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 June 30, 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		(I.R.S. Employer
incorporation or organization)		Identification No.)
515 Post Oak Boulevard
Suite 600
Houston, Texas		77027-3415
(Address of principal executive offices)		(Zip Code)

(713) 693-4000

     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
				(Do not check if a smaller reporting company)

     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 August 4, 2008
Common Shares, par value $1.00		680,648,807

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

		June 30,				December 31,
		2008				2007
		(unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents		$	267,978			$	170,714
Accounts Receivable, Net of Allowance for Uncollectible Accounts of $12,687 and $13,760, Respectively			2,111,299				1,961,854
Inventories			1,909,239				1,607,684
Other Current Assets			639,145				731,517
			4,927,661				4,471,769
Property, Plant and Equipment, Net of Accumulated Depreciation of $2,592,818 and $2,400,062, Respectively			4,979,621				4,153,845
Goodwill			3,510,619				3,358,490
Other Intangible Assets, Net of Accumulated Amortization of $250,224 and $227,307 Respectively			584,005				596,999
Equity Investments			473,571				368,618
Other Assets			321,065				241,236
		$	14,796,542			$	13,190,957
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt		$	49,593			$	774,220
Accounts Payable			664,421				612,775
Other Current Liabilities			734,986				815,370
			1,449,000				2,202,365
Long-term Debt			4,539,706				3,066,335
Other Liabilities			572,578				482,211
			6,561,284				5,750,911
Minority Interest in Consolidated Subsidiaries			66,288				33,327
Shareholders’ Equity:
Common Shares, $1 Par Value, Authorized 2,000,000 Shares, Issued 728,181 and 727,204 Shares, Respectively			728,181				727,204
Capital in Excess of Par Value			4,078,849				3,995,747
Treasury Shares, Net			(911,768	)			(924,202	)
Retained Earnings			3,805,367				3,170,182
Accumulated Other Comprehensive Income			468,341				437,788
			8,168,970				7,406,719
		$	14,796,542			$	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								Six Months
		Ended June 30,								Ended June 30,
		2008				2007				2008				2007
Revenues:
Products		$	834,443			$	676,851			$	1,663,626			$	1,359,103
Services			1,394,807				1,139,094				2,761,516				2,309,127
			2,229,250				1,815,945				4,425,142				3,668,230
Costs and Expenses
Cost of Products			621,836				614,154				1,220,626				1,103,023
Cost of Services			832,318				578,314				1,683,206				1,253,801
Research and Development			44,430				40,700				87,069				81,214
Selling, General and Administrative Attributable to Segments			268,798				219,775				509,665				421,416
Corporate General and Administrative			46,288				35,561				93,462				65,621
Gain on Sale of Subsidiary			(81,344	)			—				(81,344	)			—
Operating Income			496,924				327,441				912,458				743,155
Other Expense:
Interest Expense, Net			(62,399	)			(35,293	)			(115,202	)			(69,064	)
Other, Net			(5,282	)			(5,934	)			(4,783	)			(8,306	)
Income from Continuing Operations Before Income Taxes and Minority Interest			429,243				286,214				792,473				665,785
Provision for Income Taxes			(57,875	)			(105,271	)			(131,500	)			(196,649	)
Income from Continuing Operations Before Minority Interest			371,368				180,943				660,973				469,136
Minority Interest, Net of Taxes			(7,324	)			(4,463	)			(12,860	)			(8,837	)
Income from Continuing Operations			364,044				176,480				648,113				460,299
Gain (Loss) from Discontinued Operation, Net of Taxes			6,940				(11,170	)			(12,928	)			(13,417	)
Net Income		$	370,984			$	165,310			$	635,185			$	446,882
Basic Earnings Per Share:
Income from Continuing Operations		$	0.53			$	0.26			$	0.95			$	0.68
Gain (Loss) from Discontinued Operation			0.01				(0.02	)			(0.02	)			(0.02	)
Net Income		$	0.54			$	0.24			$	0.93			$	0.66
Diluted Earnings Per Share:
Income from Continuing Operations		$	0.52			$	0.25			$	0.93			$	0.66
Gain (Loss) from Discontinued Operation			0.01				(0.01	)			(0.02	)			(0.02	)
Net Income		$	0.53			$	0.24			$	0.91			$	0.64
Weighted Average Shares Outstanding:
Basic			681,870				676,662				681,030				677,340
Diluted			701,927				695,634				699,507				694,124

