a particular series of debt securities
does not necessarily constitute an event of default for any
other series of debt securities issued under an indenture. The
trustee may withhold notice to the holders of debt securities of
any default (except in the payment of principal or interest) if
it considers such withholding of notice to be in the best
interests of the holders.
If an event of default for any series of debt securities occurs
and continues, the trustee or the holders of a specified
percentage in aggregate principal amount of the debt securities
of the series may declare the entire principal of all the debt
securities of that series to be due and payable immediately. If
this happens, subject to certain conditions, the holders of a
specified percentage of the aggregate principal amount of the
debt securities of that series can void the declaration.
Other than its duties in case of a default, a trustee is not
obligated to exercise any of its rights or powers under any
indenture at the request, order or direction of any holders,
unless the holders offer the trustee reasonable indemnification.
If they provide this reasonable indemnification, the holders of a
13
Description of our debt securities
majority in principal amount of any series of debt securities
may direct the time, method and place of conducting any
proceeding or any remedy available to the trustee, or exercising
any power conferred upon the trustee, for any series of debt
securities.
COVENANTS
Under the indentures, we have agreed to:
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pay the principal of, interest and
any premium on, the debt securities when due;
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maintain a place of payment;
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deliver a report to the trustee at
the end of each fiscal year reviewing our obligations under the
indentures; and
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deposit sufficient funds with any
paying agent on or before the due date for any principal,
interest or premium.
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We have also agreed to the following covenants relating to
limitations on liens and restrictions on sale-and-leaseback
transactions.
Limitation on liens
The senior indenture provides that we will not, nor will we
permit any subsidiary to, create, assume, incur or suffer to
exist any lien upon any principal property, whether owned or
leased on the date of the senior indenture or thereafter
acquired, to secure any of our debt or any other person (other
than the senior debt securities issued under the senior
indenture), without causing all of the debt securities
outstanding under the applicable indenture to be secured equally
and ratably with, or prior to, the new debt so long as new debt
is secured. This restriction does not prohibit us from creating
the following:
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certain liens existing, or
provided for under the terms of existing agreements, on the date
that any debt securities are issued under the senior indenture;
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liens on current assets to secure
current liabilities;
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certain liens that are created
within one year after acquisition, completion and/or
commencement of commercial operation on, property acquired,
constructed, altered or improved by us or any of our
subsidiaries;
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certain preexisting liens on any
property acquired and liens on property of a subsidiary existing
at the time it became our subsidiary;
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liens in favor of us or our
subsidiaries;
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certain liens in favor of
governmental bodies to secure progress, advance or other
payments;
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liens on any property securing
indebtedness incurred for the purpose of financing the purchase
price or the cost of constructing, installing or improving the
property;
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liens on any property securing
indebtedness issued or guaranteed by governmental
bodies; and
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any extension, renewal or
replacement of the foregoing.
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Notwithstanding the foregoing, under the senior indenture we
may, and may permit any subsidiary to, issue, assume or
guarantee secured indebtedness which would otherwise be subject
to the foregoing restrictions, in an aggregate amount which,
with all other such secured indebtedness, does not exceed 15% of
our consolidated net worth. For purposes of this paragraph,
consolidated net worth means
14
Description of our debt securities
the amount of total shareholders equity shown in our most
recent consolidated statement of our financial position.
Sale-and-leaseback transactions
The senior indenture provides that we will not, and we will not
permit any of our subsidiaries to, enter into any
sale-and-leaseback transaction unless:
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at the time of entering into such
sale-and-leaseback transaction, we or our subsidiary would be
entitled under the indentures to mortgage the property under the
indentures for an amount equal to the proceeds of the
sale-and-leaseback
transaction without equally and ratably securing the notes in
compliance with the exceptions to the liens covenant in the
indentures;
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within a period commencing six
months prior to the consummation of the
sale-and-leaseback
transaction and ending six months after the consummation of such
transaction, we or our subsidiary expend an amount equal to all
or a portion of the net proceeds of such
sale-and-leaseback
transaction for property used or to be used in the ordinary
course of our or our subsidiaries businesses, and we have
elected to designate that amount as a credit against such
sale-and-leaseback
transaction, with any such amount not so designated to be
applied as set forth in the next paragraph; or
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during the
12-month period after
the effective date of the
sale-and-leaseback
transaction, we apply to the retirement of the notes or any of
our pari passu indebtedness:
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(i) an amount equal to the proceeds of the property sold in
the sale-and-leaseback
transaction, which shall not be less than the fair value of such
property at the time of entering into such
sale-and-leaseback
transaction, less |
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(ii) an amount equal to the principal amount of the notes
and pari passu indebtedness retired by us within that
12-month period and not
designated as a credit against any other
sale-and-leaseback
transaction by us or any of our subsidiaries during that period. |
PAYMENT AND TRANSFER
Principal, interest and any premium on fully registered
securities will be paid at designated places. Payment will be
made by check and mailed to the persons in whose names the debt
securities are registered on days specified in the indentures or
any prospectus supplement. Debt securities payments in other
forms will be paid at a place designated by us and specified in
a prospectus supplement.
Fully registered securities may be transferred or exchanged at
the corporation trust office of the trustee or at any other
office or agency maintained by us for such purposes, without the
payment of any service charge except for any tax or governmental
charge.
GLOBAL SECURITIES
Certain series of the debt securities may be issued as permanent
global debt securities to be deposited with a depositary with
respect to that series. Unless otherwise indicated in the
prospectus supplement, the following is a summary of the
depository arrangements applicable to debt securities issued in
permanent global form and for which The Depositary Trust
Company, or DTC, acts as depositary.
Each global debt security will be deposited with, or on behalf
of, DTC, as depositary, or its nominee and registered in the
name of a nominee of DTC. Except under the limited circumstances
described below, global debt securities are not exchangeable for
definitive certificated debt securities.
15
Description of our debt securities
DTC has advised us of the following matters. The information in
this section concerning DTC and DTCs book-entry system has
been obtained from sources that we believe to be reliable
(including DTC), but we take no responsibility for the accuracy
thereof.
DTC, the worlds largest depository, is:
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a limited-purpose trust company
organized under the New York Banking Law;
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a banking organization
within the meaning of the New York Banking Law;
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a member of the Federal Reserve
System;
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a clearing corporation
within the meaning of the New York Uniform Commercial
Code; and
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a clearing agency
registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934.
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DTC holds and provides asset servicing for over 2 million
issues of U.S. and
non-U.S. equity
issues, corporate and municipal debt issues, and money market
instruments from over 85 countries that DTCs
participants (Direct Participants) deposit with DTC.
DTC also facilitates the post-trade settlement among Direct
Participants of sale and other securities transactions in
deposited securities, through electronic computerized book-entry
transfers and pledges between Direct Participants
accounts. This eliminates the need for physical movement of
securities certificates. Direct Participants include both U.S.
and
non-U.S. securities
brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is a
wholly-owned subsidiary of The Depository Trust &
Clearing Corporation (DTCC). DTCC, in turn, is owned
by a number of Direct Participants of DTC and Members of the
National Securities Clearing Corporation, Government Securities
Clearing Corporation, MBS Clearing Corporation, and Emerging
Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also
subsidiaries of DTCC), as well as by the New York Stock
Exchange, Inc., the American Stock Exchange LLC, and the
National Association of Securities Dealers, Inc. Access to the
DTC system is also available to others such as both U.S. and
non-U.S. securities
brokers and dealers, banks, trust companies, and clearing
corporations that clear through or maintain a custodial
relationship with a Direct Participant, either directly or
indirectly (Indirect Participants). DTC has
Standard & Poors highest rating: AAA. The DTC
rules applicable to its Participants are on file with the
Securities and Exchange Commission. More information about DTC
can be found at www.dtcc.com.
Purchases of notes under the DTC system must be made by or
through Direct Participants, which will receive a credit for the
notes on DTCs records. The ownership interest of each
actual purchaser of notes (Beneficial Owner) is in
turn to be recorded on the Direct and Indirect
Participants records. Beneficial Owners will not receive
written confirmations from DTC of their purchase. Beneficial
Owners are, however, expected to receive written confirmations
providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the
transaction. Transfers of ownership interests in the notes are
to be accomplished by entries made on the books of Direct or
Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing
their ownership interests in the notes, except in the event that
use of the book-entry system for the notes is discontinued.
