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, 2007

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

(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, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ       Accelerated filer o       Non-accelerated filer 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 July 31, 2007
Common Shares, par value $1.00		336,993,477

 

 

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,
		2007				2006
		(unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents		$	115,504			$	126,287
Accounts Receivable, Net of Allowance for Uncollectible Accounts of $14,603 and $13,452, Respectively			1,740,277				1,560,849
Inventories			1,515,812				1,239,034
Other Current Assets			504,696				465,605
			3,876,289				3,391,775
Property, Plant and Equipment, Net of Accumulated Depreciation of $2,151,174 and $1,925,177, Respectively			3,491,395				2,979,271
Goodwill			3,239,487				3,000,589
Other Intangible Assets, Net			606,365				599,828
Equity Investments in Unconsolidated Affiliates			358,172				31,175
Other Assets			157,691				136,610
		$	11,729,399			$	10,139,248
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt		$	268,440			$	648,736
Accounts Payable			527,976				509,942
Other Current Liabilities			716,875				884,467
			1,513,291				2,043,145
Long-term Debt			3,072,430				1,564,600
Deferred Tax Liabilities			227,837				136,208
Other Liabilities			300,416				220,496
Commitments and Contingencies
Shareholders’ Equity:
Common Shares, $1 Par Value, Authorized 1,000,000 Shares, Issued 362,715 and 361,921 Shares, Respectively			362,715				361,921
Capital in Excess of Par Value			4,324,540				4,275,534
Treasury Shares, Net			(855,046	)			(681,116	)
Retained Earnings			2,546,458				2,099,307
Accumulated Other Comprehensive Income			236,758				119,153
			6,615,425				6,174,799
		$	11,729,399			$	10,139,248

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,
		2007				2006				2007				2006
Revenues:
Products		$	676,851			$	601,931			$	1,359,103			$	1,170,614
Services			1,139,094				936,645				2,309,127				1,903,973
			1,815,945				1,538,576				3,668,230				3,074,587
Costs and Expenses
Cost of Products			614,154				412,510				1,103,023				803,057
Cost of Services			578,314				585,762				1,253,801				1,179,577
Research and Development			40,700				37,361				81,214				73,804
Selling, General and Administrative Attributable to Segments			220,764				181,469				423,195				365,054
Corporate General and Administrative			35,561				24,277				65,621				46,533
Equity in Earnings of Unconsolidated Affiliates			(989	)			(3,293	)			(1,779	)			(5,927	)
Operating Income			327,441				300,490				743,155				612,489
Other Expense:
Interest Expense, Net			(35,293	)			(23,637	)			(69,064	)			(42,579	)
Other, Net			(5,934	)			(9,926	)			(8,306	)			(10,749	)
Income from Continuing Operations Before Income Taxes and Minority Interest			286,214				266,927				665,785				559,161
Provision for Income Taxes			(105,271	)			(77,533	)			(196,649	)			(162,406	)
Income from Continuing Operations Before Minority Interest			180,943				189,394				469,136				396,755
Minority Interest, Net of Taxes			(4,463	)			(899	)			(8,837	)			(1,736	)
Income from Continuing Operations			176,480				188,495				460,299				395,019
Loss from Discontinued Operation, Net of Taxes			(11,170	)			(1,648	)			(13,417	)			(4,855	)
Net Income		$	165,310			$	186,847			$	446,882			$	390,164
Basic Earnings Per Share:
Income from Continuing Operations		$	0.52			$	0.54			$	1.36			$	1.13
Loss from Discontinued Operation			(0.03	)			(0.00	)			(0.04	)			(0.01	)
Net Income		$	0.49			$	0.54			$	1.32			$	1.12
Diluted Earnings Per Share:
Income from Continuing Operations		$	0.51			$	0.53			$	1.33			$	1.10
Loss from Discontinued Operation			(0.03	)			(0.01	)			(0.04	)			(0.01	)
Net Income		$	0.48			$	0.52			$	1.29			$	1.09
Weighted Average Shares Outstanding:
Basic			338,331				348,853				338,670				349,006
Diluted			347,817				358,433				347,062				358,164

