THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS
NOT COMPLETE AND MAY BE CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS ARE NOT AN OFFER TO SELL THESE SECURITIES AND ARE NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
File Pursuant to Rule 424(B)(5)
Registration No. 333-100588
333-100588-01
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED OCTOBER 2, 2003
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 28, 2002)
$250,000,000
(WEATHERFORD INTERNATIONAL LOGO)
WEATHERFORD INTERNATIONAL LTD.
% SENIOR NOTES DUE 2013
FULLY AND UNCONDITIONALLY GUARANTEED BY
WEATHERFORD INTERNATIONAL, INC.
----------------------
We will pay interest on the notes on and of each year, beginning
, 2004 for interest accruing from , 2003. The notes will
mature on , 2013. We may redeem some or all of the notes at any time
and from time to time at the redemption prices set forth in this prospectus
supplement.
The notes will be unsecured senior obligations of our company and will rank
equally with all of our other unsecured senior indebtedness from time to time
outstanding.
The notes are irrevocably 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.
INVESTING IN THE NOTES INVOLVES RISKS. PLEASE READ "RISK FACTORS"
BEGINNING ON PAGE S-6 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 7 OF THE
ACCOMPANYING PROSPECTUS.
----------------------
<Table>
<Caption>
PER NOTE TOTAL
-------- -----
Public offering price(1).................................... % $
Underwriting discount....................................... % $
Proceeds, before expenses, to us............................ % $
(1) Plus accrued interest from , 2003, if the settlement occurs after that date
</Table>
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 , 2003.
----------------------
Joint Book-Running Managers
DEUTSCHE BANK SECURITIES MERRILL LYNCH & CO.
ABN AMRO INCORPORATED
RBC CAPITAL MARKETS
SCOTIA CAPITAL
SUNTRUST ROBINSON HUMPHREY
----------------------
The date of this prospectus supplement is , 2003
TABLE OF CONTENTS
<Table>
PROSPECTUS SUPPLEMENT
About this Prospectus Supplement............................ S-i
Where You Can Find More Information......................... S-ii
Prospectus Supplement Summary............................... S-1
Risk Factors................................................ S-6
Use of Proceeds............................................. S-8
Capitalization.............................................. S-8
Ratios of Earnings to Fixed Charges......................... S-9
Description of Notes........................................ S-10
Book-Entry, Delivery and Form............................... S-13
Underwriting................................................ S-16
Legal Matters............................................... S-17
Experts..................................................... S-17
PROSPECTUS
About this Prospectus....................................... 1
Where You Can Find More Information......................... 1
Forward-Looking Statements.................................. 2
Weatherford International Ltd............................... 5
Weatherford International, Inc. ............................ 5
Recent Developments......................................... 5
Risk Factors................................................ 7
Use of Proceeds............................................. 8
Ratios of Earnings to Fixed Charges......................... 9
Description of Our Debt Securities.......................... 9
Description of Weatherford Delaware's Debt Securities....... 16
Description of Share Capital................................ 16
Description of Warrants..................................... 20
Description of Units........................................ 21
Certain Tax Considerations.................................. 21
Plan of Distribution........................................ 31
Legal Matters............................................... 32
Experts..................................................... 33
</Table>
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
S-i
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.
WHERE YOU CAN FIND MORE INFORMATION
We file reports and other information with the SEC. You may read our SEC
filings at the SEC's 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.
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:
- our annual report on Form 10-K for the year ended December 31, 2002 filed
with the SEC on March 18, 2003;
- the amendment, on Form 10-K/A, to our annual report for the year ended
December 31, 2002 filed with the SEC on June 26, 2003;
- our quarterly report on Form 10-Q for the quarter ended March 31, 2003
filed with the SEC on May 8, 2003;
- our quarterly report on Form 10-Q for the quarter ended June 30, 2003
filed with the SEC on August 14, 2003;
- our current reports on Form 8-K filed on January 17, 2003, February 5,
2003, May 6, 2003, July 1, 2003, July 2, 2003, July 3, 2003, July 21,
2003 and October 2, 2003; and
S-ii
- 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 our world wide web site
at 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.
OUR BUSINESS
Weatherford International Ltd. is one of the world's leading providers of
equipment and services used for drilling, intervention, 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:
- Drilling Services; and
- Production Systems.
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.
RECENT DEVELOPMENTS
On July 3, 2003, we sold 10,000,000 common shares for $400.0 million and
called for redemption of all the outstanding Weatherford International, Inc. 5%
Convertible Subordinated Preferred Equivalent Debentures. In connection with the
early extinguishment of the debentures, we expensed $10.1 million related to the
call premium and $10.9 million related to unamortized debt issuance costs. We
redeemed the debentures on August 4, 2003.
Prior to April 2003, we operated our business through three operating
divisions. In April, we realigned our three divisions into the two present
divisions, Drilling Services and Production Systems. This realignment was
undertaken to improve our ability to serve our customers' interests, better
coordinate our business efforts across divisions, accelerate the delivery of
strategic technologies to the marketplace and generate operating efficiencies.
As a result of the realignment, we expect to eliminate certain duplicative
costs, including the rationalization of certain properties and headcount.
On May 14, 2003, we replaced each of our two then-existing $250 million
credit facilities with one new $500 million revolving credit facility, which
matures in May 2006.
S-1
THE OFFERING
Issuer........................ Weatherford International Ltd.
Guarantor..................... Weatherford International, Inc. will fully and
unconditionally guarantee the notes.
Notes Offered................. $250,000,000 aggregate principal amount of
% Senior Notes due 2013.
Maturity Date................. , 2013.
Interest Rate................. The notes will bear interest at the rate of
% per year from , 2003 to, but
excluding, , 2013.
Interest Payment Dates........ and of each year,
commencing , 2004. Interest payments
will be made to the person in whose name the
notes are registered on and
immediately preceding the applicable
interest payment date.
Covenants..................... We will issue the notes under an indenture with
Deutsche Bank Trust Company Americas, as
trustee. The indenture will contain limitations
on, among other things, our ability to:
- incur indebtedness secured by certain liens;
and
- engage in certain sale-leaseback
transactions.
The notes will contain certain events of
default including cross-default provisions on
certain other indebtedness.
Optional Redemption........... We may redeem the notes at our option, in whole
or in part, at any time, at a redemption price
described in "Description of Notes -- Optional
Redemption."
Ranking....................... 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."
Use of Proceeds............... We estimate that the net proceeds from the
offering will be approximately $ million.
We expect to use the proceeds for the repayment
of borrowings under our revolving credit
facility. Please read "Use of Proceeds."
Ratings....................... The notes have been assigned ratings of BBB+ by
Standard & Poor's Rating Services and Baa1 by
Moody's 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.
Risk Factors.................. 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
S-2
information incorporated by reference, before
investing in the notes.
Additional Issuances.......... 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, may 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-3
SUMMARY FINANCIAL INFORMATION
The following table presents selected financial data for the years ended
December 31, 2001 and 2002 on an actual basis, and for the six months ended June
30, 2003 (i) on an actual basis and (ii) as adjusted to give effect to our
$400.0 million public equity offering in July 2003 and our redemption of $402.5
million of Convertible Subordinated Preferred Equivalent Debentures in August
2003 assuming these transactions had occurred on January 1, 2003. The as
adjusted information does not reflect the impact of the proposed offering of
senior notes pursuant to this prospectus supplement and the accompanying
prospectus.
