National Oilwell Varco, Inc. (NYSE: NOV) today reported third
quarter 2018 revenues of $2.15 billion, an increase of two percent
compared to the second quarter of 2018 and an increase of 17
percent from the third quarter of 2017. Operating profit for the
third quarter of 2018 was $73 million, or 3.4 percent of sales,
Adjusted EBITDA (operating profit excluding depreciation and
amortization) was $245 million, or 11.4 percent of sales, and net
income was $1 million. Operating profit increased 40 percent
sequentially, and Adjusted EBITDA increased eight percent
sequentially and 47 percent compared to the third quarter of
2017.
“Our revenues and Adjusted EBITDA continued to grow in the third
quarter, underpinned by higher sequential demand for downhole
tools, drill pipe, and wellsite services in support of drilling
operations globally,” commented Clay Williams, Chairman, President,
and CEO. “However, the slowdown in North American completions
activity late in the period led to lower sequential
well-stimulation equipment sales. This together with weaker demand
for offshore equipment offset some of our sequential revenue
gains.
We believe the industry is poised to achieve higher levels of
activity in 2019 as it works through near-term logistical
challenges in North American unconventional basins, navigates
end-of-year budget constraints, and sanctions more offshore
projects. During the third quarter we saw rising demand for
conductor pipe connections—a leading indicator of future offshore
wells—as well as increased inquiries around offshore rig
reactivations, pointing to more offshore activity ahead. We also
see pockets of demand strengthening in certain international land
markets, as operators respond to generally higher commodity prices.
In the meantime, we continue to develop and deliver technology that
helps lower the industry’s marginal production costs, and position
our business as a leading innovator and provider of critical well
construction tools. National Oilwell Varco is well-positioned to
capitalize on the opportunities that lie ahead.”
Wellbore Technologies
Wellbore Technologies generated revenues of $847 million in the
third quarter of 2018, an increase of seven percent from the second
quarter of 2018 and an increase of 22 percent from the third
quarter of 2017. The segment realized meaningful growth for the
second consecutive quarter as domestic revenue outpaced the
percentage growth in the U.S. rig count, and international
operations capitalized on an increasing number of opportunities
associated with the emerging recovery in the Eastern Hemisphere.
Operating leverage was limited to four percent mostly due to higher
steel and labor costs, which outpaced the segment’s price
increases. Operating profit was $40 million, or 4.7 percent of
sales. Adjusted EBITDA increased two percent sequentially and 44
percent from the prior year to $135 million, or 15.9 percent of
sales.
Completion & Production Solutions
Completion & Production Solutions generated revenues of $735
million in the third quarter of 2018, a decrease of $3 million from
the second quarter of 2018 and an increase of eight percent from
the third quarter of 2017. Slowing demand for pressure pumping
equipment in North America and sharper-than-anticipated declines in
offshore-focused businesses more than offset strong growth in
demand for land production equipment. Operating profit was $46
million, or 6.3 percent of sales. Adjusted EBITDA increased five
percent sequentially and two percent from the prior year to $99
million, or 13.5 percent of sales.
New orders booked during the quarter were $372 million,
representing a book-to-bill of 85 percent when compared to the $439
million of orders shipped from backlog. Backlog for capital
equipment orders for Completion & Production Solutions at
September 30, 2018 was $880 million.
Rig Technologies
Rig Technologies generated revenues of $637 million in the third
quarter of 2018, a decrease of two percent from the second quarter
of 2018 and an increase of 25 percent from the third quarter of
2017. Improving aftermarket sales and better progress on offshore
projects did not fully offset lower land rig sales from inventory.
Operating profit was $58 million, or 9.1 percent of sales. Adjusted
EBITDA decreased seven percent sequentially and increased 95
percent from the prior year to $78 million, or 12.2 percent of
sales.
New orders booked during the quarter totaled $151 million,
representing a book-to-bill of 59 percent when compared to the $256
million of orders shipped from backlog. At September 30, 2018,
backlog for capital equipment orders for Rig Technologies was $3.40
billion.
Other Corporate Items
Revenue eliminations decreased $11 million sequentially due to a
reduction in intersegment sales. This decrease, along with lower
compensation and third-party service expenses, resulted in a $17
million reduction in eliminations and corporate costs.