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,
		2007				2006
Cash Flows from Operating Activities:
Net Income		$	446,882			$	390,164
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization			280,057				230,483
Gain on Sales of Assets, Net			(19,680	)			(10,544	)
Loss from Discontinued Operation			13,417				4,855
Equity in Earnings of Unconsolidated Affiliates			(1,779	)			(5,927	)
Employee Share-Based Compensation Expense			37,213				28,467
Excess Tax Benefits from Share-Based Compensation			(8,154	)			(690	)
Minority Interest			8,837				1,736
Deferred Income Tax Provision (Benefit)			95,071				(1,536	)
Other, Net			11,431				3,517
Change in Operating Assets and Liabilities, Net of Effect of Businesses Acquired			(583,071	)			(126,227	)
Net Cash Provided by Operating Activities — Continuing Operations			280,224				514,298
Net Cash Used by Operating Activities — Discontinued Operation			(14,038	)			(4,574	)
Net Cash Provided by Operating Activities			266,186				509,724
Cash Flows from Investing Activities:
Acquisitions of Businesses, Net of Cash Acquired			(211,044	)			(106,077	)
Capital Expenditures for Property, Plant and Equipment			(672,528	)			(446,306	)
Acquisition of Intellectual Property			(14,057	)			(4,945	)
Purchase of Equity Investment in Unconsolidated Affiliates			(331,771	)			¾
Proceeds from Sale of Assets and Business, Net			30,390				1,352
Net Cash Used by Investing Activities — Continuing Operations			(1,199,010	)			(555,976	)
Net Cash Used by Investing Activities — Discontinued Operation			(12,265	)			(4,833	)
Net Cash Used by Investing Activities			(1,211,275	)			(560,809	)
Cash Flows from Financing Activities:
Borrowings of (Repayments on) Short-term Debt, Net			(389,517	)			86,524
Borrowings of Long-term Debt, Net			1,483,443				143,215
Purchase of Treasury Shares			(179,262	)			(238,652	)
Proceeds from Exercise of Stock Options			13,010				52,062
Excess Tax Benefits from Share-Based Compensation			8,154				690
Other Financing Activities, Net			(1,522	)			376
Net Cash Provided by Financing Activities — Continuing Operations			934,306				44,215
Net Cash Provided by Financing Activities — Discontinued Operation			¾				¾
Net Cash Provided by Financing Activities			934,306				44,215
Net Decrease in Cash and Cash Equivalents			(10,783	)			(6,870	)
Cash and Cash Equivalents at Beginning of Period			126,287				134,245
Cash and Cash Equivalents at End of Period		$	115,504			$	127,375
Supplemental Cash Flow Information:
Interest Paid		$	73,460			$	45,226
Income Taxes Paid, Net of Refunds			207,855				76,452

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,
		2007				2006				2007				2006
Net Income		$	165,310			$	186,847			$	446,882			$	390,164
Other Comprehensive Income:
Reclassification Adjustment for Deferred Gain, net on Derivative Instruments			39				21				75				6,289
Pension Adjustments			3,530				¾				4,582				¾
Pension Remeasurement Loss			(15,427	)			¾				(15,427	)			¾
Foreign Currency Translation Adjustment			124,453				52,175				128,375				61,867
Comprehensive Income		$	277,905			$	239,043			$	564,487			$	458,320

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, 2007, Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2007 and 2006, and Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006. 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, 2006 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, 2007 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 bad debts, inventories, investments, intangible assets and goodwill, property, plant and equipment, income taxes, insurance, employment benefits 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 reviewed the presentation of its reporting segments during the first quarter of 2007. Based on this review, the Company determined that its operational performance would be segmented and reviewed on a geographic basis. As a result, the Company realigned its financial reporting segments and will now report the following regions as separate, distinct reporting segments: (1) North America, (2) Latin America, (3) Europe/West Africa/the Commonwealth of Independent States (“CIS”) and (4) Middle East/North Africa/Asia. The Company’s historical segment data previously reported under the Evaluation, Drilling & Intervention Services and Completion & Production Systems divisions have been restated for all periods to conform to the new presentation (See Notes 6 and 16).

2. Critical Accounting Policies

     There have been no material changes or developments in the Company’s evaluation of accounting estimates and underlying assumptions or methodologies that the Company believes to be Critical Accounting Policies and Estimates as disclosed in our Form 10-K, for the year ended December 31, 2006.

3. 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

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

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.

     During the first half of 2007, the Company effected various acquisitions that were integrated into the Company’s operations for total consideration of approximately $191.6 million.

