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 September 30, 2007

OR

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

For the transition period from                      to                     

Commission file number 1-31339

WEATHERFORD INTERNATIONAL LTD.

(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

(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 October 26, 2007
Common Shares, par value $1.00		337,283,227

 

 

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

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

		September 30,				December 31,
		2007				2006
		(unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents		$	125,998			$	126,287
Accounts Receivable, Net of Allowance for Uncollectible Accounts of $14,985 and $13,452, Respectively			1,868,458				1,560,849
Inventories			1,639,095				1,239,034
Other Current Assets			538,656				465,605
			4,172,207				3,391,775
Property, Plant and Equipment, Net of Accumulated Depreciation of $2,256,751 and $1,925,177, Respectively			3,807,593				2,979,271
Goodwill			3,325,182				3,000,589
Other Intangible Assets, Net			609,468				599,828
Equity Investments in Unconsolidated Affiliates			356,212				31,175
Other Assets			168,740				136,610
		$	12,439,402			$	10,139,248
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt		$	431,051			$	648,736
Accounts Payable			556,202				509,942
Other Current Liabilities			745,620				884,467
			1,732,873				2,043,145
Long-term Debt			3,064,508				1,564,600
Deferred Tax Liabilities			230,470				136,208
Other Liabilities			329,787				220,496
Commitments and Contingencies
Shareholders’ Equity:
Common Shares, $1 Par Value, Authorized 1,000,000 Shares, Issued 363,344 and 361,921 Shares, Respectively			363,344				361,921
Capital in Excess of Par Value			4,363,424				4,275,534
Treasury Shares, Net			(849,368	)			(681,116	)
Retained Earnings			2,839,171				2,099,307
Accumulated Other Comprehensive Income			365,193				119,153
			7,081,764				6,174,799
		$	12,439,402			$	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								Nine Months
		Ended September 30,								Ended September 30,
		2007				2006				2007				2006
Revenues:
Products		$	777,243			$	634,415			$	2,136,346			$	1,805,029
Services			1,194,748				1,062,338				3,503,875				2,966,311
			1,971,991				1,696,753				5,640,221				4,771,340
Costs and Expenses
Cost of Products			544,295				439,132				1,647,318				1,242,189
Cost of Services			728,952				638,714				1,982,753				1,818,291
Research and Development			43,199				38,241				124,413				112,045
Selling, General and Administrative Attributable to Segments			211,532				192,363				634,727				557,417
Corporate General and Administrative			28,573				24,718				94,194				71,251
Equity in (Earnings) Losses of Unconsolidated Affiliates			(4,149	)			190				(5,928	)			(5,737	)
Operating Income			419,589				363,395				1,162,744				975,884
Other Expense:
Interest Expense, Net			(50,194	)			(27,487	)			(119,258	)			(70,066	)
Other, Net			1,282				332				(7,024	)			(10,417	)
Income from Continuing Operations Before Income Taxes and Minority Interest			370,677				336,240				1,036,462				895,401
Provision for Income Taxes			(70,429	)			(94,022	)			(267,078	)			(256,428	)
Income from Continuing Operations Before Minority Interest			300,248				242,218				769,384				638,973
Minority Interest, Net of Taxes			(5,324	)			(6,076	)			(14,161	)			(7,812	)
Income from Continuing Operations			294,924				236,142				755,223				631,161
Loss from Discontinued Operation, Net of Taxes			(2,211	)			(1,939	)			(15,628	)			(6,794	)
Net Income		$	292,713			$	234,203			$	739,595			$	624,367
Basic Earnings Per Share:
Income from Continuing Operations		$	0.87			$	0.68			$	2.23			$	1.81
Loss from Discontinued Operation			—				—				(0.05	)			(0.02	)
Net Income		$	0.87			$	0.68			$	2.18			$	1.79
Diluted Earnings Per Share:
Income from Continuing Operations		$	0.85			$	0.67			$	2.17			$	1.77
Loss from Discontinued Operation			(0.01	)			(0.01	)			(0.04	)			(0.02	)
Net Income		$	0.84			$	0.66			$	2.13			$	1.75
Weighted Average Shares Outstanding:
Basic			338,176				345,733				338,506				347,915
Diluted			348,248				354,471				347,458				356,905