To facilitate subsequent transfers, all notes deposited by
Direct Participants with DTC are registered in the name of
DTCs partnership nominee, Cede & Co., or such
other name as may be requested by an authorized representative
of DTC. The deposit of notes with DTC and their registration in
the name of Cede & Co. or such other DTC nominee do not
effect any change in beneficial ownership. DTC has no knowledge
of the actual Beneficial Owners of the notes; DTCs records
reflect only the identity of the Direct Participants to whose
accounts such notes are credited, which may or may not be the
16
Description of our debt securities
Beneficial Owners. The Direct and Indirect Participants will
remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants,
and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in
effect from time to time. Beneficial Owners may wish to take
certain steps to augment the transmission to them of notices of
significant events with respect to the notes, such as
redemption, tenders, defaults, and proposed amendments to the
documents governing the notes. For example, Beneficial Owners of
Securities may wish to ascertain that the nominee holding the
notes for their benefit has agreed to obtain and transmit
notices to Beneficial Owners. In the alternative, Beneficial
Owners may wish to provide their names and address to the
registrar and request that copies of notices be provided
directly to them.
Redemption notices shall be sent to DTC. If less than all the
notes within an issue are being redeemed, DTCs practice is
to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee)
will consent or vote with respect to the global notes unless
authorized by a Direct Participant in accordance with DTCs
procedures. Under its usual procedures, DTC mails an omnibus
proxy to the issuer as soon as possible after the record date.
The omnibus proxy assigns Cede & Co.s consenting
or voting rights to those Direct Participants to whose accounts
the notes are credited on the record date (identified in the
listing attached to the omnibus proxy).
Principal and interest payments on the global notes (including
any redemption payments) will be made to Cede & Co., or
such other nominee as may be requested by an authorized
representative of DTC. DTCs practice is to credit Direct
Participants accounts upon DTCs receipt of funds and
corresponding detail information from us, or the trustee, in
accordance with their respective holdings shown on DTCs
records. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in
bearer form or registered in street name, and will
be the responsibility of such Participant and not of DTC nor its
nominee, us or the trustee, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Principal and interest payments (including any redemption
payments) on the global notes made to Cede & Co. (or
such other nominee as may be requested by an authorized
representative of DTC) is the responsibility of us or the
trustee, disbursement of such payments to Direct Participants
will be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners will be the responsibility of
Direct and Indirect Participants.
DTC may discontinue providing its service as depository with
respect to the notes at any time by giving reasonable notice to
us or the trustee. Under such circumstances, in the event that a
successor depository is not obtained, certificates representing
the notes in fully-registered form are required to be printed
and delivered to Beneficial Owners.
We may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In
that event, certificates representing the notes in
fully-registered form are required to be printed and delivered
to Beneficial Owners.
Neither we, the trustee nor the underwriter will have any
responsibility or obligation to Direct or Indirect Participants,
or the persons for whom they act as nominees, with respect to
the accuracy of the records of DTC, its nominee or any Direct or
Indirect Participant with respect to any ownership interest in
the notes, or payments to, or the providing of notice to Direct
or Indirect Participants or Beneficial Owners.
17
Description of our debt securities
The notes will trade in DTCs Same-Day Funds Settlement
System, and secondary market trading activity in the notes will,
therefore, settle in immediately available funds. We will make
all applicable payments of principal, premium (if any) and
interest on the notes issued as global notes in immediately
available funds.
DEFEASANCE
We may choose to either discharge our obligations on the debt
securities of any series in a legal defeasance, or to be
released from covenant restrictions on the debt securities of
any series in a covenant defeasance. We may do so at any time on
the 91st day after we deposit with the applicable trustee
sufficient cash or government securities to pay the principal,
interest, any premium and any other sums due on the stated
maturity date or a redemption date of the debt securities of the
series. If we choose the legal defeasance option, the holders of
the debt securities of the series will not be entitled to the
benefits of the applicable indenture, except for certain
obligations, including obligations to register the transfer or
exchange of debt securities, to replace lost, stolen or
mutilated debt securities, to pay principal and interest on the
original stated due dates and certain other obligations set
forth in the indenture.
We may discharge our obligations under the indentures or be
released from covenant restrictions only if we meet certain
requirements. Among other things, we must deliver to the trustee
an opinion of our legal counsel to the effect that holders of
the series of debt securities will not recognize income, gain or
loss for United States federal income tax purposes as a result
of such defeasance and will be subject to federal income tax on
the same amount and in the same manner and at the same times as
would have been the case if such deposit and defeasance had not
occurred. In the case of legal defeasance only, this opinion
must be based on either a ruling received from or published by
the Internal Revenue Service or a change in United States
federal income tax law since the date of the indenture. We may
not have a default on the debt securities discharged on the date
of deposit.
GOVERNING LAW
Each indenture and the debt securities will be governed by and
construed in accordance with the laws of the State of New York.
NOTICES
Notices to holders of debt securities will be given by mail to
the addresses of such holders as they appear in the security
register for such debt securities.
NO PERSONAL LIABILITY OF OFFICERS, DIRECTORS, EMPLOYEES OR
SHAREHOLDERS
No director, officer, employee or shareholder, as such, of ours
or any of our affiliates shall have any personal liability in
respect of our obligations under any indenture or the debt
securities by reason of his, her or its status as such.
18
Description of Weatherford Delawares debt securities
Except as described in this section, the above descriptions of
our debt securities also apply to any debt securities that may
be issued by Weatherford Delaware. With respect to debt
securities issued by Weatherford Delaware, the references in the
above section to we, us and
our should be replaced with references to
Weatherford Delaware.
The debt securities will be issued under one or more separate
indentures between us and a banking or financial institution, as
trustee. Senior debt securities will be issued under a senior
indenture, and subordinated debt securities will be issued under
a subordinated indenture. Together, the senior indenture and the
subordinated indenture are called the indentures.
GUARANTEE OF WEATHERFORD DELAWARE DEBT SECURITIES
If the applicable prospectus supplement relating to a series of
Weatherford Delawares senior debt securities provides that
those senior debt securities will have the benefit of the
guarantee by Weatherford Bermuda, payment of the principal,
premium, if any, and interest on those senior debt securities
will be unconditionally guaranteed on an unsecured,
unsubordinated basis by Weatherford Bermuda. The guarantee of
senior debt securities will rank equally in right of payment
with all of the unsecured and unsubordinated indebtedness of
Weatherford Bermuda.
If the applicable prospectus supplement relating to a series of
Weatherford Delawares subordinated debt securities
provides that those subordinated debt securities will have the
benefit of the guarantee by Weatherford Bermuda, payment of the
principal, premium, if any, and interest on those subordinated
debt securities will be unconditionally guaranteed on an
unsecured, subordinated basis by Weatherford Bermuda. The
guarantee of Weatherford Delawares subordinated debt
securities will be subordinated in right of payment to all of
Weatherford Bermudas existing and future senior
indebtedness (as defined in the related prospectus supplement),
including any guarantee of Weatherford Delawares senior
debt securities, to the same extent and in the same manner as
Weatherford Delawares subordinated debt securities are
subordinated to our senior indebtedness (as defined in the
related prospectus supplement).
The obligations of Weatherford Bermuda under any such guarantee
will be limited as necessary to prevent the guarantee from
constituting a fraudulent conveyance or fraudulent transfer
under applicable law.
19
Description of share capital
Our authorized share capital consists of 500,000,000 common
shares, par value US$1.00 per share, and 10,000,000
undesignated preference shares, par value US$1.00 per
share. The following summary is qualified in its entirety by the
provisions of our memorandum of association and our
bye-laws, which are
both publicly available. As of June 9, 2004, there were
133,665,566 common shares issued and outstanding (excluding
common shares held by subsidiaries), 9,219,821 shares held
by subsidiaries and no preference shares issued and outstanding.