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)

		Six Months
		Ended June 30,
		2008				2007
Cash Flows from Operating Activities:
Net Income		$	635,185			$	446,882
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization			340,998				280,057
Gain on Sales of Assets and Businesses, Net			(85,815	)			(19,680	)
Loss from Discontinued Operation			12,928				13,417
Employee Share-Based Compensation Expense			48,134				37,213
Excess Tax Benefits from Share-Based Compensation			(15,194	)			(8,154	)
Minority Interest			12,860				8,837
Deferred Income Tax (Benefit) Provision			(12,248	)			95,071
Other, Net			(12,478	)			11,431
Change in Operating Assets and Liabilities, Net of Effect of Businesses Acquired Accounts Receivable			(115,277	)			(158,108	)
Inventories			(288,328	)			(274,094	)
Accounts Payable			45,041				8,903
Other			(178,370	)			(161,551	)
Net Cash Provided by Operating Activities – Continuing Operations			387,436				280,224
Net Cash Used by Operating Activities – Discontinued Operation			(6,219	)			(14,038	)
Net Cash Provided by Operating Activities			381,217				266,186
Cash Flows from Investing Activities:
Acquisitions of Businesses, Net of Cash Acquired			(160,351	)			(211,044	)
Capital Expenditures for Property, Plant and Equipment			(1,144,530	)			(672,528	)
Acquisition of Intellectual Property			(6,436	)			(14,057	)
Purchase of Equity Investment in Unconsolidated Affiliates			—				(331,771	)
Proceeds from Sale of Assets and Businesses, Net			255,121				30,390
Net Cash Used by Investing Activities – Continuing Operations			(1,056,196	)			(1,199,010	)
Net Cash Provided (Used) by Investing Activities – Discontinued Operation			2,000				(12,265	)
Net Cash Used by Investing Activities			(1,054,196	)			(1,211,275	)
Cash Flows from Financing Activities:
Borrowings of (Repayments on) Short-term Debt, Net			(728,801	)			(389,517	)
Borrowings of Long-term Debt, Net			1,486,207				1,483,443
Purchase of Treasury Shares			—				(179,262	)
Proceeds from Exercise of Stock Options			9,512				13,010
Excess Tax Benefits from Share-Based Compensation			15,194				8,154
Other Financing Activities, Net			(11,869	)			(1,522	)
Net Cash Provided by Financing Activities – Continuing Operations			770,243				934,306
Net Cash Provided by Financing Activities – Discontinued Operation			—				—
Net Cash Provided by Financing Activities			770,243				934,306
Net Increase (Decrease)in Cash and Cash Equivalents			97,264				(10,783	)
Cash and Cash Equivalents at Beginning of Period			170,714				126,287
Cash and Cash Equivalents at End of Period		$	267,978			$	115,504
Supplemental Cash Flow Information:
Interest Paid		$	110,515			$	73,460
Income Taxes Paid, Net of Refunds			148,123				207,855

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								Six Months
		Ended June 30,								Ended June 30,
		2008				2007				2008				2007
Net Income		$	370,984			$	165,310			$	635,185			$	446,882
Other Comprehensive Income:
Deferred Loss on Derivative Instruments			—				—				(12,576	)			—
Amortization of Pension Components			980				3,530				5,616				4,582
Pension Remeasurement Loss			—				(15,427	)			—				(15,427	)
Foreign Currency Translation Adjustment			32,449				124,453				37,326				128,375
Other			147				39				187				75
Comprehensive Income		$	404,560			$	277,905			$	665,738			$	564,487

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

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(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 June 30, 2008, Condensed Consolidated Statements of Income, Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 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 and six months ended June 30, 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.