     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 June 30, 2007, the Company has recorded a liability in the amount of approximately $20 million for this matter. If the Company used the high end of the range, the aggregate potential liability would be approximately $27 million higher. It is reasonably possible that the actual amount paid to settle these items could be materially different from the Company’s estimate and could have a material adverse effect on its consolidated financial statements.

4. Inventories

     Inventories by category are as follows:

		June 30,				December 31,
		2007				2006
		(In thousands)
Raw materials, components and supplies		$	344,336			$	330,006
Work in process			121,509				98,920
Finished goods			1,049,967				810,108
		$	1,515,812			$	1,239,034

     Inventories are stated at the lower of cost or market. Work in process and finished goods inventories include the cost of materials, labor and plant overhead.

5. Discontinued Operation

     In June 2007, the Company’s management approved a plan to sell its oil and gas development and production business. We expect the sale of this business to be finalized within the next twelve months. The business was historically included in the Company’s North America and Europe/West Africa/CIS segments. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”), the results of operations, financial position and cash flows of the business have been 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 Condensed Consolidated Balance Sheets.

     The $13.4 million loss from discontinued operation for the six months ended June 30, 2007, includes non-cash asset impairment charges of $9.2 million.

     Interest charges have been allocated to the discontinued operation in accordance with Emerging Issues Task Force (“EITF”) Issue No. 87-24, Allocation of Interest to Discontinued Operations. The interest was allocated based on a pro rata calculation of the net assets of the discontinued business to the Company’s consolidated net assets.

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

     Operating results of the discontinued operation are as follows:

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2007				2006				2007				2006
						(In thousands)
Revenues		$	1,206			$	¾			$	1,206			$	¾
Loss Before Income Taxes		$	13,373			$	2,122			$	16,699			$	6,816
Benefit for Income Taxes			2,203				474				3,282				1,961
Loss from Discontinued Operation, Net of Taxes		$	11,170			$	1,648			$	13,417			$	4,855

     Balance sheet information for the discontinued operation is as follows:

		June 30,				December 31,
		2007				2006
		(In thousands)
Other Current Assets		$	3,458			$	1,715
Property, Plant and Equipment, Net			34,038				24,377
Other Assets			2,992				7,401
Current Assets Held for Sale		$	40,488			$	33,493
Accounts Payable		$	388			$	2,553
Other Current Liabilities			709				4,826
Other Liabilities			391				¾
Current Liabilities Held for Sale		$	1,488			$	7,379

6. Goodwill

     Goodwill is evaluated for impairment in accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), which requires that such assets be tested for impairment on at least an annual basis. The Company performs its annual goodwill impairment test as of October 1. The Company performed a goodwill impairment test as of January 1, 2007 due to the change in its reporting segments (See Notes 1 and 16). The Company’s January 1, 2007 and October 1, 2006 impairment tests indicated goodwill was not impaired.

     The Company’s goodwill impairment test involves a comparison of the fair value of each of the Company’s reporting units, as defined under SFAS No. 142, with its carrying amount. The fair value is determined using discounted cash flows. 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.

     In connection with the June 2007 approval of the plan to sell its discontinued operation (See Note 5), $6.9 million of goodwill from the Company’s North America reporting unit was allocated to the discontinued business based on a relative fair value approach.

     As of January 1, 2007, the Company recorded an adjustment of $1.4 million to its goodwill balance as a result of the adoption of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109 (“FIN No. 48”) (See Note 10).

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, 2007 are as follows:

										Europe/				Middle East/
		North				Latin				West Africa/				North Africa/
		America				America				CIS				Asia				Total
										(In thousands)
As of December 31, 2006		$	1,759,086			$	146,507			$	499,686			$	595,310			$	3,000,589
Goodwill acquired during period			24,642				(620	)			123,147				3,087				150,256
Purchase price and other adjustments			(363	)			3,937				361				475				4,410
Impact of foreign currency translation			68,289				3,011				10,006				2,926				84,232
As of June 30, 2007		$	1,851,654			$	152,835			$	633,200			$	601,798			$	3,239,487

7. Other Intangible Assets, Net

     The components of intangible assets are as follows:

