e10vq

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, 2005


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 incorporation or organization)		(I.R.S. Employer Identification No.)

515 Post Oak Boulevard Suite 600 Houston, Texas		77027-3415

(Address of principal executive offices)		(Zip Code)

(713) 693-4000

(Registrant’s telephone number, include area code)

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

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

Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes þ No o

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 26, 2005

Common Shares, par value $1.00		138,760,991

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
	ITEM 2. UNREGISTERED SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS
SIGNATURES
EXHIBIT INDEX
Certification of CEO pursuant to Section 302
Certification of CFO pursuant to Section 302
Certification of CEO pursuant to Section 906
Certification of CFO pursuant to Section 906

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,
	2005			2004
	(unaudited)
ASSETS

Current Assets:
Cash and Cash Equivalents	$	305,671		$	317,439
Accounts Receivable, Net of Allowance for Uncollectible Accounts of $14,111 and $15,910, Respectively		809,394			742,291
Inventories		764,676			679,607
Other Current Assets		209,359			191,391
Current Assets from Discontinued Operation		7,493			12,450

		2,096,593			1,943,178


Property, Plant and Equipment, Net		1,427,884			1,377,182
Goodwill		1,666,455			1,669,637
Other Intangible Assets, Net		289,562			294,593
Equity Investments in Unconsolidated Affiliates		174,302			170,202
Other Assets		106,838			88,384
Long-term Assets from Discontinued Operation		689			306

	$	5,762,323		$	5,543,482


LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt	$	30,825		$	22,235
Accounts Payable		270,149			279,763
Current Portion of Zero Coupon Convertible Senior Debentures		582,182			—
Other Current Liabilities		332,288			346,320
Current Liabilities from Discontinued Operation		9,526			11,688

		1,224,970			660,006


Long-term Debt		828,971			830,853
Zero Coupon Convertible Senior Debentures		—			573,578
Deferred Tax Liabilities		32,767			30,580
Other Liabilities		134,814			135,076

Commitments and Contingencies

Shareholders’ Equity:
Common Shares, $1 Par Value, Authorized 500,000 Shares, Issued 146,474 and 145,279 Shares, Respectively		146,474			145,279
Capital in Excess of Par Value		2,593,965			2,531,365
Treasury Shares, Net		(195,856	)		(228,064	)
Retained Earnings		911,302			735,518
Accumulated Other Comprehensive Income		84,916			129,291

		3,540,801			3,313,389

	$	5,762,323		$	5,543,482

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,
	2005			2004			2005			2004
Revenues:
Products	$	427,228		$	400,162		$	855,996		$	754,232
Services		510,067			342,026			939,005			700,596

		937,295			742,188			1,795,001			1,454,828

Costs and Expenses:
Cost of Products		298,692			294,821			595,242			552,039
Cost of Services		335,527			222,608			621,713			462,880
Research and Development		23,903			20,021			44,922			39,274
Selling, General and Administrative Attributable to Segments		129,441			106,555			240,924			208,727
Corporate General and Administrative		17,341			12,186			36,967			23,554
Equity in Earnings of Unconsolidated Affiliates		(6,578	)		(6,025	)		(6,754	)		(11,278	)


Operating Income		138,969			92,022			261,987			179,632


Other Income (Expense):
Gain on Sale of Universal Common Stock		¾			25,280			¾			25,280
Interest Expense, Net		(13,379	)		(15,054	)		(27,037	)		(30,728	)
Other, Net		3,272			(1,251	)		2,693			(623	)

Income from Continuing Operations Before Income Taxes		128,862			100,997			237,643			173,561
Provision for Income Taxes		(34,137	)		(19,965	)		(62,483	)		(39,029	)

Income from Continuing Operations		94,725			81,032			175,160			134,532
Income (Loss) from Discontinued Operation, Net of Taxes		463			(7,143	)		624			(8,038	)

Net Income	$	95,188		$	73,889		$	175,784		$	126,494


Basic Earnings (Loss) Per Share:
Income from Continuing Operations	$	0.68		$	0.61		$	1.27		$	1.01
Income (Loss) from Discontinued Operation		0.01			(0.05	)		0.00			(0.06	)

Net Income	$	0.69		$	0.56		$	1.27		$	0.95


Diluted Earnings (Loss) Per Share:
Income from Continuing Operations	$	0.64		$	0.57		$	1.19		$	0.95
Income (Loss) from Discontinued Operation		0.00			(0.05	)		0.00			(0.05	)

Net Income	$	0.64		$	0.52		$	1.19		$	0.90


Weighted Average Shares Outstanding:
Basic		138,936			133,107			138,375			132,710
Diluted		153,513			147,597			152,792			147,273

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,
	2005			2004
Cash Flows from Operating Activities:
Net Income	$	175,784		$	126,494
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization		140,439			125,527
Gain on Sale of Universal Common Stock		¾			(25,280	)
(Gain) Loss on Sales of Assets, Net		(2,504	)		942
(Income) Loss from Discontinued Operation		(624	)		8,038
Equity in Earnings of Unconsolidated Affiliates		(6,754	)		(11,278	)
Employee Stock-based Compensation Expense		13,448			3,722
Amortization of Original Issue Discount		8,604			8,351
Deferred Income Tax Provision (Benefit)		5,583			(3,923	)
Other, Net		4,320			1,017
Change in Operating Assets and Liabilities, Net of Effect of Businesses Acquired		(201,200	)		(79,965	)

Net Cash Provided by Continuing Operations		137,096			153,645
Net Cash Provided (Used) by Discontinued Operation		3,051			(526	)

Net Cash Provided by Operating Activities		140,147			153,119


Cash Flows from Investing Activities:
Acquisitions of Businesses, Net of Cash Acquired		(26,237	)		(13,100	)
Capital Expenditures for Property, Plant and Equipment		(191,094	)		(136,973	)
Acquisition of Intellectual Property		(6,830	)		(13,085	)
Purchase of Equity Investment in Unconsolidated Affiliate, Net		(1,351	)		(1,606	)
Proceeds from Sale of Universal Common Stock		¾			89,998
Proceeds from Sale of Property, Plant and Equipment		7,044			8,939

Net Cash Used by Investing Activities		(218,468	)		(65,827	)


Cash Flows from Financing Activities:
Borrowings (Repayments) of Short-term Debt, Net		7,928			(120,862	)
Repayments of Long-term Debt, Net		(1,195	)		(5,842	)
Proceeds from Asset Securitization		¾			5,000
Proceeds from Exercise of Stock Options		62,320			38,573
Other Financing Activities, Net		(2,500	)		(463	)

Net Cash Provided (Used) by Financing Activities		66,553			(83,594	)


Net Increase (Decrease) in Cash and Cash Equivalents		(11,768	)		3,698
Cash and Cash Equivalents at Beginning of Period		317,439			56,082

Cash and Cash Equivalents at End of Period	$	305,671		$	59,780


Supplemental Cash Flow Information:
Interest Paid	$	27,891		$	34,640
Income Taxes Paid, Net of Refunds		54,563			48,566

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, 2005, Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2005 and 2004, and Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004. 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, 2004 and the notes thereto included in the Company’s Annual Report on Form 10-K, as amended on Form 10-K/A. The results of operations for the three and six months ended June 30, 2005 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.

On June 6, 2005, the Company signed a definitive agreement to purchase Precision Drilling Corporation’s Energy Services Division and International Contract Drilling Division for aggregate consideration of 26 million common shares and approximately 1.1 billion Canadian dollars in cash. The transaction is expected to be completed during the third quarter of 2005 and is subject to regulatory approvals and to other customary closing conditions.

2. Discontinued Operation

In June 2004, the Company’s management approved a plan to sell its non-core Gas Services International (“GSI”) compression fabrication business. The sale of this business was finalized in July 2005 for approximately $0.5 million subject to working capital adjustments. The GSI compression fabrication business was historically included in the Company’s Production Systems segment. In accordance with Statement of Financial Accounting Standard (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”), the GSI compression fabrication business results of operations, financial position and cash flows have been reflected in the condensed consolidated financial statements and notes as a discontinued operation for all periods presented.

The $7.1 million and $8.0 million loss from discontinued operations for the three and six months ended June 30, 2004 include non-cash charges of $5.2 million. The non-cash charges consist of a $3.1 million goodwill and asset impairment charge and an income tax provision of $2.1 million to record a valuation allowance against deferred tax assets from net operating losses that the Company will not be able to utilize.

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,
	2005		2004			2005		2004
			(In thousands)
Revenues	$	12,478	$	6,693		$	20,794	$	20,859


Income (Loss) Before Income Taxes	$	29	$	(5,030	)	$	190	$	(6,153	)
Benefit (Provision) for Income Taxes		434		(2,113	)		434		(1,885	)

Income (Loss) from Discontinued Operation, Net of Taxes	$	463	$	(7,143	)	$	624	$	(8,038	)

Balance sheet information for the discontinued operation is as follows:


	June 30,		December 31,
	2005		2004
	(In thousands)
Accounts Receivable, Net of Allowance for Uncollectible Accounts	$	4,640	$	1,759
Inventories		2,048		9,533
Other Current Assets		805		1,158

Current Assets from Discontinued Operation		7,493		12,450


Property, Plant and Equipment, Net		143		175
Other Assets		546		131

Long-term Assets from Discontinued Operation		689		306

	$	8,182	$	12,756


Accounts Payable	$	6,101	$	7,567
Other Current Liabilities		3,425		4,121

Current Liabilities from Discontinued Operation	$	9,526	$	11,688

3. Universal Compression

The Company has an investment in Universal Compression Holdings, Inc. (“Universal”). In 2004, the Company sold 7.0 million shares of Universal common stock. This sale reduced the Company’s ownership to 6.75 million shares, or approximately 21%, of Universal’s outstanding common stock.

Summarized financial information for Universal is presented below:


	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2005		2004		2005		2004
			(In thousands)
Revenues	$	207,684	$	184,874	$	401,320	$	375,584
Gross Profit		85,982		73,748		165,134		150,536
Net Income		18,136		11,785		13,646		23,510

The financial statements of Universal for the fiscal year ended March 31, 2005 were filed as an amendment to the Company’s Form 10-K on June 10, 2005.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

4. 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’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 Company’s reporting units correspond to the Company’s business segments, namely Drilling Services and Production Systems. The fair value is determined using discounted cash flows and other market-related valuation models, including earnings multiples and comparable asset market values. The Company will continue to test its goodwill annually as of October 1 unless events occur or circumstances change between annual tests that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The changes in the carrying amount of goodwill for the six months ended June 30, 2005 are as follows:


	Drilling			Production
	Services			Systems			Total
				(In thousands)
As of January 1, 2005	$	871,924		$	797,713		$	1,669,637
Goodwill acquired during period		21,776			2,443			24,219
Disposals		¾			(4,174	)		(4,174	)
Purchase price and other adjustments		(5,622	)		3,703			(1,919	)
Impact of foreign currency translation		(6,981	)		(14,327	)		(21,308	)

As of June 30, 2005	$	881,097		$	785,358		$	1,666,455

5. Other Intangible Assets, Net

The components of definite-lived intangible assets are as follows:


	June 30, 2005							December 31, 2004
	Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated
	Amount		Amortization			Net		Amount		Amortization			Net
						(In thousands)
Licenses	$	204,529	$	(42,401	)	$	162,128	$	203,728	$	(36,549	)	$	167,179
Patents		112,686		(29,602	)		83,084		107,630		(26,609	)		81,021
Covenants not to compete		22,094		(18,741	)		3,353		21,986		(17,625	)		4,361
Other		13,026		(5,317	)		7,709		12,923		(4,392	)		8,531

	$	352,335	$	(96,061	)	$	256,274	$	346,267	$	(85,175	)	$	261,092

Amortization expense was $5.6 million and $11.5 million for the three and six months ended June 30, 2005, respectively, and $5.7 million and $11.5 million for the three and six months ended June 30, 2004, respectively. Estimated amortization expense for the carrying amount of intangible assets as of June 30, 2005 is expected to be $11.3 million for the remainder of 2005, $21.7 million for 2006, $19.6 million for 2007, $18.0 million for 2008 and $17.5 million for 2009.