Our selected financial data as of and for the years ended December 31, 2001
and 2002 is derived from our audited consolidated financial statements, which
are incorporated herein by reference. Our selected financial data for the six
months ended June 30, 2003 is derived from our unaudited consolidated financial
statements, which are incorporated herein by reference. We believe, unless
otherwise disclosed, that these unaudited consolidated financial statements
reflect all adjustments, consisting only of normal recurring adjustments,
necessary for the fair presentation of these financial statements. Results of
operations for the interim period are not necessarily indicative of the results
of operations for the entire year due to the seasonal nature of our business.
Our selected financial data should be read in conjunction with
"Capitalization," "Management's 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.
<Table>
<Caption>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 2003
--------------------- ------------------------
2001 2002 ACTUAL AS ADJUSTED
--------- --------- --------- ------------
(IN MILLIONS, EXCEPT FOR PERCENTAGES AND RATIOS)
Revenues........................................... $2,328.7 $2,328.9 $1,207.0 $1,207.0
Net Income (Loss).................................. 214.7 (6.0) 62.4 55.3
EBITDA(1).......................................... 617.6 280.3 238.7 238.7
EBITDA Margin %:
Drilling Services................................ 33.0% 28.4% 27.1% 27.1%
Production Systems............................... 17.4% 13.0% 12.0% 12.0%
Consolidated..................................... 26.5% 12.0% 19.8% 19.8%
EBIT(1)............................................ $ 409.5 $ 65.4 $ 124.6 $ 124.6
Interest Expense................................... 74.0 85.5 42.7 32.6
Cash Flow from Operating Activities................ 249.0 269.8 94.1 94.2
Cash Flow from Investing Activities................ (939.4) (404.8) (155.0) (155.0)
Cash Flow from Financing Activities................ 622.9 94.0 61.1 58.0
Capital Expenditures............................... 339.4 268.7 150.9 150.9
Total Debt(2)...................................... 1,690.0 1,878.2 1,935.4 1,532.9
Total Debt(2)/Capitalization....................... 48% 49% 47% 37%
EBITDA/Interest Expense............................ 8.3x 3.3x 5.6x 7.3x
Total Debt(2)/EBITDA(3)............................ 2.7x 6.7x 4.1x 3.2x
</Table>
- ---------------
(1) Includes $217.1 million related to non-cash write-down of our investment in
Universal Compression recorded in the third quarter of 2002.
(2) Total Debt does not include our accounts receivable securitization, which
permits us to securitize up to $75.0 million of accounts receivable.
(3) EBITDA for the six months ended June 30, 2003 has been annualized for
comparative purposes.
EBITDA is not a financial measure calculated or presented in accordance
with generally accepted accounting principles, or GAAP. The following table
presents a reconciliation of EBITDA to net income,
S-4
the most directly comparable GAAP financial measure, on a historical and as
adjusted basis, as applicable, for each of the periods indicated.
<Table>
<Caption>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 2003
DECEMBER 31, -----------------
--------------- AS
2001 2002 ACTUAL ADJUSTED
------ ------ ------ --------
(IN MILLIONS)
Net Income (Loss)......................................... $214.7 $ (6.0) $ 62.4 $ 55.3
Adjustments:
Minority Interest, Net of Taxes......................... 0.9 0.6 0.3 0.3
Provision (Benefit) for Income Taxes.................... 123.0 (4.4) 23.6 19.8
Interest Income......................................... (2.6) (2.6) (1.0) (1.0)
Interest Expense........................................ 74.0 85.5 42.7 32.6
Other, Net.............................................. (0.5) (7.7) (3.4) 17.6
------ ------ ------ ------
EBIT...................................................... 409.5 65.4 124.6 124.6
Depreciation and Amortization............................. 208.1 214.9 114.1 114.1
------ ------ ------ ------
EBITDA.................................................... $617.6 $280.3 $238.7 $238.7
====== ====== ====== ======
</Table>
We evaluate performance and allocate resources based on EBITDA, which is
calculated as operating income adding back depreciation and amortization and
non-recurring charges. Calculations of EBITDA should not be viewed as a
substitute to calculations under accounting principles generally accepted in the
United States, in particular cash flows from operations, operating income (loss)
and net income (loss). EBITDA excludes some, but not all, items that affect net
income and operating income, and these measures may vary among other companies.
Therefore, EBITDA as presented herein may not be comparable to similarly titled
measures of other companies.
EBITDA is used as a supplemental financial measure by management and by
external users of our financial statements, such as investors and commercial
banks, to assess:
- the financial performance of our assets without regard to financing
methods, capital structures or historical cost basis;
- the ability of our assets to generate cash sufficient to pay interest on
our indebtedness;
- our operating performance and return on invested capital as compared to
those of other companies in our industry, without regard to financing
methods and capital structure; and
- our compliance with certain financial covenants included in our debt
agreements.
S-5
RISK FACTORS
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 2 and "Risk Factors" on
page 7 and in our other current filings with the SEC under the Exchange Act,
particularly under "Business -- Forward-Looking Statements," "Business -- Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in our Annual Report on Form 10-K for the year ended
December 31, 2002, as amended, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Exposures" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Forward-Looking Statements" in our Quarterly Report on Form 10-Q
for the quarter ended June 30, 2003, which are incorporated by reference in this
prospectus supplement.
WE MAY INCUR SIGNIFICANT TAXES IF THE U.S. INTERNAL REVENUE SERVICE AND OTHER
NON-U.S. TAXING AUTHORITIES DO NOT AGREE WITH OUR TAX TREATMENT OF VARIOUS
ITEMS.
If the U.S. Internal Revenue Service or other taxing authorities do not
agree with our assessment of the effects or interpretation of tax laws, treaties
and regulations, we could incur a material amount of U.S. federal income tax as
a result of our June 2002 reorganization as a Bermuda company.
OUR NET INCOME AND CASH FLOW WOULD BE REDUCED IF WE BECOME SUBJECT TO U.S.
CORPORATE INCOME TAX.
Weatherford Bermuda and our non-U.S. affiliates conduct our operations in a
manner intended to ensure that we do not engage in the conduct of a U.S. trade
or business. However, if the IRS successfully contends that we or any of our
non-U.S. affiliates are engaged in a trade or business in the United States, we
or such non-U.S. affiliate would be required to pay U.S. corporate income tax on
income that is subject to the taxing jurisdiction of the United States, and
possibly the U.S. branch profits tax. Additionally, Weatherford Delaware and its
U.S. subsidiaries would continue to be subject to U.S. corporate income tax on
their worldwide income, and our foreign subsidiaries at the time of the
reorganization would continue to be subject to U.S. corporate income tax on
their U.S. operations.
CHANGES IN TAX LAWS, INCLUDING RECENTLY PROPOSED LEGISLATION, COULD REDUCE OR
ELIMINATE OUR EXPECTED TAX SAVINGS FROM OUR RECENT REINCORPORATION IN BERMUDA.
In June 2002, we reincorporated as a Bermuda exempted company. One of the
expected benefits of this reincorporation was that our effective tax rate would
decrease on our worldwide income. Numerous bills have been introduced by both
the U.S. Senate and the House of Representatives that would either place a
moratorium on foreign reincorporation transactions or would otherwise deny the
tax benefits that are intended by our reincorporation transaction. Some versions
of this legislation would have a retroactive effective date prior to our
reincorporation transaction. Adoption of this legislation could reduce or
eliminate our expected tax savings from reincorporation in Bermuda or could
otherwise penalize us for undertaking the reincorporation in Bermuda.