As of that date, we also had approximately 34.5 million
common shares reserved for issuance:
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in connection with options or
other awards issued or available for issuance under various
employee or director incentive, compensation and option plans;
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pursuant to conversions of
Weatherford Delawares Zero Coupon Convertible Senior
Debentures due 2020, which we have guaranteed;
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upon exercise of a warrant issued
to Shell Technology Ventures Inc. pursuant to the Warrant
Agreement, dated February 28, 2002, between Shell
Technology Ventures Inc. and Weatherford Delaware; and
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in connection with prior
acquisitions.
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COMMON SHARES
Under Bermuda law, a company is required to convene at least one
general meeting of shareholders each calendar year. Bermuda law
provides that a special general meeting of shareholders may be
called by the board of directors of a company and must be called
upon the request of shareholders holding not less than 10% of
the paid-up capital of the company carrying the right to vote.
Bermuda law also requires that shareholders be given at least
five days advance notice (unless shorter notice is agreed,
as described below) of a general meeting, but the accidental
omission to give notice to any person does not invalidate the
proceedings at a meeting. Our bye-laws provide that the chairman
or our board of directors may convene an annual general meeting
or a special general meeting. Under our bye-laws, at least
10 days notice of an annual general meeting or a
special general meeting must be given to our shareholders. This
notice requirement is subject to the ability to hold such
meetings on shorter notice if such notice is agreed: (i) in
the case of an annual general meeting, by all of the
shareholders entitled to attend and vote at such meeting; or
(ii) in the case of a special general meeting, by a
majority of the shareholders entitled to attend and vote at the
meeting holding not less than 95% of the shares entitled to vote
at such meeting. The quorum required for a general meeting of
shareholders is two or more persons present in person and
representing in person or by proxy in excess of 50% of the total
issued voting shares.
Holders of our common shares are entitled to one vote per share
on all matters submitted to a vote of the holders of our common
shares. Our bye-laws do not provide for cumulative voting.
Except as specifically provided in our bye-laws or in the
Companies Act 1981 of Bermuda (the Companies Act),
resolutions to be approved by holders of common shares require
approval by a simple majority of votes cast at a meeting at
which a quorum is present. There are no limitations imposed by
Bermuda law or our bye-laws on the right of shareholders who are
not Bermuda residents to hold or vote our common shares.
PRICE RANGE OF COMMON SHARES
Our common shares are traded on the New York Stock Exchange
under the symbol WFT. The following table sets
forth, for the periods indicated, the high and low sale price
per share of our
20
Description of share capital
common shares, since the reorganization, and the high and low
sale price per share of Weatherford Delaware common stock, prior
to the reorganization, in each case on the New York Stock
Exchange.
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High | |
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Low | |
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(U.S.$) | |
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(U.S.$) | |
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Weatherford Delaware
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2002
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First Quarter
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49.80 |
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32.55 |
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Second Quarter (through June 26, 2002)
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54.25 |
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42.73 |
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Weatherford Bermuda
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2002
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Second Quarter (from June 27, 2002 through June 30,
2002)
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46.20 |
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43.11 |
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Third Quarter
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45.19 |
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33.10 |
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Fourth Quarter
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43.70 |
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34.86 |
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2003
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First Quarter
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42.67 |
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35.05 |
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Second Quarter
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47.70 |
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37.07 |
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Third Quarter
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41.74 |
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34.91 |
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Fourth Quarter
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39.00 |
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31.30 |
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2004
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First Quarter
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47.10 |
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35.82 |
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DIVIDEND RIGHTS
Under Bermuda law, a companys board of directors may
declare and pay dividends from time to time unless there are
reasonable grounds for believing that the company is, or would
after the payment be, unable to pay its liabilities as they
become due or that the realizable value of its assets would
thereby be less than the aggregate of its liabilities and issued
share capital and share premium accounts. Each of our common
shares is entitled to dividends if, as and when dividends are
declared by its board of directors, subject to any preferred
dividend right of the holders of any preference shares. There
are no restrictions on our ability to transfer funds (other than
funds denominated in Bermuda dollars) in and out of Bermuda or
to pay dividends to U.S. residents who are holders of our
common shares.
Any cash dividends payable to our shareholders at any time when
the corresponding shares are quoted on the New York Stock
Exchange will be paid to American Stock Transfer &
Trust Company, our transfer agent in the United States, for
disbursement to those holders. We do not anticipate that we will
pay any cash dividends on our common shares in the foreseeable
future.
PREEMPTIVE, REDEMPTION, SINKING FUND AND CONVERSION RIGHTS
Holders of our common shares have no preemptive, redemption,
conversion or sinking fund rights.
REGISTRAR OR TRANSFER AGENT
A register of holders of our common shares is maintained by
Codan Services Limited in Bermuda, and a branch register is
maintained in the United States by American Stock
Transfer & Trust Company, who serves as branch
registrar and transfer agent.
PREFERENCE SHARES
Pursuant to Bermuda law and our bye-laws, our board of directors
by resolution may establish one or more series of preference
shares having such number of shares, designations, dividend
rates, relative
21
Description of share capital
voting rights, conversion or exchange rights, redemption rights,
liquidation rights and other relative participation, optional or
other special rights, qualifications, limitations or
restrictions as may be fixed by the board of directors without
any further shareholder approval. Such rights, preferences,
powers and limitations as may be established could have the
effect of discouraging an attempt to obtain control of us.
ANTI-TAKEOVER PROVISIONS
Our bye-laws have provisions that could have an anti-takeover
effect. In addition, our bye-laws include an advance
notice provision that places time limitations on
shareholders nominations of directors and submission of
proposals for consideration at an annual general meeting. These
provisions are intended to enhance the likelihood of continuity
and stability in the composition of the board of directors and
in the policies formulated by the board of directors and to
encourage negotiations with the board of directors in
transactions that may involve an actual or potential change of
control of us.
Directors can be removed from office, only for cause, by
resolution of the shareholders at a special general meeting of
our shareholders. The board of directors does not have the power
to remove directors. These provisions can delay a shareholder
from obtaining majority representation on the board of directors.
Our bye-laws also provide that our board of directors will
consist of not less than three nor more than 18 persons,
the exact number to be set from time to time by board
resolution. Accordingly, our board of directors, and not the
shareholders, has the authority to determine the number of
directors and could delay any shareholder from obtaining
majority representation on our board of directors by enlarging
the size of our board of directors and filling the new vacancies
with its own nominees.
Our bye-laws provide that at any annual general meeting, only
such business shall be conducted as shall have been brought
before the meeting by or at the direction of our board of
directors, by any shareholder who complies with certain
procedures set forth in our bye-laws or by any shareholder
pursuant to the valid exercise of the power granted under the
Companies Act. For business to be properly brought before an
annual general meeting by a shareholder in accordance with the
terms of our bye-laws, the shareholder must have given timely
notice thereof in proper written form to our Secretary and
satisfied all requirements under applicable rules promulgated by
the Securities and Exchange Commission or by the New York Stock
Exchange or any other exchange on which our securities are
traded. To be timely for consideration at the annual general
meeting, such shareholders notice must be received by the
Secretary at our principal executive offices and our registered
office in Bermuda not less than 60 days nor more than
90 days prior to the anniversary date of the immediately
preceding annual general meeting, provided that in the event
that the annual general meeting is called for a date that is not
within 60 days before or after such anniversary date, not
later than the seventh day following the day on which such
notice of the date of the annual general meeting was mailed or
public disclosure of the date of the annual general meeting was
made, whichever occurs first. In order for a shareholder to
nominate directors in connection with an annual general meeting
of shareholders, a shareholders notice of his intention to
make such nominations must be received in proper written form as
specified in our bye-laws by our Secretary within the time
limits described above. In addition, the Companies Act provides
for a mechanism by which not less than 100 shareholders or
shareholders holding at least 5% of the voting power of a
Bermuda company may require the company to give notice of a
resolution that may properly be moved at an annual general
meeting of the company, or to circulate to members entitled to
notice of any general meeting a statement with respect to any
proposed resolution or business to be dealt with at that meeting.
