##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from  to
 Commission file number 1-31339
 WEATHERFORD INTERNATIONAL LTD.
  Bermuda
    
    98-0371344(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)515 Post Oak BoulevardSuite 600Houston, Texas
    
    77027-3415(Address of principal executive offices)
    
    (Zip Code)
 
  
   þ o
  þ o o
  o þ
  Title of Class
    
    Outstanding at May 2, 2007Common Shares, par value $1.00
    
    337,304,435




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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 1A. RISK FACTORSITEM 2. UNREGISTERED SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDSITEM 6. EXHIBITSSIGNATURESIndex to ExhibitsCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
 March 31,
    
    
    December 31,2007
    
    
    2006(unaudited)ASSETSCurrent Assets:Cash and Cash Equivalents
    
    $
    109,211
    
    
    $
    126,287Accounts Receivable, Net of Allowance for Uncollectible
Accounts of $13,250 and $13,452, Respectively
    
    
    1,703,096
    
    
    
    1,560,849Inventories
    
    
    1,372,883
    
    
    
    1,239,034Other Current Assets
    
    
    421,360
    
    
    
    433,8273,606,550
    
    
    
    3,359,997Property, Plant and Equipment, Net of Accumulated
Depreciation of $2,008,060 and $1,925,259, Respectively
    
    
    3,254,051
    
    
    
    3,003,648Goodwill
    
    
    3,040,965
    
    
    
    3,007,487Other Intangible Assets, Net
    
    
    599,162
    
    
    
    599,828Other Assets
    
    
    177,102
    
    
    
    168,288$
    10,677,830
    
    
    $
    10,139,248LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Short-term Borrowings and Current Portion of Long-term Debt
    
    $
    989,156
    
    
    $
    648,736Accounts Payable
    
    
    574,034
    
    
    
    512,495Other Current Liabilities
    
    
    845,229
    
    
    
    881,9142,408,419
    
    
    
    2,043,145Long-term Debt
    
    
    1,569,669
    
    
    
    1,564,600Deferred Tax Liabilities
    
    
    109,200
    
    
    
    136,208Other Liabilities
    
    
    233,343
    
    
    
    220,496Commitments and ContingenciesShareholders Equity:Common Shares, $1 Par Value, Authorized 1,000,000 Shares,
Issued 362,023 and 361,921 Shares, Respectively
    
    
    362,023
    
    
    
    361,921Capital in Excess of Par Value
    
    
    4,290,830
    
    
    
    4,275,534Treasury Shares, Net
    
    
    (800,965
    )
    
    
    (681,116
    )Retained Earnings
    
    
    2,381,148
    
    
    
    2,099,307Accumulated Other Comprehensive Income
    
    
    124,163
    
    
    
    119,1536,357,199
    
    
    
    6,174,799$
    10,677,830
    
    
    $
    10,139,248
  1




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WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
 Three MonthsEnded March 31,2007
    
    
    2006Revenues:Products
    
    $
    682,252
    
    
    $
    568,683Services
    
    
    1,170,033
    
    
    
    967,3281,852,285
    
    
    
    1,536,011Costs and Expenses:Cost of Products
    
    
    488,869
    
    
    
    390,547Cost of Services
    
    
    675,972
    
    
    
    597,094Research and Development
    
    
    40,514
    
    
    
    36,443Selling, General and Administrative Attributable to Segments
    
    
    205,009
    
    
    
    184,946Corporate General and Administrative
    
    
    30,060
    
    
    
    22,256Equity in Earnings of Unconsolidated Affiliates
    
    
    (790
    )
    
    
    (2,634
    )Operating Income
    
    
    412,651
    
    
    
    307,359Other Expense:Interest Expense, Net
    
    
    (34,034
    )
    
    
    (18,988
    )Other, Net
    
    
    (2,372
    )
    
    
    (831
    )Income Before Income Taxes and Minority Interest
    
    
    376,245
    
    
    
    287,540Provision for Income Taxes
    
    
    (90,299
    )
    
    
    (83,386
    )Income Before Minority Interest
    
    
    285,946
    
    
    
    204,154Minority Interest, Net of Taxes
    
    
    (4,374
    )
    
    
    (837
    )Net Income
    
    $
    281,572
    
    
    $
    203,317Earnings Per Share:Basic
    
    $
    0.83
    
    
    $
    0.58Diluted
    
    $
    0.81
    
    
    $
    0.57Weighted Average Shares Outstanding:Basic
    
    
    339,010
    
    
    
    349,160Diluted
    
    
    346,308
    
    
    
    358,326
  2




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WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
 Three MonthsEnded March 31,2007
    
    
    2006Cash Flows from Operating Activities:Net Income
    
    $
    281,572
    
    
    $
    203,317Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:Depreciation and Amortization
    
    
    135,576
    
    
    
    115,503(Gain) Loss on Sales of Assets, Net
    
    
    (19,047
    )
    
    
    1,559Equity in Earnings of Unconsolidated Affiliates
    
    
    (790
    )
    
    
    (2,634
    )Employee Share-Based Compensation Expense
    
    
    16,555
    
    
    
    14,343Minority Interest
    
    
    4,374
    
    
    
    837Deferred Income Tax Benefit
    
    
    (250
    )
    
    
    (1,328
    )Other, Net
    
    
    (264
    )
    
    
    2,107Change in Operating Assets and Liabilities, Net of Effect
of Businesses Acquired
    
    
    (262,139
    )
    
    
    (130,487
    )Net Cash Provided by Operating Activities
    
    
    155,587
    
    
    
    203,217Cash Flows from Investing Activities:Acquisitions of Businesses, Net of Cash Acquired
    
    
    (51,006
    )
    
    
    (23,751
    )Capital Expenditures for Property, Plant and Equipment
    
    
    (358,176
    )
    
    
    (212,677
    )Acquisition of Intellectual Property
    
    
    (10,724
    )
    
    
    (2,957
    )Proceeds from Sale of Assets, Net
    
    
    24,524
    
    
    
    225Net Cash Used by Investing Activities
    
    
    (395,382
    )
    
    
    (239,160
    )Cash Flows from Financing Activities:Borrowings of (Repayments on) Short-term Debt, Net
    
    
    338,845
    
    
    
    (246,206
    )Borrowings of Long-term Debt, Net
    
    
    1,839
    
    
    