		June 30, 2007												December 31, 2006
		Gross												Gross
		Carrying				Accumulated								Carrying				Accumulated
		Amount				Amortization				Net				Amount				Amortization				Net
										(In thousands)
Acquired technology		$	329,115			$	(39,203	)		$	289,912			$	311,939			$	(26,620	)		$	285,319
Licenses			236,223				(67,880	)			168,343				226,444				(60,316	)			166,128
Patents			132,982				(46,197	)			86,785				127,799				(42,184	)			85,615
Customer relationships			28,396				(4,724	)			23,672				27,043				(3,133	)			23,910
Customer contracts			21,890				(5,370	)			16,520				21,890				(4,027	)			17,863
Covenants not to compete			27,404				(24,576	)			2,828				24,831				(23,257	)			1,574
Other			15,636				(8,732	)			6,904				15,761				(7,743	)			8,018
Total finite-lived intangible assets			791,646				(196,682	)			594,964				755,707				(167,280	)			588,427
Intangible assets with an indefinite useful life			11,401				¾				11,401				11,401				¾				11,401
		$	803,047			$	(196,682	)		$	606,365			$	767,108			$	(167,280	)		$	599,828

     The estimated fair value of intangible assets obtained through acquisitions consummated in the preceding twelve months are based on preliminary information which is subject to change when final valuations are obtained.

     The Company has trademarks which are considered to have indefinite lives as the Company has the ability and intent to renew indefinitely. These trademarks had a carrying value of $11.4 million as of June 30, 2007 and December 31, 2006.

     Amortization expense was $13.2 million and $26.2 million for the three and six months ended June 30, 2007, respectively, and $12.8 million and $24.5 million for the three and six months ended June 30, 2006, respectively. Future estimated amortization expense for the carrying amount of intangible assets as of June 30, 2007 is expected to be as follows (in thousands):

Remainder of 2007		$	26,589
2008			51,755
2009			50,487
2010			49,596
2011			48,811

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

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

The components of our short-term borrowings are as follows:

		June 30,				December 31,
		2007				2006
		(In thousands)
Revolving credit facility		$	76,739			$	75,321
Canadian credit facility			9,297				6,854
Commercial paper program			68,061				490,808
Other short-term bank borrowings			99,746				60,010
Total Short-term Borrowings			253,843				632,993
Current Portion of Long-term Debt			14,597				15,743
Short-term Borrowings and Current Portion of Long-term Debt		$	268,440			$	648,736

     On June 18, 2007, the Company completed a $1.5 billion long-term debt offering comprised of (i) $600 million senior notes at a coupon rate of 5.95% with a maturity in June 2012, (ii) $600 million senior notes at a coupon rate of 6.35% with a maturity in June 2017 and (iii) $300 million senior notes at a coupon rate of 6.80% with a maturity in June 2037. Net proceeds of approximately $1.486 billion were used to repay outstanding borrowings on our commercial paper program and for general corporate purposes.

     The Company maintains a revolving credit agreement with a syndicate of banks of which JPMorgan Chase Bank is the Administrative Agent (“Revolving Credit Facility”). 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 borrowings of $76.7 million and $62.2 million in outstanding letters of credit under the Revolving Credit Facility at June 30, 2007. The weighted average interest rate on the outstanding borrowings of this facility was 4.3% at June 30, 2007. The Revolving Credit Facility requires the Company to maintain a debt-to-capitalization ratio of less than 60% and contains other covenants and representations customary for an investment-grade commercial credit. The Company was in compliance with these covenants at June 30, 2007.

     At June 30, 2007, the Company also maintained a Canadian dollar committed facility (“Canadian Credit Facility”) to support operations in that country. The Canadian Credit Facility provides for borrowings or letters of credit up to an aggregate of 25.0 million Canadian dollars, or $23.4 million, as of June 30, 2007. There were borrowings of $9.3 million and $0.4 million in outstanding letters of credit under the Canadian Credit Facility at June 30, 2007. The weighted average interest rate on the outstanding borrowings of this facility was 6.0% at June 30, 2007. Effective July 20, 2007, the Canadian Credit Facility was amended to convert it to an uncommitted facility.

     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 Facility. As of June 30, 2007, the Company had $68.1 million of outstanding commercial paper issuances with a weighted average maturity of 61 days. The weighted average interest rate related to outstanding commercial paper issuances at June 30, 2007 was 5.4%.