Subject to the terms of any other class of shares in issue, any
action required or permitted to be taken by the holders of our
common shares must be taken at a duly called special or annual
general meeting
22
Description of share capital
of shareholders unless taken by written resolution signed by or
on behalf of all holders of common shares. Under our bye-laws,
special general meetings may be called at any time by the
chairman, the board of directors or when requisitioned by
shareholders pursuant to the provisions of the Companies Act.
The Companies Act permits shareholders holding at least 10% of
the paid-up capital of a company entitled to vote at general
meetings to requisition a special general meeting.
Our board of directors is authorized to issue, from time to
time, without obtaining any vote or consent of the holders of
any class or series of shares unless expressly provided by the
terms of issue of a class or series, any authorized and unissued
shares with such rights and restrictions as it may determine.
For example, the board of directors could authorize the issuance
of preference shares with rights that could discourage a
takeover or other transaction that holders of some or a majority
of our common shares might believe to be in their best interests
or in which holders might receive a premium for their shares
over the then market price of the shares.
23
Description of warrants
We may issue warrants to purchase:
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our common shares, preference
shares or other equity securities;
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our debt securities (which may be
guaranteed by Weatherford Delaware);
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Weatherford Delawares debt
securities (which may be guaranteed by us); or
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debt or equity securities or
securities of third parties or other rights, including rights to
receive payment in cash or securities based on the value, rate
or price of one or more specified commodities, currencies,
securities or indices, or any combination of the foregoing.
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Warrants may be issued independently or together with any other
securities and may be attached to, or separate from, such
securities. Each series of warrants will be issued under a
separate warrant agreement to be entered into between us and a
warrant agent. In addition to this summary, you should refer to
the warrant agreement, including the forms of warrant
certificate representing the warrants, relating to the specific
warrants being offered for the complete terms of the warrant
agreement and the warrants. That warrant agreement, together
with the terms of warrant certificate and warrants, will be
filed with the SEC in connection with the offering of the
specific warrants.
The applicable prospectus supplement will describe the following
terms of any warrants in respect of which this prospectus is
being delivered:
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the title of such warrants;
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the aggregate number of such
warrants;
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the price or prices at which such
warrants will be issued;
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the currency or currencies, in
which the price of such warrants will be payable;
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the securities or other rights,
including rights to receive payment in cash or securities based
on the value, rate or price of one or more specified
commodities, currencies, securities or indices, or any
combination of the foregoing, purchasable upon exercise of such
warrants;
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the price at which and the
currency or currencies in which the securities or other rights
purchasable upon exercise of such warrants may be purchased;
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the date on which the right to
exercise such warrants shall commence and the date on which such
right shall expire;
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if applicable, the minimum or
maximum amount of such warrants which may be exercised at any
one time;
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if applicable, the designation and
terms of the securities with which such warrants are issued and
the number of such warrants issued with each such security;
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if applicable, the date on and
after which such warrants and the related securities will be
separately transferable; information with respect to book-entry
procedures, if any; and
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if applicable, a discussion of any
material United States federal income tax considerations; and
any other terms of such warrants, including terms, procedures
and limitations relating to the exchange and exercise of such
warrants.
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24
Description of units
As specified in the applicable prospectus supplement, we may
issue units consisting of one or more of our warrants, debt
securities (which may be guaranteed by Weatherford Delaware),
preference shares, common shares, Weatherford Delawares
debt securities (which may be guaranteed by us) or any
combination of such securities.
The applicable prospectus supplement will describe:
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the terms of the units and of any
of our warrants, debt securities (which may be guaranteed by
Weatherford Delaware), preference shares, common shares and/or
Weatherford Delawares debt securities (which may be
guaranteed by us) comprising the units, including whether and
under what circumstances the securities comprising the units may
be traded separately;
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a description of the terms of any
unit agreement governing the units;
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a description of the provisions
for the payment, settlement, transfer or exchange of the
units; and
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if applicable, a discussion of any
material United States federal income tax considerations.
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25
Certain tax considerations
BERMUDA TAX CONSIDERATIONS
At the present time, there is no Bermuda income or profits tax,
withholding tax, capital gains tax, capital transfer tax, estate
duty or inheritance tax payable by Weatherford Bermuda or by
Weatherford Bermuda securityholders in respect of its shares,
debt securities or warrants. Weatherford Bermuda has obtained an
assurance from the Minister of Finance of Bermuda under the
Exempted Undertakings Tax Protection Act 1966 that, in the event
that any legislation is enacted in Bermuda imposing any tax
computed on profits or income, or computed on any capital asset,
gain or appreciation or any tax in the nature of estate duty or
inheritance tax, such tax shall not, until March 28, 2016,
be applicable to Weatherford Bermuda or to any of its operations
or to its shares, debentures or other obligations except insofar
as such tax applies to persons ordinarily resident in Bermuda or
to any taxes payable by Weatherford Bermuda in respect of real
property or leasehold interests in Bermuda held by it.
BARBADOS TAX CONSIDERATIONS
Weatherford Bermuda will be registered to operate as an
International Business Company or IBC
for Barbados tax purposes and Weatherford Bermuda will be
legally managed and controlled through an executive office
located in Barbados. Under current Barbados law, an IBC is
subject to tax on its international business profits generated
outside of Barbados at a maximum rate of 2.5%. This tax rate
gradually decreases to 1% as taxable income increases. The
benefits of these lower tax rates for companies registered as
IBCs can be guaranteed by the Minister for up to 15 years.
Barbados imposes no income tax on capital gains. In addition to
Barbados income tax, Weatherford Bermuda will be subject to
Barbados property transfer tax to the extent that it transfers
real property owned in Barbados and certain other taxes to the
extent that it employs persons in Barbados.
Under existing Barbados law, there will be no Barbados income or
withholding tax imposed on any dividends, interest, royalties or
other amounts paid by Weatherford Bermuda to any person resident
outside of Barbados. Furthermore, U.S. shareholders will
not be subject to any Barbados taxation on the sale or other
transfer (including by gift or on the death of the shareholder)
of Weatherford Bermuda common shares.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal
income tax consequences, as of the date of this document, of the
ownership of our debt securities, common shares, preference
shares or warrants by beneficial owners that purchase the debt
securities, shares or warrants in connection with their initial
issuance, that hold the debt securities, shares or warrants as
capital assets and that are United States holders
under the Internal Revenue Code. Under the Internal Revenue
Code, you are a United States holder if you are:
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a citizen or resident of the
United States;
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a corporation or partnership
created or organized in or under the laws of the United States
or any political subdivision thereof;
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26
Certain tax considerations
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an estate the income of which is
subject to United States federal income taxation regardless of
its source;
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a trust if it (1) is subject
to the primary supervision of a court within the United States
and one or more United States holders have the authority to
control all substantial decisions of the trust or (2) has a
valid election in effect under applicable United States Treasury
regulations to be treated as a United States holder.
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This summary is based on current law, which is subject to
change, perhaps retroactively, is for general purposes only and
should not be considered tax advice. This summary does not
represent a detailed description of the United States federal
income tax consequences to you in light of your particular
circumstances. In addition, it does not present a description of
the United States federal income tax consequences applicable to
you if you are subject to special treatment under the United
States federal income tax laws, including if you are:
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a dealer in securities or
currencies;
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a trader in securities if you
elect to use a
mark-to-market method
of accounting for your securities holdings;
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a bank or financial institution;
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an insurance company;
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a tax-exempt organization;
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a person liable for alternative
minimum tax;
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a person holding debt securities,
common shares, preference shares or warrants as part of a
hedging, integrated or conversion transaction, constructive sale
or straddle;
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a person owning, actually or
constructively, 10% or more of our voting shares or 10% or more
of the voting shares of any of our non-United States
subsidiaries;
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a United States holder whose
functional currency is not the United States dollar;
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a regulated investment
company; or
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a real estate investment trust.
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We cannot assure you that a later change in law will not alter
significantly the tax considerations that we describe in this
summary. The discussion below assumes that all debt securities
issued hereunder will be classified as debt for United States
federal income tax purposes, and holders should note that in the
event of an alternative characterization, the tax consequences
would differ from those discussed below.