    347,346Purchase of Treasury Shares
    
    
    (123,808
    )
    
    
    (91,479
    )Proceeds from Exercise of Stock Options
    
    
    3,014
    
    
    
    26,783Excess Tax Benefits from Share-Based Compensation
    
    
    2,829
    
    
    
    508Other Financing Activities, Net
    
    
    
    
    
    
    56Net Cash Provided by Financing Activities
    
    
    222,719
    
    
    
    37,008Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    (17,076
    )
    
    
    1,065Cash and Cash Equivalents at Beginning of Period
    
    
    126,287
    
    
    
    134,245Cash and Cash Equivalents at End of Period
    
    $
    109,211
    
    
    $
    135,310Supplemental Cash Flow Information:Interest Paid
    
    $
    40,403
    
    
    $
    8,205Income Taxes Paid, Net of Refunds
    
    
    82,495
    
    
    
    39,687
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WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(In thousands)
 Three MonthsEnded March 31,2007
    
    
    2006Net Income
    
    $
    281,572
    
    
    $
    203,317Other Comprehensive Income:Reclassification Adjustment for Deferred Gain, net on Derivative
Instruments
    
    
    36
    
    
    
    6,268Amortization of Pension Components
    
    
    1,052
    
    
    
    Foreign Currency Translation Adjustment
    
    
    3,922
    
    
    
    9,692Comprehensive Income
    
    $
    286,582
    
    
    $
    219,277
  4




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WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 1. General
     2. Critical Accounting Policies
  3. Business Combinations
  5




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WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
   Accounting for Contingencies
 4. Inventories
  March 31,
    
    
    December 31,2007
    
    
    2006(In thousands)Raw materials, components and supplies
    
    $
    374,115
    
    
    $
    330,006Work in process
    
    
    104,829
    
    
    
    98,920Finished goods
    
    
    893,939
    
    
    
    810,108$
    1,372,883
    
    
    $
    1,239,034
  5. Goodwill
 Goodwill and Other
Intangible Assets
 Disclosures about Segments of an Enterprise and Related Information
  
    
    North America  (i) United States of America and (ii) Canada
    
    Latin America  (i) North Latin America and (ii) South Latin America
    
    Europe/West Africa/CIS  (i) West Europe, (ii) Central Europe, (iii) West Africa,
(iv) Russia and (v) CIS
 6




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WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
 
    
    Middle East/North Africa/Asia  (i) Middle East/North Africa and (ii) Asia Pacific
   Accounting for Uncertainty in Income Taxes  an Interpretation of FASB
Statement No. 109
  Europe/
    
    
    Middle East/North
    
    
    Latin
    
    
    West Africa/
    
    
    North Africa/America
    
    
    America
    
    
    CIS
    
    
    Asia
    
    
    Total(In thousands)As of December 31,
2006
    
    $
    1,765,984
    
    
    $
    146,507
    
    
    $
    499,686
    
    
    $
    595,310
    
    
    $
    3,007,487Goodwill acquired
during period
    
    
    7,594
    
    
    
    3⁄4
    
    
    
    11,998
    
    
    
    5,076
    
    
    
    24,668Purchase price and
other adjustments
    
    
    (2,022
    )
    
    
    3,773
    
    
    
    361
    
    
    
    (328
    )
    
    
    1,784Impact of foreign
currency
translation
    
    
    (2,096
    )
    
    
    709
    
    
    
    4,494
    
    
    
    3,919
    
    
    
    7,026As of March 31, 2007
    
    $
    1,769,460
    
    
    $
    150,989
    
    
    $
    516,539
    
    
    $
    603,977
    
    
    $
    3,040,965
 6. Other Intangible Assets, Net
  March 31, 2007
    
    
    December 31, 2006Gross
    
    
    
    
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    
    
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    Net(In thousands)Acquired technology
    
    $
    312,683
    
    
    $
    (31,940
    )
    
    $
    280,743
    
    
    $
    311,939
    
    
    $
    (26,620
    )
    
    $
    285,319Licenses
    
    
    234,650
    
    
    
    (64,092
    )
    
    
    170,558
    
    
    
    226,444
    
    
    
    (60,316
    )
    
    
    166,128Patents
    
    
    130,723
    
    
    
    (44,161
    )
    
    
    86,562
    
    
    
    127,799
    
    
    
    (42,184
    )
    
    
    85,615Customer relationships
    
    
    27,049
    
    
    
    (3,813
    )
    
    
    23,236
    
    
    
    27,043
    
    
    
    (3,133
    )
    
    
    23,910Customer contracts
    
    
    21,890
    
    
    
    (4,713
    )
    
    
    17,177
    
    
    
    21,890
    
    
    
    (4,027
    )
    
    
    17,863Covenants not to compete
    
    
    26,240
    
    
    
    (23,965
    )
    
    
    2,275
    
    
    
    24,831
    
    
    
    (23,257
    )
    
    
    1,574Other
    
    
    15,425
    
    
    
    (8,215
    )
    
    
    7,210
    
    
    
    15,761
    
    
    
    (7,743
    )
    
    
    8,018Total finite-lived intangible
assets
    
    
    768,660
    
    
    
    (180,899
    )
    
    
    587,761
    
    
    
    755,707
    
    
    
    (167,280
    )
    
    
    588,427Intangible assets with an
indefinite useful life
    
    
    11,401
    
    
    
    3⁄4
    
    
    
    11,401
    
    
    
    11,401
    
    
    
    3⁄4
    
    
    
    11,401$
    780,061
    
    
    $
    (180,899
    )
    
    $
    599,162
    
    
    $
    767,108
    
    
    $
    (167,280
    )
    
    $
    599,828
  7




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WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
   Remainder of 2007
    
    $
    38,9042008
    
    
    49,8972009
    
    
    48,6702010
    
    
    47,9692011
    
    
    47,346
 7. Short-term Borrowings and Current Portion of Long-term Debt
  March 31,
    
    
    December 31,2007
    
    
    2006(In thousands)Revolving credit facility
    
    $
    75,987
    
    
    $
    75,321Canadian credit facility
    
    
    6,875
    
    
    
    6,854Commercial paper program
    
    
    847,905
    
    
    
    490,808Other short-term bank borrowings
    
    
    42,786
    
    
    