ALTHOUGH THE NOTES WILL BE DESIGNATED "SENIOR NOTES", THEY WILL BE EFFECTIVELY
SUBORDINATED TO ANY SECURED DEBT, DEBT OF OUR SUBSIDIARIES, AND SENIOR DEBT
WITH EARLIER MATURITIES.
The notes are unsecured and therefore will be effectively subordinated to
any indebtedness of our subsidiaries (other than Weatherford Delaware) and to
any secured indebtedness to the extent of the value of the assets securing the
indebtedness.
We currently conduct our operations through our subsidiaries, and our
subsidiaries generate our operating income and cash flow. As a result,
distributions or advances from our subsidiaries are one of the principal sources
of funds necessary to meet our debt service obligations. Contractual provisions
or laws, as well as our subsidiaries' financial conditions and operating
requirements, may limit our ability to obtain cash from our subsidiaries that we
require to pay our debt service obligations, including payments on the
S-6
notes. In addition, holders of the notes have a junior position to the claims of
creditors of our subsidiaries on their assets and earnings.
Our existing senior debt will rank equally with the notes. As of June 30,
2003, we had $569.2 million of outstanding senior debt with scheduled maturities
earlier than the scheduled maturity of the notes.
THERE IS CURRENTLY NO PUBLIC MARKET FOR THE NOTES.
The notes are a new issue of securities for which there is currently no
public market. Although the underwriters have informed us that they currently
intend to make a market in the notes, they are not obligated to do so and any
such market making may be discontinued at any time without notice. Accordingly,
there can be no assurance as to the liquidity of any market that may develop for
the notes. We do not currently intend to apply for listing of the notes on any
securities exchange.
The liquidity of, and trading market for, the notes also may be adversely
affected by general declines in the market or by declines in the market for
similar securities. These declines may adversely affect such liquidity and
trading markets independent of our financial performance and prospects.
OUR RESULTS OF OPERATIONS ARE IMPACTED BY UNIVERSAL COMPRESSION'S RESULTS OF
OPERATIONS.
We own approximately 45% 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 Universal's results of operations in our
consolidated statement of operations. Accordingly, fluctuations in Universal's
earnings will cause fluctuations in our earnings.
For instance, on May 16, 2003, Universal filed a Current Report on Form 8-K
that disclosed, among other things, that Universal would recognize a charge of
approximately $8.9 million after tax related to the purchase premium and other
costs incurred in connection with the tender for and repurchase of senior notes
issued by a wholly owned subsidiary. This charge adversely impacted Universal's
results of operations for the quarter ended June 30, 2003, and as a result had
an adverse impact on our results of operations for the same quarter of
approximately $4.0 million.
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. Under Bermuda law, it may be difficult
for investors to effect service of process in the United States or to enforce in
the United States judgments obtained in U.S. courts against us, any of our
non-U.S. directors or some of the named experts referred to in this prospectus
supplement based on the civil liability provisions of the U.S. securities laws.
We have been advised by our Bermuda counsel, Conyers Dill & Pearman, that
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.
S-7
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. We expect to use the net proceeds from this offering for the repayment
of borrowings under our revolving credit facility. Borrowings under our
revolving credit facility currently bear interest at rates ranging from 1.625%
to 1.6875% and mature in May 2006.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2003, (i)
on an actual basis, (ii) on an as adjusted basis to give effect to our $400.0
million public equity offering in July 2003 and our redemption of $402.5 million
of Convertible Subordinated Preferred Equivalent Debentures in August 2003 and
(iii) on a pro forma as adjusted basis for the public equity offering and
redemption of the Convertible Subordinated Preferred Equivalent Debentures, and
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 consolidated financial statements, including
the notes to those statements, which are incorporated by reference in this
prospectus supplement and the accompanying prospectus.
<Table>
<Caption>
AS OF JUNE 30, 2003
--------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS, EXCEPT PAR VALUE)
Cash and Cash Equivalents........................ $ 49,085 $ 36,023 $ 36,023
========== ========== ==========
Short-term Borrowings and Current Portion of
Long-term Debt................................. $ 415,185 $ 415,185 $ 167,485
---------- ---------- ----------
Long-term Debt:
7 1/4% Senior Notes due 2006................... $ 200,000 $ 200,000 $ 200,000
6 5/8% Senior Notes due 2011................... 347,401 347,401 347,401
Other Long-term Debt(1)........................ 21,764 21,764 21,764
% Senior Notes due 2013.................... -- -- 250,000
Zero Coupon Convertible Senior Debentures due
2020........................................ 548,522 548,522 548,522
5% Convertible Subordinated Preferred Equivalent
Debentures..................................... 402,500 -- --
---------- ---------- ----------
Total Long-term Debt...................... $1,520,187 $1,117,687 $1,367,687
---------- ---------- ----------
Shareholders' Equity...................... $2,171,267 $2,557,101 $2,557,101
---------- ---------- ----------
Total Capitalization............................. $4,106,639 $4,089,973 $4,092,273
========== ========== ==========
</Table>
- ---------------
(1) Other Long-term Debt includes foreign bank and other debt denominated in
foreign currencies and obligations under capital leases. Other Long-term
Debt does not include our accounts receivable securitization, which permits
us to securitize up to $75.0 million of accounts receivable. See the notes
to our historical consolidated financial statements.
S-8
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our and Weatherford Delaware's ratios of
earnings to fixed charges for the periods shown. As Weatherford Delaware is our
predecessor company, the ratios presented reflect only Weatherford Delaware's
ratios of earnings to fixed charges for periods ended prior to June 30, 2002,
and our ratio of earnings to fixed charges on a consolidated basis for periods
ended after June 30, 2002.
You should read these ratios of earnings to fixed charges in connection
with our and Weatherford Delaware's consolidated financial statements, including
the notes to those statements, incorporated by reference in this prospectus
supplement and the accompanying prospectus.
<Table>
<Caption>
WEATHERFORD DELAWARE WEATHERFORD BERMUDA
- ------------------------- -------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED SIX MONTHS ENDED
- ------------------------- DECEMBER 31, JUNE 30,
1998 1999 2000 2001 2002 2003
- ---- ----- ----- ----- ------------ ----------------
-- 1.52x 1.99x 4.79x -- 2.57x
</Table>
For the year ended December 31, 1998, earnings before fixed charges were
inadequate to cover fixed charges by $6.7 million. 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, extraordinary charges,
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.
S-9
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. 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, may 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 $250,000,000. The notes will mature on , 2013.
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 ,
2003 to, but excluding, , 2013. Interest on the notes will be payable
semiannually on and of each year, beginning , 2004
for interest accruing from , 2003. Interest payments will be made to
the persons in whose names the notes are registered on and
(whether or not a business day) immediately preceding the related interest
payment date.
THE GUARANTEE
The notes are irrevocably 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.
The guarantee:
- is Weatherford Delaware's unsecured, unsubordinated general obligation;
and
- ranks on parity with all of Weatherford Delaware's other unsecured,
unsubordinated indebtedness.