If a partnership holds our debt securities, common shares,
preference shares or warrants, the tax treatment of a partner
will generally depend upon the status of the partner and the
activities of the partnership. If you are a partner of a
partnership holding our debt securities, common shares,
preference shares or warrants, you should consult your tax
advisor.
You should consult your own tax advisor concerning the
particular United States federal income tax consequences to you
of the ownership and disposition of debt securities, common
shares, preference shares or warrants, as well as the
consequences to you arising under the laws of any other taxing
jurisdiction.
27
Certain tax considerations
DEBT SECURITIES
This summary is not intended to include all of the possible
types of debt securities that we may issue under this
prospectus, including, for example, senior debt securities or
subordinated debt securities (which may include medium-term
notes). We will describe any additional United States federal
income tax consequences resulting from a specific issuance of
debt securities in the applicable prospectus supplement.
Payment of interest
Except as provided below, interest on a debt security will
generally be taxable to you as ordinary income at the time it is
paid or accrued in accordance with your method of accounting for
tax purposes.
Original issue discount
If you own debt securities issued with original issue discount,
which we refer to as OID, you will be subject to
special tax accounting rules, as described in greater detail
below. In that case, you should be aware that you generally must
include OID in gross income in advance of the receipt of cash
attributable to that income. However, you generally will not be
required to include separately in income cash payments received
on the debt securities, even if denominated as interest, to the
extent those payments do not constitute qualified stated
interest, as defined below. Notice will be given in the
applicable prospectus supplement when we determine that a
particular debt security will be an original issue discount debt
security.
A debt security with an issue price that is less than its
stated redemption price at maturity (the sum of all
payments to be made on the debt security other than
qualified stated interest) generally will be
considered issued with OID if that difference is at least 0.25%
of the stated redemption price at maturity multiplied by the
number of complete years to maturity. The issue
price of each debt security in a particular offering will
be the first price at which a substantial amount of that
particular offering is sold to the public. The term
qualified stated interest means stated interest that
is unconditionally payable in cash or in property, other than
debt instruments of the issuer, and meets all of the following
conditions:
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it is payable at least once per
year;
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it is payable over the entire term
of the debt security; and
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it is payable at a single fixed
rate or, subject to certain conditions, based on one or more
interest indices.
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We will give you notice in the applicable prospectus supplement
when we determine that a particular debt security will bear
interest that is not qualified stated interest.
If you own a debt security issued with de minimis OID, i.e.,
discount that is not OID because it is less than 0.25% of the
stated redemption price at maturity multiplied by the number of
complete years to maturity, you generally must include the de
minimis OID in income at the time payments, other than qualified
stated interest, on the debt securities are made in proportion
to the amount paid. Any amount of de minimis OID that you have
included in income will be treated as capital gain.
Certain of the debt securities may contain provisions permitting
them to be redeemed prior to their stated maturity at our option
and/or your option. Original issue discount debt securities
containing those features may be subject to rules that differ
from the general rules discussed herein. If you are considering
the purchase of original issue discount debt securities with
those features, you should carefully examine the applicable
prospectus supplement and should consult your own tax advisors
with
28
Certain tax considerations
respect to those features since the tax consequences to you with
respect to OID will depend, in part, on the particular terms and
features of the debt securities.
If you own original issue discount debt securities with a
maturity upon issuance of more than one year you generally must
include OID in income in advance of the receipt of some or all
of the related cash payments using the constant yield
method described in the following paragraph.
The amount of OID that you must include in income if you are the
initial United States holder of an original issue discount debt
security is the sum of the daily portions of OID
with respect to the debt security for each day during the
taxable year or portion of the taxable year in which you held
that debt security (accrued OID). The daily portion
is determined by allocating to each day in any accrual
period a pro rata portion of the OID allocable to that
accrual period. The accrual period for an original
issue discount debt security may be of any length and may vary
in length over the term of the debt security, provided that each
accrual period is no longer than one year and each scheduled
payment of principal or interest occurs on the first day or the
final day of an accrual period. The amount of OID allocable to
any accrual period is an amount equal to the excess, if any, of:
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the debt securitys adjusted
issue price at the beginning of the accrual period times its
yield to maturity, determined on the basis of compounding at the
close of each accrual period and properly adjusted for the
length of the accrual period, over
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the aggregate of all qualified
stated interest allocable to the accrual period.
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OID allocable to a final accrual period is the difference
between the amount payable at maturity, other than a payment of
qualified stated interest, and the adjusted issue price at the
beginning of the final accrual period. The adjusted issue
price of a debt security at the beginning of any accrual
period is equal to its issue price increased by the accrued OID
for each prior accrual period, determined without regard to the
amortization of any acquisition or bond premium, as described
below, and reduced by any payments made on the debt security
(other than qualified stated interest) on or before the first
day of the accrual period. Under these rules, you will have to
include in income increasingly greater amounts of OID in
successive accrual periods. We are required to provide
information returns stating the amount of OID accrued on debt
securities held of record by holders other than corporations and
other exempt holders.
You may elect to treat all interest on any debt security as OID
and calculate the amount includible in gross income under the
constant yield method described above. For purposes of this
election, interest includes stated interest, acquisition
discount, OID, de minimis OID, market discount, de minimis
market discount and unstated interest, as adjusted by any
amortizable bond premium or acquisition premium. You must make
this election for the taxable year in which you acquired the
debt security, and you may not revoke the election without the
consent of the Internal Revenue Service. You should consult with
your own tax advisors about this election.
Market discount
If you purchase a debt security, other than an original issue
discount debt security, for an amount that is less than its
stated redemption price at maturity, or, in the case of an
original issue discount debt security, its adjusted issue price,
the amount of the difference will be treated as market
discount for United States federal income tax purposes,
unless that difference is less than a specified de minimis
amount. Under the market discount rules, you will be required to
treat any payment, other than qualified stated interest, on, or
any gain on the sale, exchange, retirement or other disposition
of, a debt security as ordinary income to the extent of the
market discount that you have not previously included in income
and are treated as having accrued on the debt security at the
time of its payment or disposition. In addition, you may be
required to defer, until the maturity of the debt security or its
29
Certain tax considerations
earlier disposition in a taxable transaction, the deduction of
all or a portion of the interest expense on any indebtedness
attributable to the debt security.
Any market discount will be considered to accrue ratably during
the period from the date of acquisition to the maturity date of
the debt security, unless you elect to accrue on a constant
interest method. Your election to accrue market discount on a
constant interest method is to be made for the taxable year in
which you acquired the debt security, applies only to that debt
security and may not be revoked without the consent of the
Internal Revenue Service. You may elect to include market
discount in income currently as it accrues, on either a ratable
or constant interest method, in which case the rule described
above regarding deferral of interest deductions will not apply.
Your election to include market discount in income currently,
once made, applies to all market discount obligations acquired
by you on or after the first taxable year to which your election
applies and may not be revoked without the consent of the
Internal Revenue Service. You should consult your own tax
advisor before making either election described in this
paragraph.
Acquisition premium; amortizable bond premium
If you purchase an original issue discount debt security for an
amount that is greater than its adjusted issue price but equal
to or less than the sum of all amounts payable on the debt
security after the purchase date other than payments of
qualified stated interest, you will be considered to have
purchased that debt security at an acquisition
premium. Under the acquisition premium rules, the amount
of OID that you must include in gross income with respect to the
debt security for any taxable year will be reduced by the
portion of the acquisition premium properly allocable to that
year.
If you purchase a debt security, including an original issue
discount debt security, for an amount in excess of the sum of
all amounts payable on the debt security after the purchase date
other than qualified stated interest, you will be considered to
have purchased the debt security at a premium and,
if it is an original issue discount debt security, you will not
be required to include any OID in income. You generally may
elect to amortize the premium over the remaining term of the
debt security on a constant yield method as an offset to
interest when includible in income under your regular accounting
method. If you do not elect to amortize bond premium, that
premium will decrease the gain or increase the loss you would
otherwise recognize on disposition of the debt security. Your
election to amortize premium on a constant yield method will
also apply to all debt obligations held or subsequently acquired
by you on or after the first day of the first taxable year to
which the election applies. You may not revoke the election
without the consent of the Internal Revenue Service. You should
consult your own tax advisor before making this election.
