UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                

WEATHERFORD INTERNATIONAL LTD.

(Exact name of Registrant as specified in its Charter)

Bermuda		98-0371344
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
515 Post Oak Boulevard Suite 600 Houston, Texas		77027-3415
(Address of principal executive offices)		(Zip Code)

(713) 693-4000(Registrant’s telephone number, include area code)

(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

     Yes þ          No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

     Yes o          No þ

     Indicate the number of shares outstanding of each of the issuer’s classes of common shares, as of the latest practicable date:

Title of Class		Outstanding at April 29, 2008
Common Shares, par value $1.00		339,791,807

 

 

ITEM 1. FINANCIAL STATEMENTS

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)

		March 31,				December 31,
		2008				2007
		(unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents		$	626,438			$	170,714
Accounts Receivable, Net of Allowance for Uncollectible Accounts of $14,128 and $13,760, Respectively			2,104,837				1,961,854
Inventories			1,768,047				1,607,684
Other Current Assets			602,103				731,517
			5,101,425				4,471,769
Property, Plant and Equipment, Net of Accumulated Depreciation of $2,511,530 and $2,400,062, Respectively			4,582,620				4,153,845
Goodwill			3,454,511				3,358,490
Other Intangible Assets, Net of Accumulated Amortization of $236,814 and $227,307, Respectively			583,882				596,999
Equity Investments			463,221				368,618
Other Assets			298,475				241,236
		$	14,484,134			$	13,190,957
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt		$	193,462			$	774,220
Accounts Payable			678,078				612,775
Other Current Liabilities			789,720				815,370
			1,661,260				2,202,365
Long-term Debt			4,563,579				3,066,335
Other Liabilities			567,845				515,538
Shareholders’ Equity:
Common Shares, $1 Par Value, Authorized 1,000,000 Shares, Issued 363,814 and 363,602 Shares, Respectively			363,814				363,602
Capital in Excess of Par Value			4,387,645				4,359,349
Treasury Shares, Net			(929,157	)			(924,202	)
Retained Earnings			3,434,383				3,170,182
Accumulated Other Comprehensive Income			434,765				437,788
			7,691,450				7,406,719
		$	14,484,134			$	13,190,957

The accompanying notes are an integral part of these condensed consolidated financial statements.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)

		Three Months
		Ended March 31,
		2008				2007
Revenues:
Products		$	829,183			$	682,252
Services			1,366,709				1,170,033
			2,195,892				1,852,285
Costs and Expenses:
Cost of Products			598,790				488,869
Cost of Services			850,888				675,487
Research and Development			42,639				40,514
Selling, General and Administrative Attributable to Segments			240,867				201,641
Corporate General and Administrative			47,174				30,060
Operating Income			415,534				415,714
Other Expense:
Interest Expense, Net			(52,803	)			(33,771	)
Other, Net			499				(2,372	)
Income from Continuing Operations Before Income Taxes and Minority Interest			363,230				379,571
Provision for Income Taxes			(73,625	)			(91,378	)
Income from Continuing Operations Before Minority Interest			289,605				288,193
Minority Interest, Net of Taxes			(5,536	)			(4,374	)
Income from Continuing Operations			284,069				283,819
Loss from Discontinued Operation, Net of Taxes			(19,868	)			(2,247	)
Net Income		$	264,201			$	281,572
Basic Earnings Per Share:
Income from Continuing Operations		$	0.84			$	0.84
Loss from Discontinued Operation			(0.06	)			(0.01	)
Net Income		$	0.78			$	0.83
Diluted Earnings Per Share:
Income from Continuing Operations		$	0.82			$	0.82
Loss from Discontinued Operation			(0.06	)			(0.01	)
Net Income		$	0.76			$	0.81
Weighted Average Shares Outstanding:
Basic			340,095				339,010
Diluted			348,543				346,308

The accompanying notes are an integral part of these condensed consolidated financial statements.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)