As of June 30, 2003, Weatherford Delaware had approximately $1,514.3
million of indebtedness outstanding and approximately $1,573.4 million of
indebtedness outstanding on a consolidated basis. The guarantees will be
effectively subordinated to all existing and future obligations of Weatherford
Delaware's
S-10
subsidiaries. As of June 30, 2003, Weatherford Delaware's subsidiaries had
approximately $59.1 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
Deutsche Bank Securities Inc. or Merrill Lynch, Pierce, Fenner & Smith
Incorporated on behalf of the underwriters will be in immediately available
funds. The notes will trade in DTC's 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 ( %), 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.
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.
S-11
"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 Deutsche Bank Securities Inc. or
Merrill Lynch, Pierce, Fenner & Smith Incorporated 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:
- Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated 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 New York City (Primary Treasury Dealer), we will
substitute another Primary Treasury Dealer; and
- up to one other Primary Treasury Dealer 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.
Please read "Description of Our Debt Securities -- Covenants" in the
accompanying prospectus.
RATINGS
The notes have been assigned ratings of BBB+ by Standard & Poor's Rating
Services and Baa1 by Moody's Investors Service, Inc. A rating reflects only the
view of a rating agency and is not a
S-12
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.
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. (DTC's 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 underwriter of the following matters. The
information in this section concerning DTC and DTC's 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 world's 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 DTC's 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 & Poor's 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 DTC's 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.
S-13
To facilitate subsequent transfers, all notes deposited by Direct
Participants with DTC are registered in the name of DTC's 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; DTC's 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 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, DTC's 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 DTC's 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. DTC's practice is to credit
Direct Participants' accounts upon DTC's receipt of funds and corresponding
detail information from us, or the trustee, in accordance with their respective
holdings shown on DTC's 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
S-14
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 DTC's 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-15
UNDERWRITING
We intend to offer the notes through the underwriters named below. Deutsche
Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated 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.
<Table>
<Caption>
PRINCIPAL
UNDERWRITER AMOUNT
----------- -----------
Deutsche Bank Securities Inc. .............................. $
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
ABN AMRO Incorporated.......................................
RBC Dominion Securities Corporation.........................
Scotia Capital (USA), Inc. .................................
SunTrust Capital Markets, Inc. .............................
-----------
Total.......................................... $
</Table>
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 officer's 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, not including the underwriting discount, are
estimated to be $0.7 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-16
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. Deutsche Bank AG New York Branch, an affiliate
of Deutsche Bank Securities Inc., ABN AMRO Bank, N.V., an affiliate of ABN AMRO
Incorporated, Royal Bank of Canada, an affiliate of RBC Dominion Securities
Corporation, Scotiabank Inc., an affiliate of Scotia Capital (USA), Inc. and
SunTrust Bank, an affiliate of SunTrust Capital Markets, Inc. are lenders under
our revolving credit facility and will receive their respective share of any
repayment by us of amounts outstanding under our revolving credit facilities
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 to us by affiliates of Deutsche Bank Securities
Inc., ABN AMRO Incorporated, RBC Dominion Securities Corporation, and Scotia
Capital (USA), Inc. Accordingly, the offering is being made in compliance with
the requirements of Rule 2410(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.
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 as of December 31, 2002
and 2001 and for each of the two fiscal years in the period ended December 31,
2002 appearing in Weatherford International Ltd.'s Annual Report (Form 10-K) for
the year ended December 31, 2002, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
consolidated financial statement schedule are incorporated herein by reference
in reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
S-17
The consolidated financial statements as of December 31, 2000 and for the
year ended December 31, 2000 appearing in Weatherford International, Inc.'s
Annual Report on Form 10-K incorporated by reference in this prospectus
supplement have been audited by Arthur Andersen LLP, independent public
accountants, as set forth in their report. Arthur Andersen LLP has not consented
to the inclusion of their report in this prospectus supplement, and we have
dispensed with the requirement to file their consent in reliance upon Rule 437a
of the Securities Act of 1933. Because Arthur Andersen LLP has not consented to
the inclusion of their report in this prospectus supplement, you will not be
able to recover against Arthur Andersen LLP under Section 11 of the Securities
Act for any untrue statements of a material fact contained in the financial
statements audited by Arthur Andersen LLP or any omissions to state a material
fact required to be stated therein.
The consolidated financial statements and the related consolidated
financial statement schedule of Universal Compression Holdings, Inc. and its
subsidiaries as of March 31, 2003 and 2002 and for the years then ended
incorporated in this prospectus supplement by reference from Universal
Compression Holdings, Inc.'s Annual Report on Form 10-K for the year ended March
31, 2003 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, 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-18
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 October 14, 2002, the
last reported sales price for the common shares on the New York Stock Exchange
was $39.80 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 7 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 October 28, 2002.
TABLE OF CONTENTS
<Table>
About this Prospectus....................................... 1
Where You Can Find More Information......................... 1
Forward-Looking Statements.................................. 2
Weatherford International Ltd............................... 5
Weatherford International, Inc. ............................ 5
Recent Developments......................................... 5
Risk Factors................................................ 7
Use of Proceeds............................................. 8
Ratios of Earnings to Fixed Charges......................... 9
Description of Our Debt Securities.......................... 9
Description of Weatherford Delaware's Debt Securities....... 16
Description of Share Capital................................ 16
Description of Warrants..................................... 20
Description of Units........................................ 21
Certain Tax Considerations.................................. 21
Plan of Distribution........................................ 31
Legal Matters............................................... 32
Experts..................................................... 33
</Table>
i
ABOUT THIS PROSPECTUS
In this prospectus, unless otherwise indicated, when we refer to
Weatherford Bermuda and use phrases 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,
and 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 and Weatherford
Delaware filed with the Securities and Exchange Commission, or the SEC using a
"shelf" registration process. Under this shelf registration process, we and/or
Weatherford Delaware 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 and/or Weatherford Delaware 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
and/or Weatherford Delaware 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".
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.
WHERE YOU CAN FIND MORE INFORMATION
We and Weatherford Delaware file annual, quarterly and special reports,
proxy statements and other information with the SEC pursuant to the Securities
Exchange Act of 1934. You may inspect and copy those reports, proxy statements
and other information at the Public Reference Room of 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.
The SEC maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding us and Weatherford Delaware. You can also inspect
and copy those reports, proxy and information statements and other information
regarding Weatherford Bermuda at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005, the exchange on which our
common shares are listed.
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,
Weatherford Delaware 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 and Weatherford Delaware to "incorporate by reference"
information into this prospectus, which means that we and Weatherford Delaware
can disclose important information to you by referring you to another document
filed separately with the SEC. The information incorporated by reference is
deemed to be part of this prospectus, except for any information superseded by
information in this prospectus or in any prospectus supplement. This prospectus
incorporates by reference the documents set forth below that we and Weatherford
Delaware previously filed with the SEC. These documents contain important
information about us and Weatherford Delaware.
1
The following documents that we have filed with the SEC (File No. 1-13086
for Weatherford Delaware and File No. 1-31339 for Weatherford Bermuda) are
incorporated by reference into this prospectus:
- Weatherford Delaware's Annual Report on Form 10-K for the year ended
December 31, 2001;
- Weatherford Delaware's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2002 and June 30, 2002;
- Weatherford Delaware's Current Reports on Form 8-K dated January 30,
2002, March 1, 2002, April 5, 2002, April 23, 2002, June 26, 2002, August
9, 2002 and October 8, 2002;
- Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2002;
- Our Current Reports on Form 8-K dated June 26, 2002, July 21, 2002,
August 9, 2002 and October 8, 2002; and
- 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).