Sale, exchange and retirement of debt securities
Your tax basis in a debt security will, in general, be your cost
for that debt security, increased by OID, market discount or any
discount with respect to a short-term debt security that you
previously included in income, and reduced by any amortized
premium and any cash payments on the debt security other than
qualified stated interest. Upon the sale, exchange, retirement
or other disposition of a debt security, you will recognize gain
or loss equal to the difference between the amount you realize
upon the sale, exchange, retirement or other disposition (less
an amount equal to any accrued qualified stated interest
previously includible in income, which will be treated as a
payment of interest for United States federal income tax
purposes), and the adjusted tax basis of the debt security.
Except as described above with respect to market discount, that
gain or loss will be United States source capital gain or loss.
Capital gains of individuals derived in respect of capital
assets held for more than one year are eligible for reduced
rates of taxation. The deductibility of capital losses is
subject to limitations.
30
Certain tax considerations
Information reporting and backup withholding
In general, information reporting will apply to certain payments
of principal, interest, OID and premium paid on debt securities
and to the proceeds of sale of a debt security made to you
(unless you are an exempt recipient such as a corporation). A
backup withholding tax will apply to these payments if you fail
to provide a taxpayer identification number, a certification of
exempt status, or fail to report in full dividend and interest
income.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against your United States
federal income tax liability, provided you furnish the required
information to the Internal Revenue Service.
Common shares and preference shares
The consequences of the purchase, ownership or disposition of
our shares depend on a number of factors including:
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the term of the shares;
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any put or call or redemption
provisions with respect to the shares;
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any conversion or exchange
features with respect to the shares; and
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the price at which the shares are
sold.
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You should carefully examine the applicable prospectus
supplement regarding the material United States federal income
tax consequences, if any, of holding and disposing of shares
with such terms.
Distributions on our shares
We do not anticipate that we will pay any cash distributions on
our common shares for the foreseeable future. Subject to this
and the passive foreign investment company rules discussed
below, in general, you will be required to include in gross
income the gross amount of any distribution on your common
shares or preference shares to the extent that the distribution
is paid out of our current or accumulated earnings and profits
as determined for United States federal income tax purposes (a
dividend). These dividends will not be eligible for
the dividends-received deduction, which is generally allowed to
United States corporate shareholders on dividends received from
certain domestic and foreign corporations.
You may be eligible for capital gains rates (instead of ordinary
income rates) on these dividends unless the dividends are paid
during a taxable year for which we are considered a passive
foreign investment company (discussed further below), in which
case the dividends will in all cases be taxed as ordinary
income. To be eligible for the reduced rate, you must be an
individual and you must have held the shares for the relevant
holding period. The holding period for common shares is
60 days during the 120 day period beginning
60 days before the ex-dividend date; for preference shares
the holding period is 90 days during the 180 day
period beginning 90 days before the ex-dividend date.
Periods during which the risk of loss has been diminished
through certain hedging transactions do not count towards the
required holding period.
Distributions in excess of our current and accumulated earnings
and profits will be applied first to reduce your adjusted tax
basis in the common shares or preference shares, and thereafter
will constitute gain from the sale or other taxable disposition
of your shares. We will calculate our earnings and profits under
United States federal income tax principles.
For foreign tax credit purposes, dividends paid by a foreign
corporation generally constitute foreign source income. However,
under Section 904(g) of the Internal Revenue Code,
dividends paid by a foreign corporation that is more than 50%
owned by United States persons may be treated as United
31
Certain tax considerations
States source income for foreign tax credit purposes to the
extent that the foreign corporation itself has more than an
insignificant amount of United States source income. We expect
that a portion of any dividends we pay will be treated as United
States source income under Section 904(g) of the Internal
Revenue Code. To the extent that any dividends we distribute are
treated as foreign source income, however, these dividends
generally will constitute passive income or, in the case of
certain United States holders, financial services income for
foreign tax credit purposes.
Preference shares redemption premium
Under Section 305(c) of the Internal Revenue Code and the
applicable United States Treasury regulations thereunder, if in
certain circumstances the redemption price of the preference
shares exceeds its issue price by more than a de minimis amount,
the difference-which we refer to as redemption
premiumwill be taxable as a constructive
distribution to you over time of additional preference shares.
These constructive distributions would be treated first as a
dividend to the extent of our current and accumulated earnings
and profits and otherwise would be subject to the treatment
described above for dividends not paid out of current and
accumulated earnings and profits. If the preference shares
provide for optional rights of redemption by us at prices in
excess of the issue price, you could be required to recognize
such excess if, based on all of the facts and circumstances, the
optional redemptions are more likely than not to occur.
Applicable United States Treasury regulations provide a
safe harbor under which a right to redeem will not
be treated as more likely than not to occur if (1) you are
not related to us within the meaning of the regulations;
(2) there are no plans, arrangements, or agreements that
effectively require or are intended to compel us to redeem the
shares and (3) exercise of the right to redeem would not
reduce the yield of the shares, as determined under the
regulations. Regardless of whether the optional redemptions are
more likely than not to occur, constructive dividend treatment
will not result if the redemption premium does not exceed a de
minimis amount or is in the nature of a penalty for premature
redemption. You should also consult the applicable prospectus
supplement for information regarding any additional consequences
under Section 305(c) of the Internal Revenue Code in light
of the particular terms of an issuance of preference shares.
Disposition of the common shares or preference shares
Subject to the passive foreign investment company rules and
redemption rules discussed below, when you sell or otherwise
dispose of your common shares or preference shares you generally
will recognize gain or loss for United States federal income tax
purposes in an amount equal to the difference between the amount
realized from the sale or other taxable disposition and your
adjusted tax basis in such shares. In general, your adjusted tax
basis in the common shares will be your cost of obtaining the
shares reduced by any previous distributions that are not
characterized as dividends. In general, your adjusted tax basis
in the preference shares will be your cost of obtaining those
shares increased by any redemption premium previously included
in income by you and reduced by any previous distributions that
are not characterized as dividends. The gain or loss will
generally be capital in nature. In the case of a noncorporate
United States holder, the maximum marginal United States federal
income tax rate applicable to such gain will be lower than the
maximum marginal United States federal income tax rate
applicable to ordinary income if your holding period for the
common shares or preference shares exceeds twelve months. The
gain or loss generally will be United States source gain or loss
for foreign tax credit purposes. The deductibility of capital
losses is subject to limitations. A redemption of our common
shares or preference shares by us may be treated, depending upon
the circumstances, as a sale or a dividend. You should consult
your tax advisor regarding the application of these rules to
your particular circumstances.
32
Certain tax considerations
Passive foreign investment company
Based upon estimates with respect to our income, assets and
operations, we do not believe that, for United States federal
income tax purposes, we are a passive foreign investment
company, referred to in this discussion as a PFIC, and we do not
anticipate becoming a PFIC in the foreseeable future. However,
because the determination of PFIC status must be made on an
annual basis, and will depend on the composition of our (and our
subsidiaries) income and assets, as well as the nature of
our (and our subsidiaries) activities, from time to time,
there can be no assurance that we will not be considered a PFIC
for any taxable year. Moreover, neither an opinion from counsel
nor a ruling from the Service will be obtained regarding whether
we are or will be a PFIC.
A foreign corporation is a PFIC, if either (1) at least 75%
or more of its gross income for the taxable year is passive
income, or (2) the average percentage of assets held by
such corporation during the taxable year which produces passive
income or which is held for the production of passive income is
at least 50%. For purposes of applying the tests in the
preceding sentence, the foreign corporation is deemed to own its
proportionate share of the assets, and to receive directly its
proportionate share of the income, of any other corporation of
which the foreign corporation owns, directly or indirectly, at
least 25% by value of the stock. In addition, special rules
provide that for purposes of determining whether a foreign
corporation is a PFIC, qualified stock held by
certain domestic corporate subsidiaries of the foreign
corporation is treated as an asset which does not produce
passive income (and is not held for the production of passive
income), and any amount included in gross income with respect to
such stock is treated as active income. We anticipate that the
stock of certain of our indirect, domestic subsidiaries may
constitute qualified stock.