The Company has trademarks associated with its 2001 acquisition of the Johnson Screens division from Vivendi Environnement, which are considered to have indefinite lives as the Company has the ability and intent to renew indefinitely. These trademarks are classified in Other Intangible Assets, Net on the accompanying Condensed Consolidated Balance Sheets and had a carrying value of $8.0 million as of June 30, 2005 and December 31, 2004, respectively. 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.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

The Company has intangible assets recorded for unrecognized prior service costs related to its Supplemental Executive Retirement Plan (“SERP”) and several of its international pension plans (See Note 13). These unrecognized costs are classified in Other Intangible Assets, Net on the accompanying Condensed Consolidated Balance Sheets and were $25.3 million and $25.5 million as of June 30, 2005 and December 31, 2004, respectively.

6. Inventories

Inventories by category are as follows:


	June 30,		December 31,
	2005		2004
	(In thousands)
Raw materials, components and supplies	$	180,167	$	167,569
Work in process		58,018		49,701
Finished goods		526,491		462,337

	$	764,676	$	679,607

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

7. Short-term Debt


	June 30,		December 31,
	2005		2004
	(In thousands)
2003 Revolving credit facility	$	¾	$	¾
Short-term bank loans		18,890		11,072

Total short-term borrowings		18,890		11,072
Current portion of long-term debt		11,935		11,163

Short-term Borrowings and Current Portion of Long-term Debt	$	30,825	$	22,235

In May 2003, the Company entered into a three-year unsecured revolving credit facility agreement that provides for borrowings or issuances of letters of credit of up to an aggregate of $500.0 million. Amounts outstanding accrue interest at a variable rate based on either the U.S. prime rate or London Interbank Offered Rate (“LIBOR”) and the credit rating assigned to the Company’s long-term senior debt. The facility contains customary affirmative and negative covenants, including a maximum debt to capitalization ratio, a minimum interest coverage ratio, a limitation on liens, a limitation on incurrence of indebtedness and a limitation on asset dispositions. The Company was in compliance with these covenants at June 30, 2005. As of June 30, 2005, the Company had $481.8 million available under this agreement due to $18.2 million being used to secure outstanding letters of credit.

During 2004, the Company entered into three short-term committed credit facilities to support its operations at the regional level. The Canadian facility provides that borrowings or letters of credit may be issued under the facility up to an aggregate of 20 million Canadian dollars, or $16.2 million as of June 30, 2005. The Middle East and Asia Pacific facilities provide that borrowings or letters of credit may be issued under the facilities up to an aggregate of $25.0 million per facility. As of June 30, 2005, there were $2.7 million in outstanding borrowings and $28.6 million in outstanding letters of credit under the three facilities combined.

The Company has short-term borrowings with various domestic and international institutions pursuant to uncommitted facilities. As of June 30, 2005, the Company had $16.2 million in short-term borrowings outstanding under these arrangements with a weighted average interest rate of 6.52%.

8. Interest Rate Derivatives

During 2004, the Company entered into and terminated interest rate swap agreements on its 4.95% Senior Notes due 2013 (“4.95% Senior Notes”) and its 6 5/8% Senior Notes due 2011 (“6 5/8% Senior Notes”) to take advantage of short-term interest rates available in the economic environment at that time. As a result of these terminations, the

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

Company received cash proceeds, net of accrued interest, of approximately $12.8 million. Amounts received upon termination of the swap agreements represented the fair market value of the agreements at the time of termination and were recorded as an adjustment to the carrying value of the related debt. The amounts are being amortized as a reduction to interest expense over the remaining term of the debt. The Company’s interest expense was reduced by $1.6 million and $3.3 million for the three and six months ended June 30, 2005, respectively, and $3.6 million and $6.6 million for the three and six months ended June 30, 2004, respectively, as a result of its interest rate swap activity. There were no interest rate swap agreements outstanding as of June 30, 2005 or December 31, 2004.

9. Zero Coupon Convertible Senior Debentures

On June 30, 2000, the Company completed the private placement of $910.0 million face amount of Zero Coupon Convertible Senior Debentures due 2020 (the “Zero Coupon Debentures”). These debentures were issued at $501.6 million, providing the holders with an annual 3% yield to maturity. At June 30, 2005, the accreted amount of these debentures was $582.2 million.

Holders may convert the Zero Coupon Debentures into common shares at any time before maturity at a conversion rate of 9.9970 shares per $1,000 principal amount at maturity. The holders could require the Company to repurchase the Zero Coupon Debentures on June 30, 2005, June 30, 2010 and June 30, 2015 at the accreted amount. The Company may elect to repurchase the debentures in common shares, cash or a combination thereof.

On June 30, 2005, certain holders of these debentures required the Company to repurchase $11.0 million of face value for an aggregate accreted value of $7.1 million. The Company settled this obligation during July 2005 by utilizing available cash on hand. The repurchase price has been presented in Current Portion of Zero Coupon Convertible Senior Debentures on the Condensed Consolidated Balance Sheet as of June 30, 2005.

The Company also has the right to redeem the Zero Coupon Debentures for cash at the accreted amount on or after June 30, 2005. On July 28, 2005, the Company announced that it is calling for redemption on August 29, 2005 all of the outstanding Zero Coupon Debentures (See Note 17).

10. Earnings Per Share

Basic earnings per share for all periods presented equals net income divided by the weighted average number of Weatherford International Ltd. common shares, $1.00 par value (“Common Shares”), outstanding during the period. Diluted earnings per share is computed by dividing net income, as adjusted for the assumed conversion of dilutive debentures, 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, warrant and the incremental shares for the assumed conversion of dilutive debentures.

For the three and six months ended June 30, 2005, there were no anti-dilutive stock options, therefore, the effect of all stock options were included in the diluted earnings per share calculation for that period. However, the diluted earnings per share calculation for the three and six months ended June 30, 2004 excludes 0.4 million stock options that were anti-dilutive. Net income for the diluted earnings per share calculation for the three and six months ended June 30, 2005 and 2004 is adjusted to add back the amortization of original issue discount, net of taxes, relating to the Company’s Zero Coupon Debentures totaling $3.0 million and $5.9 million, respectively, and $2.9 million and $5.7 million, respectively.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

The following reconciles basic and diluted weighted average shares outstanding:


	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2005		2004		2005		2004
			(In thousands)
Basic weighted average shares outstanding		138,936		133,107		138,375		132,710
Dilutive effect of:
Warrant		1,043		975		749		975
Stock option and restricted share plans		4,437		4,418		4,571		4,491
Convertible debentures		9,097		9,097		9,097		9,097

Diluted weighted average shares outstanding		153,513		147,597		152,792		147,273

11. 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,
	2005			2004
	(In thousands)
Fair value of assets, net of cash acquired	$	4,490		$	9,248
Goodwill		24,219			6,471
Consideration paid related to prior year acquisitions		1,946			2,514
Total liabilities assumed		(4,418	)		(5,133	)

Cash consideration, net of cash acquired	$	26,237		$	13,100

12. Stock-Based Compensation

During the first quarter of 2005, the Company issued approximately 1.2 million restricted shares at an average stock price of $49.44 to certain key employees. The restricted shares generally vest over a four-year period based on continued employment, with an equal amount of the restricted shares vesting on each anniversary of the grant date. During the three and six months ended June 30, 2005 the Company recognized $5.5 million and $11.3 million, respectively, and $1.4 million and $2.3 million for the three and six months ended June 30, 2004, respectively, in employee stock-based compensation expense related to the issuance of all restricted share grants.

Effective January 1, 2003, the Company adopted SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”), to expense the fair value of employee stock-based compensation. The Company selected the prospective method of adoption, and under this method, the fair value of employee stock-based compensation granted subsequent to January 1, 2003 is measured at the grant date based on the fair value of the award and is recognized as an expense over the service period, which is usually the vesting period. The Company accounts for employee stock-based compensation granted, modified or settled prior to January 2003 using the intrinsic method of accounting as prescribed by Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees. Under the intrinsic method, no compensation expense is recognized when the exercise price of an employee stock option is equal to the market price of Common Shares on the grant date. The following illustrates the pro forma effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to all outstanding and unvested awards in each period:

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)


	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2005			2004			2005			2004
	(In thousands, except per share amounts)
Net Income:
As reported	$	95,188		$	73,889		$	175,784		$	126,494
Employee stock-based compensation expense included in reported net income, net of income tax benefit		4,300			1,140			8,742			2,419
Pro forma compensation expense, determined under fair value methods for all awards, net of income tax benefit		(8,221	)		(5,967	)		(16,242	)		(12,280	)

Pro forma		91,267		$	69,062			168,284		$	116,633

Basic earnings per share:
As reported	$	0.69		$	0.56		$	1.27		$	0.95
Pro forma		0.66			0.52			1.22			0.88
Diluted earnings per share:
As reported	$	0.64		$	0.52		$	1.19		$	0.90
Pro forma		0.61			0.49			1.14			0.83

For purposes of pro forma disclosures, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. The estimated fair value of the options is amortized to pro forma expense over the option’s vesting period.

13. 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. The components of net periodic benefit cost for the three and six months ended June 30, 2005 and 2004 are as follows:


	Three Months Ended June 30,
	2005						2004
	United States			International			United States			International
				(In thousands)
Service cost	$	633		$	1,993		$	440		$	1,375
Interest cost		881			1,148			632			787
Expected return on plan assets		(208	)		(882	)		(232	)		(705	)
Amortization of transition obligation		¾			(1	)		¾			¾
Amortization of prior service cost		657			82			657			22
Amortization of loss		309			11			25			280

Net periodic benefit cost	$	2,272		$	2,351		$	1,522		$	1,759

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)


	Six Months Ended June 30,
	2005						2004
	United States			International			United States			International
				(In thousands)
Service cost	$	1,266		$	4,010		$	881		$	2,768
Interest cost		1,761			2,311			1,264			1,583
Expected return on plan assets		(415	)		(1,777	)		(464	)		(1,419	)
Amortization of transition obligation		¾			(2	)		¾			¾
Amortization of prior service cost		1,314			166			1,314			44
Amortization of loss		618			21			50			303

Net periodic benefit cost	$	4,544		$	4,729		$	3,045		$	3,279

The Company previously disclosed in its financial statements for the year ended December 31, 2004, that it expected to contribute $0.1 million in the U.S. and $8.4 million internationally to its pension and other postretirement benefit plans during 2005. As of June 30, 2005, approximately $40 thousand of contributions have been made in the U.S. and $2.3 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.