		Three Months
		Ended March 31,
		2008				2007
Cash Flows from Operating Activities:
Net Income		$	264,201			$	281,572
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization			169,288				135,515
Gain on Sales of Assets and Businesses, Net			(2,221	)			(19,047	)
Loss from Discontinued Operations			19,868				2,247
Employee Share-Based Compensation Expense			23,474				16,555
Excess Tax Benefits from Share-Based Compensation			(7,555	)			(2,829	)
Minority Interest			5,536				4,374
Deferred Income Tax Benefit			(10,514	)			(45	)
Other, Net			(1,130	)			(1,054	)
Change in Operating Assets and Liabilities, Net of Effect of Businesses Acquired
Accounts Receivable			(131,985	)			(137,190	)
Inventories			(151,666	)			(135,480	)
Accounts Payable			59,341				58,484
Other			(85,974	)			(43,951	)
Net Cash Provided by Operating Activities — Continuing Operations			150,663				159,151
Net Cash Used by Operating Activities — Discontinued Operation			(1,294	)			(3,564	)
Net Cash Provided by Operating Activities			149,369				155,587
Cash Flows from Investing Activities:
Acquisitions of Businesses, Net of Cash Acquired			(113,013	)			(51,006	)
Capital Expenditures for Property, Plant and Equipment			(588,639	)			(346,756	)
Acquisition of Intellectual Property			(2,787	)			(10,724	)
Proceeds from Sale of Assets and Businesses, Net			112,260				24,524
Net Cash Used by Investing Activities — Continuing Operations			(592,179	)			(383,962	)
Net Cash Used by Investing Activities — Discontinued Operation			—				(11,420	)
Net Cash Used by Investing Activities			(592,179	)			(395,382	)
Cash Flows from Financing Activities:
Borrowings of (Repayments on) Short-term Debt, Net			(585,075	)			338,845
Borrowings of Long-term Debt, Net			1,487,439				1,839
Purchase of Treasury Shares			—				(123,808	)
Proceeds from Exercise of Stock Options			2,840				3,014
Excess Tax Benefits from Share-Based Compensation			7,555				2,829
Other Financing Activities, Net			(14,225	)			—
Net Cash Provided by Financing Activities — Continuing Operations			898,534				222,719
Net Cash Provided by Financing Activities — Discontinued Operation			—				—
Net Cash Provided by Financing Activities			898,534				222,719
Net Increase (Decrease) in Cash and Cash Equivalents			455,724				(17,076	)
Cash and Cash Equivalents at Beginning of Period			170,714				126,287
Cash and Cash Equivalents at End of Period		$	626,438			$	109,211
Supplemental Cash Flow Information:
Interest Paid		$	42,776			$	40,403
Income Taxes Paid, Net of Refunds			62,418				82,495

The accompanying notes are an integral part of these condensed consolidated financial statements.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(In thousands)

		Three Months
		Ended March 31,
		2008				2007
Net Income		$	264,201			$	281,572
Other Comprehensive Income:
Deferred Loss on Derivative Instruments			(12,576	)			—
Amortization of Pension Components			4,636				1,052
Foreign Currency Translation Adjustment			4,877				3,922
Other			40				36
Comprehensive Income		$	261,178			$	286,582

The accompanying notes are an integral part of these condensed consolidated financial statements.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

1. General

     The condensed consolidated financial statements of Weatherford International Ltd. and all majority-owned subsidiaries (the “Company”) included herein are unaudited; however, they include all adjustments of a normal recurring nature which, in the opinion of management, are necessary to present fairly the Company’s Condensed Consolidated Balance Sheet at March 31, 2008, Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007. Although the Company believes the disclosures in these financial statements are adequate to make the interim information presented not misleading, certain information relating to the Company’s organization and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted in this Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2007 and the notes thereto included in the Company’s Annual Report on Form 10-K. The results of operations for the three months ended March 31, 2008 are not necessarily indicative of the results expected for the full year.

     The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period and disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to uncollectible accounts receivable, lower of cost or market of inventories, equity investments, intangible assets and goodwill, property, plant and equipment, income taxes, self-insurance, pension and post retirement benefit plans and contingent liabilities. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

     Certain reclassifications have been made to conform prior year financial information to the current period presentation.

2. Business Combinations

     The Company has acquired businesses critical to its long-term growth strategy. Results of operations for acquisitions are included in the accompanying Condensed Consolidated Statements of Income from the date of acquisition. The balances included in the Condensed Consolidated Balance Sheets related to acquisitions are based on preliminary information and are subject to change when final asset valuations are obtained and the potential for liabilities has been evaluated. Acquisitions are accounted for using the purchase method of accounting and the purchase price is allocated to the net assets acquired based upon their estimated fair values at the date of acquisition. Final valuations of assets and liabilities are obtained and recorded within one year from the date of the acquisition.

     In August of 2005, the Company acquired Precision Energy Services and Precision Drilling International. In association with the acquisition, the Company identified pre-acquisition contingencies related to duties and taxes associated with the importation of certain equipment assets to foreign jurisdictions. The Company calculated a range of reasonable estimates of the costs associated with these duties. As no amount within the range appeared to be a better estimate than any other, the Company used the amount that is the low end of the range in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 5, Accounting for Contingencies, and its interpretations. At March 31, 2008, the Company has a liability in the amount of $13 million for this matter. If the Company used the high end of the range, the aggregate potential liability would be approximately $19 million higher.

     During the first quarter of 2008, the Company acquired various businesses for cash consideration of approximately $113 million.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

3. Equity Investment Acquisition

     The Company acquired a 33% ownership interest in Premier Business Solutions (“PBS”) in June 2007 for approximately $330 million. PBS conducts business in Russia and is the world’s largest electric submersible pump manufacturer by volume. In January 2008, the Company sold its electrical submersible pumps (“ESP”) product line to PBS and received a combination of cash and an additional equity investment in PBS in consideration of the sale. The Company’s investment in PBS is included in Equity Investments in Unconsolidated Affiliates in the accompanying Condensed Consolidated Balance Sheets at March 31, 2008 and December 31, 2007. The assets and liabilities of the ESP product line were classified as held for sale at December 31, 2007 and included in Other Current Assets and Other Current Liabilities in the Consolidated Balance Sheet.