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)

		Nine Months
		Ended September 30,
		2007				2006
Cash Flows from Operating Activities:
Net Income		$	739,595			$	624,367
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization			439,034				353,963
Gain on Sales of Assets, Net			(35,188	)			(23,040	)
Loss from Discontinued Operation			15,628				6,794
Equity in Earnings of Unconsolidated Affiliates			(5,928	)			(5,737	)
Employee Share-Based Compensation Expense			57,109				43,017
Excess Tax Benefits from Share-Based Compensation			(20,396	)			(194	)
Minority Interest			14,161				7,812
Deferred Income Tax Provision (Benefit)			140,884				(19,283	)
Other, Net			15,022				8,520
Change in Operating Assets and Liabilities, Net of Effect of Businesses Acquired			(829,469	)			(277,701	)
Net Cash Provided by Operating Activities- Continuing Operations			530,452				718,518
Net Cash Used by Operating Activities- Discontinued Operation			(9,014	)			(4,433	)
Net Cash Provided by Operating Activities			521,438				714,085
Cash Flows from Investing Activities:
Acquisitions of Businesses, Net of Cash Acquired			(224,878	)			(162,192	)
Capital Expenditures for Property, Plant and Equipment			(1,097,470	)			(707,103	)
Acquisition of Intellectual Property			(17,683	)			(28,469	)
Purchase of Equity Investment in Unconsolidated Affiliates			(334,520	)			—
Proceeds from Sale of Assets and Business, Net			59,927				22,132
Net Cash Used by Investing Activities- Continuing Operations			(1,614,624	)			(875,632	)
Net Cash Used by Investing Activities- Discontinued Operation			(22,361	)			(13,547	)
Net Cash Used by Investing Activities			(1,636,985	)			(889,179	)
Cash Flows from Financing Activities:
Repayments on Short-term Debt, Net			(228,256	)			(121,716	)
Borrowings of Long-term Debt, Net			1,474,773				735,920
Purchase of Treasury Shares			(179,262	)			(507,646	)
Proceeds from Exercise of Stock Options			30,753				54,003
Excess Tax Benefits from Share-Based Compensation			20,396				194
Other Financing Activities, Net			(3,146	)			386
Net Cash Provided by Financing Activities-Continuing Operations			1,115,258				161,141
Net Cash Provided by Financing Activities-Discontinued Operation			—				—
Net Cash Provided by Financing Activities			1,115,258				166,141
Net Decrease in Cash and Cash Equivalents			(289	)			(13,953	)
Cash and Cash Equivalents at Beginning of Period			126,287				134,245
Cash and Cash Equivalents at End of Period		$	125,998			$	120,292
Supplemental Cash Flow Information:
Interest Paid		$	110,766			$	64,453
Income Taxes Paid, Net of Refunds			241,887				111,888

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								Nine Months
		Ended September 30,								Ended September 30,
		2007				2006				2007				2006
Net Income		$	292,713			$	234,203			$	739,595			$	624,367
Other Comprehensive Income:
Reclassification Adjustment for Deferred Gain (Loss), Net on Derivative Instruments			39				(1,499	)			114				4,790
Pension Adjustments			1,026				—				5,608				—
Pension Remeasurement Loss			—				—				(15,427	)			—
Foreign Currency Translation Adjustment			127,370				19,381				255,745				81,248
Comprehensive Income		$	421,148			$	252,085			$	985,635			$	710,405

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 September 30, 2007, Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2007 and 2006, and Condensed Consolidated Statements of Cash Flows for the nine months ended September 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 and updated on the Company’s Current Report on Form 8-K filed October 9, 2007. The results of operations for the three and nine months ended September 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 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

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

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.

     During the three and nine months ended September 30, 2007, the Company effected various acquisitions that were integrated into the Company’s operations for total consideration of $12.5 million and $204.1 million, respectively.