14. Segment Information

Business 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 divides its business into two separate segments as defined by the chief operating decision maker: Drilling Services and Production Systems.

The Company’s Drilling Services segment provides a wide range of oilfield products and services, including drilling services and equipment, well installation services and cementing products and equipment, underbalanced systems, fishing and intervention services, pipeline and specialty services, liner systems and expandable solid tubular systems.

The Company’s Production Systems segment designs, manufactures, sells and services a complete line of artificial lift equipment, including progressing cavity pumps, reciprocating rod lift systems, gas lift systems, electrical submersible pumps, product optimization services and automation and monitoring of wellhead production. This segment also provides certain completion products and systems including cased hole systems, flow control systems, sand screens, expandable sand screen systems and intelligent completion technologies. Production Systems also provides screens for industrial applications and total process system solutions for all aspects of natural gas production.

Financial information by industry segment for each of the three and six months ended June 30, 2005 and 2004 is summarized below. The accounting policies of the segments are the same as those of the Company. Inter-segment sales are not material.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)


	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2005			2004			2005			2004
				(In thousands)
Revenues from unaffiliated customers:
Drilling Services	$	533,422		$	424,912		$	1,020,066		$	828,631
Production Systems		403,873			317,276			774,935			626,197

	$	937,295		$	742,188		$	1,795,001		$	1,454,828


Depreciation and amortization:
Drilling Services	$	50,268		$	45,634		$	100,440		$	90,998
Production Systems		19,486			16,840			38,868			33,317
Corporate		563			628			1,131			1,212

	$	70,317		$	63,102		$	140,439		$	125,527


Operating income (expense):
Drilling Services	$	109,322		$	77,135		$	211,756		$	144,017
Production Systems		40,410			21,048			80,444			47,891
Corporate (a)		(10,763	)		(6,161	)		(30,213	)		(12,276	)

	$	138,969		$	92,022		$	261,987		$	179,632


(a)		Includes equity in earnings of unconsolidated affiliates.

As of June 30, 2005, total assets were $2,875.3 million for Drilling Services, $2,138.1 million for Production Systems, and $740.7 million for Corporate. Total assets as of December 31, 2004, were $2,746.3 million for Drilling Services, $2,055.1 million for Production Systems and $729.3 million for Corporate. The total assets do not include the assets of the Company’s discontinued operation.

15. Condensed Consolidating Financial Statements

As of June 30, 2005 and December 31, 2004, the following obligations of Weatherford International, Inc. (the “Issuer”) were guaranteed by Weatherford International Ltd. (the “Parent”): (1) the 7 1/4% Senior Notes, (2) the 6 5/8% Senior Notes and (3) the Zero Coupon Debentures. The following obligations of Parent were guaranteed by Issuer as of June 30, 2005 and December 31, 2004: (i) the 2003 Revolving Credit Facility and (ii) the 4.95% Senior Notes. 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, including investments in consolidated subsidiaries, to conform to the current presentation.

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

Condensed Consolidating Balance Sheet
June 30, 2005
(unaudited)
(In thousands)


					Other
	Parent		Issuer		Subsidiaries		Eliminations			Consolidation
ASSETS

Current Assets:
Cash and Cash Equivalents	$	4,885	$	40,633	$	260,153	$	¾		$	305,671
Other Current Assets		897		53,010		1,737,015		¾			1,790,922


		5,782		93,643		1,997,168		¾			2,096,593


Equity Investments in Unconsolidated Affiliates		154,429		¾		19,873		¾			174,302
Equity Investments in Affiliates		4,404,403		2,105,239		7,028,888		(13,538,530	)		¾
Shares Held in Parent		¾		195,856		¾		(195,856	)		¾
Intercompany Receivables, Net		37,551		2,418,930		¾		(2,456,481	)		¾
Other Assets		33,945		5,191		3,452,292		¾			3,491,428

	$	4,636,110	$	4,818,859	$	12,498,221	$	(16,190,867	)	$	5,762,323


LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt	$	685	$	588,775	$	23,547	$	¾		$	613,007
Accounts Payable and Other Current Liabilities		3,224		14,377		594,362		¾			611,963

		3,909		603,152		617,909		¾			1,224,970


Long-term Debt		255,663		558,083		15,225		¾			828,971
Intercompany Payables, Net		¾		¾		2,456,481		(2,456,481	)		¾
Other Long-term Liabilities		33,205		68,417		65,959		¾			167,581
Shareholders’ Equity		4,343,333		3,589,207		9,342,647		(13,734,386	)		3,540,801

	$	4,636,110	$	4,818,859	$	12,498,221	$	(16,190,867	)	$	5,762,323

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(UNAUDITED)

Condensed Consolidating Balance Sheet
December 31, 2004
(In thousands)


					Other
	Parent		Issuer		Subsidiaries		Eliminations			Consolidation
ASSETS

Current Assets:
Cash and Cash Equivalents	$	138,979	$	74,053	$	104,407	$	¾		$	317,439
Other Current Assets		1,149		52,900		1,571,690		¾			1,625,739

		140,128		126,953		1,676,097		¾			1,943,178


Equity Investments in Unconsolidated Affiliates		151,798		¾		18,404		¾			170,202
Equity Investments in Affiliates		3,987,900		1,897,325		6,925,407		(12,810,632	)		¾
Shares Held in Parent		¾		228,064		¾		(228,064	)		¾
Intercompany Receivables, Net		¾		2,366,608		¾		(2,366,608	)		¾
Other Assets		34,026		7,379		3,388,697		¾			3,430,102

	$	4,313,852	$	4,626,329	$	12,008,605	$	(15,405,304	)	$	5,543,482


LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:
Short-term Borrowings and Current Portion of Long-term Debt	$	669	$	6,115	$	15,451	$	¾		$	22,235
Accounts Payable and Other Current Liabilities		4,645		7,578		625,548		¾			637,771
		5,314		13,693		640,999		¾			660,006


Long-term Debt		255,989		1,133,263		15,179		¾			1,404,431
Intercompany Payables, Net		50,978		¾		2,315,630		(2,366,608	)		¾
Other Long-term Liabilities		28,727		68,998		67,931		¾			165,656
Shareholders’ Equity		3,972,844		3,410,375		8,968,866		(13,038,696	)		3,313,389

	$	4,313,852	$	4,626,329	$	12,008,605	$	(15,405,304	)	$	5,543,482

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

Condensed Consolidating Statements of Operations
Three Months Ended June 30, 2005
(unaudited)
(In thousands)


							Other
	Parent			Issuer			Subsidiaries			Eliminations			Consolidation
Revenues	$	¾		$	¾		$	937,295		$	¾		$	937,295
Costs and Expenses		(2,240	)		(294	)		(802,370	)		¾			(804,904	)
Equity in Earnings of Unconsolidated Affiliates		3,756			¾			2,822			¾			6,578

Operating Income (Loss)		1,516			(294	)		137,747			¾			138,969


Other Income (Expense):
Interest Expense, Net		(351	)		(12,076	)		(952	)		¾			(13,379	)
Intercompany Charges, Net		36,482			57,559			(24,668	)		(69,373	)		¾
Equity in Subsidiary Income		128,779			90,238			¾			(219,017	)		¾
Other, Net		(1,865	)		(1,827	)		6,964			¾			3,272

Income (Loss) from Continuing Operations Before Income Taxes		164,561			133,600			119,091			(288,390	)		128,862
Provision for Income Taxes		¾			(4,821	)		(29,316	)		¾			(34,137	)

Income (Loss) from Continuing Operations		164,561			128,779			89,775			(288,390	)		94,725
Income from Discontinued Operation, Net of Taxes		¾			¾			463			¾			463

Net Income (Loss)	$	164,561		$	128,779		$	90,238		$	(288,390	)	$	95,188

Condensed Consolidating Statements of Operations
Three Months Ended June 30, 2004
(unaudited)
(In thousands)


							Other
	Parent			Issuer			Subsidiaries			Eliminations			Consolidation
Revenues	$	¾		$	¾		$	742,188		$	¾		$	742,188
Costs and Expenses		(359	)		(522	)		(655,310	)		¾			(656,191	)
Equity in Earnings of Unconsolidated Affiliates		5,212			¾			813			¾			6,025

Operating Income (Loss)		4,853			(522	)		87,691			¾			92,022


Other Income (Expense):
Gain on Sale of Universal Common Stock		25,280			¾			¾			¾			25,280
Interest Expense, Net		(2,570	)		(10,971	)		(1,513	)		¾			(15,054	)
Intercompany Charges, Net		(6,451	)		17,188			(10,737	)		¾			¾
Equity in Subsidiary Income		53,088			48,969			¾			(102,057	)		¾
Other, Net		121			(44	)		(1,328	)		¾			(1,251	)

Income (Loss) from Continuing Operations Before Income Taxes		74,321			54,620			74,113			(102,057	)		100,997
Provision for Income Taxes		(432	)		(1,532	)		(18,001	)		¾			(19,965	)

Income (Loss) from Continuing Operations		73,889			53,088			56,112			(102,057	)		81,032
Loss from Discontinued Operation, Net of Taxes		¾			¾			(7,143	)		¾			(7,143	)

Net Income (Loss)	$	73,889		$	53,088		$	48,969		$	(102,057	)	$	73,889

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

Condensed Consolidating Statements of Operations
Six Months Ended June 30, 2005
(unaudited)
(In thousands)


							Other
	Parent			Issuer			Subsidiaries			Eliminations			Consolidation
Revenues	$	¾		$	¾		$	1,795,001		$	¾		$	1,795,001
Costs and Expenses		(5,144	)		(341	)		(1,534,283	)		¾			(1,539,768	)
Equity in Earnings of Unconsolidated Affiliates		2,631			¾			4,123			¾			6,754

Operating Income (Loss)		(2,513	)		(341	)		264,841			¾			261,987


Other Income (Expense):
Interest Expense, Net		(2,887	)		(23,826	)		(324	)		¾			(27,037	)
Intercompany Charges, Net		67,317			86,571			(16,116	)		(137,772	)		¾
Equity in Subsidiary Income		253,634			202,160			¾			(455,794	)		¾
Other, Net		(2,587	)		(1,772	)		7,052			¾			2,693

Income (Loss) from Continuing Operations Before Income Taxes		312,964			262,792			255,453			(593,566	)		237,643
Provision for Income Taxes		592			(9,158	)		(53,917	)		¾			(62,483	)