     The Company’s Board of Directors approved a two-for-one share split of our common shares effected through a share dividend. Shareholders of record on May 9, 2008 were entitled to the dividend, which was distributed on May 23, 2008. All share and option amounts included in the accompanying consolidated financial statements and related notes reflect the effect of the share split.

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 recent 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. At June 30, 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.

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

     During the six months ended June 30, 2008, the Company acquired various businesses for cash consideration of approximately $160 million and 824 thousand common shares valued at approximately $35 million.

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 the accompanying Condensed Consolidated Balance Sheets at June 30, 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 Condensed 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 Company finalized the divestiture of the business in June 2008 and recorded an $11 million gain, net of taxes, during the three months ended June 30, 2008. This gain was partially offset by operating and legal expenses incurred during the period. Included in the loss for the six months ended June 30, 2008, is approximately $21 million, net of taxes, incurred in connection with the settlement of a legal dispute regarding the business.

5. Inventories

     The components of inventory were as follows:

		June 30,				December 31,
		2008				2007
		(In thousands)
Raw materials, components and supplies		$	400,182			$	373,383
Work in process			155,325				118,407
Finished goods			1,353,732				1,115,894
		$	1,909,239			$	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.

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

     The changes in the carrying amount of goodwill for the six months ended June 30, 2008 were as follows:

										Europe/				Middle East/
		North				Latin				West Africa/				North Africa/
		America				America				CIS				Asia				Total
										(In thousands)
December 31, 2007		$	1,918,411			$	156,825			$	678,433			$	604,821			$	3,358,490
Acquisitions			33,310				—				112,392				8,063				153,765
Disposals			(1,362	)			(27	)			—				—				(1,389	)
Purchase price and other adjustments			1,195				4,330				1,402				(14,992	)			(8,065	)
Foreign currency translation			(25,363	)			3,987				25,971				3,223				7,818
As of June 30, 2008		$	1,926,191			$	165,115			$	818,198			$	601,115			$	3,510,619

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

     The components of short-term borrowings were as follows:

		June 30,				December 31,
		2008				2007
		(In thousands)
Revolving credit facilities		$	—			$	491,000
Commercial paper program			13,479				191,621
Other short-term bank loans			25,025				80,025
Total Short-term Borrowings			38,504				762,646
Current Portion of Long-term Debt			11,089				11,574
Short-term Borrowings and Current Portion of Long-term Debt		$	49,593			$	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 (“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. 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 this facility at June 30, 2008.

     On March 19, 2008, the Company entered into an additional $250 million revolving credit facility with a syndicate of banks. This facility allows for a combination of borrowings, support of the Company’s commercial paper program and issuances of letters of credit.

     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 June 30, 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.

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

The weighted average interest rate on the outstanding borrowings under the commercial paper program was 3.1% at June 30, 2008.

     The Company has short-term borrowings with various domestic and international institutions pursuant to uncommitted facilities. At June 30, 2008, the Company had $25 million in short-term borrowings under these arrangements with a weighted average interest rate of 12.0%. In addition, the Company had $194 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 June 30, 2008 and December 31, 2007.

8. Derivative Instruments

     Interest Rate Swaps

     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 June 30, 2008. The aggregate fair value of the interest rate swaps at June 30, 2008 resulted in a liability of $24 million with the offset to Long-term Debt on the accompanying Consolidated Balance Sheet.

     Cash Flow Hedges

     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 June 30, 2008, we had several foreign currency forward contracts and one option contract with notional amounts aggregating $561 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 June 30, 2008 resulted in a liability of $7 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 June 30, 2008, the Company had notional amounts outstanding of $364 million. The total estimated fair value of these contracts at June 30, 2008 resulted in a liability of $63 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 Statement of Financial Accounting Standards (“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.