     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 September 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:

		September 30,				December 31,
		2007				2006
		(In thousands)
Raw materials, components and supplies		$	350,739			$	330,006
Work in process			123,767				98,920
Finished goods			1,164,589				810,108
		$	1,639,095			$	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. The Company expects the sale of this business to be finalized within the next nine 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 $15.6 million loss from discontinued operation for the nine months ended September 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								Nine Months
		Ended September 30,								Ended September 30,
		2007				2006				2007				2006
						(In thousands)
Revenues		$	856			$	¾			$	2,062			$	¾
Loss Before Income Taxes		$	3,272			$	2,517			$	19,971			$	9,333
Benefit for Income Taxes			1,061				578				4,343				2,539
Loss from Discontinued Operation, Net of Taxes		$	2,211			$	1,939			$	15,628			$	6,794

     Balance sheet information for the discontinued operation is as follows:

		September 30,				December 31,
		2007				2006
		(In thousands)
Other Current Assets		$	3,938			$	1,715
Property, Plant and Equipment, Net			37,272				24,377
Other Assets			3,012				7,401
Current Assets Held for Sale		$	44,222			$	33,493
Accounts Payable		$	732			$	2,553
Other Current Liabilities			1,373				4,826
Other Liabilities			262				¾
Current Liabilities Held for Sale		$	2,367			$	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). This impairment test 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 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 nine months ended September 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			33,676				—				132,463				3,200				169,339
Purchase price and other adjustments			(167	)			4,854				(2,539	)			194				2,342
Impact of foreign currency translation			124,920				3,319				19,421				5,252				152,912
As of September 30, 2007		$	1,917,515			$	154,680			$	649,031			$	603,956			$	3,325,182

7. Other Intangible Assets, Net

     The components of intangible assets are as follows:

		September 30, 2007												December 31, 2006
		Gross Carrying				Accumulated								Gross Carrying				Accumulated
		Amount				Amortization				Net				Amount				Amortization				Net
										(In thousands)
Acquired technology		$	342,267			$	(46,699	)		$	295,568			$	311,939			$	(26,620	)		$	285,319
Licenses			237,531				(71,663	)			165,868				226,444				(60,316	)			166,128
Patents			135,426				(48,366	)			87,060				127,799				(42,184	)			85,615
Customer relationships			29,532				(5,669	)			23,863				27,043				(3,133	)			23,910
Customer contracts			21,890				(5,993	)			15,897				21,890				(4,027	)			17,863
Covenants not to compete			28,077				(25,195	)			2,882				24,831				(23,257	)			1,574
Other			16,212				(9,283	)			6,929				15,761				(7,743	)			8,018
Total finite-lived intangible assets			810,935				(212,868	)			598,067				755,707				(167,280	)			588,427
Intangible assets with an indefinite useful life			11,401				—				11,401				11,401				—				11,401
		$	822,336			$	(212,868	)		$	609,468			$	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 September 30, 2007 and December 31, 2006.

     Amortization expense was $13.6 million and $39.8 million for the three and nine months ended September 30, 2007, respectively, and $12.9 million and $37.4 million for the three and nine months ended September 30, 2006, respectively. Future estimated amortization expense for the carrying amount of intangible assets as of September 30, 2007 is expected to be as follows (in thousands):

Remainder of 2007		$	13,506
2008			53,254
2009			51,911
2010			50,968
2011			50,157

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:

		September 30,				December 31,
		2007				2006
		(In thousands)
Revolving credit facility		$	224,000			$	75,321
Commercial paper program			69,865				490,808
Other short-term bank borrowings			122,158				66,864
Total Short-term Borrowings			416,023				632,993
Current Portion of Long-term Debt			15,028				15,743
Short-term Borrowings and Current Portion of Long-term Debt		$	431,051			$	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 (“5.95% Senior Notes”), (ii) $600 million senior notes at a coupon rate of 6.35% with a maturity in June 2017 (“6.35% Senior Notes”) and (iii) $300 million senior notes at a coupon rate of 6.80% with a maturity in June 2037 (“6.80% Senior Notes”). 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 $224.0 million and $74.6 million in outstanding letters of credit under the Revolving Credit Facility at September 30, 2007. The weighted average interest rate on the outstanding borrowings of this facility was 5.7% at September 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 September 30, 2007.

     The Company maintained a committed Canadian dollar facility to support operations in that country prior to July 20, 2007, when it was converted 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. The weighted average interest rate related to outstanding commercial paper issuances at September 30, 2007 was 5.5%.