    60,010Total Short-term Borrowings
    
    
    973,553
    
    
    
    632,993Current Portion of Long-term Debt
    
    
    15,603
    
    
    
    15,743Short-term Borrowings and Current Portion of Long-term Debt
    
    $
    989,156
    
    
    $
    648,736
     8




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WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
  8. Derivative Instruments
 Interest Rate Swaps
   Cash Flow Hedges
  Other Derivative Instruments
   9. Income Taxes
    9




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WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
     10. Earnings Per Share
    Three MonthsEnded March 31,2007
    
    
    2006(In thousands)Basic weighted average shares outstanding
    
    
    339,010
    
    
    
    349,160Dilutive effect of:Warrant
    
    
    1,742
    
    
    
    2,377Stock option and restricted share plans
    
    
    5,556
    
    
    
    6,789Diluted weighted average shares outstanding
    
    
    346,308
    
    
    
    358,326
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WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
 11. Supplemental Cash Flow Information
  Three MonthsEnded March 31,2007
    
    
    2006(In thousands)Fair value of assets, net of cash acquired
    
    $
    42,921
    
    
    $
    6,769Goodwill
    
    
    24,668
    
    
    
    17,272Consideration paid related to prior year acquisitions
    
    
    17,635
    
    
    
    5,818Total liabilities
    
    
    (34,218
    )
    
    
    (6,108
    )Cash consideration, net of cash acquired
    
    $
    51,006
    
    
    $
    23,751
 Non-cash Activities
  12. Share-Based Compensation
   13. Retirement and Employee Benefit Plans
  Three Months Ended March 31,2007
    
    
    2006United
    
    
    
    
    
    
    UnitedStates
    
    
    International
    
    
    States
    
    
    International(In thousands)Service cost
    
    $
    650
    
    
    $
    2,682
    
    
    $
    609
    
    
    $
    2,240Interest cost
    
    
    1,223
    
    
    
    1,971
    
    
    
    1,016
    
    
    
    1,578Expected return on plan assets
    
    
    (165
    )
    
    
    (1,926
    )
    
    
    (165
    )
    
    
    (1,481
    )Amortization of transition obligation
    
    
    3⁄4
    
    
    
    (1
    )
    
    
    3⁄4
    
    
    
    (1
    )Amortization of prior service cost
    
    
    560
    
    
    
    (26
    )
    
    
    572
    
    
    
    (25
    )Amortization of loss
    
    
    651
    
    
    
    37
    
    
    
    472
    
    
    
    118Curtailment
    
    
    397
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4Net periodic benefit cost
    
    $
    3,316
    
    
    $
    2,737
    
    
    $
    2,504
    
    
    $
    2,429
 11




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WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
  14. Segment Information
 Reporting Segments
   12




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WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
  Three Months Ended March 31, 2007Net
    
    
    
    
    
    
    DepreciationOperating
    
    
    Income from
    
    
    and
    
    
    Total Assets atRevenues (b)
    
    
    Operations
    
    
    Amortization
    
    
    March 31, 2007North America
    
    $
    1,006,633
    
    
    $
    297,282
    
    
    $
    61,822
    
    
    $
    5,563,167Latin America
    
    
    205,942
    
    
    
    47,949
    
    
    
    16,739
    
    
    
    1,034,272Europe/West Africa/CIS
    
    
    244,958
    
    
    
    53,936
    
    
    
    18,238
    
    
    
    1,412,729Middle East/North
Africa/Asia
    
    
    394,752
    
    
    
    83,268
    
    
    
    36,167
    
    
    
    2,446,1191,852,285
    
    
    
    482,435
    
    
    
    132,966
    
    
    
    10,456,287Corporate and Other (a)
    
    
    3⁄4
    
    
    
    (69,784
    )
    
    
    2,610
    
    
    
    221,543Total
    
    $
    1,852,285
    
    
    $
    412,651
    
    
    $
    135,576
    
    
    $
    10,677,830
 Three Months Ended March 31, 2006Net
    
    
    
    
    
    
    Depreciation
    
    
    Total Assets atOperating
    
    
    Income from
    
    
    and
    
    
    December 31,Revenues (b)
    
    
    Operations
    
    
    Amortization
    
    
    2006North America
    
    $
    922,434
    
    
    $
    258,238
    
    
    $
    53,503
    
    
    $
    5,323,916Latin America
    
    
    162,095
    
    
    
    25,162
    
    
    
    15,450
    
    
    
    959,141Europe/West Africa/CIS
    
    
    177,224
    
    
    
    33,710
    
    
    
    15,737
    
    
    
    1,272,872Middle East/North
Africa/Asia
    
    
    274,258
    
    
    
    46,314
    
    
    
    28,134
    
    
    
    2,330,9111,536,011
    
    
    
    363,424
    
    
    
    112,824
    
    
    
    9,886,840Corporate and Other (a)
    
    
    3⁄4
    
    
    
    (56,065
    )
    
    
    2,679
    
    
    
    252,408Total
    
    $
    1,536,011
    
    
    $
    307,359
    
    
    $
    115,503
    
    
    $
    10,139,248
 
 (a)
    
    Includes equity in earnings of unconsolidated affiliates that are integral to the Companys
operations and research and development expenses which are not allocated geographically.(b)
    
    Net operating revenues are comprised of sales to the Companys external customers. For the three
months ended March 31, 2007, the Company had intersegment revenues of approximately $123
million, $27 million, $77 million and $85 million for North America, Latin America, Europe/West
Africa/CIS and Middle East/North Africa/Asia, respectively. For the three months ended March
31, 2006, the Company had intersegment revenues of approximately $83 million, $22 million, $50
million and $45 million for North America, Latin America, Europe/West Africa/CIS and Middle
East/North Africa/Asia, respectively. 15. Condensed Consolidating Financial Statements
   13




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WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
 Condensed Consolidating Balance Sheet
March 31, 2007
(unaudited)
(In thousands)
 OtherParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidationASSETSCurrent Assets:Cash and Cash Equivalents
    
    $
    24
    
    
    $
    2,439
    
    
    $
    106,748
    
    
    $
    3⁄4
    
    
    $
    109,211Other Current Assets
    
    
    944
    
    
    
    1,134
    
    
    
    3,495,261
    
    
    
    3⁄4
    
    
    