Income (Loss) from Continuing Operations		313,556			253,634			201,536			(593,566	)		175,160
Income from Discontinued Operation, Net of Taxes		¾			¾			624			¾			624

Net Income (Loss)	$	313,556		$	253,634		$	202,160		$	(593,566	)	$	175,784

Condensed Consolidating Statements of Operations
Six Months Ended June 30, 2004
(unaudited)
(In thousands)


							Other
	Parent			Issuer			Subsidiaries			Eliminations			Consolidation
Revenues	$	¾		$	¾		$	1,454,828		$	¾		$	1,454,828
Costs and Expenses		(1,097	)		(891	)		(1,284,486	)		¾			(1,286,474	)
Equity in Earnings of Unconsolidated Affiliates		10,073			¾			1,205			¾			11,278

Operating Income (Loss)		8,976			(891	)		171,547			¾			179,632


Other Income (Expense):
Gain on Sale of Universal Common Stock		25,280			¾			¾			¾			25,280
Interest Expense, Net		(6,344	)		(21,662	)		(2,722	)		¾			(30,728	)
Intercompany Charges, Net		(7,994	)		89,544			(8,321	)		(73,229	)		¾
Equity in Subsidiary Income		179,586			122,835			¾			(302,421	)		¾
Other, Net		658			(53	)		(1,228	)		¾			(623	)

Income (Loss) from Continuing Operations Before Income Taxes		200,162			189,773			159,276			(375,650	)		173,561
Provision for Income Taxes		(439	)		(10,187	)		(28,403	)		¾			(39,029	)

Income (Loss) from Continuing Operations		199,723			179,586			130,873			(375,650	)		134,532
Loss from Discontinued Operation, Net of Taxes		¾			¾			(8,038	)		¾			(8,038	)

Net Income (Loss)	$	199,723		$	179,586		$	122,835		$	(375,650	)	$	126,494

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

Condensed Consolidating Statements of Cash Flows
Six Months Ended June 30, 2005
(unaudited)
(In thousands)


							Other
	Parent			Issuer			Subsidiaries			Eliminations			Consolidation
Cash Flows from Operating Activities:
Net Income (Loss)	$	313,556		$	253,634		$	202,160		$	(593,566	)	$	175,784
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by Operating Activities:
Equity in Earnings of Unconsolidated Affiliates		(2,631	)		¾			(4,123	)		¾			(6,754	)
Equity in Earnings of Affiliates		(253,634	)		(202,160	)		¾			455,794			¾
Charges from Parent or Subsidiary		(67,317	)		(86,571	)		16,116			137,772			¾
Deferred Income Tax Provision (Benefit)		¾			9,103			(3,520	)		¾			5,583
Other, Net		(35,538	)		(13,198	)		11,219			—			(37,517	)

Net Cash Provided (Used) by Continuing Operations		(45,564	)		(39,192	)		221,852			¾			137,096
Net Cash Used by Discontinued Operation		¾			¾			3,051			¾			3,051
Net Cash Provided (Used) by Operating Activities		(45,564	)		(39,192	)		224,903			¾			140,147

Cash Flows from Investing Activities:
Acquisition of Businesses, Net of Cash Acquired		¾			¾			(26,237	)		¾			(26,237	)
Capital Expenditures for Property, Plant and Equipment		¾			¾			(191,094	)		¾			(191,094	)
Acquisition of Intellectual Property		¾			¾			(6,830	)		¾			(6,830	)
Proceeds from Sales of Property, Plant and Equipment		¾			¾			7,044			¾			7,044
Other, Net		¾			¾			(1,351	)		¾			(1,351	)

Net Cash Used by Investing Activities		¾			¾			(218,468	)		¾			(218,468	)


Cash Flows from Financing Activities:
Repayments of Short-term Debt, Net		¾			¾			7,928			¾			7,928
Repayments of Long-term Debt, Net		¾			(1,761	)		566			¾			(1,195	)
Borrowings (Repayments) Between Subsidiaries, Net		(88,530	)		(52,324	)		140,854			¾			¾
Proceeds from Exercise of Stock Options		¾			62,320			¾			¾			62,320
Other, Net		¾			(2,463	)		(37	)		¾			(2,500	)

Net Cash Provided (Used) by Financing Activities		(88,530	)		5,772			149,311			¾			66,553


Net Increase (Decrease) in Cash and Cash Equivalents		(134,094	)		(33,420	)		155,746			¾			(11,768	)
Cash and Cash Equivalents at Beginning of Period		138,979			74,053			104,407			¾			317,439

Cash and Cash Equivalents at End of Period	$	4,885		$	40,633		$	260,153		$	¾		$	305,671

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

Condensed Consolidating Statements of Cash Flows
Six Months Ended June 30, 2004
(unaudited)
(In thousands)


							Other
	Parent			Issuer			Subsidiaries			Eliminations			Consolidation
Cash Flows from Operating Activities:
Net Income (Loss)	$	199,723		$	179,586		$	122,835		$	(375,650	)	$	126,494
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by Operating Activities:
Equity in Earnings of Unconsolidated Affiliates		(10,073	)		¾			(1,205	)		¾			(11,278	)
Equity in Earnings of Affiliates		(179,586	)		(122,835	)		¾			302,421			¾
Gain on Sale of Universal Common Stock		(25,280	)		¾			¾			¾			(25,280	)
Charges from Parent or Subsidiary		7,994			(89,544	)		8,321			73,229			¾
Deferred Income Tax Provision (Benefit)		34			10,187			(14,144	)		¾			(3,923	)
Other, Net		67,632			(29,488	)		29,488			¾			67,632

Net Cash Provided (Used) by Continuing Operations		60,444			(52,094	)		145,295			¾			153,645
Net Cash Used by Discontinued Operation		¾			¾			(526	)		¾			(526	)
Net Cash Provided (Used) by Operating Activities		60,444			(52,094	)		144,769			¾			153,119


Cash Flows from Investing Activities:
Acquisition of Businesses, Net of Cash Acquired		¾			¾			(13,100	)		¾			(13,100	)
Capital Expenditures for Property, Plant and Equipment		¾			¾			(136,973	)		¾			(136,973	)
Acquisition of Intellectual Property		¾			¾			(13,085	)		¾			(13,085	)
Proceeds from Sale of Universal Common Stock		89,998			¾			¾			¾			89,998
Proceeds from Sales of Property, Plant and Equipment		¾			¾			8,939			¾			8,939
Other		¾			¾			(1,606	)		¾			(1,606	)

Net Cash Used by Investing Activities		89,998			¾			(155,825	)		¾			(65,827	)


Cash Flows from Financing Activities:
Borrowings (Repayments) of Short-term Debt, Net		(144,000	)		25,340			(2,202	)		¾			(120,862	)
Repayments of Long-term Debt, Net		¾			(559	)		(5,283	)		¾			(5,842	)
Proceeds from Asset Securitization		¾			¾			5,000			¾			5,000
Borrowings (Repayments) Between Subsidiaries, Net		(7,786	)		(13,156	)		20,942			¾			¾
Proceeds from Exercise of Stock Options		¾			38,573			¾			¾			38,573
Other, Net		¾			¾			(463	)		¾			(463	)

Net Cash Provided (Used) by Financing Activities		(151,786	)		50,198			17,994			¾			(83,594	)


Net Increase (Decrease) in Cash and Cash Equivalents		(1,344	)		(1,896	)		6,938			¾			3,698
Cash and Cash Equivalents at Beginning of Period		1,582			2,959			51,541			¾			56,082

Cash and Cash Equivalents at End of Period	$	238		$	1,063		$	58,479		$	¾		$	59,780

WEATHERFORD INTERNATIONAL LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(UNAUDITED)

16. New Accounting Pronouncement

In December 2004, the FASB issued SFAS No. 123 (Revised 2004) Share-Based Payment (“SFAS No. 123R”). SFAS No. 123R addresses all forms of share-based payment awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. SFAS No. 123R requires all share-based payments to employees to be recognized in the financial statements based on their fair values. In April 2005, the Securities and Exchange Commission (“SEC”) issued Release No. 2005-57 which permits implementation of SFAS No. 123R at the beginning of the next fiscal year instead of the next reporting period as required by SFAS No. 123R. In addition, the SEC, in March 2005, issued Staff Accounting Bulletin No. 107 (“SAB No. 107”). SAB No. 107 provides guidance regarding the interaction between SFAS No. 123R and SEC rules and regulations. The Company does not believe the adoption of SFAS No. 123R and SAB No. 107 will have a material impact on its results of operations and financial position as essentially all grants either vest during 2005 or are already reflected in the Company’s results.

17. Subsequent Event

On July 28, 2005, the Company called for the redemption of all of the outstanding Zero Coupon Debentures. The Company intends to fund the redemption price, which is expected to approximate $578.0 million, from cash on hand and borrowings under its revolving credit agreement. Holders of the Zero Coupon Debentures retain the right to convert their Debenture into the Company’s common shares prior to the redemption date. This amount has been presented in Current Portion of Zero Coupon Convertible Senior Debentures in the Condensed Consolidated Balance Sheet as of June 30, 2005.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) with an executive level overview. This overview provides a general description of our company today, a discussion of industry market trends, insight into management’s perspective of the opportunities and challenges we face and our outlook for the remainder of 2005 and into 2006. Next, we analyze the results of our operations for the three and six months ended June 30, 2005 and 2004, including the trends in our overall business and our operating segments. Then we review our cash flows and liquidity, capital resources and contractual obligations. We close with a discussion of new accounting pronouncements and an update, when applicable, to our critical accounting judgments and estimates.

Overview

General

The following discussion should be read in conjunction with our financial statements included with this report and our financial statements and related Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2004 included in our Annual Report on Form 10-K, as amended on Form 10-K/A. Our discussion includes various forward-looking statements about our markets, the demand for our products and services and our future results. These statements are based on certain assumptions we consider reasonable. For information about these assumptions, you should refer to the section below entitled “Forward-Looking Statements.”

We provide equipment and services used for drilling, completion and production of oil and natural gas wells throughout the world. We conduct operations in approximately 100 countries and have service and sales locations in nearly all of the oil and natural gas producing regions in the world. Our offerings include drilling services and equipment, well installation services, fishing and intervention services, completion systems and all forms of artificial lift. We offer step-change technologies, including expandable technology, production optimization systems, underbalanced systems and drilling with casing. We operate under two segments: Drilling Services and Production Systems.

On June 6, 2005, we signed a definitive agreement to purchase Precision Drilling Corporation’s Energy Services Division and International Contract Drilling Division. Under the terms of the agreement, we have agreed to pay aggregate consideration of 26 million of our common shares and approximately 1.1 billion Canadian dollars in cash. Using a current exchange rate as of June 30, 2005, the cash portion of the consideration approximates $914.7 million. The transaction is expected to be completed during the third quarter of 2005 and is subject to regulatory approvals, including U.S., Canada and Mexico competition filings, and to other customary closing conditions.