All documents that we and Weatherford Delaware file pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date
of this prospectus or after the date of the registration statement of which this
prospectus forms a part and prior to effectiveness of the registration statement
will be deemed to be incorporated in this prospectus by reference and will be a
part of this prospectus from the date of the filing of the document. Any
statement contained in a document incorporated or deemed to be incorporated by
reference in this prospectus will be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained in this
prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated by reference in this prospectus modifies or supersedes
that statement. Any statement that is modified or superseded will not constitute
a part of this prospectus, except as modified or superseded.
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus has been delivered, upon written or
oral request, a copy of any or all of the documents incorporated by reference in
this prospectus, other than the exhibits to those documents, unless the exhibits
are specifically incorporated by reference into the information that this
prospectus incorporates. You should direct a request for copies to us at First
Floor, Trident House, Lower Broad Street, Bridgetown, Barbados, Attention:
Secretary (telephone number: (246) 427-3174) or c/o Weatherford International,
Inc., 515 Post Oak Blvd., Suite 600, Houston, Texas 77027 (telephone number:
(713) 693-4000) Attention: Investor Relations.
FORWARD-LOOKING STATEMENTS
This prospectus, our and Weatherford Delaware's filings with the SEC and
our and Weatherford Delaware's 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:
- A downturn in market conditions could affect our projected results. Any
material changes in oil and gas supply and demand balance, 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, there was a general decrease in prices for oil and natural gas,
reflecting diminished demand attributable to political and economic
issues. In the last few months, there has been a modest increase and
stabilization of prices for oil and natural gas. If an extended regional
and/or worldwide recession would occur, it would result in lower demand
and lower prices for
2
oil and gas, which would adversely affect our revenues and income. At
this time, we have assumed that there will not be any material increases
in worldwide demand during the remainder of 2002 and increases will be
modest throughout the first half of 2003.
- Our results are dependent upon our ability to react to the current market
environment. During the fourth quarter of 2001 and 2002 to date, we
implemented a number of programs intended to reduce costs and align our
cost structure with the current market environment. Our forward-looking
statements assume these measures will generate the savings expected and,
if the markets continue to decline, that any additional actions we pursue
will be adequate to achieve the desired savings.
- A material disruption in our manufacturing could adversely affect some
divisions of our business. Our forward-looking statements assume that any
manufacturing expansion or consolidation will be completed without any
material disruptions. If there are any disruptions or excess costs
associated with manufacturing changes, our results could be adversely
affected.
- Our success is dependent upon the integration of acquisitions. We have
consummated acquisitions of several product lines and businesses. The
success of our acquisitions will be dependent on our ability to integrate
the product lines and businesses with our existing businesses and
eliminate duplicative costs. We incur various duplicative costs during
the integration of the operations of acquired businesses into our
operations. Our forward-looking statements assume the successful
integration of the operations of the acquired businesses; however, there
can be no assurance that the expected benefits of these acquisitions will
materialize. Integration of acquisitions is something that cannot occur
in the short-term and that requires constant effort at the local level to
be successful. Accordingly, there can be no assurance as to the ultimate
success of these integration efforts.
- Our long-term growth strategy is dependent upon technological
advances. Our ability to succeed with our long-term growth strategy is
dependent in part on the technological competitiveness of our products
and services. A central aspect of our growth strategy is to enhance the
technology of our current products and services, to obtain new
technologically-advanced, value-added products through internal research
and development and/or acquisitions and to then expand the markets for
the technology through the leverage of our worldwide infrastructure.
These technological advances include, but are not limited to, our
underbalanced drilling technology, expandable technology, production
optimization and fiber optic sensor technology. Our forward-looking
statements have assumed above-average growth from these new products and
services.
- Changes in tax laws related to our corporate reorganization could have an
adverse effect on our financial results. Any change 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 could affect our
corporate reorganization. The U.S. Congress introduced legislation with
retroactive effects, which could substantially reduce or eliminate the
tax benefits resulting from the reorganization.
- Unanticipated costs or nonrealization of expected benefits from our
corporate reorganization could affect our projected results. An inability
to realize expected benefits of the reorganization (as discussed below
under "Recent Developments") within the anticipated time frame, or at
all, would likely affect the impact of our corporate reorganization.
Similarly, any cost or difficulty related to the reorganization and
related transactions, which could be greater than expected or thought,
would also affect our corporate reorganization.
- A sustained decline in the fair value of our investment in Universal that
is other than temporary would adversely affect our projected results. We
can make no assurances that there will not be a sustained decline in
value of our investment in Universal or that any such decline would be
temporary. Any sustained decline may result in a write-down in the
carrying value of our investment in Universal.
- The cyclical nature of or a prolonged downturn in our industry could
affect the carrying value of our goodwill. As of June 30, 2002, we had
approximately $1.4 billion of goodwill. Our estimates of the values of
these assets could be reduced in the future as a result of various
factors in or beyond our
3
control. Any reduction in the value of these assets would reduce our
reported income or increase our reported loss and reduce our total assets
and shareholders' or stockholders' equity in the year in which the
reduction is recognized.
- 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.
- Political disturbances, war, terrorist attacks and changes in global
trade policies could adversely impact our operations. We have assumed
that there will be no material political disturbances, war, or terrorist
attacks and that there will be no material changes in global trade
policies. On October 11, 2002, the U.S. Congress passed a resolution
authorizing the President of the United States to use the armed forces of
the United States as he determines to be necessary and appropriate in
order to (1) defend the national security of the United States against
the continuing threat posed by Iraq, and (2) enforce all relevant United
Nation Security Council resolutions regarding Iraq. Any military action
undertaken by the United States or other countries against Iraq could
adversely affect our results of operations.
- Unexpected litigation and legal disputes could have a material adverse
financial impact. If we experience unexpected litigation or unexpected
results in our existing litigation that have a material effect on our
financial results, the accuracy of the forward-looking statements would
be affected. Our forward-looking statements assume that there will be no
such unexpected litigation or results.
Finally, our and Weatherford Delaware's future results will depend upon
various other risks and uncertainties, including, but not limited to, those
detailed in our and Weatherford Delaware's other filings with the SEC. For
additional information regarding risks and uncertainties, please read our and
Weatherford Delaware's other current filings with the SEC under the Exchange Act
and the Securities Act, particularly under "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our and
Weatherford Delaware's Quarterly Reports on Form 10-Q for the quarter ended June
30, 2002 and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Weatherford Delaware's Annual Report on
Form 10-K for the year ended December 31, 2001. These filings are available free
of charge at the SEC's website at www.sec.gov.
All subsequent written and oral forward-looking statements attributable to
us or Weatherford Delaware or any person acting on our or Weatherford Delaware's
behalf are expressly qualified in their entirety by the cautionary statements
contained or referred to in this section. We and Weatherford Delaware 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.
We, together with our subsidiaries, are one of the world's leading
providers of equipment and services used for the drilling, completion and
production of oil and natural gas wells. We were formed as a Bermuda exempted
company on April 2, 2002 and became the parent company of Weatherford Delaware
as part of a reorganization effected on June 26, 2002. Weatherford Delaware, as
we know it today, was formed in connection with the May 1998 merger of
Weatherford Enterra, Inc. into EVI, Inc. Weatherford Delaware was incorporated
under the laws of Delaware in 1972. Many of our businesses, including those of
Weatherford Enterra, have been conducted for more than 50 years.