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

     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:

     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 June 30, 2008:

		June 30, 2008
		Level 1				Level 2				Level 3				Total
		(In thousands)
Assets:
Derivative contracts		$	—			$	—			$	—			$	—
Liabilities:
Derivative contracts			—				93,858				—				93,858

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

9. Income Taxes

     The Company’s effective tax rates were 13.5% and 16.6% for the three and six months ended June 30, 2008, respectively, and 36.8% and 29.5% for the three and six months ended June 30, 2007, respectively. The decrease in the effective tax rate was due primarily to withholding taxes of $50 million that were required to be paid on a distribution made to one of the Company’s foreign subsidiaries during the second quarter of 2007. In addition, the Company recognized a gain of $81 million, with no related tax effect, on its sale of a 50% interest in a subsidiary. The remainder of the decrease is due to the net benefits realized from the refinement of the Company’s international tax structure and changes in the Company’s geographic earnings mix.

     There were no material changes to the total amount of unrecognized tax benefits during the first half 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 Company’s Board of Directors approved a two-for-one share split of its common shares effected through a share dividend. Shareholders of record on May 9, 2008 were entitled to the dividend, which was distributed on May 23, 2008. All share and option amounts included in the accompanying consolidated financial statements and related notes reflect the effect of the share split.

     The following reconciles basic and diluted weighted average shares outstanding (in thousands):

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2008				2007				2008				2007
Basic weighted average shares outstanding			681,870				676,662				681,030				677,340
Dilutive effect of:
Warrant			8,380				5,610				7,663				4,548
Stock option and restricted share plans			11,677				13,362				10,814				12,236
Diluted weighted average shares outstanding			701,927				695,634				699,507				694,124

11. Supplemental Cash Flow Information

     During the six months ended June 30, 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.

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

12. Share-Based Compensation

     The Company recognized the following employee share-based compensation expense:

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2008				2007				2008				2007
						(In thousands)
Share-based compensation		$	24,660			$	20,658			$	48,134			$	37,213
Related tax benefit			8,631				7,230				16,847				13,024

     During the six months ended June 30, 2008, the Company granted six million restricted share awards and units at a weighted average grant date fair value of $34.61 per share.

     As of June 30, 2008, there was $286 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 2.4 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 and six months ended June 30, 2008 and 2007 were as follows:

		Three Months Ended June 30,
		2008								2007
		United States				International				United States				International
						(In thousands)
Service cost		$	720			$	3,555			$	671			$	2,736
Interest cost			1,511				2,659				1,430				2,022
Expected return on plan assets			(179	)			(2,320	)			(165	)			(1,960	)
Amortization of transition obligation			—				(1	)			¾				(1	)
Amortization of prior service cost (credit)			458				(20	)			494				(26	)
Amortization of loss			964				107				1,433				37
Curtailment/settlement loss			—				—				1,484				—
Net periodic benefit cost		$	3,474			$	3,980			$	5,347			$	2,808

		Six Months Ended June 30,
		2008								2007
		United States				International				United States				International
		(In thousands)
Service cost		$	1,440			$	7,043			$	1,321			$	5,418
Interest cost			3,022				5,269				2,653				3,993
Expected return on plan assets			(358	)			(4,626	)			(330	)			(3,886	)
Amortization of transition obligation			—				(2	)			—				(2	)
Amortization of prior service cost (credit)			916				(40	)			1,054				(52	)
Amortization of loss			1,928				208				2,084				74
Curtailment/settlement loss			5,621				—				1,881				—
Net periodic benefit cost		$	12,569			$	7,852			$	8,663			$	5,545

     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 June 30,

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

2008, the Company has contributed approximately $5 million to these plans. Currently, the Company anticipates total contributions to approximate the original estimates previously disclosed.