4. Discontinued Operations

     In June 2007, the Company’s management approved a plan to sell its oil and gas development and production business. The business was historically included in the Company’s North America and Europe/West Africa/CIS segments. The results of operations, financial position and cash flows of the business are reflected in the condensed consolidated financial statements and notes as a discontinued operation for all periods presented. The Current Assets Held for Sale and Current Liabilities Held for Sale are included in Other Current Assets and Other Current Liabilities, respectively, in the Consolidated Balance Sheets.

     Operating results of the oil and gas development and production business were as follows:

		Three Months Ended March 31,
		2008				2007
		(In thousands)
Revenues		$	522			$	485
Loss Before Income Taxes		$	30,566			$	3,326
Benefit for Income taxes			10,698				1,079
Loss from Discontinued Operation, Net of Taxes		$	19,868			$	2,247

     Included in the loss for the three months ended March 31, 2008, is approximately $19 million, net of taxes, incurred in connection with the settlement of a legal dispute regarding the business.

     Balance sheet information for the oil and gas development and production business was as follows:

		March 31,				December 31,
		2008				2007
		(In thousands)
Other Current Assets		$	—			$	4,563
Property, Plant and Equipment, Net			2,000				21,639
Other Assets			—				—
Current Assets Held for Sale		$	2,000			$	26,202
Accounts Payable		$	—			$	85
Other Current Liabilities			—				169
Other Liabilities			—				383
Current Liabilities Held for Sale		$	—			$	637

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

5. Inventories

     The components of inventory were as follows:

		March 31,				December 31,
		2008				2007
		(In thousands)
Raw materials, components and supplies		$	371,822			$	373,383
Work in process			138,571				118,407
Finished goods			1,257,654				1,115,894
		$	1,768,047			$	1,607,684

     Work in process and finished goods inventories include the cost of materials, labor and plant overhead.

6. Goodwill

     Goodwill is evaluated for impairment on at least an annual basis. The Company performs its annual goodwill impairment test as of October 1. The Company’s 2007 impairment test indicated goodwill was not impaired. The Company will continue to test its goodwill annually as of October 1 unless events occur or circumstances change between annual tests that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

     The changes in the carrying amount of goodwill for the three months ended March 31, 2008 were as follows:

														Middle
										Europe/				East/ North
		North				Latin				West Africa				Africa
		America				America				/ CIS				/ Asia				Total
		(In thousands)
As of December 31, 2007		$	1,918,411			$	156,825			$	678,433			$	604,821			$	3,358,490
Goodwill acquired during period			1,790				—				96,681				3,552				102,023
Disposals			(1,362	)			(27	)			—				—				(1,389	)
Purchase price and other adjustments			440				3,070				(523	)			201				3,188
Impact of foreign currency translation			(31,362	)			678				20,082				2,801				(7,801	)
As of March 31, 2008		$	1,887,917			$	160,546			$	794,673			$	611,375			$	3,454,511

7. Short-term Borrowings and Current Portion of Long-term Debt

     The components of short-term borrowings were as follows:

		March 31,				December 31,
		2008				2007
		(In thousands)
Revolving credit facility		$	159,000			$	491,000
Commercial paper program			—				191,621
Other short-term bank loans			23,102				80,025
Total Short-term Borrowings			182,102				762,646
Current Portion of Long-term Debt			11,360				11,574
Short-term Borrowings and Current Portion of Long-term Debt		$	193,462			$	774,220

     In March 2008, the Company completed a $1.5 billion long-term debt offering comprised of (i) $500 million of 5.15% Senior Notes due in 2013 (“5.15% Senior Notes”), (ii) $500 million of 6.00% Senior Notes due 2018

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

(“6.00% Senior Notes”) and (iii) $500 million of 7.00% Senior Notes due 2038 (“7.00% Senior Notes”). Net proceeds of $1.47 billion were used to repay short-term borrowings and for general corporate purposes, including capital expenditures and business acquisitions. Interest on these notes is due semi-annually on March 15 and September 15 of each year.

     The Company maintains a revolving credit agreement with a syndicate of banks of which JPMorgan Chase Bank is the Administrative Agent. The aggregate lending commitment of this facility is $1.5 billion and allows for a combination of borrowings, support of the Company’s commercial paper program and issuances of letters of credit. There were $34 million in outstanding letters of credit under the Revolving Credit Facility at March 31, 2008. The weighted average interest rate on the outstanding borrowings of this facility was 3.4% at March 31, 2008.

     On March 19, 2008, the Company entered into an additional $250 million revolving credit facility with a syndicate of banks of which Deutsche Bank is the Administrative Agent. This facility allows for a combination of borrowings, support of the Company’s commercial paper program and issuances of letters of credit. There were no borrowings outstanding under this facility at March 31, 2008.

     Both committed borrowing facilities require the Company to maintain a debt-to-capitalization ratio of less than 60% and contain other covenants and representations customary for an investment-grade commercial credit. The Company was in compliance with these covenants at March 31, 2008.