In June 2004, we undertook a plan to sell our Gas Services International compression fabrication business. The sale of this business was finalized in July 2005 for approximately $0.5 million subject to working capital adjustments. Results of this business were formerly reported within our Production Systems business segment and have been classified as a discontinued operation for all periods presented.

Industry Trends

Changes in the current price and expected future prices of oil and natural gas influence the level of energy industry spending. Changes in expenditures result in an increased or decreased demand for our products and services. Rig count is an indicator of the level of spending for the exploration for and production of oil and natural gas reserves.

The following chart sets forth certain statistics that reflect historical market conditions:


			Henry Hub		North American		International
	WTI Oil (1)		Gas (2)		Rig Count (3)		Rig Count (3)
June 30, 2005	$	56.50	$	6.981		1,662		932
December 31, 2004		43.45		6.149		1,686		869
June 30, 2004		37.05		6.155		1,472		841


(1)		Price per barrel as of June 30 and December 31 – Source: Applied Reasoning, Inc.

(2)		Price per MM/BTU as of June 30 and December 31 – Source: Oil World

(3)		Average rig count for the applicable month – Source: Baker Hughes Rig Count

Historically, the majority of worldwide activity, as measured by the rig count, has been concentrated in North America. From mid-1999 through mid-2001, North American rig count improved steadily, peaking in the first quarter of 2001 at a quarterly average of 1,636 rigs. In late 2001, the demand for oil and natural gas weakened due to slowing growth in worldwide economies. This resulted in a slow-down in North American rig activity. The decline continued through April 2002 hitting a low of 845 rigs. Since April 2002, the North American rig count has steadily improved to a second quarter 2005 average of 1,585 rigs.

Traditionally, the international rig count has not been as volatile as the North American rig count. The international rig count improved from late 1999 through third quarter 2001. It peaked at a quarterly average of 757 rigs. In late 2001, it began to decline and in the third quarter of 2002 fell to a low of 718 rigs. Since then, activity has steadily increased and average rig count for the second quarter 2005 surpassed the 2001 peak with a quarterly average of 916 rigs.

Drilling and completion spending is continuing to increase in both North America and the international markets. According to Spears and Associates, 2004 drilling and completion spending increased 19% in North America and 5% in the international market over 2003 levels and in 2005, is anticipated to increase 30% and 17%, respectively, over 2004 levels.

Opportunities and Challenges

The nature of our industry offers many opportunities and challenges. We have created a long-term strategy aimed at growing our business, servicing our customers, and most importantly, creating value for our shareholders. Our strategy centers around:

	•		Eastern Hemisphere Infrastructure

	•		Supply Chain Management

	•		Technology

We believe the future of the industry is in the Eastern Hemisphere. The Eastern Hemisphere has the industry’s best reservoirs in terms of size, quality and depletion. Capital that was formerly invested in the U.S. is being redistributed to the Eastern Hemisphere, primarily in large project developments underway in Russia, the Caspian Region and the Middle East. Opportunities will exist for those companies that can capture a large share of the Eastern Hemisphere growth without incurring undue risk. Throughout 2003 and 2004, we expanded the size and scope of our infrastructure to a large cross section of the Caspian Region, Middle East and North Africa. We now have 155 large-scale service locations in the Eastern Hemisphere and 26 manufacturing locations. Now focusing on leveraging infrastructure we continue to focus on our expansion into Russia as we are currently underlevered to this important market. We will continue to execute our growth strategy either through organic means or acquisitions, or a combination thereof.

While leveraging our international footprint, we continue efforts to reduce our cost structure company-wide. The primary barrier to this strategy is the ability to reduce the cost structure without disrupting the normal course of business. To improve our returns worldwide, in 2004, we committed to a company-wide supply chain analysis with the focus on manufacturing, logistics, procurement and systems. Initiatives such as relocation of product line manufacturing, engineering rationalization and third party outsourcing were undertaken. Productivity gains and cost

reductions were realized during the first six months of 2005 and are expected to continue throughout the remainder of the year.

A component of our growth strategy is technology based. We view technology in the oilfield as a critical competency and have invested a substantial amount of our time and capital into raising the technology content of our products and services. We are committed to advancing our core technology beyond the present generation of tools and developing and commercializing step-change technologies that are an extension of our core products and services.

The success of our long-term strategy will be determined by our ability to withstand the cyclicality of the energy industry, capitalize on our investment in the Eastern Hemisphere, lower our cost structure, and successfully commercialize new technologies.

Outlook

In general, we believe the outlook for our businesses is favorable. As decline rates are accelerating and reservoir productivity complexities are increasing, our clients are having difficulty securing desired rates of production growth. Assuming the demand for hydrocarbons does not weaken, these phenomena provide us with the following general market assumptions:

	•		In 2006 and beyond, North American land rig activity will flatten out and earnings and returns will result from market share, technology and pricing.

	•		The international markets will flourish, with the Eastern Hemisphere standing out as the strongest market.

	•		The North Sea is beginning a multi-year recovery phase, albeit from a very low current activity level.

	•		Pricing is likely to strengthen in all geographic regions.

	•		Technologies that improve productivity will do increasingly well in the upcoming years.

Looking into 2005 and 2006 in the Eastern Hemisphere, we expect average rig activity to increase compared to second quarter 2005 levels and we expect our business to grow at a slightly faster rate than the underlying activity as measured by rig activity.

Geographic Markets. We expect modest growth in the North American market for the remainder of 2005 and anticipate a volume increase in our U.S. operations from second quarter activity levels. The spring break-up in Canada negatively affected our operations in the second quarter of 2005. We expect our third quarter results to reflect the improvement in activity in the Gulf of Mexico Shelf. Deepwater activity is expected to be strong in 2005 and 2006 as a number of projects are scheduled to start throughout the next 24 months. We expect volume in Latin America to be essentially flat. The North Sea is expected to show substantial growth throughout the remainder of 2005 and into 2006 due to under-investment and concurrent production declines, underutilization of the available infrastructure and encouraging governmental policies. We expect growth in the Middle East and North Africa regions from the addition of Precision’s International Contract Drilling land rigs.

Pricing. The overall pricing outlook is positive. We are seeing pricing momentum in the international marketplace. Improvements are on a contract-by-contract basis and not a simultaneous movement. We expect this phenomenon to continue in the international markets throughout 2005 and 2006. In the North American market, we anticipate price increases for both our products and services. The benefit of price increases is offset in part by the continued personnel cost increases. We expect this price increase to be true for both our divisions and if successful, it will impact our third and fourth quarter results.

Business Segments. Overall, we expect both of our operating segments to outpace market activity. In our Drilling Services Division, underbalanced systems is expected to have the highest growth rate followed by our enhanced product lines of well construction and proprietary drilling tools. We expect strong growth from our underbalanced systems in Asia Pacific, Latin America, Middle East and North Africa. Our proprietary drilling tools are expected to gain market share offshore and in the international markets. Furthermore, we expect our well construction product line to gain deepwater market share in both the U.S. and international markets. In our Production Systems Division, we anticipate our production optimization product lines to have the highest growth rate. The largest fields of application for this technology should come from Latin America, Russia and Asia.

Technology. We expect the need for new technologies to increase as our customers face accelerating decline rates. We remain committed to increasing the technology content of our products and services. We expect revenues from our technology products to grow into 2006 and beyond as commercialization of our new technologies occurs and we expand the geographic scope of the Precision Energy Services offering.

Overall, the level of market improvements for our businesses in 2005 will continue to depend heavily on our ability to contain our costs, the ability to attract and retain quality personnel, our gains in market share outside North America, primarily in the Eastern Hemisphere, and the acceptance of our new technologies. The continued strength of the industry is uncertain and will be highly dependent on many external factors, such as world economic and political conditions, member country quota compliance within OPEC and weather conditions. The extreme volatility of our markets makes predictions regarding future results difficult.

Results of Operations

The following charts contain selected financial data comparing our consolidated and segment results from operations for the three and six months ended June 30, 2005 and 2004. We are unable to provide certain information regarding our results excluding the impact of acquisitions due to the integration of these acquisitions into our operations.

Comparative Financial Data


	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2005			2004			2005			2004
	(In thousands, except percentages and per share data)
Revenues:
Drilling Services	$	533,422		$	424,912		$	1,020,066		$	828,631
Production Systems		403,873			317,276			774,935			626,197

		937,295			742,188			1,795,001			1,454,828

Gross Profit %:
Drilling Services		35.8	%		33.8	%		35.4	%		33.2	%
Production Systems		27.8			25.6			27.9			26.4

		32.3			30.3			32.2			30.2

Research and Development:
Drilling Services	$	11,714		$	9,815		$	21,519		$	19,629
Production Systems		12,189			10,206			23,403			19,645

		23,903			20,021			44,922			39,274

Selling, General and Administrative Attributable to
Segments:
Drilling Services		69,822			56,460			128,270			111,115
Production Systems		59,619			50,095			112,654			97,612

		129,441			106,555			240,924			208,727

Corporate General and Administrative		17,341			12,186			36,967			23,554

Equity in Earnings of Unconsolidated Affiliates		(6,578	)		(6,025	)		(6,754	)		(11,278	)

Operating Income (Expense):
Drilling Services		109,322			77,135			211,756			144,017
Production Systems		40,410			21,048			80,444			47,891
Corporate (a)		(10,763	)		(6,161	)		(30,213	)		(12,276	)

		138,969			92,022			261,987			179,632

Gain on Sale of Universal Common Stock		—			25,280			—			25,280

Interest Expense, Net		(13,379	)		(15,054	)		(27,037	)		(30,728	)

Other, Net		3,272			(1,251	)		2,693			(623	)

Effective Tax Rate		26.5	%		19.8	%		26.3	%		22.5	%

Income from Continuing Operations per Diluted Share	$	0.64		$	0.57		$	1.19		$	0.95

Income (Loss) from Discontinued Operation, Net of Taxes		463			(7,143	)		624			(8,038	)

Net Income per Diluted Share	$	0.64		$	0.52		$	1.19		$	0.90

Depreciation and Amortization		70,317			63,102			140,439			125,527


(a)		Includes equity in earnings of unconsolidated affiliates.

Consolidated Revenues by Geographic Region


	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2005			2004			2005			2004
U.S		40	%		38	%		38	%		36	%
Canada		13			14			16			17
Latin America		9			10			9			10
Europe, CIS and West Africa		18			18			17			18
Middle East and North Africa		12			12			12			12
Asia Pacific		8			8			8			7

Total		100	%		100	%		100	%		100	%

Company Results

Revenues

Consolidated revenues increased $195.1 million, or 26.3%, in the second quarter of 2005 as compared to the second quarter of 2004 and the increase was the result of growth in all geographic regions. North American revenues increased $106.8 million, or 27.4%, and included increases of 32.4% and 14.5% in the U.S. and Canada, respectively. This region’s increase of 27.4% in revenues outpaced the 14.9% increase in the average North American rig count. The increase in activity and the price increase in the U.S. and Canadian markets implemented during July of 2004 were the key contributors to revenue growth. International revenues increased $88.3 million, or 25.1%, as compared to the 9.4% increase in the average international rig count. The international revenue growth was led by increases of 36.5%, 26.5% and 23.9% in the Asia Pacific, the Europe, CIS and West Africa and the Middle East and North Africa regions, respectively. The Eastern Hemisphere realized positive pricing trends which, in addition to activity increases, contributed to the increase in revenues in the second quarter of 2005 as compared to the second quarter of 2004.