We conduct operations in approximately 100 countries and have approximately
485 service and sales locations, which are located 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 industry.
Our business is conducted through three principal operating divisions:
- Drilling and Intervention Services -- This division provides (1) drilling
systems, (2) well installation services, (3) cementing products and (4)
underbalanced drilling. It is a leader in each of these markets, and this
division offers its products and services worldwide.
- Completion Systems -- This division provides a full range of completion
products and services. It maintains a growing share of the world's
completion market and offers leading proprietary and patented
technologies, such as our expandable systems, aimed at minimizing
formation damage and maximizing production.
- Artificial Lift Systems -- This division is the only organization in the
world that is able to provide all forms of artificial lift used primarily
for the production of oil. It also provides production optimization
services and automation and monitoring of well head production.
In addition to the above operations, we historically operated a Compression
Services Division and a Drilling Products Division. In February 2001,
Weatherford Delaware completed the merger of essentially all of our Compression
Services Division into a subsidiary of Universal Compression Holdings, Inc. in
exchange for 13.75 million shares of Universal, or approximately 45% of
Universal's currently outstanding common stock. In April 2000, Weatherford
Delaware completed the spin-off to its stockholders of our Drilling Products
Division through a distribution of the stock of our Grant Prideco, Inc.
subsidiary. Grant Prideco's operations have been classified as discontinued in
our financial statements.
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.
RECENT DEVELOPMENTS
On June 26, 2002, Weatherford Bermuda became the parent holding company of
Weatherford Delaware as the result of a corporate reorganization effected
through the merger of a subsidiary with and into Weatherford Delaware. Each
share of Weatherford Delaware issued immediately prior to the effective time of
the merger automatically converted into the right to receive a common share of
Weatherford Bermuda. Thus, the stockholders of Weatherford Delaware became the
shareholders of Weatherford Bermuda which, together with its subsidiaries,
continues to be engaged in the same business that Weatherford Delaware and its
subsidiaries were engaged in before the merger.
Although we are incorporated under Bermuda law, we are legally managed and
controlled through an executive office located in Barbados and consequently are
resident in Barbados. We are registered as an external company in Barbados under
the Barbados Companies Act, Cap. 308 of the laws of Barbados, and
5
licensed to operate as an "International Business Company" or "IBC." As a
resident of Barbados, we should be entitled to the benefits under the income tax
treaty entered into between the United States and Barbados.
We will continue to conduct the business previously conducted by
Weatherford Delaware and its subsidiaries. We consummated the reorganization
because international activities are an important part of our current business,
and we believe that international operations will account for a greater
percentage of our total revenues in the future. Expansion of our international
business is an important part of our current business strategy and significant
growth opportunities exist in the international marketplace. We believe that
reorganizing as a Bermuda company will allow us to implement our business
strategy more effectively. In addition, we believe that the reorganization
should increase our access to international capital markets and acquisition
opportunities, increase our attractiveness to non-U.S. investors, improve our
global cash management, improve our global tax position and result in a more
favorable corporate structure for expansion of our current business.
It is important to note that the United States Congress is considering
legislation that, if enacted, would have the effect of eliminating or reducing
the anticipated tax benefits of the reorganization. As a result of the increased
scrutiny of transactions such as our reorganization, changes in the tax laws,
tax treaties or tax regulations may occur, with prospective or retroactive
effect, which could eliminate or substantially reduce the anticipated tax
benefits of the reorganization or have a material adverse effect on the tax
consequences of the reorganization to Weatherford Bermuda.
6
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) Weatherford
Delaware's Annual Report on Form 10-K for the year ended December 31, 2001, (ii)
Weatherford Delaware's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2002 and June 30, 2002, (iii) Weatherford Delaware's definitive proxy
statement, filed with the SEC on May 22, 2002 (which also contains a prospectus
relating to our common shares) and (iv) our Quarterly Report on Form 10-Q for
the quarter ended June 30, 2002, under the headings "Forward-looking
Statements", "Risk Factors" in Weatherford Delaware's Form 10-K and "Exposures"
in ours and Weatherford Delaware's Form 10-Q.
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 the common stock or common shares, as the
case may be, of companies engaged in the oil and gas industry has been highly
volatile. Likewise, the market price of our common shares and Weatherford
Delaware's common stock 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 and
Weatherford Delaware's common stock.
CUSTOMER CREDIT RISKS COULD RESULT IN LOSSES.
The concentration of our customers in the energy industry may impact our
overall exposure to credit risk, either positively or negatively, 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. We
maintain reserves for potential credit losses and, generally, actual historical
losses have been 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. last year may
adversely impact our ability to obtain insurance or impact the cost of such
insurance, which 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 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.
7
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 which 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 the expenditure of a material amount of funds.
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
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 inherently subject to risks of war, political
disruption, civil disturbance and changes in global trade policies that may:
- disrupt oil and gas exploration and production activities;
- negatively impact results of operations;
- restrict the movement of funds;
- inhibit our ability to collect receivables;
- lead to U.S. government or international sanctions; and
- limit access to markets for periods of time.
OUR SIGNIFICANT OPERATIONS IN FOREIGN COUNTRIES EXPOSE US TO CURRENCY
FLUCTUATION RISKS.
A single European currency, the Euro, was introduced on January 1, 1999, at
which time the conversion rates between legacy currencies and the Euro were set
for 11 participating member countries. However, the legacy currencies in those
countries continued to be used as legal tender through January 1, 2002.
Thereafter, the legacy currencies were canceled, and the Euro bills and coins
are now used. The transition to the Euro did not have a significant impact on
our consolidated financial statements or our business operations.
Approximately 30.0% of our net assets are located outside the U.S. 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 loss in the shareholders' equity
section on our consolidated balance sheet. Changes in currencies also result in
the recognition of remeasurement and transactional gains and losses in our
consolidated statements of operations. Such remeasurement and transactional
gains and 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.
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.
8
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our and Weatherford Delaware's ratios of
earnings to fixed charges for the periods shown. As Weatherford Delaware is the
predecessor company to us, for periods prior to June 30, 2002, only Weatherford
Delaware's ratios of earnings to fixed charges are presented. Our ratio of
earnings to fixed charges on a consolidated basis is shown for the six months
ended June 30, 2002. You should read these ratios of earnings to fixed charges
in connection with our and Weatherford Delaware's consolidated financial
statements, including the notes to those statements, incorporated by reference
in this prospectus. We and Weatherford Delaware have no preferred stock dividend
obligations, accordingly our ratios of earnings to combined fixed charges and
preference share dividend requirements would be the same as our ratios of
earnings to fixed charges set forth below.
<Table>
<Caption>
WEATHERFORD DELAWARE WEATHERFORD BERMUDA
-------------------------------------------------------- -------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED SIX MONTHS ENDED
------------------------------------- JUNE 30, JUNE 30,
1997 1998 1999 2000 2001 2001 2002
----- ----- ----- ----- ----- ---------------- -------------------
Ratio of Earnings to
Fixed Charges........ 6.00x -- 1.52x 1.99x 4.79x 5.03x 3.48x
</Table>
For the year ended December 31, 1998, earnings before fixed charges were
inadequate to cover fixed charges by $6.7 million. For the six months ended June
30, 2002, Weatherford Delaware's earnings were inadequate to cover fixed charges
by $70.6 million.