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 June 30, 2008
		Net				Income				Depreciation
		Operating				from				and
		Revenues				Operations				Amortization
						(In thousands)
North America		$	1,012,244			$	224,252			$	75,093
Middle East/North Africa/Asia			556,251				130,650				45,982
Europe/West Africa/CIS			389,563				99,016				27,600
Latin America			271,192				58,355				20,368
			2,229,250				512,273				169,043
Research and Development			—				(44,430	)			1,867
Corporate			—				(35,275	)			800
Other (a)			—				64,356				—
Total		$	2,229,250			$	496,924			$	171,710

		Three Months Ended June 30, 2007
		Net				Income				Depreciation
		Operating				from				and
		Revenues				Operations				Amortization
						(In thousands)
North America		$	883,364			$	192,268			$	66,959
Middle East/North Africa/Asia			435,338				96,998				36,951
Europe/West Africa/CIS			290,639				69,790				20,936
Latin America			206,604				45,742				17,118
			1,815,945				404,798				141,964
Research and Development			—				(40,700	)			1,669
Corporate			—				(23,525	)			909
Other (b)			—				(13,132	)			—
Total		$	1,815,945			$	327,441			$	144,542

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

		Six Months Ended June 30, 2008
		Net				Income				Depreciation
		Operating				from				and
		Revenues				Operations				Amortization
						(In thousands)
North America		$	2,102,606			$	515,905			$	149,880
Middle East/North Africa/Asia			1,078,135				251,324				91,718
Europe/West Africa/CIS			737,192				192,229				54,221
Latin America			507,209				118,853				40,050
			4,425,142				1,078,311				335,869
Research and Development			—				(87,069	)			3,561
Corporate			—				(68,907	)			1,568
Other (c)			—				(9,877	)			—
Total		$	4,425,142			$	912,458			$	340,998

		Six Months Ended June 30, 2007
		Net				Income				Depreciation
		Operating				from				and
		Revenues				Operations				Amortization
						(In thousands)
North America		$	1,889,997			$	492,478			$	128,723
Middle East/North Africa/Asia			830,090				180,471				73,118
Europe/West Africa/CIS			535,597				125,025				39,171
Latin America			412,546				94,331				33,857
			3,668,230				892,305				274,869
Research and Development			—				(81,214	)			3,289
Corporate			—				(50,620	)			1,899
Other (d)			—				(17,316	)			—
Total		$	3,668,230			$	743,155			$	280,057

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

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 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 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 six months ended June 30, 2008, we incurred $57 million for costs incurred in connection with our exit from sanctioned countries and $19 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,

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

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.

     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. Condensed Consolidating Financial Statements

     The following obligations of Weatherford International, Inc. (“Issuer”) were guaranteed by Weatherford International Ltd. (“Parent”) at June 30, 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 June 30, 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.

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

     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.

Condensed Consolidating Balance Sheet
June 30, 2008
(unaudited)
(In thousands)

										Other
		Parent				Issuer				Subsidiaries				Eliminations				Consolidation
ASSETS
Current Assets:
Cash and Cash Equivalents		$	25			$	52,725			$	215,228			$	—			$	267,978
Other Current Assets			13,357				21,271				4,625,055				—				4,659,683
			13,382				73,996				4,840,283				—				4,927,661
Equity Investments in Affiliates			13,334,120				5,384,779				12,846,663				(31,565,562	)			—
Shares Held in Parent			—				135,041				776,731				(911,772	)			—
Intercompany Receivables, Net			730,327				836,476				—				(1,566,803	)			—
Other Assets			74,220				164,901				9,629,760				—				9,868,881
		$	14,152,049			$	6,595,193			$	28,093,437			$	(34,044,137	)		$	14,796,542
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt		$	14,264			$	1,704			$	33,625			$	—			$	49,593
Accounts Payable and Other Current Liabilities			57,745				7,819				1,333,843				—				1,399,407
			72,009				9,523				1,367,468				—				1,449,000
Long-term Debt			2,669,180				1,850,020				20,506				—				4,539,706
Intercompany Payables, Net			—				—				1,566,803				(1,566,803	)			—
Other Long-term Liabilities			77,679				9,024				485,875				—				572,578
			2,818,868				1,868,567				3,440,652				(1,566,803	)			6,561,284
Minority Interest in Consolidated Subsidiaries			—				—				66,288				—				66,288
Shareholders’ Equity			11,333,181				4,726,626				24,586,497				(32,477,334	)			8,168,970
		$	14,152,049			$	6,595,193			$	28,093,437			$	(34,044,137	)		$	14,796,542