     The Company has a $1.5 billion commercial paper program under which it may from time to time issue short-term unsecured notes. The commercial paper program is supported by the Company’s revolving credit facilities.

     The Company has short-term borrowings with various domestic and international institutions pursuant to uncommitted facilities. At March 31, 2008, the Company had $23 million in short-term borrowings under these arrangements with a weighted average interest rate of 11.5%. In addition, the Company had $189 million of letters of credit and bid and performance bonds outstanding under these uncommitted facilities.

     The Company’s short-term borrowings approximate their fair value at March 31, 3008 and December 31, 2007.

8. Derivative Instruments

     Interest Rate Swaps

     The Company uses interest rate swap agreements to take advantage of available short-term interest rates. Amounts received upon termination of the swaps represent the fair value of the agreements at the time of termination and are recorded as an adjustment to the carrying value of the related debt. These amounts are amortized as a reduction to interest expense over the remaining term of the debt.

     Upon completion of the long-term debt offering in March 2008, the Company entered into interest rate swap agreements on an aggregate notional amount of $500 million against its 5.15% Senior Notes. These agreements were outstanding at March 31, 2008. The aggregate fair value of the interest rate swaps at March 31, 2008 resulted in a liability of $3 million with the offset to Long-term Debt on the accompanying Consolidated Balance Sheet.

     As of March 31, 2008 and December 31, 2007, the Company had net unamortized gains of $11 million and $12 million, respectively, associated with interest rate swap terminations. The Company’s interest expense was reduced by $1 million for each of the three months ended March 31, 2008 and 2007, respectively, as a result of the Company’s interest rate swap activity.

     Cash Flow Hedges

     From time to time the Company utilizes interest rate derivatives to hedge projected exposures to interest rates in anticipation of future debt issuances. Amounts received or paid upon termination of these hedges represent the fair value of the agreements at the time of termination and are recorded as an adjustment to Other Comprehensive Income. These amounts are amortized as an adjustment to interest expense over the remaining term of the related debt.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

     In March 2008, the Company entered into interest rate derivative instruments for a notional amount of $500 million to hedge projected exposures to interest rates in anticipation of the 7.00% Senior Notes issued in March 2008. Those hedges were terminated at the time of the issuance. The Company paid a cash settlement of $13 million at termination, and the loss on these hedges is being amortized to interest expense over the life of the 7.00% Senior Notes.

      Other Derivative Instruments

     As of March 31, 2008, we had several foreign currency forward contracts and one option contract with notional amounts aggregating $317 million, which were entered into to hedge exposure to currency fluctuations in various foreign currencies, including, but not limited to, the British pound sterling, the Canadian dollar, the euro and the Norwegian kroner. The total estimated fair value of these contracts at March 31, 2008 resulted in an asset of $2 million. These derivative instruments were not designated as hedges and the changes in fair value of the contracts were recorded each period in current earnings.

     In addition, after the closing of the acquisition of Precision Energy Services and Precision Drilling International, the Company entered into a series of cross-currency swaps between the U.S. dollar and Canadian dollar to hedge certain exposures to the Canadian dollar created as a result of the acquisition. At March 31, 2008, the Company had notional amounts outstanding of $364 million. The total estimated fair value of these contracts at March 31, 2008 resulted in a liability of $62 million. These derivative instruments were not designated as hedges and the changes in fair value of the contracts were recorded each period in current earnings.

     Effective January 1, 2008, the Company adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115, (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis (the fair value option) with changes in fair value reported in earnings. The Company already records derivative contracts and hedging activities at fair value in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. The adoption of SFAS No. 159 had no impact on the financial statements as the Company did not elect the fair value option for any other financial instruments or certain other assets and liabilities.

     Effective January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements, (“SFAS No. 157”) as it relates to financial assets and financial liabilities. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis, until January 1, 2009 for calendar year-end entities. Accordingly, the Company will defer the adoption of SFAS No. 157 for its nonfinancial assets and nonfinancial liabilities until January 1, 2009.

     SFAS No. 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principals and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements. The adoption of SFAS No. 157, as it relates to financial assets, had no impact on the Company’s consolidated financial position, results of operations and cash flows. The Company is currently evaluating the potential impact of SFAS No. 157, as it relates to nonfinancial assets and nonfinancial liabilities, on its consolidated financial position, results of operations and cash flows.

     SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 establishes a fair value hierarchy that distinguishes between market participant assumptions developed based on market data obtained from independent sources (observable inputs) and an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under SFAS No. 157 are described below:

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

     Level 1— Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

     Level 2— Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

     Level 3— Inputs that are both significant to the fair value measurement and unobservable.

     In accordance with SFAS No. 157, the following table presents the Company’s assets and liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of March 31, 2008:

		March 31, 2008
		Level 1				Level 2				Level 3				Total
		(In thousands)
Assets:
Derivative contracts		$	—			$	1,931			$	—			$	1,931
Liabilities:
Derivative contracts			—				(64,917	)			—				(64,917	)

9. Income Taxes

     The Company’s effective tax rates were 20.3% and 24.1% for the first quarter of 2008 and 2007, respectively. The decrease in the effective tax rate for the first quarter of 2008 as compared to the first quarter of 2007 is due to benefits realized from the refinement of our international tax structure and changes in our geographic earnings mix.