     The Company has short-term borrowings with various domestic and international institutions pursuant to uncommitted facilities. At June 30, 2007, the Company had $99.7 million in short-term borrowings under these arrangements with a weighted average interest rate of 6.5%. In addition, the Company had $109.5 million of letters of credit and bid and performance bonds outstanding under these uncommitted facilities.

9. Derivative Instruments

     Interest Rate Swaps

     The Company may use interest rate swap agreements to take advantage of available short-term interest rates. Amounts received or paid upon termination of the swap agreements represent the fair value of the agreements at the

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

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.

     As of June 30, 2007 and December 31, 2006, the Company had net unamortized gains of $13.2 million and $14.3 million, respectively, associated with interest rate swap terminations. The Company’s interest expense was reduced by $0.5 million and $1.1 million for the three and six months ended June 30, 2007, respectively, and $1.2 million and $3.0 million for the three and six months ended June 30, 2006, respectively, as a result of the Company’s interest rate swap activity. There were no interest rate swap agreements outstanding as of June 30, 2007.

     Cash Flow Hedges

     The Company may utilize 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 being amortized as an adjustment to interest expense over the remaining term of the related debt. There were no interest rate derivative agreements outstanding as of June 30, 2007.

     Other Derivative Instruments

     As of June 30, 2007, the Company had several foreign currency forward contracts and one option contract with notional amounts aggregating $522.3 million, which were entered into to hedge exposure to currency fluctuations in various foreign currencies, including the Argentine peso, the Australian dollar, the Brazilian real, the British pound sterling, the Canadian dollar, the Columbian peso, the euro, the Indian rupee, the New Zealand dollar, and the Thai baht. The total estimated change in fair value of these contracts compared to the original notional amount at June 30, 2007 resulted in a liability of $1.5 million. These derivative instruments were not designated as hedges and the changes in fair value of the contracts are recorded each period in current earnings.

     In addition, after the closing of the acquisition of Precision Energy Services and Precision Drilling International on August 31, 2005, 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, 2007, the Company had notional amounts outstanding of $364.3 million. The total estimated change in fair value of these contracts at June 30, 2007 compared to the original notional amount resulted in a liability of $46.9 million. These derivative instruments were not designated as hedges and the changes in fair value of the contracts are recorded each period in current earnings.

10. Income Taxes

     The Company’s effective tax rates were 36.8% and 29.5% for the three and six months ended June 30, 2007, respectively, and 29.0% for both the three and six months ended June 30, 2006. This percentage increase was due primarily to withholding taxes of $50.0 million required to be paid on a distribution made to one of our foreign subsidiaries net of the benefits realized from the refinement of the Company’s international tax structure and changes in the Company’s geographic earnings mix.

     The Company adopted the provisions of FIN No. 48 on January 1, 2007. The total amount of unrecognized tax benefits as of the date of adoption was $33.9 million. As a result of the implementation of FIN No. 48, the Company recognized a $1.1 million increase in the liability for unrecognized benefits accounted for as a $0.3 million increase to retained earnings (cumulative effect) and a $1.4 million increase to goodwill.

     Included in the balance of unrecognized tax benefits as January 1, 2007, are $27.6 million of tax benefits that, if recognized in future periods, would impact the Company’s effective tax rate. Also included in the balance of unrecognized tax benefits at January 1, 2007 are $6.3 million of tax benefits that, if recognized, would result in a decrease to goodwill in purchase business combinations.

     To the extent penalties and interest would be assessed on any underpayment of income tax, such amounts have been accrued and classified as a component of income tax expense in the financial statements. This is an accounting policy election made by the Company that is a continuation of the Company’s historical policy and will

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

continue to be consistently applied in the future. As of January 1, 2007, the Company has accrued $6.8 million of interest and penalties related to unrecognized tax benefits.

     At June 30, 2007, the Company had a $39.6 million liability recorded for unrecognized tax benefits. The Company has accrued $8.8 million of interest and penalties related to unrecognized tax benefits. The amount of unrecognized tax benefits that, if recognized in future periods, would affect the Company’s effective tax rate is $30.8 million. The balance of unrecognized tax benefits also includes $8.8 million of tax benefits that, if recognized in future periods, would result in a decrease to goodwill in purchase business combinations.

     The Company is subject to income tax in many of the approximately 100 countries where it operates including major operations in the United States, the United Kingdom, and Canada. Many of the Company’s subsidiaries are open to examination in the United Kingdom and Canada dating from 1998 and 1999, respectively through December 31, 2006. The Company is open to examination in the United States for tax years ended December 31, 2003 through December 31, 2006.