Cash flow provided by operations for the third quarter of 2018
was $190 million. As of September 30, 2018, the Company had $1.3
billion in cash and cash equivalents, total debt of $2.7 billion
and $3.0 billion available on its revolving credit facility.
Significant Events and Achievements
NOV completed the first commercial field trial of the Vector™
SelectShift™ downhole adjustable motor in West Texas, where the
tool successfully reached section total depth. This brings the
field trial tally up to 13 in total, including seven internal
trials on test wells in Navasota, five runs in the Bakken, and this
one in West Texas. The SelectShift tool has drilled over 45,000 ft
to date, with more than 500 drilling and circulating hours and over
100 bend angle shifts downhole. Customers are embracing the new
technology after seeing significant drilling improvements when
drilling in straight mode versus bent mode, including substantial
ROP increases and reductions in torque and vibration.
NOV’s highly engineered drill bits with 3D shaped cutter
technology helped a prominent operator in the Permian Basin drill
their wells 6.5 days faster. The shaped cutters provided a 14%
increase in ROP in the 12¼-in. intermediate, a 44% increase in ROP
in the 8¾-in. intermediate, and a 47% increase in ROP in the 6-in.
horizontal intervals. The operator also realized a more than 200%
improvement in footage per 6-in. bit, allowing them to drill their
6-in. horizontal sections with 1.8 bits per well on average
compared to 5.8 bits per well with other products, a savings of
four bit trips per well.
NOV recently completed several successful installations of its
packer-setting system, which features the latest product from its
d-Solve™ dissolvable platform, the i-Seat ball, with a major North
Sea operator. The integrated system reduced the necessary amount of
rig time by six days on average versus traditional packer-setting
operations, and it eliminated the cost and risk associated with the
wireline and tractor run involved in setting production packers and
removing the equipment prior to well startup.
NOV achieved several wins in its directional measurement and
steerable technologies business. In Russia, a customer used the
VectorZIEL rotary steerable system (RSS) to drill a 1,610-ft long
horizontal section, with the tool maintaining target inclination
and azimuth within 0.3° and 2.5°, respectively, across the entire
section. After this successful field trial, the two tools used to
conduct the field trial were purchased, with additional tools sales
expected next quarter. The Company also received, in Russia, the
first order for its symmetric propagation resistivity LWD tool,
which provides high-quality recorded and real-time resistivity
data.
NOV, in consortium with Subsea 7, was awarded an engineering,
procurement, construction, and installation (EPCI) contract by
Tullow Oil. NOV will provide Tullow with an oil offloading system
using its buoy turret loading (BTL) system, which will be
retrofitted to the Kwame Nkrumah FPSO located in the Jubilee field
offshore Ghana. The BTL offshore loading terminal, which is
designed for deepwater applications requiring large and frequent
offloading operations, will be moored in 800 m of water, weigh
approximately 900 tons, and have an offloading capacity to transfer
1 million barrel parcels of oil within 27 hours.
NOV’s drill bits helped a major operator in Oman set a new
drilling record in their 12¼-in. section. The 12¼-in. TK66 drill
bit with ION™ 3D cutters achieved a normalized average ROP through
the section of 28.8 m/hr, more than a meter per hour ahead of the
closest competitor bit and previous record holder. The operator
noted that the new performance record was the result of continuous
improvement in drill bit design, effective after-action review and
learning implementation, superior support and follow-up from field
engineers and office staff, consistent application of recommended
drilling parameters and practices, and open communication between
NOV and the customer.
NOV customers continue to see the benefits of using Agitator™
systems in conjunction with an RSS in global operations, including
in technically challenging laterals greater than 10,000 ft. On a
project in the Middle East, a customer using a 6¾-in. Agitator
system in their RSS bottomhole assembly (BHA) recorded a 66%
reduction in vibration, significantly reducing their risk of tool
failure. In Asia, an operator ran a 4¾-in. Agitator system with an
international directional company’s RSS and MWD systems due to
consistently experiencing severe stick-slip activity and associated
directional control challenges. The Agitator system reduced the
stick-slip shock count and severity levels induced by BHA/string
interaction with the borehole by over 50%, improving directional
performance and borehole quality. The market for NOV’s Agitator
system is expanding, including various applications in the Permian,
as service companies seek efficiency gains, reduced equipment
damage, and improved geosteering/directional control.