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 (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.
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 a senior indenture, and 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
9
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:
- The title and type of the debt securities;
- The total principal amount of the debt securities;
- 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;
- The dates on which the principal of the debt securities will be payable;
- The interest rate which the debt securities will bear and the interest
payment dates for the debt securities;
- Any conversion or exchange features;
- Any optional redemption periods;
- Any sinking fund or other provisions that would obligate us to repurchase
or otherwise redeem some or all of the debt securities;
- Any provisions granting special rights to holders when a specified event
occurs;
- Any changes to or additional events of default or covenants;
- Any special tax implications of the debt securities, including provisions
for original issue discount securities, if offered; and
- Any other terms of the debt securities.
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 Delaware's 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.
10
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:
- of any insolvency, bankruptcy or similar proceeding involving us or our
property; or
- we fail to pay the principal, interest, any premium or any other amounts
on any senior debt when due.
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.
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:
- the successor or resulting person assumes all of our obligations under
the indentures; and
- we or the successor or resulting person will not immediately be in
default under the indentures.
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:
- failure to pay the principal of or any premium on any debt security when
due;
- failure to deposit any sinking fund payment when due;
- failure to pay interest on any debt security for 30 days;
- failure to perform any other covenant in the indenture that continues for
90 days after being given written notice;
11
- certain events in bankruptcy, insolvency or reorganization of us; or
- any other event of default included in any indenture or supplemental
indenture.
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 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:
- pay the principal of, interest and any premium on, the debt securities
when due;
- maintain a place of payment;
- deliver a report to the trustee at the end of each fiscal year reviewing
our obligations under the indentures; and
- deposit sufficient funds with any paying agent on or before the due date
for any principal, interest or premium.
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:
- 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;
- liens on current assets to secure current liabilities;
- 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;
- certain preexisting liens on any property acquired and liens on property
of a subsidiary existing at the time it became our subsidiary;
- liens in favor of us or our subsidiaries;
12
- certain liens in favor of governmental bodies to secure progress, advance
or other payments;
- 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;
- liens on any property securing indebtedness issued or guaranteed by
governmental bodies; and
- any extension, renewal or replacement of the foregoing.
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 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:
- 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;
- 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
- 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:
(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
(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
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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.
Ownership of beneficial interests in a global debt security is limited to
institutions that have accounts with DTC or its nominee ("participants") or
persons that may hold interests through participants. In addition, ownership of
beneficial interests by participants in a global debt security will be evidenced
only by, and the transfer of that ownership interest will be effected only
through, records maintained by DTC or its nominee for a global debt security.
Ownership of beneficial interests in a global debt security by persons that hold
through participants will be evidenced only by, and the transfer of that
ownership interest within that participant will be effected only through,
records maintained by that participant. DTC has no knowledge of the actual
beneficial owners of the debt securities. Beneficial owners will not receive
written confirmation from DTC of their purchase, but beneficial owners are
expected to receive written confirmations providing details of the transaction,
as well as periodic statements of their holdings, from the participants through
which the beneficial owners entered the transaction. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such laws may impair the ability
to transfer beneficial interests in a global debt security.
Payment of principal of, and interest on, debt securities represented by a
global debt security registered in the name of or held by DTC or its nominee
will be made to DTC or its nominee, as the case may be, as the registered owner
and holder of the global debt security representing the debt securities. We have
been advised by DTC that upon receipt of any payment of principal of, or
interest on, a global debt security, DTC will immediately credit accounts of
participants on its book-entry registration and transfer system with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of that global debt security as shown in the records of DTC. Payments by
participants to owners of beneficial interests in a global debt security held
through those participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the sole
responsibility of those participants, subject to any statutory or regulatory
requirements that may be in effect from time to time.
Neither we, any trustee nor any of our respective agents will be
responsible for any aspect of the records of DTC, any nominee or any participant
relating to, or payments made on account of, beneficial interests in a permanent
global debt security or for maintaining, supervising or reviewing any of the
records of DTC, any nominee or any participant relating to such beneficial
interests.
A global debt security is exchangeable for definitive debt securities
registered in the name of, and a transfer of a global debt security may be
registered to, any person other than DTC or its nominee, only if:
- DTC notifies us that it is unwilling or unable to continue as depositary
for that global debt security or at any time DTC ceases to be registered
under the Exchange Act;
- we determine in our discretion that the global debt security shall be
exchangeable for definitive debt securities in registered form; or
- there shall have occurred and be continuing an event of default or an
event which, with notice or the lapse of time or both, would constitute
an event of default under the debt securities.
Any global debt security that is exchangeable pursuant to the preceding
sentence will be exchangeable in whole for definitive debt securities in
registered form, of like tenor and of an equal aggregate principal amount as the
global debt security, in denominations of $1,000 and integral multiples thereof.
The definitive debt securities will be registered by the registrar in the name
or names instructed by DTC. We expect that these instructions may be based upon
directions received by DTC from its participants with respect to ownership of
beneficial interests in the global debt security.
14
Except as provided above, owners of the beneficial interests in a global
debt security will not be entitled to receive physical delivery of debt
securities in definitive form and will not be considered the holders of debt
securities for any purpose under the indentures. No global debt security shall
be exchangeable except for another global debt security of like denomination and
tenor to be registered in the name of DTC or its nominee. Accordingly, each
person owning a beneficial interest in a global debt security must rely on the
procedures of DTC and, if that person is not a participant, on the procedures of
the participant through which that person owns its interest, to exercise any
rights of a holder under the global debt security or the indentures.
We understand that, under existing industry practices, in the event that we
request any action of holders, or an owner of a beneficial interest in a global
debt security desires to give or take any action that a holder is entitled to
give or take under the debt securities or the indentures, DTC would authorize
the participants holding the relevant beneficial interest to give or take that
action, and those participants would authorize beneficial owners owning through
those participants to give or take that action or would otherwise act upon the
instructions of beneficial owners owning through them.
DTC has advised us that DTC is a limited purpose trust company organized
under the laws of the State of New York, 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 under the Exchange Act. DTC was created
to hold securities of its participants and to facilitate the clearance and
settlement of securities transactions among its participants in those securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. DTC is owned by a number
of its participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to DTC's book-entry system is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. The rules
applicable to DTC and its participants are on file with the SEC.
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.
15
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.
DESCRIPTION OF WEATHERFORD DELAWARE'S 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.
GUARANTEE OF WEATHERFORD DELAWARE DEBT SECURITIES
If the applicable prospectus supplement relating to a series of Weatherford
Delaware's 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
Delaware's 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 Delaware's
subordinated debt securities will be subordinated in right of payment to all of
Weatherford Bermuda's existing and future senior indebtedness (as defined in the
related prospectus supplement), including any guarantee of Weatherford
Delaware's senior debt securities, to the same extent and in the same manner as
Weatherford Delaware's 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.
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 October 11, 2002, there were 120,330,667 common shares
issued and outstanding (excluding common shares held by subsidiaries), 9,735,310
shares held by subsidiaries and no preference shares issued and outstanding. As
of that date, we also had approximately 35.2 million common shares reserved for
16
issuance in connection with options or other awards outstanding under various
employee or director incentive, compensation and option plans, and for issuance:
- pursuant to conversions of Weatherford Delaware's 5% Convertible
Subordinated Preferred Equivalent Debentures due 2027, which we have
guaranteed;
- pursuant to conversions of Weatherford Delaware's Zero Coupon Convertible
Senior Debentures due 2020, which we have guaranteed;
- 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 International, Inc.; and
- in connection with prior acquisitions.