     The Company has short-term borrowings with various domestic and international institutions pursuant to uncommitted facilities. At September 30, 2007, the Company had $122.2 million in short-term borrowings under these arrangements with a weighted average interest rate of 5.7%. In addition, the Company had $118.2 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 swaps to take advantage of available short-term interest rates. Amounts received or paid upon termination of the swaps represent the fair value of the swaps at the time of termination and are recorded as an adjustment to the carrying value of the related debt. These amounts are amortized as a reduction to interest expense over the remaining term of the debt.

     As of September 30, 2007 and December 31, 2006, the Company had net unamortized gains of $12.6 million and $14.3 million, respectively, associated with interest rate swap terminations. The Company’s interest expense was reduced by $0.6 million and $1.7 million for the three and nine months ended September 30, 2007, respectively, and $0.5 million and $3.5 million for the three and nine months ended September 30, 2006, respectively, as a result

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

of the Company’s interest rate swap activity. There were no interest rate swaps outstanding as of September 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 hedges 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 hedges outstanding as of September 30, 2007.

     Other Derivative Instruments

     As of September 30, 2007, the Company had several foreign currency forward contracts and one option contract with notional amounts aggregating $554.1 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 Colombian peso, the euro, the Hungarian forint, the Indonesian rupiah, the Kazakhstani tenge, the New Zealand dollar, the Norwegian krone, the Russian ruble, the Singapore dollar and the Thai baht. The total estimated change in fair value of these contracts compared to the original notional amount at September 30, 2007 resulted in an asset 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 September 30, 2007, the Company had notional amounts outstanding of $364.3 million. The total estimated change in fair value of these contracts at September 30, 2007 compared to the original notional amount resulted in a liability of $78.3 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 19.0% and 25.8% for the three and nine months ended September 30, 2007, respectively, and 28.0% and 28.6% for the three and nine months ended September 30, 2006, respectively. The decrease in the effective tax rate was primarily due to the benefits realized from the refinement of the Company’s international tax structure and changes in geographic earnings mix. This decrease was partially offset by a $50.0 million withholding tax payment required to be paid on a distribution made to one of the Company’s foreign subsidiaries.

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

     At September 30, 2007, the Company had a $39.5 million liability recorded for unrecognized tax benefits. The Company has accrued $9.4 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

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

$30.7 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, 2004 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 nine months ended September 30, 2007 excludes 80 thousand stock options that were anti-dilutive. There were no anti-dilutive stock options during the three months ended September 30, 2007. The diluted earnings per share calculation for the three and nine months ended September 30, 2006 excludes 57 thousand and 24 thousand stock options that were anti-dilutive, respectively.

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

		Three Months								Nine Months
		Ended September30,								Ended September 30,
		2007				2006				2007				2006
Basic weighted average shares outstanding			338,176				345,733				338,506				347,915
Dilutive effect of:
Warrant			3,125				2,251				2,557				2,307
Stock option and restricted share plans			6,947				6,487				6,395				6,683
Diluted weighted average shares outstanding			348,248				354,471				347,458				356,905

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:

		Nine Months
		Ended September 30,
		2007				2006
		(In thousands)
Fair value of assets, net of cash acquired		$	109,907			$	87,178
Goodwill			169,339				119,770
Consideration paid related to prior year acquisitions			20,797				6,539
Total liabilities			(75,165	)			(51,295	)
Cash consideration, net of cash acquired		$	224,878			$	162,192

     Non-cash Activities

     During the nine months ended September 30, 2007 there were non-cash investing activities of $20.0 million related to a note received in exchange for the sale of an equity investment of the Company.

13. Share-Based Compensation

     The Company recognized employee share-based compensation expense of $19.9 million and $57.1 million during the three and nine months ended September 30, 2007, respectively, and $14.6 million and $43.0 million during the three and nine months ended September 30, 2006, respectively. The related income tax benefit recognized was $7.0 million and $20.0 million for the three and nine months ended September 30, 2007, respectively, and $5.1 million and $15.1 million for the three and nine months ended September 30, 2006, respectively. The Company capitalized share-based compensation during the three and nine months ended September 30, 2007 in the amount of $0.2 million and $0.5 million, respectively, and $0.2 million and $2.5 million for the three and nine months ended September 30, 2006, respectively.