NOV’s eVolve™ optimization and automation services continues to
deliver value for customers in North American land drilling
projects, recently completing the ninth successful well for a major
independent operator in the Permian running drilling automation
services. The project has so far reduced total bit runs and overall
failures per well. Encouraged by the cost and time savings
delivered by these performance improvements, the operator has
extended the eVolve contract to an additional rig.
NOV’s MPowerD™ managed pressure drilling (MPD) group delivered
an integrated MPowerD MPD control system on a Cyberbase drilling
control system for a deepwater drillship. NOV and the drilling
contractor worked together very closely to introduce the system and
fully embed MPD into the drilling controls network, making this the
first completely integrated MPD control system installed on an
offshore drilling rig. Integration of MPD controls into the
Cyberbase system will enable a step-change in MPD efficiency and
safety of operations for the drilling contractor, and the company
can now offer MPD as an integrated service to their clients. The
drilling contractor recently placed an order for a second system,
further reinforcing their commitment to a long-term MPD strategy.
In addition, NOV booked 10 land MPD projects for a large
independent operator in the Mid Continent.
Third Quarter Earnings Conference Call
NOV will hold a conference call to discuss its third quarter
2018 results on October 26, 2018 at 10:00 AM Central Time (11:00 AM
Eastern Time). The call will be broadcast simultaneously at
www.nov.com/investors. A replay will be available on the website
for 30 days.
About NOV
National Oilwell Varco (NYSE: NOV) is a leading provider of
technology, equipment, and services to the global oil and gas
industry that supports customers’ full-field drilling, completion,
and production needs. Since 1862, NOV has pioneered innovations
that improve the cost-effectiveness, efficiency, safety, and
environmental impact of oil and gas operations. NOV powers the
industry that powers the world.
Visit www.nov.com for more information.
Cautionary Statement for the Purpose of the “Safe Harbor”
Provisions of the Private Securities Litigation Reform Act of
1995
Statements made in this press release that are forward-looking
in nature are intended to be “forward-looking statements” within
the meaning of Section 21E of the Securities Exchange Act of 1934
and may involve risks and uncertainties. These statements may
differ materially from the actual future events or results. Readers
are referred to documents filed by National Oilwell Varco with the
Securities and Exchange Commission, including the Annual Report on
Form 10-K, which identify significant risk factors which could
cause actual results to differ from those contained in the
forward-looking statements.
Certain prior period amounts have been reclassified in this
press release to be consistent with current period
presentation.
NATIONAL OILWELL VARCO, INC. CONSOLIDATED STATEMENTS OF
INCOME (LOSS) (Unaudited) (In millions, except per share
data) Three Months Ended Nine Months Ended
September 30, June 30, September 30, 2018
2017 2018 2018 2017 Revenue: Wellbore
Technologies $ 847 $ 693 $ 793 $ 2,351 $ 1,862 Completion &
Production Solutions 735 682 738 2,143 1,982 Rig Technologies 637
510 651 1,771 1,638 Eliminations (65 ) (50 )
(76 ) (210 ) (147 ) Total revenue 2,154 1,835 2,106
6,055 5,335 Gross profit 393 285 355 1,035 725 Gross profit % 18.2
% 15.5 % 16.9 % 17.1 % 13.6 % Selling, general, and
administrative 320 292 303 911
891 Operating profit (loss) 73 (7 ) 52 124 (166 ) Interest and
financial costs (24 ) (26 ) (23 ) (71 ) (77 ) Interest income 6 11
5 18 19 Equity income (loss) in unconsolidated affiliates (2 ) (2 )
(1 ) (1 ) (4 ) Other income (expense), net (20 ) (16
) (3 ) (70 ) (36 ) Income (loss) before income
taxes 33 (40 ) 30 — (264 ) Provision (benefit) for income taxes
29 (13 ) 5 37 (43 ) Net income
(loss) 4 (27 ) 25 (37 ) (221 ) Net (income) loss attributable to
noncontrolling interests 3 (1 ) 1 6
2 Net income (loss) attributable to Company $ 1 $ (26 ) $ 24
$ (43 ) $ (223 ) Per share data: Basic $ 0.00 $ (0.07 ) $ 0.06 $
(0.11 ) $ (0.59 ) Diluted $ 0.00 $ (0.07 ) $ 0.06 $ (0.11 ) $ (0.59
) Weighted average shares outstanding: Basic 379 377
378 378 377 Diluted 383 377
381 378 377
NATIONAL OILWELL VARCO,
INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In
millions) September 30, December
31, 2018 2017
ASSETS Current assets: Cash and cash
equivalents $ 1,293 $ 1,437 Receivables, net 2,005 2,015
Inventories, net 3,177 3,003 Contract assets 483 495 Other current
assets 263 267 Total current assets 7,221 7,217
Property, plant and equipment, net 2,813 3,002 Goodwill and
intangibles, net 9,411 9,528 Other assets 448 459
Total assets $ 19,893 $ 20,206
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $
675 $ 510 Accrued liabilities 1,023 1,238 Contract liabilities 570
519 Current portion of long-term debt and short-term borrowings 8 6
Accrued income taxes — 81 Total current liabilities
2,276 2,354 Long-term debt 2,706 2,706 Other liabilities
935 986 Total liabilities 5,917 6,046
Total stockholders’ equity 13,976
14,160 Total liabilities and stockholders’ equity $ 19,893 $ 20,206
NATIONAL OILWELL VARCO, INC.