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			¾				129,428				794,774				(924,202	)			—
Intercompany Receivables, Net			(127,594	)			1,233,846				¾				(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			—				¾				1,106,252				(1,106,252	)			—
Other Long-term Liabilities			91,392				22,556				368,263				—				482,211
			1,919,773				1,905,963				3,031,427				(1,106,252	)			5,750,911
Minority Interest in Consolidated Subsidiaries			—				—				33,327				—				33,327
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 June 30, 2008
(unaudited)
(In thousands)

										Other
		Parent				Issuer				Subsidiaries				Eliminations				Consolidation
Revenues		$	—			$	—			$	2,229,250			$	—			$	2,229,250
Costs and Expenses			(5,266	)			(151	)			(1,726,909	)			—				(1,732,326	)
Operating Income (Loss)			(5,266	)			(151	)			502,341				—				496,924
Other Income (Expense):
Interest Expense, Net			(34,877	)			(28,684	)			1,162				—				(62,399	)
Intercompany Charges, Net			73,303				—				(73,303	)			—				—
Equity in Subsidiary Income			343,816				329,164				—				(672,980	)			—
Other, Net			(7,992	)			(309	)			3,019				—				(5,282	)
Income (Loss) from Continuing Operations Before Income Taxes and Minority Interest			368,984				300,020				433,219				(672,980	)			429,243
Benefit (Provision) for Income Taxes			—				43,796				(101,671	)			—				(57,875	)
Income (Loss) from Continuing Operations Before Minority Interest			368,984				343,816				331,548				(672,980	)			371,368
Minority Interest, Net of Taxes			—				—				(7,324	)			—				(7,324	)
Income (Loss) from Continuing Operations			368,984				343,816				324,224				(672,980	)			364,044
Gain from Discontinued Operation, Net of Taxes			2,000				—				4,940				—				6,940
Net Income (Loss)		$	370,984			$	343,816			$	329,164			$	(672,980	)		$	370,984

Condensed Consolidating Statements of Income
Three Months Ended June 30, 2007
(unaudited)
(In thousands)

										Other
		Parent				Issuer				Subsidiaries				Eliminations				Consolidation
Revenues		$	¾			$	¾			$	1,815,945			$	¾			$	1,815,945
Costs and Expenses			(4,185	)			(2,243	)			(1,482,076	)			¾				(1,488,504	)
Operating Income (Loss)			(4,185	)			(2,243	)			333,869				¾				327,441
Other Income (Expense):
Interest Income (Expense), Net			(27,638	)			(8,663	)			1,008				¾				(35,293	)
Intercompany Charges, Net			(8,726	)			103,766				(95,040	)			¾				¾
Equity in Subsidiary Income			207,926				146,768				¾				(354,694	)			¾
Other, Net			(2,067	)			1,461				(5,328	)			¾				(5,934	)
Income (Loss) from Continuing Operations Before Income Taxes and Minority Interest			165,310				241,089				234,509				(354,694	)			286,214
Provision for Income Taxes			¾				(33,163	)			(72,108	)			¾				(105,271	)
Income (Loss) from Continuing Operations Before Minority Interest			165,310				207,926				162,401				(354,694	)			180,943
Minority Interest, Net of Taxes			¾				¾				(4,463	)			¾				(4,463	)
Income (Loss) from Continuing Operations			165,310				207,926				157,938				(354,694	)			176,480
Loss from Discontinued Operation, Net of Taxes			¾				¾				(11,170	)			¾				(11,170	)
Net Income (Loss)		$	165,310			$	207,926			$	146,768			$	(354,694	)		$	165,310