Consolidated revenues for the first six months of 2005 increased $340.2 million, or 23.4%, over the first six months of 2004. North American revenues increased $202.7 million, or 26.2%, and included increases of 32.4% and 13.5% in the U.S. and Canada, respectively. This region’s increase in revenues outpaced the 12.2% increase in average North American rig count during the same period. International revenues increased $137.5 million, or 20.2%, as compared to the 9.7% increase in the average international rig count. The international revenue growth was led by increases of 26.8%, 23.2% and 17.5% in the Asia Pacific, the Middle East and North Africa and the Latin America regions, respectively.

Gross Profit

Our gross profit as a percentage of revenues increased from 30.3% in the second quarter of 2004 to 32.3% in the second quarter of 2005, and increased from 30.2% to 32.2%, during the six months ended June 30, 2005 as compared to the same period of the prior year. This increase is primarily volume related, with additional contributions from stronger North American pricing implemented in July of 2004, recent positive pricing trends realized in the Eastern Hemisphere and changes in product mix.

Research and Development

Research and development expenses increased $3.9 million, or 19.4% and $5.6 million, or 14.4% during the three and six months ended June 30, 2005, respectively, as compared to the same periods of 2004. This increase and the current level of research and development expenditures reflect our continued focus on developing and commercializing new technologies as well as investing in our core product offerings. Research and development expense as a percentage of revenue has remained relatively consistent during the three and six months ended June 30, 2005 as compared to the same periods in the prior year.

Corporate General and Administrative

Corporate General and Administrative expenses increased $5.2 million, or 42.3%, and $13.4 million, or 56.9% during the three and six months ended June 30, 2005, respectively, as compared to the same periods of the prior year. Both the three and six months ended June 30, 2005 included increased costs associated with our corporate governance compliance program and higher employee stock-based compensation expense. In addition to these

factors, we incurred increased employee benefit expense and severance costs during the six months ended June 30, 2005.

Equity in Earnings of Unconsolidated Affiliates

Equity in earnings of unconsolidated affiliates increased $0.6 million, or 9.2%, during the three months ended June 30, 2005 as compared to the same period of the prior year. We realized higher equity in earnings during the second quarter of 2005 due to Universal Compression’s increased quarterly earnings, offset by our reduced percentage ownership of Universal Compression.

Equity in earnings of unconsolidated affiliates decreased from $11.3 million during the six months ended June 30, 2004 to $6.8 million during the six months ended June 30, 2005 due primarily to $4.0 million, our portion, of exit and debt restructuring charges incurred by Universal Compression during the first quarter of 2005. Excluding these charges, we realized lower equity in earnings during the six months ended June 30, 2005 due to our reduced percentage ownership of Universal Compression, partially offset by Universal Compression’s increased quarterly earnings.

Gain on Sale of Universal Common Stock

We sold three million shares of Universal Compression common stock during the second quarter of 2004. We received net proceeds of $90.0 million and recognized a gain of $25.3 million.

Other, Net

Other, net increased $4.5 million and $3.3 million during the three and six months ended June 30, 2005, respectively, as compared to the same periods in the prior year due primarily to the sale of non-core assets and the favorable impact of changes in foreign exchange rates.

Interest Expense, Net

Interest expense, net decreased $1.7 million, or 11.1%, during the three months ended June 30, 2005 as compared to the same period in the prior year as a result of the second quarter 2005 hedging activities.

Interest expense, net decreased $3.7 million, or 12.0%, during the six months ended June 30, 2005, as compared to the six months ended June 30, 2004. The decrease is due primarily to the increase in interest income that was generated from the higher levels of cash and cash equivalents held during the first half of 2005 as compared to the same period of the prior year and the second quarter 2005 hedging activities.

Income Taxes

Our effective tax rates for the second quarter of 2005 and 2004 were 26.5% and 19.8%, respectively. The second quarter of 2004 includes a $25.3 million gain on sale of Universal Compression common stock. There was no tax effect related to the sale.

Our effective tax rates for the six months ended June 30, 2005 and 2004 were 26.3% and 22.5%, respectively, due primarily to the $25.3 million gain on sale of Universal Compression common stock included in the second quarter of 2004.

Segment Results

Drilling Services

Drilling Services revenues increased $108.5 million, or 25.5%, in the second quarter of 2005 as compared to the second quarter of 2004. Of this increase, the North American region contributed revenue increases of $40.0 million, or 20.9%, with the U.S. and Canadian revenues increasing 22.9% and 10.3%, respectively. The North American revenue increase of 20.9% is compared to a 14.9% increase in the average North American rig count. Increases in volume and pricing in this region were the primary contributors to this region’s revenue increase. International revenues improved $68.5 million, or 29.4%, as compared to a 9.4% increase in the average international rig count. The most significant international growth was in the Latin America, the Asia Pacific and the Middle East and North Africa regions, where revenues increased 44.3%, 29.0% and 27.8%, respectively. On a product line basis, the highest revenue growth was generated from the intervention services and drilling tools products and services, which improved 35.2% and 34.0%, respectively.

Revenues in our Drilling Services segment increased $191.4 million, or 23.1%, in the first six months of 2005 as compared to the first six months of 2004. North American revenues increased $87.8 million, or 23.7%, primarily as a result of a 12.2% increase in the average North American rig count and increases in regional prices. International revenues improved $103.6 million, or 22.6%, as compared to a 9.7% increase in the average international rig count. The most significant international growth was in our Latin America and Middle East and North Africa regions, where revenues increased 38.3% and 21.9%, respectively. On a product line basis, the highest revenue growth was generated from the intervention services and drilling tools products and services, which improved 33.8% and 27.5%, respectively.

Gross profit as a percentage of revenues increased during the three and six months ended June 30, 2005 as compared to the same periods of the prior year. The increase was primarily volume driven, with additional benefits realized from the North American pricing increases enacted in July of 2004.

Selling, general and administrative expenses attributable to segments as a percentage of revenues decreased during the three and six months ended June 30, 2005 as compared to the same periods of the prior year. The percentage decline was due primarily to our higher revenue base and certain inherent fixed costs included in our selling, general and administrative expenses such as intangible asset amortization.

Production Systems

Revenues in our Production Systems segment increased $86.6 million, or 27.3%, in the second quarter of 2005 as compared to the same quarter of the prior year. This increase was driven primarily by higher demand for our artificial lift products and services, which improved 30.7%. On a geographic basis, our North American revenues increased $66.8 million, or 33.7%, in the second quarter of 2005 compared to the second quarter of 2004 and included increases of 44.8% and 16.2% in the U.S. and Canada, respectively. Improvements in the region, beyond the increases in activity, were primarily due to North American pricing increases and changes in product mix. International revenues improved $19.8 million, or 16.6%, over the second quarter of 2004 and were led by revenue growth of 44.8% in Asia Pacific and 30.3% in Europe, CIS and West Africa.

Production Systems revenues increased $148.7 million, or 23.8%, in the first six months of 2005 as compared to the first six months of 2004. On a geographic basis, our North American revenues increased $114.8 million, or 28.5% and included increases of 43.7% and 9.3% in the U.S. and Canada, respectively. International revenues improved $33.9 million, or 15.2%, over the first six months of 2004 and were led by revenue growth of 36.7% and 30.3% in the Asia Pacific and the Middle East and North African regions, respectively. On a product line basis, the highest revenue growth was generated from artificial lift, which improved 30.1%.

Our gross profit as a percentage of revenues increased during the three and six months ended June 30, 2005 as compared to the same periods of the prior year. The percentage increase was due to this division’s higher revenue base and a change in product mix.

Discontinued Operation

Our discontinued operation consists of our Gas Services International compression fabrication business. Included in the loss for the three and six months ended June 30, 2004 were non-cash charges related to goodwill and asset impairments of $3.1 million and an income tax provision of $2.1 million to record a valuation allowance against unrealizable deferred tax assets.

Liquidity and Capital Resources

Historical Cash Flows

As of June 30, 2005, our cash and cash equivalents were $305.7 million, a net decrease of $11.8 million from December 31, 2004, which was primarily attributable to the following:

	•		cash inflows from operating activities of $140.1 million;

	•		capital expenditures for property, plant and equipment of $191.1 million;

	•		acquisition of new businesses of approximately $26.2 million in cash, net of cash acquired;

	•		acquisition of intellectual property of $6.8 million;

	•		proceeds from the sales of property, plant and equipment of $7.0 million;

	•		borrowings, net of repayments, on long-term debt and short-term facilities of $6.7 million;

	•		proceeds from stock option activity of $62.3 million.

Sources of Liquidity

Our sources of liquidity are reserves of cash, cash generated from operations, committed availabilities under bank lines of credit and our ability to sell registered shares of Universal common stock. We hold 6.75 million shares of Universal common stock, all of which have been registered through our Registration Rights Agreement with Universal. From time to time we have elected to dispose of non-core assets generating additional cash for working capital needs or investing purposes. We also historically have accessed the capital markets with debt, equity and convertible offerings. In June 2004, we filed a shelf Registration Statement on Form S-3 which covers the future issuance of various types of securities, including debt, common shares, preferred shares, warrants and units, up to an aggregate offering price of $750.0 million. There has been no issuance of securities under this shelf registration statement. Additional capital in the form of either debt or equity will be required upon closing of the call of the Zero Coupon Convertible Senior Debentures or the pending acquisition discussed below.

The following summarizes our short-term committed financing activities and our usage and availability as of June 30, 2005:


	Facility		Expiration			Letters
Short-term Financing Facilities	Amount		Date	Drawn		of Credit		Availability
	(In millions)
2003 Revolving Credit Facility⁽¹⁾	$	500.0	May 2006	$	¾	$	18.2	$	481.8
Canadian Facility		16.2	July 2005		¾		0.3		15.9
Middle East Facility		25.0	July 2005		¾		19.4		5.6
Asia Pacific Facility		25.0	Sept 2005		2.7		8.9		13.4


(1)		Our revolving credit facility contains customary affirmative and negative covenants, including a maximum debt to capitalization ratio, a minimum interest coverage ratio, a limitation on liens, a limitation on incurrence of indebtedness and a limitation on asset dispositions. We are in compliance with all covenants set forth in the credit facility. The committed revolving credit facility does not contain any provisions that make its availability dependent upon our credit ratings; however, the interest rates are dependent upon the credit rating of our long-term senior debt.

We also have short-term borrowings with various domestic and international institutions pursuant to uncommitted facilities. At June 30, 2005, we had $16.2 million in short-term borrowings outstanding under these arrangements with a weighted average interest rate of 6.52%.