RECONCILIATION OF ADJUSTED EBITDA TO
NET INCOME (LOSS) (Unaudited)
(In millions)
The Company discloses Adjusted EBITDA (defined as Operating
Profit excluding Depreciation, Amortization and, when applicable,
Other Items) in its periodic earnings press releases and other
public disclosures to provide investors additional information
about the results of ongoing operations. The Company uses Adjusted
EBITDA internally to evaluate and manage the business. Adjusted
EBITDA is not intended to replace GAAP financial measures, such as
Net Income. Other items in the three and nine months ended
September 30, 2018 were $0 and a net credit of $12 million,
pre-tax, respectively, primarily from the reversal of certain
accruals, partially offset by restructure charges and severance
payments. Other items in 2017 consisted primarily of restructure
charges for inventory write-downs, facility closures and severance
payments.
Three Months Ended Nine Months Ended September 30,
June 30 September 30, 2018 2017 2018 2018 2017
Operating profit (loss): Wellbore Technologies $ 40 $ — $ 38 $ 90 $
(81 ) Completion & Production Solutions 46 44 40 102 79 Rig
Technologies 58 18 62 138 37 Eliminations and corporate costs
(71 ) (69 ) (88 ) (206 ) (201 )
Total operating profit (loss) $ 73 $ (7 ) $ 52 $ 124 $ (166 )
Other items: Wellbore Technologies $ — $ — $ — $ (3 ) $ (4 )
Completion & Production Solutions — — — 3 32 Rig Technologies —
— — 6 29 Corporate — — — (18 ) —
Total other items $ — $ — $ — $ (12 ) $ 57 Depreciation
& amortization: Wellbore Technologies $ 95 $ 94 $ 95 $ 284 $
283 Completion & Production Solutions 53 53 54 161 161 Rig
Technologies 20 22 22 63 67 Corporate 4 5 3
11 12 Total depreciation & amortization $ 172 $
174 $ 174 $ 519 $ 523 Adjusted EBITDA: Wellbore Technologies
$ 135 $ 94 $ 133 $ 371 $ 198 Completion & Production Solutions
99 97 94 266 272 Rig Technologies 78 40 84 207 133 Eliminations and
corporate costs (67 ) (64 ) (85 ) (213
) (189 ) Total adjusted EBITDA $ 245 $ 167 $ 226 $ 631 $ 414
Reconciliation of Adjusted EBITDA: GAAP net income (loss)
attributable to Company $ 1 $ (26 ) $ 24 $ (43 ) $ (223 )
Noncontrolling interests 3 (1 ) 1 6 2 Provision (benefit) for
income taxes 29 (13 ) 5 37 (43 ) Interest expense 24 26 23 71 77
Interest income (6 ) (11 ) (5 ) (18 ) (19 ) Equity (income) loss in
unconsolidated affiliate 2 2 1 1 4 Other (income) expense, net 20
16 3 70 36 Depreciation and amortization 172 174 174 519 523 Other
items — — — (12 ) 57 Total
Adjusted EBITDA $ 245 $ 167 $ 226 $ 631 $ 414
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181025006101/en/
National Oilwell Varco, Inc.Loren Singletary,
713-346-7807Loren.Singletary@nov.com
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