11. 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 diluted earnings per share calculation for the six months ended June 30, 2007 excludes 0.1 million stock options that were anti-dilutive. There were no anti-dilutive stock options during the three months ended June 30, 2007. The diluted earnings per share calculation for the three and six months ended June 30, 2006 excludes 16 thousand and eight thousand stock options that were anti-dilutive, respectively.

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

		Three Months								Six Months
		Ended June 30,								Ended June 30,
		2007				2006				2007				2006
Basic weighted average shares outstanding			338,331				348,853				338,670				349,006
Dilutive effect of:
Warrant			2,805				2,809				2,274				2,377
Stock option and restricted share plans			6,681				6,771				6,118				6,781
Diluted weighted average shares outstanding			347,817				358,433				347,062				358,164

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

12. Supplemental Cash Flow Information

     The following summarizes investing activities relating to acquisitions integrated into the Company’s operations for the periods shown:

		Six Months
		Ended June 30,
		2007				2006
		(In thousands)
Fair value of assets, net of cash acquired		$	108,591			$	42,944
Goodwill			150,256				68,355
Consideration paid related to prior year acquisitions			19,421				6,216
Total liabilities			(67,224	)			(11,438	)
Cash consideration, net of cash acquired		$	211,044			$	106,077

     Non-cash Activities

     During the six months ended June 30, 2007 there were non-cash investing activities of $20.0 million related to a note received in exchange for the sale of a minority interest in a subsidiary of the Company.

13. Share-Based Compensation

     The Company recognized employee share-based compensation expense of $20.7 million and $37.2 million during the three and six months ended June 30, 2007, respectively, and $14.1 million and $28.5 million during the three and six months ended June 30, 2006, respectively. The related income tax benefit recognized was $7.2 million and $13.0 million for the three and six months ended June 30, 2007, respectively, and $4.9 million and $10.0 million for the three and six month ended June 30, 2006, respectively. The Company capitalized share-based compensation during the three and six months ended June 30, 2007 in the amount of $0.2 million and $0.3 million, respectively, and $2.1 million and $2.3 million for the three and six months ended June 30, 2006, respectively.

     The unrecognized compensation cost related to the Company’s unvested stock options and restricted share grants as of June 30, 2007 was $8.8 million and $148.3 million, respectively, and both are expected to be recognized over a weighted-average period of 2.2 years.

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

14. Retirement and Employee Benefit Plans

     The Company has defined benefit pension and other post-retirement benefit plans covering certain U.S. and international employees. Plan benefits are generally based on factors such as age, compensation levels and years of service. During the current quarter, one of the U.S. plans was remeasured to incorporate significant events that occurred during the first quarter of 2007. The largest impact of the remeasurement was a $23.7 million loss generated as a result of compensation changes. The loss was recorded on the balance sheet as an increase to Other Liabilities with a corresponding decrease to Other Comprehensive Income, net of tax. The components of net periodic benefit cost for the three and six months ended June 30, 2007 and 2006 are as follows:

		Three Months Ended June 30,
		2007								2006
		United								United
		States				International				States				International
						(In thousands)
Service cost		$	671			$	2,736			$	609			$	2,344
Interest cost			1,430				2,022				1,016				1,631
Expected return on plan assets			(165	)			(1,960	)			(165	)			(1,546	)
Amortization of transition obligation			¾				(1	)			¾				(1	)
Amortization of prior service cost			494				(26	)			573				(26	)
Amortization of loss			1,433				37				471				122
Curtailment loss			1,484				¾				¾				¾
Settlement loss			¾				¾				2,770				¾
Net periodic benefit cost		$	5,347			$	2,808			$	5,274			$	2,524

		Six Months Ended June 30,
		2007								2006
		United								United
		States				International				States				International
						(In thousands)
Service cost		$	1,321			$	5,418			$	1,218			$	4,584
Interest cost			2,653				3,993				2,032				3,209
Expected return on plan assets			(330	)			(3,886	)			(330	)			(3,027	)
Amortization of transition obligation			¾				(2	)			¾				(2	)
Amortization of prior service cost			1,054				(52	)			1,145				(51	)
Amortization of loss			2,084				74				943				240
Curtailment loss			1,881				¾				¾				¾
Settlement loss			¾				¾				2,770				¾
Net periodic benefit cost		$	8,663			$	5,545			$	7,778			$	4,953

     The Company previously disclosed in its financial statements for the year ended December 31, 2006, that it expected to contribute $1.1 million in the U.S. and $9.7 million internationally to its pension and other postretirement benefit plans during 2007. As of June 30, 2007, approximately $0.3 million of contributions have been made in the U.S. and $5.0 million of contributions have been made internationally. Currently, the Company anticipates total contributions in the U.S. and internationally to approximate the original estimates previously disclosed.