     There were no material changes to the total amount of unrecognized tax benefits during the first quarter of 2008.

10. Earnings Per Share

     Basic earnings per share for all periods presented equals net income divided by the weighted average number of the Company’s common shares, $1.00 par value (“Common Shares”) outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of Common Shares outstanding during the period, as adjusted for the dilutive effect of the Company’s stock option and restricted share plans and warrant.

     The following reconciles basic and diluted weighted average shares outstanding:

		Three Months
		Ended March 31,
		2008				2007
		(In thousands)
Basic weighted average shares outstanding			340,095				339,010
Dilutive effect of:
Warrant			3,473				1,742
Stock option and restricted share plans			4,975				5,556
Diluted weighted average shares outstanding			348,543				346,308

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

11. Supplemental Cash Flow Information

     During the three months ended March 31, 2007 there were non-cash investing activities of $20 million related to a note received in exchange for the sale of a minority interest in a subsidiary of the Company.

12. Share-Based Compensation

     The Company recognized $23 million and $17 million in employee share-based compensation expense during the three months ended March 31, 2008 and 2007, respectively. The related income tax benefit recognized for the three months ended March 31, 2008 and 2007 was $8 million and $6 million, respectively.

     During the three months ended March 31, 2008, the Company granted three million restricted share awards and units at a weighted average grant date fair value of $68.29 per share.

     As of March 31, 2008, there was $297 million of total unrecognized compensation cost related to the Company’s unvested stock options and restricted share grants and that cost is expected to be recognized over a weighted-average period of 2.6 years.

13. Retirement and Employee Benefit Plans

     The Company has defined benefit pension and other post-retirement benefit plans covering certain employees. The components of net periodic benefit cost for the three months ended March 31, 2008 and 2007 were as follows:

		Three Months Ended March 31,
		2008								2007
		United								United
		States				International				States				International
		(In thousands)
Service cost		$	720			$	3,488			$	650			$	2,682
Interest cost			1,511				2,610				1,223				1,971
Expected return on plan assets			(179	)			(2,306	)			(165	)			(1,926	)
Amortization of transition obligation			—				(1	)			—				(1	)
Amortization of prior service cost (credit)			458				(20	)			560				(26	)
Amortization of loss			964				101				651				37
Settlement/Curtailment			5,621				—				397				—
Net periodic benefit cost		$	9,095			$	3,872			$	3,316			$	2,737

     The Company previously disclosed in its financial statements for the year ended December 31, 2007, that it expected to contribute $13 million to its pension and other postretirement benefit plans during 2008. As of March 31, 2008, the Company has contributed approximately $3 million to these plans. Currently, the Company anticipates total contributions to approximate the original estimates previously disclosed.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

14. Segment Information

     Financial information by segment is summarized below. Revenues are attributable to countries based on the ultimate destination of the sale of products or performance of services. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

		Three Months Ended March 31, 2008
		Net				Income				Depreciation
		Operating				from				and
		Revenues				Operations				Amortization
		(In thousands)
North America		$	1,090,362			$	291,653			$	74,787
Middle East/North Africa/Asia			521,884				120,674				45,736
Europe/West Africa/CIS			347,629				93,213				26,621
Latin America			236,017				60,498				19,682
			2,195,892				566,038				166,826
Corporate and Other (a)			—				(150,504	)			2,462
Total		$	2,195,892			$	415,534			$	169,288

		Three Months Ended March 31, 2007
		Net				Income				Depreciation
		Operating				from				and
		Revenues				Operations				Amortization
		(In thousands)
North America		$	1,006,633			$	300,210			$	61,764
Middle East/North Africa/Asia			394,752				83,473				36,167
Europe/West Africa/CIS			244,958				55,235				18,235
Latin America			205,942				48,589				16,739
			1,852,285				487,507				132,905
Corporate and Other (a)			—				(71,793	)			2,610
Total		$	1,852,285			$	415,714			$	135,515

15. Disputes, Litigation and Contingencies

     U.S. Government and Internal Investigations

     We are currently involved in government and internal investigations involving various of our operations. We participated in the United Nations oil-for-food program governing sales of goods and services into Iraq. The SEC has subpoenaed certain documents in connection with an investigation into our participation in the oil-for-food program. The U.S. Department of Justice is also conducting an investigation of our participation in the oil-for-food program. We are cooperating fully with these investigations. We have retained legal counsel, reporting to our audit committee, to investigate this matter. These investigations are ongoing, and we cannot anticipate the timing, outcome or possible impact of these investigations, financial or otherwise.

     The U.S. Department of Commerce, Bureau of Industry & Security and the U.S. Department of Justice are investigating allegations of improper sales of products and services by us and our subsidiaries in sanctioned countries. We are cooperating fully with this investigation. We have retained legal counsel, reporting to our audit

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

committee, to investigate this matter. This investigation is ongoing, and we cannot anticipate the timing, outcome or possible impact of the investigation, financial or otherwise.