    3,497,339968
    
    
    
    3,573
    
    
    
    3,602,009
    
    
    
    3⁄4
    
    
    
    3,606,550Equity Investments in Affiliates
    
    
    10,463,875
    
    
    
    3,836,722
    
    
    
    12,998,679
    
    
    
    (27,299,276
    )
    
    
    3⁄4Shares Held in Parent
    
    
    3⁄4
    
    
    
    128,582
    
    
    
    672,383
    
    
    
    (800,965
    )
    
    
    3⁄4Intercompany Receivables, Net
    
    
    579,772
    
    
    
    1,256,732
    
    
    
    3⁄4
    
    
    
    (1,836,504
    )
    
    
    3⁄4Other Assets
    
    
    41,103
    
    
    
    8,442
    
    
    
    7,021,735
    
    
    
    3⁄4
    
    
    
    7,071,280$
    11,085,718
    
    
    $
    5,234,051
    
    
    $
    24,294,806
    
    
    $
    (29,936,745
    )
    
    $
    10,677,830LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Short-term Borrowings and Current Portion
of Long-term Debt
    
    $
    848,647
    
    
    $
    16,668
    
    
    $
    123,841
    
    
    $
    3⁄4
    
    
    $
    989,156Accounts Payable and Other Current
Liabilities
    
    
    22,473
    
    
    
    6,866
    
    
    
    1,389,924
    
    
    
    3⁄4
    
    
    
    1,419,263871,120
    
    
    
    23,534
    
    
    
    1,513,765
    
    
    
    3⁄4
    
    
    
    2,408,419Long-term Debt
    
    
    1,198,836
    
    
    
    354,988
    
    
    
    15,845
    
    
    
    3⁄4
    
    
    
    1,569,669Intercompany Payables, Net
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1,836,504
    
    
    
    (1,836,504
    )
    
    
    3⁄4Other Long-term Liabilities
    
    
    74,950
    
    
    
    41,121
    
    
    
    226,472
    
    
    
    3⁄4
    
    
    
    342,543Shareholders Equity
    
    
    8,940,812
    
    
    
    4,814,408
    
    
    
    20,702,220
    
    
    
    (28,100,241
    )
    
    
    6,357,199$
    11,085,718
    
    
    $
    5,234,051
    
    
    $
    24,294,806
    
    
    $
    (29,936,745
    )
    
    $
    10,677,830
 14




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##### Table of Contents



WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
 Condensed Consolidating Balance Sheet
December 31, 2006
(In thousands)
 OtherParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidationASSETSCurrent Assets:Cash and Cash Equivalents
    
    $
    35
    
    
    $
    2,271
    
    
    $
    123,981
    
    
    $
    3⁄4
    
    
    $
    126,287Other Current Assets
    
    
    131
    
    
    
    3,739
    
    
    
    3,229,840
    
    
    
    3⁄4
    
    
    
    3,233,710166
    
    
    
    6,010
    
    
    
    3,353,821
    
    
    
    3⁄4
    
    
    
    3,359,997Equity Investments in Affiliates
    
    
    10,009,855
    
    
    
    3,502,589
    
    
    
    12,935,625
    
    
    
    (26,448,069
    )
    
    
    3⁄4Shares Held in Parent
    
    
    3⁄4
    
    
    
    132,541
    
    
    
    548,575
    
    
    
    (681,116
    )
    
    
    3⁄4Intercompany Receivables, Net
    
    
    329,237
    
    
    
    1,333,181
    
    
    
    3⁄4
    
    
    
    (1,662,418
    )
    
    
    3⁄4Other Assets
    
    
    40,897
    
    
    
    8,517
    
    
    
    6,729,837
    
    
    
    3⁄4
    
    
    
    6,779,251$
    10,380,155
    
    
    $
    4,982,838
    
    
    $
    23,567,858
    
    
    $
    (28,791,603
    )
    
    $
    10,139,248LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Short-term Borrowings and Current Portion
of Long-term Debt
    
    $
    491,542
    
    
    $
    9,272
    
    
    $
    147,922
    
    
    $
    3⁄4
    
    
    $
    648,736Accounts Payable and Other Current
Liabilities
    
    
    33,788
    
    
    
    3,887
    
    
    
    1,356,734
    
    
    
    3⁄4
    
    
    
    1,394,409525,330
    
    
    
    13,159
    
    
    
    1,504,656
    
    
    
    3⁄4
    
    
    
    2,043,145Long-term Debt
    
    
    1,198,973
    
    
    
    355,318
    
    
    
    10,309
    
    
    
    3⁄4
    
    
    
    1,564,600Intercompany Payables, Net
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    1,662,418
    
    
    
    (1,662,418
    )
    
    
    3⁄4Other Long-term Liabilities
    
    
    72,789
    
    
    
    57,119
    
    
    
    226,796
    
    
    
    3⁄4
    
    
    
    356,704Shareholders Equity
    
    
    8,583,063
    
    
    
    4,557,242
    
    
    
    20,163,679
    
    
    
    (27,129,185
    )
    
    
    6,174,799$
    10,380,155
    
    
    $
    4,982,838
    
    
    $
    23,567,858
    
    
    $
    (28,791,603
    )
    
    $
    10,139,248
 15




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##### Table of Contents



WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
 Condensed Consolidating Statements of Income  Three Months Ended March 31, 2007
(unaudited)
(In thousands)
 OtherParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidationRevenues
    
    $
    3⁄4
    
    
    $
    3⁄4
    
    
    $
    1,852,285
    
    
    $
    3⁄4
    
    
    $
    1,852,285Costs and Expenses
    
    
    (3,101
    )
    
    
    (268
    )
    
    
    (1,437,055
    )
    
    
    3⁄4
    
    
    
    (1,440,424
    )Equity in Earnings of Unconsolidated Affiliates
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    790
    
    
    
    3⁄4
    
    
    
    790Operating Income (Loss)
    
    
    (3,101
    )
    
    
    (268
    )
    
    
    416,020
    
    
    
    3⁄4
    
    
    
    412,651Other Income (Expense):Interest Expense, Net
    
    
    (27,181
    )
    
    
    (5,593
    )
    
    
    (1,260
    )
    
    
    3⁄4
    
    
    
    (34,034
    )Intercompany Charges, Net
    
    
    116
    
    
    