15. Variable Interest Entities

     The Company acquired a 33% ownership interest in Premier Business Solutions (“PBS”) in June 2007. PBS conducts business in Russia and is the world’s largest electric submersible pump manufacturer by volume. PBS is considered to be a variable interest entity. For purposes of applying FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, the Company is not the primary beneficiary of PBS. As such, the Company accounts for this investment under the equity method of accounting and does not consolidate PBS. The Company’s

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

maximum exposure to loss as a result of its involvement with PBS is approximately $330 million. The Company’s investment in PBS is included in Equity Investments in Unconsolidated Affiliates in the accompanying Condensed Consolidated Balance Sheet at June 30, 2007.

16. Segment Information

     Reporting Segments

     The Company is a diversified international energy service and manufacturing company that provides a variety of services and equipment to the exploration, production and transmission sectors of the oil and natural gas industry. The Company operates in virtually every oil and natural gas exploration and production region in the world.

     The Company reviewed the presentation of its reporting segments during the first quarter of 2007. Based on this review, the Company determined that its operational performance would be segmented and reviewed on a geographic basis. As a result, the Company realigned its financial reporting segments and will now report the following regions as separate, distinct reporting segments as defined by the chief operating decision maker: (1) North America, (2) Latin America, (3) Europe/West Africa/CIS and (4) Middle East/North Africa/Asia. The Company’s historical segment data previously reported under the Evaluation, Drilling & Intervention Services and Completion & Production Systems divisions has been restated for all periods to conform to the new presentation.

     Financial information by segment is summarized below. Total assets at June 30, 2007 and December 31, 2006 do not include the assets of the Company’s discontinued operation. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

		Three Months Ended June 30, 2007
		Net								Depreciation
		Operating				Income from				and				Total Assets at
		Revenues (b)				Operations				Amortization				June 30, 2007
						(In thousands)
North America		$	883,364			$	191,956			$	66,959			$	5,756,259
Latin America			206,604				44,981				17,118				1,037,120
Europe/West Africa/CIS			290,639				68,778				20,936				1,696,114
Middle East/North Africa/Asia			435,338				96,998				36,951				2,600,239
			1,815,945				402,713				141,964				11,089,732
Corporate and Other (a)			¾				(75,272	)			2,578				599,179
Total		$	1,815,945			$	327,441			$	144,542			$	11,688,911

		Six Months Ended June 30, 2007
		Net								Depreciation
		Operating				Income from				and
		Revenues (b)				Operations				Amortization
		(In thousands)
North America		$	1,889,997			$	491,480			$	128,723
Latin America			412,546				92,930				33,857
Europe/West Africa/CIS			535,597				123,535				39,171
Middle East/North Africa/Asia			830,090				180,266				73,118
			3,668,230				888,211				274,869
Corporate and Other (a)			¾				(145,056	)			5,188
Total		$	3,668,230			$	743,155			$	280,057

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

		Three Months Ended June 30, 2006
		Net								Depreciation				Total Assets at
		Operating				Income from				and				December 31,
		Revenues (b)				Operations				Amortization				2006
						(In thousands)
North America		$	839,753			$	222,276			$	53,829			$	5,290,389
Latin America			178,637				33,575				15,251				959,141
Europe/West Africa/CIS			205,092				45,178				16,084				1,272,906
Middle East/North Africa/Asia			315,094				57,806				27,263				2,330,911
			1,538,576				358,835				112,427				9,853,347
Corporate and Other (a)			¾				(58,345	)			2,567				252,408
Total		$	1,538,576			$	300,490			$	114,994			$	10,105,755