     In light of this investigation and of the current U.S. and foreign policy environment and the inherent uncertainties surrounding these countries, we decided in September 2007 to direct our foreign subsidiaries to discontinue doing business in countries that are subject to U.S. economic and trade sanctions, including Cuba, Iran, Sudan and Syria. Effective September 2007, we ceased entering into any new contracts relating to these countries and began an orderly discontinuation and winding down of our existing business in these sanctioned countries. Effective March 31, 2008, we completed our withdrawal from these countries.

     With the assistance of outside counsel and in connection with the U.S. government investigations, we are conducting internal investigations regarding the embezzlement of approximately $175,000 at a European subsidiary and the possible improper use of these funds, including possible payments to government officials in Europe, during the period from 2000 to 2004, and the Company’s compliance with the Foreign Corrupt Practices Act and other laws worldwide. These internal investigations are preliminary and ongoing, and we cannot anticipate the timing, outcome or possible impact, if any, of the investigations, financial or otherwise. We have informed the SEC and the DOJ of these internal investigations, and the results of the internal investigations will be provided to the SEC and DOJ.

     The DOJ, the SEC and other agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of trading sanctions laws, the Foreign Corrupt Practices Act and other federal statutes including, but not limited to, injunctive relief, disgorgement, fines, penalties and modifications to business practices and compliance programs. In recent years, these agencies and authorities have entered into agreements with, and obtained a range of penalties against, several public corporations and individuals in similar investigations, under which civil and criminal penalties were imposed, including in some cases multi-million dollar fines and other penalties and sanctions. Under trading sanctions laws, the DOJ may also seek to impose modifications to business practices, including immediate cessation of all business activities in sanctioned countries, and modifications to compliance programs, which may increase compliance costs. In addition, our activities in sanctioned countries, such as Sudan and Iran, could result in certain investors, such as government sponsored pension funds, divesting or not investing in our common shares. Based on available information, we cannot predict what, if any, actions the DOJ, SEC or other authorities may take in our situation or the effect any such actions may have on our consolidated financial position or results of operations. To the extent we violated U.S. export regulations, fines and other penalties may be imposed. Because these matters are now pending before the indicated agencies, there can be no assurance that actual fines or penalties, if any, will not have a material adverse affect on our business, financial condition, liquidity or results of operations.

     During the three months ended March 31, 2008, we incurred $51 million for costs incurred in connection with our exit from sanctioned countries and $8 million in connection with complying with these on-going investigations. We will have additional charges related to these matters in future periods, which costs may include labor claims, contractual claims, penalties assessed by customers, and costs, fines, taxes and penalties assessed by the local governments, but we cannot quantify those charges or be certain of the timing of them.

      Other Litigation and Disputes

     The Company is aware of various disputes and potential claims and is a party in various litigation involving claims against the Company, some of which are covered by insurance. Based on facts currently known, the Company believes that the ultimate liability, if any, which may result from known claims, disputes and pending litigation, would not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

16. New Accounting Pronouncements

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS No. 141R”). SFAS No. 141R establishes principles and requirements for how a company recognizes assets acquired, liabilities assumed, contractual contingencies and contingent consideration measured at fair value at the acquisition date. The statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effect of the business combination. SFAS No. 141R is effective for business combinations completed in fiscal years beginning after December 15, 2008.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

     In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interest of the parent and the interest of the noncontrolling owners. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the impact that the adoption of SFAS No. 160 will have on our financial position, results of operation and cash flows.

     In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS No. 161”). SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activity. Entities are required to provide enhanced disclosures about how and why they use derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS No. 161 on its consolidated financial position, results of operations and cash flows.

17. Subsequent Event

     On April 21, 2008, the Company announced that its Board of Directors had approved a two-for-one share split of its Common Shares. The split will be effected by payment of a dividend of one common share for each outstanding common share and is payable on May 23, 2008 to shareholders of record on May 9, 2008.

18. Condensed Consolidating Financial Statements

     The following obligations of Weatherford International, Inc. (“Issuer”) were guaranteed by Weatherford International Ltd. (“Parent”) at March 31, 2008 and December 31, 2007: (i) the 6.625% Senior Notes, (ii) the 5.95% Senior Notes, (iii) the 6.35% Senior Notes and (iv) the 6.80% Senior Notes.

     The following obligations of the Parent were guaranteed by the Issuer at of March 31, 2008: (i) both revolving credit facilities, (ii) the 4.95% Senior Notes, (iii) the 5.50% Senior Notes, (iv) the 6.50% Senior Notes (v) the 5.15% Senior Notes, (vi) the 6.00% Senior Notes, (vii) the 7.00% Senior Notes and (viii) issuances of notes under the commercial paper program.

     The following obligations of the Parent were guaranteed by the Issuer at December 31, 2007: (i) the revolving credit facility, (ii) the 4.95% Senior Notes, (iii) the 5.50% Senior Notes, (iv) the 6.50% Senior Notes and (v) issuances of notes under the commercial paper program.