    (10,164
    )
    
    
    10,048
    
    
    
    3⁄4
    
    
    
    3⁄4Equity in Subsidiary Income
    
    
    309,785
    
    
    
    320,533
    
    
    
    3⁄4
    
    
    
    (630,318
    )
    
    
    3⁄4Other, Net
    
    
    1,953
    
    
    
    (229
    )
    
    
    (4,096
    )
    
    
    3⁄4
    
    
    
    (2,372
    )Income (Loss) Before Income Taxes and Minority
Interest
    
    
    281,572
    
    
    
    304,279
    
    
    
    420,712
    
    
    
    (630,318
    )
    
    
    376,245(Provision) Benefit for Income Taxes
    
    
    3⁄4
    
    
    
    5,506
    
    
    
    (95,805
    )
    
    
    3⁄4
    
    
    
    (90,299
    )Income (Loss) Before Minority Interest
    
    
    281,572
    
    
    
    309,785
    
    
    
    324,907
    
    
    
    (630,318
    )
    
    
    285,946Minority Interest, Net of Taxes
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (4,374
    )
    
    
    3⁄4
    
    
    
    (4,374
    )Net Income (Loss)
    
    $
    281,572
    
    
    $
    309,785
    
    
    $
    320,533
    
    
    $
    (630,318
    )
    
    $
    281,572
 Condensed Consolidating Statements of Income
Three Months Ended March 31, 2006
(unaudited)
(In thousands)
 OtherParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidationRevenues
    
    $
    3⁄4
    
    
    $
    3⁄4
    
    
    $
    1,536,011
    
    
    $
    3⁄4
    
    
    $
    1,536,011Costs and Expenses
    
    
    (2,820
    )
    
    
    (276
    )
    
    
    (1,228,190
    )
    
    
    3⁄4
    
    
    
    (1,231,286
    )Equity in Earnings of Unconsolidated Affiliates
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    2,634
    
    
    
    3⁄4
    
    
    
    2,634Operating Income (Loss)
    
    
    (2,820
    )
    
    
    (276
    )
    
    
    310,455
    
    
    
    3⁄4
    
    
    
    307,359Other Income (Expense):Interest Income (Expense), Net
    
    
    (12,231
    )
    
    
    (7,935
    )
    
    
    1,178
    
    
    
    3⁄4
    
    
    
    (18,988
    )Intercompany Charges, Net
    
    
    227
    
    
    
    (13,610
    )
    
    
    13,383
    
    
    
    3⁄4
    
    
    
    3⁄4Equity in Subsidiary Income
    
    
    216,252
    
    
    
    230,699
    
    
    
    3⁄4
    
    
    
    (446,951
    )
    
    
    3⁄4Other, Net
    
    
    1,889
    
    
    
    (195
    )
    
    
    (2,525
    )
    
    
    3⁄4
    
    
    
    (831
    )Income (Loss) Before Income Taxes and Minority
Interest
    
    
    203,317
    
    
    
    208,683
    
    
    
    322,491
    
    
    
    (446,951
    )
    
    
    287,540(Provision) Benefit for Income Taxes
    
    
    3⁄4
    
    
    
    7,569
    
    
    
    (90,955
    )
    
    
    3⁄4
    
    
    
    (83,386
    )Income (Loss) Before Minority Interest
    
    
    203,317
    
    
    
    216,252
    
    
    
    231,536
    
    
    
    (446,951
    )
    
    
    204,154Minority Interest, Net of Taxes
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (837
    )
    
    
    3⁄4
    
    
    
    (837
    )Net Income (Loss)
    
    $
    203,317
    
    
    $
    216,252
    
    
    $
    230,699
    
    
    $
    (446,951
    )
    
    $
    203,317
 16




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##### Table of Contents



WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
 Condensed Consolidating Statements of Cash Flows
Three Months Ended March 31, 2007
(unaudited)
(In thousands)
 OtherParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidationCash Flows from Operating Activities:Net Income (Loss)
    
    $
    281,572
    
    
    $
    309,785
    
    
    $
    320,533
    
    
    $
    (630,318
    )
    
    $
    281,572Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided (Used) by Operating
Activities:Equity in Earnings of Unconsolidated
Affiliates
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (790
    )
    
    
    3⁄4
    
    
    
    (790
    )Equity in (Earnings) Loss of Affiliates
    
    
    (309,785
    )
    
    
    (320,533
    )
    
    
    3⁄4
    
    
    
    630,318
    
    
    
    3⁄4Charges from Parent or Subsidiary
    
    
    (116
    )
    
    
    10,164
    
    
    
    (10,048
    )
    
    
    3⁄4
    
    
    
    3⁄4Deferred Income Tax Provision (Benefit)
    
    
    3⁄4
    
    
    
    1,747
    
    
    
    (1,997
    )
    
    
    3⁄4
    
    
    
    (250
    )Other Adjustments
    
    
    (25,009
    )
    
    
    (66,446
    )
    
    
    (33,490
    )
    
    
    3⁄4
    
    
    
    (124,945
    )Net Cash Provided (Used) by Operating
Activities
    
    
    (53,338
    )
    
    
    (65,283
    )
    
    
    274,208
    
    
    
    3⁄4
    
    
    
    155,587Cash Flows from Investing Activities:Acquisition of Businesses, Net of Cash
Acquired
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (51,006
    )
    
    
    3⁄4
    
    
    
    (51,006
    )Capital Expenditures for Property, Plant and
Equipment
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (358,176
    )
    
    
    3⁄4
    
    
    
    (358,176
    )Acquisition of Intellectual Property
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (10,724
    )
    
    
    3⁄4
    
    
    
    (10,724
    )Proceeds from Sale of Assets
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    24,524
    
    
    
    3⁄4
    
    
    
    24,524Capital Contribution to Subsidiary
    
    
    (144,219
    )
    
    
    (13,600
    )
    
    
    3⁄4
    
    
    
    157,819
    
    
    
    3⁄4Net Cash Provided (Used) by Investing
Activities
    
    
    (144,219
    )
    
    
    (13,600
    )
    
    
    (395,382
    )
    
    
    157,819
    
    
    
    (395,382
    )Cash Flows from Financing Activities:Borrowings of (Repayments on) Short-term
Debt, Net
    