     The unrecognized compensation cost related to the Company’s unvested stock options and restricted share grants as of September 30, 2007 was $8.0 million and $168.6 million, respectively, and are expected to be recognized over a weighted-average period of 2.9 years and 2.2 years, respectively.

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 second quarter of 2007, one of the U.S. plans was remeasured to incorporate significant events that occurred within the plan. 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 nine months ended September 30, 2007 and 2006 are as follows:

		Three Months Ended September 30,
		2007								2006
										United
		United States				International				States				International
						(In thousands)
Service cost		$	660			$	2,798			$	610			$	2,408
Interest cost			1,326				2,060				1,002				1,659
Expected return on plan assets			(165	)			(2,001	)			(144	)			(1,551	)
Amortization of transition obligation			—				(1	)			—				(1	)
Amortization of prior service cost			527				(27	)			572				(27	)
Amortization of loss			1,043				39				474				127
Curtailment loss			—				—				—				—
Settlement loss			—				—				—				—
Net periodic benefit cost		$	3,391			$	2,868			$	2,514			$	2,615

		Nine Months Ended September 30,
		2007								2006
										United
		United States				International				States				International
						(In thousands)
Service cost		$	1,981			$	8,216			$	1,828			$	6,992
Interest cost			3,979				6,053				3,034				4,868
Expected return on plan assets			(495	)			(5,887	)			(474	)			(4,578	)
Amortization of transition obligation			—				(3	)			—				(3	)
Amortization of prior service cost			1,581				(79	)			1,717				(78	)
Amortization of loss			3,127				113				1,417				367
Curtailment loss			1,881				—				—				—
Settlement loss			—				—				2,770				—
Net periodic benefit cost		$	12,054			$	8,413			$	10,292			$	7,568

     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 September 30, 2007, approximately $0.9 million of contributions have been made in the U.S. and $6.9 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 maximum exposure to loss as a result of its involvement with PBS is approximately $337 million at September 30,

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

2007. The Company’s investment in PBS is included in Equity Investments in Unconsolidated Affiliates in the accompanying Condensed Consolidated Balance Sheet at September 30, 2007.   

16. Segment Information

     Products and Services

     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 composition of the Company’s consolidated revenues by product-line is as follows:

		Three Months								Nine Months
		Ended September 30,								Ended September 30,
		2007				2006				2007				2006
Artificial Lift Systems			18	%			18	%			17	%			18	%
Well Construction			16				16				16				15
Drilling Services			16				14				15				15
Drilling Tools			11				12				12				11
Completion Systems			10				10				10				10
Wireline			8				10				8				10
Re-entry & Fishing			7				8				8				8
Stimulation & Chemicals			6				6				7				6
Integrated Drilling			5				5				5				5
Pipeline & Specialty Services			3				1				2				2
Total			100	%			100	%			100	%			100	%

     Reporting Segments

     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 now reports 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 September 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 September 30, 2007
		Net								Depreciation				Total Assets at
		Operating				Income from				and				September 30,
		Revenues (b)				Operations				Amortization				2007
						(In thousands)
North America		$	993,828			$	264,183			$	74,047			$	6,070,091
Latin America			213,644				45,453				18,880				1,125,582
Europe/West Africa/CIS			308,587				73,884				22,926				1,809,351
Middle East/North Africa/Asia			455,932				103,692				40,983				2,747,233
			1,971,991				487,212				156,836				11,752,257
Corporate and Other (a)			¾				(67,623	)			2,141				642,923
Total		$	1,971,991			$	419,589			$	158,977			$	12,395,180

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

		Nine Months Ended September 30, 2007
		Net								Depreciation
		Operating				Income from				and
		Revenues (b)				Operations				Amortization
		(In thousands)
North America		$	2,883,825			$	755,663			$	202,770
Latin America			626,190				138,383				52,737
Europe/West Africa/CIS			844,184				197,419				62,097
Middle East/North Africa/Asia			1,286,022				283,958				114,101
			5,640,221				1,375,423				431,705
Corporate and Other (a)			¾				(212,679	)			7,329
Total		$	5,640,221			$	1,162,744			$	439,034