The highly complex rules which apply to PFIC are generally
intended to end the ability under prior law of all direct and
indirect United States holders of PFIC stock to defer United
States federal income tax with respect to the earnings of the
PFIC until distributions are received from the PFIC or the
shares of the PFIC are sold. Classification of a foreign
corporation as a PFIC can have various adverse United States tax
consequences to United States holders. These include taxation of
gain on a sale or other disposition of the shares of the
corporation (possibly including a disposition by way of gift or
exchange in a corporate reorganization, or the grant of the
stock as security for a loan) at ordinary income rates and
imposition of an interest charge on gain or on distributions
with respect to the shares. Accordingly, if we are classified as
a PFIC, such classification could change the tax consequences of
the distributions and sales or exchanges described above.
Moreover, a step-up in the tax basis of the stock of a PFIC may
not be available upon the death of an individual United States
holder.
If we should determine in the future that we are a PFIC, we will
endeavor to so notify United States holders, although there can
be no assurance that we will be able to do so in a timely and
complete manner. You should consult your own tax advisors
concerning the United States federal income tax consequences of
holding our common shares, preference shares or warrants if we
are considered a passive foreign investment company in any
taxable year, including the advisability and availability of
making certain elections that may alleviate the tax consequences
referred to above.
Controlled foreign corporations
For the purposes of this paragraph, we will refer to United
States holders that own, or are deemed for United States federal
income tax purposes to own, pursuant to complex attribution and
constructive ownership rules, 10% or more of our voting shares
or the voting shares of any of our non-United States
subsidiaries as 10% Shareholders. If 10%
Shareholders own, in the aggregate, more than 50%, measured by
voting power or value, of our shares or the shares of any of our
non-United States
33
Certain tax considerations
subsidiaries, directly, indirectly, or by attribution, we or any
such non-United States subsidiary would be a controlled foreign
corporation, or a CFC.
We do not believe that for United States federal income tax
purposes we are a CFC, although there can be no assurance in
this regard. However, if we are or were to become considered a
CFC, then, for the period of time that the entity is a CFC, a
portion of our undistributed income may be includible in the
taxable income of our 10% Shareholders, and all or a portion of
the gain recognized by such 10% Shareholders on the disposition
of their shares, which could otherwise qualify for capital gains
treatment, may be treated as a dividend to the 10% Shareholders,
which dividend will be taxed as ordinary income or capital gain
as discussed above under Distributions on Our Shares.
Backup withholding tax and information reporting
United States backup withholding tax and information reporting
requirements generally apply to certain payments to certain
noncorporate holders of stock. Information reporting generally
will apply to payments of dividends on common shares or
preference shares and to proceeds from the sale or redemption of
common shares, preference shares or warrants paid to you within
the United States (unless you are an exempt
recipient, including a corporation, a payee that is not a
United States person that provides an appropriate certification
and certain other persons). A payor will be required to withhold
at the then applicable rate on any payments of dividends on, or
proceeds from the sale or redemption of common shares,
preference shares or warrants within the United States to a
holder (other than an exempt recipient) if you fail
to furnish your correct taxpayer identification number or
otherwise fail to comply with, or establish an exemption from,
these backup withholding tax requirements.
In the case of such payments by a payor or any person who
receives or collects such payments on behalf of, or for the
benefit of, a payee (a middleman) within the United
States to certain foreign trusts or foreign partnerships, the
beneficiaries of such trusts or the partners of such
partnerships, as the case may be, normally will be required to
provide the certification discussed above in order to establish
an exemption from backup withholding tax and information
reporting requirements. Holders of common shares or preference
shares that are foreign trusts or foreign partnerships should
consult with their own tax advisors regarding the correct person
or persons to provide the certification discussed above.
Moreover, a payor or middleman may rely on a certification
provided by a payee that is not a United States person only if
such payor or middleman does not have actual knowledge or a
reason to know that any information or certification stated in
such certificate is incorrect.
WARRANTS
You will generally not recognize any gain or loss upon the
exercise of warrants to purchase our common shares or preference
shares except with respect to cash received in lieu of a
fractional share of common shares or preference shares. You will
have an initial tax basis in the common shares or preference
shares received on exercise of the warrants equal to the sum of
your tax basis in the warrants and the aggregate cash exercise
price paid in respect of such exercise less any basis
attributable to the receipt of fractional shares. Your holding
period in the common shares or preference shares received on
exercise of the warrants will commence on the date after the
warrants are exercised.
Subject to the passive foreign investment company rules
discussed above, (1) if a warrant expires without being
exercised, you will recognize a capital loss in an amount equal
to your tax basis in the warrant and (2) upon the sale or
exchange of a warrant, you will generally recognize a capital
gain or loss equal to the difference, if any, between the amount
realized on the sale or exchange and your tax basis in the
warrant.
34
Certain tax considerations
Under Section 305 of the Internal Revenue Code, you may be
deemed to have received a constructive distribution from us,
which may be treated as a dividend and taxed to you as ordinary
income or capital gain as discussed above under
Distributions on Our Shares, in the event of certain
adjustments, or the failure to make certain adjustments, to the
number of common shares or preference shares to be issued upon
exercise of a warrant.
If a decision is made to issue warrants exercisable into
securities other than our common shares or preference shares, we
will discuss the relevant United States federal income tax
consequences in the applicable prospectus supplement.
UNITS
If a decision is made to issue units, we will discuss the
relevant United States federal income tax consequences in the
applicable prospectus supplement.
CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following is a summary of certain United States federal
income tax consequences that will apply to you if you are a
non-United States holder of our debt securities, common shares,
preference shares or warrants. A non-United States holder is any
beneficial owner of our debt securities, common shares,
preference shares or warrants other than a United States holder.
United States federal income tax
Under current United States federal income tax law, interest
payments or dividends received by a non-United States holder
generally will be exempt from United States federal income tax.
However, to receive this exemption you may be required to
satisfy certain certification requirements to establish that you
are a non-United States holder. You may still be subject to
United States federal income tax on interest payments or
dividends you receive if:
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you are an insurance company
carrying on a United States insurance business, within the
meaning of the Internal Revenue Code; or
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you are engaged in a trade or
business in the United States and interest, including OID, on
the debt securities or dividends on common shares or preference
shares, in each case, are effectively connected with the conduct
of that trade or business.
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In addition, if you are a foreign corporation, you may be
subject to a branch profits tax equal to 30% (or lower
applicable treaty rate) of your earnings and profits for the
taxable year, subject to adjustments.
You will generally not be subject to United States federal
income tax on the disposition of a debt security or common
shares, preference shares or warrants unless:
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the gain is effectively connected
with your conduct of a trade or business in the United
States; or
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you are an individual who is
present in the United States for 183 days or more in the
taxable year of that disposition, and certain other conditions
are met.
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Information reporting and backup withholding
In general, information reporting and backup withholding will
not apply to payments of interest or dividends that we make to
you although you may have to comply with certain certification
requirements to establish that you are not a United States
person.
35
Certain tax considerations
Payment of the proceeds from the disposition of debt securities,
common shares, preference shares or warrants effected at a
United States office of a broker generally will not be subject
to information reporting or backup withholding if the payor or
broker does not have actual knowledge or reason to know that you
are a United States person, you comply with certain
certification requirements to establish that you are not a
United States person, and the sale does not have a connection
with the United States as specified in United States Treasury
regulations.