    
    356,969
    
    
    
    8,250
    
    
    
    (26,374
    )
    
    
    3⁄4
    
    
    
    338,845Borrowings of (Repayments on) Long-term
Debt, Net
    
    
    3⁄4
    
    
    
    (877
    )
    
    
    2,716
    
    
    
    3⁄4
    
    
    
    1,839Borrowings (Repayments) Between
Subsidiaries, Net
    
    
    (159,423
    )
    
    
    65,835
    
    
    
    93,588
    
    
    
    3⁄4
    
    
    
    3⁄4Purchase of Treasury Shares
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (123,808
    )
    
    
    3⁄4
    
    
    
    (123,808
    )Proceeds from Exercise of Stock Options
    
    
    3⁄4
    
    
    
    3,014
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3,014Proceeds from Capital Contribution
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    157,819
    
    
    
    (157,819
    )
    
    
    3⁄4Other, Net
    
    
    3⁄4
    
    
    
    2,829
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    2,829Net Cash Provided (Used) by Financing
Activities
    
    
    197,546
    
    
    
    79,051
    
    
    
    103,941
    
    
    
    (157,819
    )
    
    
    222,719Net Increase (Decrease) in Cash and Cash
Equivalents
    
    
    (11
    )
    
    
    168
    
    
    
    (17,233
    )
    
    
    3⁄4
    
    
    
    (17,076
    )Cash and Cash Equivalents at Beginning of
Period
    
    
    35
    
    
    
    2,271
    
    
    
    123,981
    
    
    
    3⁄4
    
    
    
    126,287Cash and Cash Equivalents at End of Period
    
    $
    24
    
    
    $
    2,439
    
    
    $
    106,748
    
    
    $
    3⁄4
    
    
    $
    109,211
 17




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##### Table of Contents



WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
 Condensed Consolidating Statements of Cash Flows
Three Months Ended March 31, 2006
(unaudited)
(In thousands)
 OtherParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidationCash Flows from Operating Activities:Net Income (Loss)
    
    $
    203,317
    
    
    $
    216,252
    
    
    $
    230,699
    
    
    $
    (446,951
    )
    
    $
    203,317Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided (Used) by Operating
Activities:Equity in Earnings of Unconsolidated
Affiliates
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (2,634
    )
    
    
    3⁄4
    
    
    
    (2,634
    )Equity in (Earnings) Loss of Affiliates
    
    
    (216,252
    )
    
    
    (230,699
    )
    
    
    3⁄4
    
    
    
    446,951
    
    
    
    3⁄4Charges from Parent or Subsidiary
    
    
    (227
    )
    
    
    13,610
    
    
    
    (13,383
    )
    
    
    3⁄4
    
    
    
    3⁄4Deferred Income Tax Provision (Benefit)
    
    
    3⁄4
    
    
    
    (7,572
    )
    
    
    6,244
    
    
    
    3⁄4
    
    
    
    (1,328
    )Other Adjustments
    
    
    44,334
    
    
    
    (115,440
    )
    
    
    74,968
    
    
    
    3⁄4
    
    
    
    3,862Net Cash Provided (Used) by Operating
Activities
    
    
    31,172
    
    
    
    (123,849
    )
    
    
    295,894
    
    
    
    3⁄4
    
    
    
    203,217Cash Flows from Investing Activities:Acquisition of Businesses, Net of Cash
Acquired
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (23,751
    )
    
    
    3⁄4
    
    
    
    (23,751
    )Capital Expenditures for Property, Plant and
Equipment
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (212,677
    )
    
    
    3⁄4
    
    
    
    (212,677
    )Acquisition of Intellectual Property
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (2,957
    )
    
    
    3⁄4
    
    
    
    (2,957
    )Proceeds from Sale of Assets, Net
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    225
    
    
    
    3⁄4
    
    
    
    225Net Cash Used by Investing Activities
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (239,160
    )
    
    
    3⁄4
    
    
    
    (239,160
    )Cash Flows from Financing Activities:Borrowings of (Repayments on) Short-term
Debt, Net
    
    
    (266,488
    )
    
    
    19,175
    
    
    
    1,107
    
    
    
    3⁄4
    
    
    
    (246,206
    )Borrowings of (Repayments on) Long-term
Debt, Net
    
    
    347,984
    
    
    
    (876
    )
    
    
    238
    
    
    
    3⁄4
    
    
    
    347,346Borrowings (Repayments) Between
Subsidiaries, Net
    
    
    (112,700
    )
    
    
    77,523
    
    
    
    35,177
    
    
    
    3⁄4
    
    
    
    3⁄4Purchase of Treasury Shares
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    (91,479
    )
    
    
    3⁄4
    
    
    
    (91,479
    )Proceeds from Exercise of Stock Options
    
    
    3⁄4
    
    
    
    26,783
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    26,783Other, Net
    
    
    (50
    )
    
    
    614
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    564Net Cash Provided (Used) by Financing
Activities
    
    
    (31,254
    )
    
    
    123,219
    
    
    
    (54,957
    )
    
    
    3⁄4
    
    
    
    37,008Net Increase (Decrease) in Cash and Cash
Equivalents
    
    
    (82
    )
    
    
    (630
    )
    
    
    1,777
    
    
    
    3⁄4
    
    
    
    1,065Cash and Cash Equivalents at Beginning of
Period
    
    
    124
    
    
    
    3,172
    
    
    
    130,949
    
    
    
    3⁄4
    
    
    
    134,245Cash and Cash Equivalents at End of Period
    
    $
    42
    
    
    $
    2,542
    
    
    $
    132,726
    
    
    $
    3⁄4
    
    
    $
    135,310
 18




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##### Table of Contents



WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(UNAUDITED)
 16. New Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial
Assets and Financial Liabilities
 19




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
 General
   Industry Trends
   Henry Hub
    
    North American
    
    InternationalWTI Oil (1)
    
    Gas (2)
    
    Rig Count (3)
    
    Rig Count (3)March 31, 2007
    
    $
    65.87
    
    
    $
    7.73
    
    
    
    2,141
    
    
    
    1,075December 31, 2006
    
    
    61.05
    
    
    
    6.30
    
    
    
    2,178
    
    
    
    1,029March 31, 2006
    
    
    66.63
    
    
    
    7.21
    
    
    