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 each shareholder
entitled to vote at such meeting. 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 a majority
of the shares entitled to vote at such meeting.
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"), any
action to be taken by the shareholders at any meeting at which a quorum is in
attendance shall be decided by a majority of the issued shares present in person
or represented by proxy and voting at such meeting. 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.
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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 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.
<Table>
<Caption>
HIGH LOW
------- -------
(U.S.$) (U.S.$)
1999 -- Weatherford Delaware
First Quarter............................................... 29.63 16.75
Second Quarter.............................................. 39.69 22.94
Third Quarter............................................... 40.44 29.75
Fourth Quarter.............................................. 42.13 28.25
2000 -- Weatherford Delaware (a)
First Quarter............................................... 62.00 34.88
Second Quarter.............................................. 61.69 35.00
Third Quarter............................................... 50.25 36.38
Fourth Quarter.............................................. 49.38 31.75
2001 -- Weatherford Delaware
First Quarter............................................... 58.94 42.31
Second Quarter.............................................. 60.38 44.38
Third Quarter............................................... 48.25 22.69
Fourth Quarter.............................................. 39.13 24.19
2002 -- Weatherford Delaware
First Quarter............................................... 49.80 32.55
Second Quarter (through June 26, 2002)...................... 54.25 42.73
2002 -- Weatherford Bermuda
Second Quarter (from June 27, 2002 through June 30, 2002)... 46.20 43.11
Third Quarter............................................... 45.19 33.10
Fourth Quarter (through October 14, 2002)................... 40.05 34.86
</Table>
- ---------------
(a) The price of Weatherford Delaware's common stock and our common shares,
subsequent to April 14, 2000, reflects the spin-off of Grant Prideco, Inc.
DIVIDEND RIGHTS
Under Bermuda law, a company's 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.
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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 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 also 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 at a special general meeting of
shareholders only for cause by the affirmative vote of the holders of a majority
of our voting power on the relevant record date. 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 the affirmative vote of a majority of the directors then in office.
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 shareholder's 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 such 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 shareholder's notice of his intention
to make such nominations must be received in proper
19
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 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 on such terms and conditions 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.
DESCRIPTION OF WARRANTS
We may issue warrants to purchase:
- our common shares, preference shares or other equity securities;
- our debt securities (which may be guaranteed by Weatherford Delaware);
- Weatherford Delaware's debt securities (which may be guaranteed by us);
or
- 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.
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:
- the title of such warrants;
- the aggregate number of such warrants;
- the price or prices at which such warrants will be issued;
- the currency or currencies, in which the price of such warrants will be
payable;
- 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;
- the date on which the right to exercise such warrants shall commence and
the date on which such right shall expire;
- if applicable, the minimum or maximum amount of such warrants which may
be exercised at any one time;
- 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;
- 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
- 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.
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 Delaware's debt securities (which may be guaranteed by us) or any
combination of such securities.
The applicable prospectus supplement will describe:
- 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 Delaware's 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;
- a description of the terms of any unit agreement governing the units;
- a description of the provisions for the payment, settlement, transfer or
exchange of the units; and
- if applicable, a discussion of any material United States federal income
tax considerations.
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
21
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:
- a citizen or resident of the United States;
- a corporation or partnership created or organized in or under the laws of
the United States or any political subdivision thereof;
- an estate of which the income is subject to United States federal income
taxation regardless of its source;
- 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.
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:
- a dealer in securities or currencies;
- a trader in securities if you elect to use a mark-to-market method of
accounting for your securities holdings;
- a bank or financial institution;
- an insurance company;
- a tax-exempt organization;
- a person liable for alternative minimum tax;
- a person holding debt securities, common shares, preference shares or
warrants as part of a hedging, integrated or conversion transaction,
constructive sale or straddle;
- 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;
- a United States holder whose "functional currency" is not the United
States dollar;
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- a regulated investment company; or
- a real estate investment trust.
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.
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 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:
- it is payable at least once per year;
- it is payable over the entire term of the debt security; and
- it is payable at a single fixed rate or, subject to certain conditions,
based on one or more interest indices.
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.
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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 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:
- the debt security's 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
- the aggregate of all qualified stated interest allocable to the accrual
period.
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
24
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 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.
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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:
- the term of the shares;
- any put or call or redemption provisions with respect to the shares;
- any conversion or exchange features with respect to the shares; and
- the price at which the shares are sold.
- You should carefully examine the applicable prospectus supplement
regarding the material United States federal income tax consequences, if
any of the holding and disposition of shares with such terms.
DISTRIBUTIONS ON OUR SHARES
We do not anticipate that we will pay any cash dividends 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 as ordinary 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. Distributions in excess of the 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 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
premium"-- will be
26
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.
PASSIVE FOREIGN INVESTMENT COMPANY
Based upon estimates with respect to our income, assets and operations, we
do not believe that, for United States federal 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
27
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's 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 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 characterized to become 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 converted into ordinary dividend
income.
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
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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.
Under Section 305 of the Internal Revenue Code, you may be deemed to have
received a constructive distribution from us, which may result in the inclusion
of ordinary dividend income, 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:
- you are an insurance company carrying on a United States insurance
business, within the meaning of the Internal Revenue Code; or
- 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:
- the gain is effectively connected with your conduct of a trade or
business in the United States; or
- 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.
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.
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.
30
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.
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
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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 may 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.
LEGAL MATTERS
Certain U.S. legal matters in connection with the securities will be passed
upon by Andrews & Kurth L.L.P., Houston, Texas. Certain Bermuda legal matters in
connection with the securities will be passed upon for us by our 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.
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EXPERTS
The consolidated financial statements and the related consolidated
financial statement schedule of Weatherford International, Inc. at December 31,
2001, and for the year then ended appearing in Weatherford International Inc.'s
Annual Report (Form 10-K) for the year ended December 31, 2001, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements and consolidated financial statement schedule 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 as of December 31, 1999 and 2000 and
for the two years ended December 31, 2000 appearing in Weatherford Delaware's
Annual Report on Form 10-K incorporated by reference in this prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as set
forth in this report. Arthur Andersen LLP has not consented to the inclusion of
their report in this prospectus, and we have dispensed with the requirement to
file their consent in reliance upon Rule 437a of the Securities Act of 1933.
Because Arthur Andersen LLP has not consented to the inclusion of their report
in this prospectus, you will not be able to recover against Arthur Andersen LLP
under Section 11 of the Securities Act for any untrue statements of a material
fact contained in the financial statements audited by Arthur Andersen LLP or any
omissions to state a material fact required to be stated therein.
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================================================================================
$250,000,000
(WEATHERFORD INTERNATIONAL LOGO)
WEATHERFORD INTERNATIONAL LTD.
% SENIOR NOTES DUE 2013
--------------------------------------------
PROSPECTUS SUPPLEMENT
--------------------------------------------
Joint Book-Running Managers
DEUTSCHE BANK SECURITIES MERRILL LYNCH & CO.
ABN AMRO INCORPORATED
RBC CAPITAL MARKETS
SCOTIA CAPITAL
SUNTRUST ROBINSON HUMPHREY
, 2003
================================================================================