Cash Requirements and Contractual Obligations

Our cash requirements and contractual obligations at June 30, 2005, and the effect such obligations are expected to have on our liquidity and cash flow in future periods are as follows:

Pending Acquisition

We have agreed to pay aggregate consideration of 26 million of our common shares and approximately 1.1 billion Canadian dollars in cash for the purchase of Precision Drilling Corporation’s Energy Services Division and International Contract Drilling Division. Using a current exchange rate as of June 30, 2005, the cash portion of the consideration approximates $914.7 million. The transaction is expected to be completed during the third quarter of 2005.

Zero Coupon Convertible Senior Debentures

On June 30, 2000, we completed the private placement of $910.0 million face amount of Zero Coupon Convertible Senior Debentures. These debentures were issued at $501.6 million, providing the holders with an annual 3% yield to maturity. At June 30, 2005, the holders had the option to require us to repurchase the Zero

Coupon Convertible Senior Debentures at the accreted amount which was $582.2 million. In total, $11.0 million of face value for an aggregate accreted value of $7.1 million was put to us. We had the option to repurchase the debentures in common shares, cash or a combination thereof. We elected to settle this obligation during July 2005 by utilizing available cash on hand.

We may redeem the Zero Coupon Convertible Senior Debentures on or after June 30, 2005 at the accreted amount at the time of redemption as provided for in the indenture. On July 28, 2005, we called for redemption on August 29, 2005 all of the outstanding Zero Coupon Debentures. We intend to fund the redemption price, which is expected to approximate $578.0 million, from cash on hand and borrowings under our revolving credit agreement. Holders of the Zero Coupon Debentures retain the right to convert their Debenture into the Company’s common shares prior to the redemption date.

Letters of Credit

We execute letters of credit in the normal course of business. While these obligations are not normally called, it should be noted that these obligations could be called by the beneficiaries at anytime before the expiration date should we breach certain contractual or payment obligations. As of June 30, 2005, we had $44.6 million of letters of credit and bid and performance bonds outstanding under various uncommitted credit facilities and $46.8 million of letters of credit outstanding under committed facilities.

Capital Expenditures

Our capital expenditures for property, plant and equipment are expected to be approximately $400 million to $425 million for 2005 and primarily relate to our new technologies, drilling equipment, fishing tools, tubular service equipment and the implementation of our enterprise wide software system. Capital expenditures during the six months ended June 30, 2005 were $178.4 million, net of proceeds from tools lost down hole of $12.7 million.

New Accounting Pronouncement

In December 2004, the FASB issued SFAS No. 123 (Revised 2004) Share-Based Payment (“SFAS No. 123R”). SFAS No. 123R addresses all forms of share-based payment awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. SFAS No. 123R requires all share-based payments to employees to be recognized in the financial statements based on their fair values. In April 2005, the Securities and Exchange Commission (“SEC”) issued Release No. 2005-57 which permits implementation of SFAS No. 123R at the beginning of the next fiscal year instead of the next reporting period as required by SFAS No. 123R. In addition, the SEC, in March 2005, issued Staff Accounting Bulletin No. 107 (“SAB No. 107”). SAB No. 107 provides guidance regarding the interaction between SFAS No. 123R and SEC rules and regulations. We do not believe the adoption of SFAS No. 123R and SAB No. 107 will have a material impact on our results of operations and financial position as essentially all grants either vest during 2005 or are already reflected in our results.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements. We prepare these financial statements in conformity with U.S. generally accepted accounting principles. As such, we are required to make certain estimates, judgments 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 periods presented. We base our estimates on historical experience, available information and various other assumptions we believe to be reasonable under the circumstances. On an on-going basis, we evaluate our estimates; however, actual results may differ from these estimates under different assumptions or conditions. There have been no material changes or developments in our evaluation of the accounting estimates and the underlying assumptions or methodologies that we believe to be Critical Accounting Policies and Estimates as disclosed in our Form 10-K, as amended on Form 10-K/A, for the year ended December 31, 2004.

Exposures

International Exposure

Like most multinational oilfield service companies, we have operations in certain international areas, including parts of the Middle East, North and West Africa, Latin America, the Asia Pacific region and the CIS, that are subject to risks of war, political disruption, civil disturbance, economic and legal sanctions (such as restrictions against countries that the U.S. government may deem to sponsor terrorism) and changes in global trade policies. Our operations may be restricted or prohibited in any country in which these risks occur. In particular, the occurrence of

any of these risks could result in the following events, which in turn, could materially and adversely impact our results of operations:

	•		disruption of oil and natural gas exploration and production activities;

	•		restriction of the movement and exchange of funds;

	•		inhibition of our ability to collect receivables;

	•		enactment of additional or stricter U.S. government or international sanctions; and

	•		limitation of our access to markets for periods of time.

Currency Exposure

Approximately 35.8% of our net assets are located outside the U.S. and are carried on our books in local currencies. Changes in those currencies in relation to the U.S. dollar result in translation adjustments, which are reflected as accumulated other comprehensive income in the shareholders’ equity section in our Condensed Consolidated Balance Sheets. We recognize remeasurement and transactional gains and losses on currencies in our Condensed Consolidated Statements of Income. Such remeasurement and transactional losses may adversely impact our results of operations.

In certain foreign countries, a component of our cost structure is U.S. dollar denominated, whereas our revenues are partially local currency based. In those cases, a devaluation of the local currency would adversely impact our operating margins.

Investment Exposure

We own approximately 21% of the common stock of Universal Compression Holdings, Inc. (NYSE: UCO). We account for this ownership interest using the equity method of accounting, which requires us to record our percentage interest in Universal’s results of operations in our consolidated statements of operations. Accordingly, fluctuations in Universal’s earnings cause fluctuations in our earnings.

Litigation and Environmental Exposure

In the ordinary course of business, we become the subject of various claims and litigation. We maintain insurance to cover many of our potential losses and we are subject to various self-retentions and deductibles with respect to our insurance. Although we are subject to various ongoing items of litigation, we do not believe any of our current items of litigation will result in any material uninsured losses to us. However, it is possible an unexpected judgment could be rendered against us in cases in which we could be uninsured and beyond the amounts we currently have reserved or anticipate incurring.

We are also subject to various federal, state and local laws and regulations relating to the energy industry in general and the environment in particular. Environmental laws have in recent years become more stringent and have generally sought to impose greater liability on a larger number of potentially responsible parties. While we are not currently aware of any situation involving an environmental claim that would be likely to have a material adverse effect on our business, it is always possible that an environmental claim with respect to one or more of our current businesses or a business or property that one of our predecessors owned or used could arise and could involve material expenditures.

Industry Exposure

The concentration of our customers in the energy industry may impact our overall exposure to credit risk as customers may be similarly affected by prolonged changes in economic and industry conditions. Further, laws in some jurisdictions in which we operate could make collection difficult or time consuming. We perform ongoing credit evaluations of our customers and do not generally require collateral in support of our trade receivables. While we maintain reserves for potential credit losses, we cannot assure such reserves will be sufficient to meet write-offs of uncollectible receivables or that our losses from such receivables will be consistent with our expectations.

Terrorism Exposure

The terrorist attacks that took place in the U.S. on September 11, 2001 were unprecedented events that have created many economic and political uncertainties, some of which may materially impact our businesses. The potential for future terrorist attacks, the national and international responses to terrorist attacks, and other acts of war or hostility have created many economic and political uncertainties that could adversely affect our businesses.

Tax Exposure

On June 26, 2002, the stockholders and Board of Directors of Weatherford International, Inc. approved our corporate reorganization, and Weatherford International Ltd., a newly formed Bermuda company, became the parent holding company of Weatherford International, Inc. The realization of the tax benefit of this reorganization could be impacted by changes in tax laws, tax treaties or tax regulations or the interpretation or enforcement thereof or differing interpretation or enforcement of applicable law by the U.S. Internal Revenue Service or other taxing jurisdictions. The inability to realize this benefit could have a material impact on the Company’s financial statements.

Acquisition Integration Exposure

In June of 2005, we agreed to acquire the Energy Services and International Contract Drilling divisions of Precision Drilling Corporation. The Precision acquisition is subject to customary conditions to closing, including regulatory approvals in various jurisdictions, and we cannot predict with accuracy when those conditions will be met. The Precision divisions we agreed to purchase are substantial businesses, and integrating those businesses with our current operations and product lines will take significant focus and effort from our management and employees. The integration of this or any other acquisition we make may include unexpected costs and temporarily divert attention from our normal operations. We also cannot be certain that we will realize anticipated synergies from any acquisition.

Forward-Looking Statements

This report, as well as other filings made by us with the Securities and Exchange Commission (“SEC”), and our releases issued to the public contain various statements relating to future results, including certain projections and business trends. We believe these statements constitute “Forward-Looking Statements” as defined in the Private Securities Litigation Reform Act of 1995.

From time to time, we update the various factors we consider in making our forward-looking statements and the assumptions we use in those statements. However, we undertake no obligation to publicly update or revise any forward-looking events or circumstances that may arise after the date of this report. The following sets forth the various assumptions we use in our forward-looking statements, as well as risks and uncertainties relating to those statements. Certain of the risks and uncertainties may cause actual results to be materially different from projected results contained in forward-looking statements in this report and in our other disclosures. These risks and uncertainties include, but are not limited to, the following:

	•		A downturn in market conditions could affect projected results. Any material changes in oil and natural gas supply and demand, oil and natural gas prices, rig count or other market trends would affect our results and would likely affect the forward-looking information we provided. The oil and natural gas industry is extremely volatile and subject to change based on political and economic factors outside our control. During 2003 and 2004, worldwide drilling activity increased; however, if an extended regional and/or worldwide recession were to occur, it would result in lower demand and lower prices for oil and natural gas, which would adversely affect drilling and production activity and therefore would affect our revenues and income. We have assumed increases in worldwide demand will continue throughout 2005.

	•		Availability of a skilled workforce could affect our projected results. The workforce and labor supply in the oilfield service industry is aging and diminishing such that there is an increasing shortage of available skilled labor. Our forward-looking statements assume we will be able to recruit and maintain a sufficient skilled workforce for activity levels.

	•		Increases in the prices of our raw materials could affect our results of operations. We use large amounts of raw materials for manufacturing our products. The price of these raw materials has a significant impact on our cost of producing products for sale or producing fixed assets used in our business. We have assumed that the prices of our raw materials will remain within a manageable range. If we are unable to minimize the impact of increased raw materials costs through our supply chain initiatives or by passing through these increases to our customers, our margins and results of operations could be adversely affected.

	•		Our long-term growth depends upon technological innovation and commercialization. Our ability to deliver our long-term growth strategy depends in part on the commercialization of new technology. A central aspect of our growth strategy is to innovate our products and services, to obtain technologically advanced products through internal research and development and/or acquisitions, to protect proprietary technology from unauthorized use and to expand the markets for new technology through leverage of our

			worldwide infrastructure. The key to our success will be our ability to commercialize the technology that we have acquired and demonstrate the enhanced value our technology brings to our customers’ operations. Our major technological advances include, but are not limited to, those related to underbalanced systems, expandable solid tubulars, expandable sand screens and intelligent well completion. Our forward-looking statements have assumed successful commercialization of, and above-average growth from, these new products and services.