    2,171
    
    
    
    898
 
 (1)
    
    Price per barrel as of March 31 and December 31  Source:Applied Reasoning, Inc.(2)
    
    Price per MM/BTU as of March 31 and December 31  Source:Oil World(3)
    
    Average rig count for the applicable month  Source:Baker Hughes Rig Count and other
third-party data   20




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##### Table of Contents



Opportunities and Challenges
   2007 and 2008 Outlook
    Geographic Markets.
 21




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##### Table of Contents



Pricing.
  22




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##### Table of Contents



Results of Operations
   Comparative Financial Data
 Three Months Ended March 31,2007
    
    
    2006(In thousands, except percentages andper share data)Revenues:North America
    
    $
    1,006,633
    
    
    $
    922,434Latin America
    
    
    205,942
    
    
    
    162,095Europe/West Africa/CIS
    
    
    244,958
    
    
    
    177,224Middle East/North Africa/Asia
    
    
    394,752
    
    
    
    274,2581,852,285
    
    
    
    1,536,011Gross Profit %
    
    
    37.1
    %
    
    
    35.7
    %Research and Development
    
    
    40,514
    
    
    
    36,443Selling, General and Administrative Attributable to Segments
    
    
    205,009
    
    
    
    184,946Corporate General and Administrative
    
    
    30,060
    
    
    
    22,256Equity in Earnings of Unconsolidated Affiliates
    
    
    790
    
    
    
    2,634Operating Income:North America
    
    
    297,282
    
    
    
    258,238Latin America
    
    
    47,949
    
    
    
    25,162Europe/West Africa/CIS
    
    
    53,936
    
    
    
    33,710Middle East/North Africa/Asia
    
    
    83,268
    
    
    
    46,314Corporate and Other (a)
    
    
    (69,784
    )
    
    
    (56,065
    )412,651
    
    
    
    307,359Interest Expense, Net
    
    
    (34,034
    )
    
    
    (18,988
    )Other, Net
    
    
    (2,372
    )
    
    
    (831
    )Effective Tax Rate
    
    
    24.0
    %
    
    
    29.0
    %Net Income per Diluted Share
    
    $
    0.81
    
    
    $
    0.57Depreciation and Amortization
    
    
    135,576
    
    
    
    115,503
 
 (a)
    
    Includes equity in earnings of unconsolidated affiliates which are integral to our
operations and research and development expenses, which are not allocated geographically. 23




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##### Table of Contents



Consolidated Revenues by Product Line
 Three MonthsEnded March 31,2007
    
    2006Artificial Lift Systems
    
    
    17
    %
    
    
    19
    %Well Construction
    
    
    16
    
    
    
    14Drilling Services
    
    
    15
    
    
    
    16Drilling Tools
    
    
    12
    
    
    
    11Completion Systems
    
    
    10
    
    
    
    9Wireline
    
    
    10
    
    
    
    12Re-entry & Fishing
    
    
    8
    
    
    
    7Stimulation & Chemicals Services
    
    
    6
    
    
    
    5Integrated Drilling
    
    
    5
    
    
    
    6Pipeline & Specialty Services
    
    
    1
    
    
    
    1Total
    
    
    100
    %
    
    
    100
    %
 Company Results
 Revenues
  Gross Profit
  Research and Development
  Selling, General and Administrative Attributable to Segments
  24




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##### Table of Contents



Corporate General and Administrative
  Interest Expense, Net
  Income Taxes
  Segment Results
 North America
   Latin America
   Europe/West Africa/CIS
  25




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##### Table of Contents



Middle East/North Africa/Asia
   Liquidity and Capital Resources
 Historical Cash Flows
  
    
    cash inflows from operating activities of $155.6 million;
    
    capital expenditures for property, plant and equipment of $358.2 million;
    
    acquisition of businesses of approximately $51.0 million in cash, net of cash acquired;
    
    acquisition of intellectual property of $10.7 million;
    
    borrowings, net of repayments, on long-term debt and short-term facilities of $340.7 million;
    
    proceeds from the sale of assets of $24.5 million;
    
    proceeds from stock option activity of $3.0 million; and
    
    treasury share purchases of $123.8 million.
 Sources of Liquidity and Borrowings
  Committed Borrowing Facilities
  Uses of AvailabilityCommercialShort-term Committed
    
    Facility
    
    Expiration
    
    Paper
    
    
    
    
    
    Letters of
    
    CommittedFinancing Facilities
    
    Amount
    
    Date
    
    Support
    
    Drawn
    
    Credit
    
    AvailabilityRevolving Credit Facility
    
    $
    1,500.0
    
    
    May 2011
    
    $
    847.9
    
    
    $
    76.0
    
    
    $
    28.5
    
    
    $
    547.6Canadian Credit Facility
    
    
    21.5
    
    
    July 2007
    
    
    3⁄4
    
    
    
    6.9
    
    
    
    0.3
    
    
    
    14.3
  26




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##### Table of Contents



Uncommitted Borrowing Arrangements
  Commercial Paper
  Cash Requirements
    Derivative Instruments
   Interest Rate Swaps
   27




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##### Table of Contents



Cash Flow Hedges
  Other Derivative Instruments
   Off Balance Sheet Arrangements
 Guarantees
  Letters of Credit
  Operating Leases
  New Accounting Pronouncements
  Critical Accounting Policies and Estimates
  28




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##### Table of Contents



Goodwill Impairment Test
  Exposures
 Risk Factors
 Currency Exposure
   Acquisition Exposure
 Accounting for Contingencies
 Forward-Looking Statements
   29




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##### Table of Contents




    
    A downturn in market conditions could affect projected results.Any material changes in
oil and natural gas supply and demand, oil and natural gas prices, rig count or other
market trends would affect our results and would likely affect the forward-looking
information we provide. The oil and natural gas industry is extremely volatile and subject
to change based on political and economic factors outside our control. During 2004, 2005
and 2006, worldwide drilling activity increased; however, if an extended regional and/or
worldwide recession were to occur, it would result in lower demand and lower prices for oil
and natural gas, which would adversely affect drilling and production activity and
therefore would affect our revenues and income. We have assumed increases in worldwide
demand will continue throughout 2007.
    