     As a result of these guarantee arrangements, the Company is required to present the following condensed consolidating financial information. The accompanying guarantor financial information is presented on the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for the Company’s share in the subsidiaries’ cumulative results of operations, capital contributions and distributions and other changes in equity. Elimination entries relate primarily to the elimination of investments in subsidiaries and associated intercompany balances and transactions. Certain prior year amounts have been reclassified to conform to the current year presentation.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

Condensed Consolidating Balance Sheet
March 31, 2008
(unaudited)
(In thousands)

										Other
		Parent				Issuer				Subsidiaries				Eliminations				Consolidation
ASSETS
Current Assets:
Cash and Cash Equivalents		$	465,964			$	801			$	159,673			$	—			$	626,438
Other Current Assets			20,631				6,594				4,447,762				—				4,474,987
			486,595				7,395				4,607,435				—				5,101,425
Equity Investments in Affiliates			12,976,895				5,051,615				12,864,077				(30,892,587	)			—
Shares Held in Parent			—				134,381				794,776				(929,157	)			—
Intercompany Receivables, Net			304,163				1,079,579				—				(1,383,742	)			—
Other Assets			62,233				164,241				9,156,235				—				9,382,709
		$	13,829,886			$	6,437,211			$	27,422,523			$	(33,205,486	)		$	14,484,134
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt		$	100,776			$	1,679			$	91,007			$	—			$	193,462
Accounts Payable and Other Current Liabilities			21,016				28,784				1,417,998				—				1,467,798
			121,792				30,463				1,509,005				—				1,661,260
Long-term Debt			2,692,830				1,850,308				20,441				—				4,563,579
Intercompany Payables, Net			—				—				1,383,742				(1,383,742	)			—
Other Long-term Liabilities			93,450				69,867				404,528				—				567,845
Shareholders’ Equity			10,921,814				4,486,573				24,104,807				(31,821,744	)			7,691,450
		$	13,829,886			$	6,437,211			$	27,422,523			$	(33,205,486	)		$	14,484,134

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

Condensed Consolidating Balance Sheet
December 31, 2007
(In thousands)

										Other
		Parent				Issuer				Subsidiaries				Eliminations				Consolidation
ASSETS
Current Assets:
Cash and Cash Equivalents		$	228			$	1,489			$	168,997			$	—			$	170,714
Other Current Assets			13,591				2,537				4,284,927				—				4,301,055
			13,819				4,026				4,453,924				—				4,471,769
Equity Investments in Affiliates			12,008,907				4,696,938				13,600,365				(30,306,210	)			—
Shares Held in Parent			—				129,428				794,774				(924,202	)			—
Intercompany Receivables, Net			(127,594	)			1,233,846				—				(1,106,252	)			—
Other Assets			52,031				34,186				8,632,971				—				8,719,188
		$	11,947,163			$	6,098,424			$	27,482,034			$	(32,336,664	)		$	13,190,957
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt		$	582,389			$	24,854			$	166,977			$	—			$	774,220
Accounts Payable and Other Current Liabilities			47,574				7,959				1,372,612				—				1,428,145
			629,963				32,813				1,539,589				—				2,202,365
Long-term Debt			1,198,418				1,850,594				17,323				—				3,066,335
Intercompany Payables, Net			—				—				1,106,252				(1,106,252	)			—
Other Long-term Liabilities			91,392				22,556				401,590				—				515,538
Shareholders’ Equity			10,027,390				4,192,461				24,417,280				(31,230,412	)			7,406,719
		$	11,947,163			$	6,098,424			$	27,482,034			$	(32,336,664	)		$	13,190,957

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

Condensed Consolidating Statements of Income
Three Months Ended March 31, 2008
(unaudited)
(In thousands)

										Other
		Parent				Issuer				Subsidiaries				Eliminations				Consolidation
Revenues		$	—			$	—			$	2,195,892			$	—			$	2,195,892
Costs and Expenses			(12,155	)			(690	)			(1,767,513	)			—				(1,780,358	)
Operating Income (Loss)			(12,155	)			(690	)			428,379				—				415,534
Other Income (Expense):
Interest Expense, Net			(22,696	)			(29,645	)			(462	)			—				(52,803	)
Intercompany Charges, Net			2,995				—				(2,995	)			—				—
Equity in Subsidiary Income			283,120				303,252				—				(586,372	)			—
Other, Net			12,966				(257	)			(12,210	)			—				499
Income (Loss) from Continuing Operations
Before Income Taxes and Minority Interest			264,230				272,660				412,712				(586,372	)			363,230
Benefit (Provision) for Income Taxes			(29	)			10,460				(84,056	)			—				(73,625	)
Income (Loss) from Continuing Operations
Before Minority Interest			264,201				283,120				328,656				(586,372	)			289,605
Minority Interest, Net of Taxes			—				—				(5,536	)			—				(5,536	)
Income (Loss) from Continuing Operations			264,201				283,120				323,120				(586,372	)			284,069
Loss from Discontinued Operations, Net of Taxes			—				—				(19,868	)			—				(19,868	)
Net Income (Loss)		$	264,201			$	283,120			$	303,252			$	(586,372	)		$	264,201

Condensed Consolidating Statements of Income
Three Months Ended March 31, 2007
(unaudited)
(In thousands)

										Other
		Parent				Issuer				Subsidiaries				Eliminations				Consolidation
Revenues		$	—			$	—			$	1,852,285			$	—			$	1,852,285
Costs and Expenses			(3,101	)			(268	)			(1,433,202	)			—				(1,436,571	)
Operating Income (Loss)			(3,101	)			(268	)			419,083				—				415,714
Other Income (Expense):
Interest Income (Expense), Net			(27,181	)			(5,593	)			(997	)			—				(33,771	)
Intercompany Charges, Net			116				(10,164	)			10,048				—				—
Equity in Subsidiary Income			309,785				320,533				—				(630,318	)			—
Other, Net			1,953				(229	)			(4,096	)			—				(2,372	)
Income (Loss) from Continuing Operations Before Income Taxes and Minority Interest			281,572				304,279				424,038				(630,318	)			379,571
Benefit (Provision) for Income Taxes			—				5,506				(96,884	)			—				(91,378	)
Income (Loss) from Continuing Operations Before Minority Interest			281,572				309,785				327,154				(630,318	)			288,193
Minority Interest, Net of Taxes			—				—				(4,374	)			—				(4,374	)
Income (Loss) from Continuing Operations			281,572				309,785				322,780				(630,318	)			283,819
Loss from Discontinued Operations, Net of Taxes			—				—				(2,247	)			—				(2,247	)
Net Income (Loss)		$	281,572			$	309,785			$	320,533			$	(630,318	)		$	281,572

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

Condensed Consolidating Statement of Cash Flows
Three Months Ended March 31, 2008
(In thousands)

										Other
		Parent				Issuer				Subsidiaries				Eliminations				Consolidation
Cash Flows from Operating Activities:
Net Income (Loss)		$	264,201			$	283,120			$	303,252			$	(586,372	)		$	264,201
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by Operating Activities:
Charges from Parent or Subsidiary			(2,995	)			—				2,995				—				—
Loss from Discontinued Operations			—				—				19,868				—				19,868
Equity in (Earnings) Loss of Affiliates			(283,120	)			(303,252	)			—				586,372				—
Deferred Income Tax Provision (Benefit)			—				(251	)			(10,263	)			—				(10,514	)
Other Adjustments			(23,138	)			19,152				(118,906	)			—				(122,892	)
Net Cash Provided (Used) by Operating Activities-Continuing Operations			(45,052	)			(1,231	)			196,946				—				150,663
Net Cash Used by Operating Activities- Discontinued Operations			—				—				(1,294	)			—				(1,294	)
Net Cash Provided (Used) by Operating Activities			(45,052	)			(1,231	)			195,652				—				149,369
Cash Flows from Investing Activities:
Acquisitions of Businesses, Net of Cash Acquired			—				—				(113,013	)			—				(113,013	)
Capital Expenditures for Property, Plant and Equipment			—				—				(588,639	)			—				(588,639	)
Acquisition of Intellectual Property			—				—				(2,787	)			—				(2,787	)
Proceeds from Sale of Assets and Business, Net			—				—				112,260				—				112,260
Capital Contribution to Subsidiary			(103,043	)			(5,000	)			—				108,043				—
Net Cash Provided (Used) by Investing Activities-Continuing Operations			(103,043	)			(5,000	)			(592,179	)			108,043				(592,179	)
Net Cash Used by Investing Activities- Discontinued Operations			—				—				—				—				—
Net Cash Provided (Used) by Investing Activities			(103,043	)			(5,000	)			(592,179	)			108,043				(592,179	)
Cash Flows from Financing Activities:
Borrowings of (Repayments on) Short-term Debt, Net			(481,612	)			(21,521	)			(81,942	)			—				(585,075	)
Borrowings of (Repayments on) Long-term Debt, Net			1,483,931				(285	)			3,793				—				1,487,439
Proceeds from Exercise of Stock Options			—				2,840				—				—				2,840
Borrowings (Repayments) Between Subsidiaries, Net			(375,912	)			18,603				357,309				—				—
Proceeds from Capital Contribution			—				—				108,043				(108,043	)			—
Excess Tax Benefits of Share-Based Compensation			—				7,555				—				—				7,555
Other, Net			(12,576	)			(1,649	)			—				—				(14,225	)
Net Cash Provided (Used) by Financing Activities-Continuing Operations			613,831				5,543				387,203				(108,043	)			898,534
Net Cash Provided by Financing Activities- Discontinued			—				—				—				—				—
Net Cash Provided (Used) by Financing Activities			613,831				5,543				387,203				(108,043	)			898,534
Net Decrease in Cash and Cash Equivalents			465,736				(688	)			(9,324	)			—				455,724
Cash and Cash Equivalents at Beginning of Year			228				1,489				168,997				—				170,714
Cash and Cash Equivalents at End of Year		$	465,964			$	801			$	159,673			$	—			$	626,438