Payment of the proceeds from the disposition of debt securities,
common shares, preference shares or warrants effected at the
foreign office of a broker generally will not be subject to
information reporting or backup withholding provided that such
broker is not for United States federal income tax purposes
(1) a United States person, (2) a controlled foreign
corporation, (3) a foreign person that derives 50% or more
of its gross income for certain periods from the conduct of a
trade or business in the United States, or (4) a foreign
partnership in which one or more United States persons, in the
aggregate, own more than 50% of the income or capital interests
in the partnership or which is engaged in a trade or business in
the United States. If you receive payments of such amounts
outside the United States from a foreign office of any other
broker, the payment will not be subject to backup withholding
tax, but will be subject to information reporting requirements
unless (1) you are the beneficial owner and the broker has
documentary evidence in its records that you are not a United
States person and certain other conditions are met or
(2) you otherwise establish an exemption, and provided that
the broker does not have actual knowledge that you are a United
States person.
Any amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against your United States
federal income tax liability provided the required information
is furnished to the Internal Revenue Service.
The foregoing discussion is intended only as a summary and
does not purport to be a complete analysis or listing of all
potential tax effects relevant to a decision whether to invest
in our debt securities, common shares, preference shares or
warrants. Potential investors are urged to consult their tax
advisors concerning the United States federal, state and local,
Bermuda, and other non-United States tax consequences of such
investment to them. If a decision is made to issue units, we
will discuss the relevant income tax consequences in the
applicable prospectus supplement.
36
Plan of distribution
We may sell the securities through agents, through underwriters
or dealers, or directly to one or more purchasers. In this
section, references to we, our and
us refer to Weatherford Bermuda and/or Weatherford
Delaware.
BY AGENTS
We may designate agents to solicit offers to purchase our
securities. We will name any agent involved in offering or
selling our securities, and any commissions that we will pay to
the agent, in a prospectus supplement. Unless we indicate
otherwise in our prospectus supplement, our agents will act on a
best efforts basis for the period of their appointment. Our
agents may be deemed to be underwriters under the Securities Act
of any of our securities that they offer or sell.
BY UNDERWRITERS OR DEALERS
If underwriters are used in the sale, the securities will be
acquired by the underwriters for their own account. The
underwriters may resell the securities in one or more
transactions (including block transactions), at negotiated
prices, at a fixed public offering price or at varying prices
determined at the time of sale. We will include the names of the
managing underwriter(s), as well as any other underwriters, and
the terms of the transaction, including the compensation the
underwriters and dealers will receive, in our prospectus
supplement. If we use an underwriter, we will execute an
underwriting agreement with the underwriter(s) at the time that
we reach an agreement for the sale of our securities. The
obligations of the underwriters to purchase the securities will
be subject to certain conditions. The underwriters will be
obligated to purchase all the securities of the series offered
if any of the securities are purchased. Any public offering
price and any discounts or concessions allowed or re-allowed or
paid to dealers may be changed from time to time. The
underwriters will use a prospectus supplement to sell our
securities.
If we use a dealer, we, as principal, will sell our securities
to the dealer. The dealer will then sell our securities to the
public at varying prices that the dealer will determine at the
time it sells our securities. We will include the name of the
dealer and the terms of our transactions with the dealer in our
prospectus supplement.
DIRECT SALES
We may directly solicit offers to purchase our securities, and
we may directly sell our securities to institutional or other
investors. In this case, no underwriters or agents would be
involved. We will describe the terms of our direct sales in our
prospectus supplement.
GENERAL INFORMATION
Underwriters, dealers and agents that participate in the
distribution of the securities may be underwriters as defined in
the Securities Act, and any discounts or commissions received by
them from us and any profit on the resale of the securities by
them may be treated as underwriting discounts and commissions
under the Securities Act. Any underwriters, dealers or agents
will be identified and their compensation described in a
prospectus supplement.
We may have agreements with the underwriters, dealers and agents
to indemnify them against certain civil liabilities, including
liabilities under the Securities Act, or to contribute with
respect to payments which the underwriters, dealers or agents
may be required to make.
37
Plan of distribution
Underwriters, dealers and agents may engage in transactions
with, or perform services for, us or our subsidiaries in the
ordinary course of their business.
Other than common shares, all securities offered under this
prospectus will be a new issue of securities with no established
trading market. Any underwriter to whom securities are sold by
us for public offering and sale may make a market in such
securities, but such underwriters will not be obligated to do so
and may discontinue any market making at any time without
notice. The securities may or may not be listed on a national
securities exchange or a foreign securities exchange, except for
the common shares which are currently listed and traded on the
New York Stock Exchange. Any common shares sold by this
prospectus will be listed for trading on the New York Stock
Exchange subject to official notice of issuance. We cannot give
you any assurance as to the liquidity of or the trading markets
for any securities.
CERTAIN PROVISIONS OF BERMUDA LAW
We have been designated by the Bermuda Monetary Authority as a
non-resident for Bermuda exchange control purposes. This
designation allows us to engage in transactions in currencies
other than the Bermuda dollar, and there are no restrictions on
our ability to transfer funds (other than funds denominated in
Bermuda dollars) in and out of Bermuda or to pay dividends to
United States residents who are holders of our common shares.
The Bermuda Monetary Authority has given its consent for the
issue and free transferability of our shares, up to the amount
of our authorized capital from time to time, to and between
non-residents of Bermuda for exchange control purposes, and the
issue of options, warrants, depository receipts, rights, loan
notes and other of our securities and the subsequent free
transferability thereof, provided our shares remain listed on an
appointed stock exchange, which includes the New York Stock
Exchange. Approvals or permissions given by the Bermuda Monetary
Authority do not constitute a guarantee by the Bermuda Monetary
Authority as to our performance or our creditworthiness.
Accordingly, in giving such consent or permissions, the Bermuda
Monetary Authority shall not be liable for the financial
soundness, performance or default of our business or for the
correctness of any opinions or statements expressed in this
prospectus. Certain issues and transfers of shares involving
persons deemed resident in Bermuda for exchange control purposes
require the specific consent of the Bermuda Monetary Authority.
This prospectus will be filed with the Registrar of Companies in
Bermuda pursuant to Part III of the Companies Act 1981 of
Bermuda. In accepting this prospectus for filing, the Registrar
of Companies in Bermuda shall not be liable for the financial
soundness, performance or default of our business or for the
correctness of any opinions or statements expressed in this
prospectus.
In accordance with Bermuda law, share certificates are only
issued in the names of companies, partnerships or individuals.
In the case of a shareholder acting in a special capacity (for
example, as a trustee), certificates may, at the request of the
shareholder, record the capacity in which the shareholder is
acting. Notwithstanding such recording of any special capacity,
we are not bound to investigate or see to the execution of any
such trust. We will take no notice of any trust applicable to
any of our shares, whether or not we have been notified of such
trust.
38
Legal matters
Certain U.S. legal matters in connection with the
securities will be passed upon by Andrews Kurth LLP, Houston,
Texas. Certain Bermuda legal matters in connection with the
securities will be passed upon for us by our special Bermuda
counsel, Conyers Dill & Pearman. If the securities are
being distributed in an underwritten offering, the validity of
the securities will be passed upon for the underwriters by
counsel identified in the related prospectus supplement.
Experts
The consolidated financial statements and the related
consolidated financial statement schedule of Weatherford
International Ltd., the successor of Weatherford International,
Inc., and its subsidiaries appearing in Weatherford
International Ltd.s Annual Report
(Form 10-K/A) for
the year ended December 31, 2003, have been audited by
Ernst & Young LLP, independent auditors, as set forth
in their report thereon incorporated by reference therein and
incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon
such report given on the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements and the related
consolidated financial statement schedule of Universal
Compression Holdings, Inc. and its subsidiaries as of
March 31, 2004 and 2003, and for each of three years in the
period ended March 31, 2004 incorporated by reference in
the registration statement of which this prospectus is a part
from Universal Compression Holdings, Inc.s Annual Report
on Form 10-K for
the year ended March 31, 2004 have been audited by
Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their reports, which are
incorporated herein by reference, and have been so included and
incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
39
________________________________________________________________________________
$350,000,000
Weatherford International
Ltd.
% Senior
Notes due 2016
Preliminary Prospectus Supplement
February , 2006
Joint Book-Running
Managers
Banc of America Securities
LLC
Morgan Stanley & Co.
Incorporated
UBS Investment Bank
Co-Manager
Merrill Lynch &
Co.