    Availability of a skilled workforce could affect our projected results.Due to the high
activity in the exploration and production and oilfield service industries there is an
increasing shortage of available skilled labor. Our forward-looking statements assume we
will be able to recruit and maintain a sufficient skilled workforce for activity levels.
    
    Increases in the prices and availability of our raw materials could affect our results
of operations.We use large amounts of raw materials for manufacturing our products. The
price of these raw materials has a significant impact on our cost of producing products for
sale or producing fixed assets used in our business. We have assumed that the prices of
our raw materials will remain within a manageable range and will be readily available. If
we are unable to attain necessary raw materials or if we are unable to minimize the impact
of increased raw materials costs through our supply chain initiatives or by passing through
these increases to our customers, our margins and results of operations could be adversely
affected.
    
    Our long-term growth depends 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, to protect proprietary technology from unauthorized use
and to expand the markets for new technology through leverage of our worldwide
infrastructure. The 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 controlled pressure drilling and testing systems, 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.
    
    Nonrealization of expected benefits from our 2002 corporate reincorporation could affect
our projected results.We are incorporated in Bermuda and we operate through our various
subsidiaries in numerous countries throughout the world including the United States.
Consequently, we are subject to changes in tax laws, treaties or regulations or the
interpretation or enforcement thereof in the U.S., Bermuda or jurisdictions in which we or
any of our subsidiaries operates or is resident. Our income tax expense is based upon our
interpretation of the tax laws in effect in various countries at the time that the expense
was incurred. If the U.S. Internal Revenue Service or other taxing authorities do not agree
with our assessment of the effects of such laws, treaties and regulations, this could have
a material adverse effect on us including the imposition of a higher effective tax rate on
our worldwide earnings or a reclassification of the tax impact of our significant corporate
restructuring transactions.
    
    Nonrealization of expected benefits from our 2005 acquisition of Precision Energy
Services and Precision Drilling International could affect our projected results.We
expect to gain certain business, financial and strategic advantages as a result of this
acquisition, including synergies and operating efficiencies. Our integration of this
acquisition was completed in 2006. Our forward-looking statements assume that we will
realize the benefits of this integration throughout 2007. An inability to realize expected
strategic advantages as a result of the acquisition would negatively affect the anticipated
benefits of the acquisition.
    
    The cyclical nature of or a prolonged downturn in our industry could affect the carrying
value of our goodwill.As of March 31, 2007, we had approximately $3.0 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.
    
    Currency fluctuations could have a material adverse financial impact on our business.A
material change 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 currency exchange rates.
 30




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##### Table of Contents




    
    Adverse weather conditions in certain regions could aversely affect our operations.In
the summer of 2005, the Gulf of Mexico suffered several significant hurricanes. These
hurricanes and associated hurricane threats reduced the number of days on which we and our
customers could operate, which resulted in lower revenues than we otherwise would have
achieved. In the last three quarters of 2006, climatic conditions in Canada were not as
favorable to drilling as we anticipated, which limited our potential results in that
region. Similarly, unusually rough weather in the North Sea could reduce our operations
and revenues from that area during the relevant period. Our forward-looking statements
assume weather patterns in our primary areas of operations will not deviate significantly
from historical patterns.
    
    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 U.S. or other countries could
adversely affect our results of operations.
 www.sec.gov
 Available Information
 
 31




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  Foreign Currency Exposures
     Interest Rates
  32




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##### Table of Contents



March 31, 2007
    
    December 31, 2006Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    Value(In millions)6 5/8% Senior Notes due 2011
    
    $
    356.6
    
    
    $
    367.9
    
    
    $
    356.9
    
    
    $
    368.84.95% Senior Notes due 2013
    
    
    255.2
    
    
    
    240.4
    
    
    
    255.4
    
    
    
    245.25.50% Senior Notes due 2016
    
    
    348.6
    
    
    
    344.0
    
    
    
    348.6
    
    
    
    339.96.50% Senior Notes due 2036
    
    
    595.7
    
    
    
    602.1
    
    
    
    595.7
    
    
    
    619.5
   Interest Rate Swaps and Derivatives
    
 ITEM 4. CONTROLS AND PROCEDURES
  33




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
  
    
    We have updated the percentage of our net assets located outside the U.S. and carried on
our books in local currencies on page 29 of this report from 38.9% as of December 31, 2006
to 35.3% as of March 31, 2007.
 
 ITEM 2. UNREGISTERED SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS
  Total Number
    
    Maximumof Shares
    
    Number (orPurchased as
    
    ApproximatePart of
    
    Dollar Value) ofPublicly
    
    Shares that MayTotal Number
    
    Average
    
    Announced
    
    Yet Be Purchasedof Shares
    
    Price Paid
    
    Plans or
    
    Under the Plans orPeriod
    
    Purchased
    
    per Share
    
    Programs
    
    ProgramsJanuary 1  January 31, 2007
    
    
    1,750,000
    
    
    $
    37.34
    
    
    
    1,750,000
    
    
    $
    386,071,009February 1  February 28, 2007
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    386,071,009March 1  March 31, 2007
    
    
    1,361,800
    
    
    
    42.92
    
    
    
    1,361,800
    
    
    
    327,615,9683,111,800
    
    
    
    39.79
    
    
    
    3,111,800
    
    
    
    327,615,968
  Period
    
    No. of Shares
    
    Average PriceJanuary 1  January 31, 2007
    
    
    126,379
    
    
    $
    38.05February 1  February 28, 2007
    
    
    5,498
    
    
    
    40.40March 1  March 31, 2007
    
    
    1,536
    
    
    
    46.06
 34




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##### Table of Contents



ITEM 6. EXHIBITS
  ExhibitNumber
    
    Description31.1
    
    Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
 
 
    
    Filed herewith 35




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##### Table of Contents



SIGNATURES
  Weatherford International Ltd.By:
    
    /s/ Bernard J. Duroc-DannerBernard J. Duroc-DannerChief Executive Officer(Principal Executive Officer)/s/ Andrew P. BecnelAndrew P. BecnelSenior Vice President and Chief
FinancialOfficer(Principal Financial Officer)/s/ Jessica AbarcaJessica AbarcaVice President  Accounting
and ChiefAccounting Officer(Principal Accounting Officer)Date: May 7, 2007
 36




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##### Table of Contents



ExhibitNumber
    
    Description31.1
    
    Certification of Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
 
 
    
    Filed herewith