		Three Months Ended September 30, 2006
		Net								Depreciation				Total Assets at
		Operating				Income from				and				December 31,
		Revenues (b)				Operations				Amortization				2006
						(In thousands)
North America		$	954,007			$	281,484			$	58,102			$	5,290,389
Latin America			173,953				27,877				16,856				959,141
Europe/West Africa/CIS			215,270				46,049				16,460				1,272,906
Middle East/North Africa/Asia			353,523				71,134				29,653				2,330,911
			1,696,753				426,544				121,071				9,853,347
Corporate and Other (a)			¾				(63,149	)			2,409				252,408
Total		$	1,696,753			$	363,395			$	123,480			$	10,105,755

		Nine Months Ended September 30, 2006
		Net								Depreciation
		Operating				Income from				and
		Revenues (b)				Operations				Amortization
		(In thousands)
North America		$	2,716,194			$	766,173			$	165,420
Latin America			514,685				86,614				47,557
Europe/West Africa/CIS			597,586				125,402				48,281
Middle East/North Africa/Asia			942,875				175,254				85,050
			4,771,340				1,153,443				346,308
Corporate and Other (a)			¾				(177,559	)			7,655
Total		$	4,771,340			$	975,884			$	353,963

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

had intersegment revenues of approximately $272 million, $72 million, $168 million and $153 million for North America, Latin America, Europe/West Africa/CIS and Middle East/North Africa/Asia, respectively.

17. New Accounting Pronouncements

     In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles (“GAAP”) and expands disclosures about fair value measurements. SFAS No. 157 applies to other accounting pronouncements that require or permit fair value measurements. The new guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS No. 157 on its consolidated financial position, results of operations and cash flows.

     In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). This standard allows companies to elect to follow fair value accounting for certain financial assets and liabilities in an effort to mitigate volatility in earnings without having to apply complex hedge accounting provisions. SFAS No. 159 is applicable only to certain financial instruments and is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the potential impact, if any, of the adoption of SFAS No. 159 on its consolidated financial position, results of operations and cash flows.

18. Condensed Consolidating Financial Statements

     The following obligations of Weatherford International, Inc. (“Issuer”) were guaranteed by Weatherford International Ltd. (“Parent”) as of September 30, 2007: (i) $350.0 million of 6 5/8% senior notes due 2011 (“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.

     The following obligations of the Parent were guaranteed by the Issuer as of September 30, 2007 and December 31, 2006: (i) the Revolving Credit Facility, (ii) $250.0 million of 4.95% senior notes due 2013 (“4.95% Senior Notes”), (iii) $350.0 million of 5.50% senior notes due 2016 (“5.50% Senior Notes”), (iv) $600.0 million of 6.50% senior notes due 2036 (“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
September 30, 2007
(unaudited)
(In thousands)

										Other
		Parent				Issuer				Subsidiaries				Eliminations				Consolidation
ASSETS
Current Assets:
Cash and Cash Equivalents		$	25			$	23,478			$	102,495			$	¾			$	125,998
Other Current Assets			12,502				1,167				4,032,540				¾				4,046,209
			12,527				24,645				4,135,035				¾				4,172,207
Equity Investments in Affiliates			11,392,440				4,268,347				13,750,508				(29,411,295	)			¾
Shares Held in Parent			¾				121,523				727,845				(849,368	)			¾
Intercompany Receivables, Net			(468,049	)			1,307,810				¾				(839,761	)			¾
Other Assets			52,866				19,929				8,194,400				¾				8,267,195
		$	10,989,784			$	5,742,254			$	26,807,788			$	(31,100,424	)		$	12,439,402
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt		$	130,624			$	92,540			$	207,887			$	¾			$	431,051
Accounts Payable and Other Current Liabilities			18,492				36,547				1,246,783				¾				1,301,822
			149,116				129,087				1,454,670				¾				1,732,873
Long-term Debt			1,198,559				1,850,874				15,075				¾				3,064,508
Intercompany Payables, Net			¾				¾				839,761				(839,761	)			¾
Other Long-term Liabilities			99,900				23,023				437,334				¾				560,257
Shareholders’ Equity			9,542,209				3,739,270				24,060,948				(30,260,663	)			7,081,764
		$	10,989,784			$	5,742,254			$	26,807,788			$	(31,100,424	)		$	12,439,402

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