		Six Months Ended June 30, 2006
		Net								Depreciation
		Operating				Income from				and
		Revenues (b)				Operations				Amortization
		(In thousands)
North America		$	1,762,187			$	484,689			$	107,318
Latin America			340,732				58,737				30,701
Europe/West Africa/CIS			382,316				79,353				31,821
Middle East/North Africa/Asia			589,352				104,120				55,397
			3,074,587				726,899				225,237
Corporate and Other (a)			¾				(114,410	)			5,246
Total		$	3,074,587			$	612,489			$	230,483

17. Condensed Consolidating Financial Statements

     The following obligations of Weatherford International, Inc. (“Issuer”) were guaranteed by Weatherford International Ltd. (“Parent”) as of June 30, 2007: (i) the 6 5/8% Senior Notes, (ii) the 5.95% Senior Notes, (iii) the 6.35% Senior Notes, and (iv) the 6.80% Senior Notes. As of December 31, 2006, the 6 5/8% Senior Notes of the Issuer were guaranteed by the Parent.

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

     The following obligations of the Parent were guaranteed by the Issuer as of June 30, 2007 and December 31, 2006: (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
June 30, 2007
(unaudited)
(In thousands)

										Other
		Parent				Issuer				Subsidiaries				Eliminations				Consolidation
ASSETS
Current Assets:
Cash and Cash Equivalents		$	24			$	747			$	114,733			$	¾			$	115,504
Other Current Assets			4,941				1,167				3,754,677				¾				3,760,785
			4,965				1,914				3,869,410				¾				3,876,289
Equity Investments in Affiliates			11,119,716				3,992,990				13,758,026				(28,870,732	)			¾
Shares Held in Parent			¾				127,208				727,838				(855,046	)			¾
Intercompany Receivables, Net			(606,685	)			1,356,551				¾				(749,866	)			¾
Other Assets			42,063				18,269				7,792,778				¾				7,853,110
		$	10,560,059			$	5,496,932			$	26,148,052			$	(30,475,644	)		$	11,729,399
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt		$	68,812			$	65,658			$	133,970			$	¾			$	268,440
Accounts Payable and Other Current Liabilities			31,439				7,217				1,206,195				¾				1,244,851
			100,251				72,875				1,340,165				¾				1,513,291
Long-term Debt			1,198,698				1,851,151				22,581				¾				3,072,430
Intercompany Payables, Net			¾				¾				749,866				(749,866	)			¾
Other Long-term Liabilities			98,124				34,097				396,032				¾				528,253
Shareholders’ Equity			9,162,986				3,538,809				23,639,408				(29,725,778	)			6,615,425
		$	10,560,059			$	5,496,932			$	26,148,052			$	(30,475,644	)		$	11,729,399

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

Condensed Consolidating Balance Sheet
December 31, 2006
(In thousands)

										Other
		Parent				Issuer				Subsidiaries				Eliminations				Consolidation
ASSETS
Current Assets:
Cash and Cash Equivalents		$	35			$	2,271			$	123,981			$	¾			$	126,287
Other Current Assets			131				3,739				3,261,618				¾				3,265,488
			166				6,010				3,385,599				¾				3,391,775
Equity Investments in Affiliates			10,009,855				3,502,589				12,935,625				(26,448,069	)			¾
Shares Held in Parent			¾				132,541				548,575				(681,116	)			¾
Intercompany Receivables, Net			329,237				1,333,181				¾				(1,662,418	)			¾
Other Assets			40,897				8,517				6,698,059				¾				6,747,473
		$	10,380,155			$	4,982,838			$	23,567,858			$	(28,791,603	)		$	10,139,248
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt		$	491,542			$	9,272			$	147,922			$	¾			$	648,736
Accounts Payable and Other Current Liabilities			33,788				3,887				1,356,734				¾				1,394,409
			525,330				13,159				1,504,656				¾				2,043,145
Long-term Debt			1,198,973				355,318				10,309				¾				1,564,600
Intercompany Payables, Net			¾				¾				1,662,418				(1,662,418	)			¾
Other Long-term Liabilities			72,789				57,119				226,796				¾				356,704
Shareholders’ Equity			8,583,063				4,557,242				20,163,679				(27,129,185	)			6,174,799
		$	10,380,155			$	4,982,838			$	23,567,858			$	(28,791,603	)		$	10,139,248

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

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	)			(1,483,065	)			¾				(1,489,493	)
Equity in Earnings of Unconsolidated Affiliates			¾				¾				989				¾				989
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