	•		Nonrealization of expected benefits from our 2002 corporate reincorporation could affect our projected results. We expect to gain certain business, financial and strategic advantages as a result of our reincorporation, including improvements to our global tax position and cash flow. An inability to realize expected benefits of the reincorporation in the anticipated time frame, or at all, would negatively affect the anticipated benefit of our corporate reincorporation.

	•		A decline in the fair value of our investment in Universal that is other than temporary would adversely affect our projected results. In the third quarter of 2002, we recorded a write-down in the carrying value of our investment in Universal. We can make no assurances that there will not be an additional decline in value of this investment. Any decline may result in an additional write-down in the carrying value of our investment and would adversely affect our results.

	•		The cyclical nature of or a prolonged downturn in our industry could affect the carrying value of our goodwill. As of June 30, 2005, we had approximately $1.7 billion of goodwill. Our estimates of the value of our goodwill could be reduced in the future as a result of various factors, some of which are beyond our control. Any reduction in the value of our goodwill may result in an impairment charge and therefore adversely affect our results.

	•		Currency fluctuations could have a material adverse financial impact on our business. A material change in currency rates in our markets could affect our future results as well as affect the carrying values of our assets. World currencies have been subject to much volatility. Our forward-looking statements assume no material impact from future changes in currencies.

	•		Adverse weather conditions in certain regions could aversely affect our operations. In the summer of 2004, the Gulf of Mexico suffered an unusually high number of hurricanes, and the early months of the 2005 hurricane season have seen several significant storms in the Gulf of Mexico. These hurricanes and associated hurricane threats reduced the number of days on which we and our customers could operate, which resulted in lower revenues than we otherwise would have achieved. Similarly, an unusually warm Canadian winter or unusually rough weather in the North Sea could reduce our operations and revenues from those areas during the relevant period. Our forward-looking statements assume weather patterns in our primary areas of operations will not deviate significantly from historical patterns.

	•		Political disturbances, war, or terrorist attacks and changes in global trade policies could adversely impact our operations. We have assumed there will be no material political disturbances or terrorist attacks and there will be no material changes in global trade policies. Any further military action undertaken by the U.S. or other countries could adversely affect our results of operations.

Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in our other filings with the SEC. For additional information regarding risks and uncertainties, see our other filings with the SEC under the Securities Exchange Act of 1934, as amended, and the Securities Act of 1933, as amended, available free of charge at the SEC’s website at www.sec.gov. We will generally update our assumptions in our filings as circumstances require.

Available Information

We make available, free of charge, on our website (www.weatherford.com) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file or furnish them to the SEC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are currently exposed to market risk from changes in foreign currency and changes in interest rates. From time to time, we may enter into derivative financial instrument transactions to manage or reduce our market risk, but we do not enter into derivative transactions for speculative purposes. A discussion of our market risk exposure in financial instruments follows.

Foreign Currency Exchange Rates

We operate in virtually every oil and natural gas exploration and production region in the world. In some parts of the world, such as the Middle East and Southeast Asia, the currency of our primary economic environment is the U.S. dollar. We use this as our functional currency. In other parts of the world, we conduct our business in currencies other than the U.S. dollar and the functional currency is the applicable local currency. In those countries in which we operate in the local currency, the effects of foreign currency fluctuations are largely mitigated because local expenses of such foreign operations are also generally denominated in the same currency.

Assets and liabilities of which the functional currency is the local currency are translated using the exchange rates in effect at the balance sheet date, resulting in translation adjustments that are reflected as accumulated other comprehensive income in the shareholders’ equity section on our Condensed Consolidated Balance Sheets. Approximately 35.8% of our net assets are impacted by changes in foreign currencies in relation to the U.S. dollar. We recorded a $44.5 million adjustment to reduce our equity account for the six months ended June 30, 2005 to reflect the net impact of the strengthening U.S. dollar against various foreign currencies.

As of June 30, 2005, we entered into several foreign currency forward contracts and one foreign currency option contract with notional amounts aggregating $90.2 million to hedge exposure to currency fluctuations in various foreign currencies, including the Euro, the Canadian Dollar, the Australian Dollar, the Mexican Peso, the Brazilian Real and the British Pound Sterling. Gains and losses on these contracts are recognized currently in earnings, offsetting the impact of the change in the fair value of the asset or liability being hedged.

Interest Rates

We are subject to interest rate risk on our long-term fixed interest rate debt and, to a lesser extent, variable-interest rate borrowings. Variable rate debt, where the interest rate fluctuates periodically, exposes us to short-term changes in market interest rates. Fixed rate debt, where the interest rate is fixed over the life of the instrument, exposes us to changes in market interest rates reflected in the fair value of the debt and to the risk that we may need to refinance maturing debt with new debt at a higher rate. All other things being equal, the fair value of our fixed rate debt will increase or decrease as interest rates change.

The Company’s long-term borrowings subject to interest rate risk consist of the following:


	June 30,				December 31,
	2005				2004
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(In millions)
6 5/8% Senior Notes due 2011	$	358.6	$	384.6	$	359.2	$	386.4
7 1/4% Senior Notes due 2006		204.3		205.1		206.6		209.7
4.95% Senior Notes due 2013		256.3		253.9		256.7		249.4

The fair value of our Senior Notes is principally dependent on changes in prevailing interest rates. We have various other long-term debt instruments of $15.8 million, but believe the impact of changes in interest rates in the near term will not be material to these instruments. Short-term borrowings of $18.9 million at June 30, 2005 approximate fair value.

As it relates to our variable rate debt, if market interest rates average 1.0% more for the remainder of 2005 than the rates as of June 30, 2005, interest expense for the remainder of 2005 would increase by $0.1 million. This amount was determined by calculating the effect of the hypothetical interest rate on our variable rate debt. This sensitivity analysis assumes there are no changes in the Company’s financial structure.

Interest Rate Swaps

We manage our debt portfolio to achieve an overall desired position of fixed and floating rates and may employ interest rate swaps as a tool to achieve that goal. The major risks from interest rate derivatives include changes in the interest rates affecting the fair value of such instruments, potential increases in interest expense due to market increases in floating interest rates and the creditworthiness of the counterparties in such transactions. The counterparties to our interest rate swaps all have been creditworthy multinational banks. We believe that the risk of counterparty nonperformance is immaterial.

During 2004, we entered into and terminated separate interest rate swap agreements on notional amounts of $200.0 million and $150.0 million of our $250.0 million 4.95% Senior Notes. We also, at different times, entered into and terminated separate interest rate swap agreements on notional amounts of $70.0 million and $170.0 million of our $350.0 million 6 5/8% Senior Notes. Each of these tranches of agreements were terminated prior to entering into a new agreement. As a result of these terminations, we received cash proceeds, net of accrued interest, of approximately $12.8 million. The deferred gain is being amortized as a reduction of interest expense over the remaining life of the underlying debt securities. There were no interest rate swap agreements outstanding as of June 30, 2005 and December 31, 2004.

ITEM 4. CONTROLS AND PROCEDURES

At the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act). Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report to timely alert them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s Exchange Act filings.

During the six months ended June 30, 2005, the Company continued its upgrade of legacy financial systems in the United Kingdom to the Company’s J.D. Edwards platform. The Company believes that the upgrade will have a positive impact on the overall control environment.

Other than as discussed above, the Company’s management, including the Chairman, Chief Executive Officer, and Chief Financial Officer, identified no change in the Company’s internal control over financial reporting that occurred during the three and six months period ended June 30, 2005, that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS

(c) The trustee for our executive deferred compensation plan purchases shares of our common stock monthly for the benefit of the plan participants using funds directed by the plan participants and funds matched by us as provided in the plan. During the period covered by this report, the trustee purchased the following number of our common shares at the average prices indicated below, inclusive of brokerage fees. Although we do not hold these shares and do not consider these purchases to be repurchases by us, the purchases are disclosed here because they could be deemed to be repurchases under applicable SEC regulations.


Period	Number of Shares Purchased		Average Price Per Share
April 2005		33,321	$	57.65
May 2005		5,360	$	52.87
June 2005		3,249	$	58.71

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company’s Annual General Meeting of Shareholders was held on May 13, 2005. The shareholders of the Company approved the election of eight directors to serve until the next annual general meeting of shareholders. The following sets forth the results of the voting with respect to such matter.


Election of Directors	For		Withheld
Nicholas F. Brady		116,963,930		341,836
David J. Butters		116,367,139		938,627
Bernard J. Duroc-Danner		115,814,998		1,490,768
Sheldon B. Lubar		116,751,706		554,060
William E. Macaulay		116,746,497		559,269
Robert B. Millard		116,361,168		944,598
Robert K. Moses, Jr.		116,773,237		532,529
Robert A. Rayne		112,159,265		5,146,501

In addition, the shareholders of the Company approved the appointment of Ernst & Young LLP as our Independent Registered Public Accounting Firm for the year ending December 31, 2005, and the authorization of the Audit Committee of the Board of Directors to set Ernst & Young LLP’s remuneration. The results of the voting with respect to such matter were 117,156,496 shares voted for, 96,885 shares voted against and 52,385 shares abstained. There were no broker non-votes.

ITEM 5. OTHER INFORMATION

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, the certifications of Bernard J. Duroc-Danner, Chief Executive Officer of the Company, and Lisa W. Rodriguez, Chief Financial Officer of the Company, are filed with this Form 10-Q as exhibits 31.1 and 31.2. Copies of these certifications are available on the Company’s website at www.weatherford.com.

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the certifications of Bernard J. Duroc-Danner, Chief Executive Officer of the Company, and Lisa W. Rodriguez, Chief Financial Officer of the Company, are filed with this Form 10-Q as Exhibit Numbers 32.1 and 32.2. Copies of these certifications are available on the Company’s website at www.weatherford.com.

ITEM 6. EXHIBITS

(a) Exhibits:


Exhibit
Number		Description
2.1		Stock Purchase Agreement dated June 6, 2005 by and between Precision Drilling Corporation and Weatherford International Ltd. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K/A (File No. 1-31339) filed June 9, 2005).

†31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

†31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

†32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

†32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


		Weatherford International Ltd.

		By:		/s/ Bernard J. Duroc-Danner

				Bernard J. Duroc-Danner
				Chief Executive Officer
				(Principal Executive Officer)

				/s/ Lisa W. Rodriguez

				Lisa W. Rodriguez
				Senior Vice President and Chief Financial Officer
				(Principal Financial and Accounting Officer)

				Date: August 1, 2005


Exhibit
Number		Description
2.1		Stock Purchase Agreement dated June 6, 2005 by and between Precision Drilling Corporation and Weatherford International Ltd. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K/A (File No. 1-31339) filed June 9, 2005).

†31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

†31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

†32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

†32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents