National Oilwell Varco, Inc. (NYSE: NOV) today reported first
quarter 2019 revenues of $1.94 billion, a decrease of 19 percent
compared to the fourth quarter of 2018 and an increase of eight
percent from the first quarter of 2018. Operating loss for the
first quarter of 2019 was $48 million, net loss was $77 million,
and Adjusted EBITDA (operating profit excluding depreciation,
amortization, and other items) was $140 million, or 7.2 percent of
sales. Adjusted EBITDA decreased $139 million sequentially and $20
million compared to the first quarter of 2018. Other items totaled
$11 million, pre-tax, and include restructure costs for facility
closures, inventory write downs, severance payments and adjustments
of certain reserves.
“Two big challenges negatively impacted our quarter—oilfield
service customers cut expenditures due to low year-end oil prices
and sliding producer activity outlook, and offshore sales declined
following the accelerated equipment deliveries we saw in the fourth
quarter,” commented Clay Williams, Chairman, President, and CEO.
“Additionally, the volume of orders for new capital equipment fell
sharply in late 2018 and remained sparse through the first two
months of the year. Nevertheless, customer confidence improved
month-by-month through the first quarter as commodity prices
strengthened. Strong order acceleration in March enabled NOV to
post a sequential increase in bookings, improving our outlook for
the second quarter and remainder of 2019.”
“While we expect modestly improving activity in international
and offshore markets, along with growing market penetration for
NOV’s proprietary technologies and services, capital austerity in
the North American land market leaves our near-term outlook
uncertain. Consequently, we are renewing our focus on controlling
what we can, namely our cost structure, as we streamline our
operations to improve our organization’s profitability, regardless
of the market environment.”
Wellbore Technologies
Wellbore Technologies generated revenues of $807 million in the
first quarter of 2019, a decrease of nine percent from the fourth
quarter of 2018 and an increase of 14 percent from the first
quarter of 2018. The sharp pull-back in commodity prices in late
2018 amplified the typical seasonal first quarter slowdown in
demand for equipment in international markets and resulted in lower
levels of drilling activity and pricing pressure in North America,
which contributed to the sequential decline in revenues. Commodity
prices, activity levels, and the Segment’s financial results
improved through the quarter, and bookings for drill pipe
accelerated rapidly into quarter-end, resulting in the Company’s
third straight sequential improvement in drill pipe orders.
Operating profit was $19 million, or 2.4 percent of sales. Adjusted
EBITDA decreased 25 percent sequentially and increased 14 percent
from the prior year to $117 million, or 14.5 percent of sales.
Completion & Production Solutions
Completion & Production Solutions generated revenues of $581
million in the first quarter of 2019, a decrease of 26 percent from
the fourth quarter of 2018 and a decrease of 13 percent from the
first quarter of 2018. The sequential decrease in revenues was a
result of equipment deliveries that were pulled forward prior to
year-end, limited order intake in late 2018 and the first two
months of 2019, and customer-deferred deliveries. Operating loss
was $35 million, and Adjusted EBITDA decreased $84 million
sequentially and $45 million from the prior year to $28 million, or
4.8 percent of sales.
Orders improved in March and totaled $470 million for the
quarter, equal to the bookings in the fourth quarter and
representing a book-to-bill of 149 percent when compared to the
$316 million of orders shipped from backlog. Backlog for capital
equipment orders for Completion & Production Solutions at March
31, 2019 was $1.04 billion.
Rig Technologies
Rig Technologies generated revenues of $603 million in the first
quarter of 2019, a decrease of 25 percent from the fourth quarter
of 2018 and an increase of 25 percent from the first quarter of
2018. The sequential decline in revenues was due to lower
contributions from offshore projects, fewer deliveries of capital
equipment, and the first quarter seasonal decline in service and
repair work. Operating profit was $31 million, or 5.1 percent of
sales. Adjusted EBITDA decreased 45 percent sequentially and
increased 24 percent from the prior year to $56 million, or 9.3
percent of sales.
New orders booked during the quarter totaled $271 million,
representing a book-to-bill of 110 percent when compared to the
$246 million of orders shipped from backlog. At March 31, 2019,
backlog for capital equipment orders for Rig Technologies was $3.1
billion.
Other Corporate Items
Lower compensation and third-party service expenses and a
decrease in intersegment sales resulted in a $29 million reduction
in eliminations and corporate costs.
During the first quarter of 2019, the Company adopted ASC 842,
Leases, effective January 1, 2019. As a result of this adoption,
the Company recorded a transition adjustment that increased
short-term liabilities by $108 million and long-term liabilities by
$482 million. As of March 31, 2019, the Company had total debt of
$3.3 billion, with $3.0 billion available on its revolving credit
facility, and $1.3 billion in cash and cash equivalents.
Significant Events and Achievements
NOV booked an order from BP and the Azeri Central East (ACE)
Project partners for the drilling and mud equipment package for the
ACE platform in the Caspian Sea. This award is the culmination of a
rigorous 2-year process, which included initial qualification for
the project and competitive Front-End Engineering Design (FEED)
studies. The ACE platform will operate offshore Azerbaijan and
achieve first production in 2023.
NOV opened its new, state-of-the-art Fiber Glass Systems
manufacturing facility in Dammam, Saudi Arabia. This 24,000 m²
manufacturing facility is the first local producer of spoolable and
jointed glass-reinforced epoxy (GRE) pipe in the Kingdom. The
facility also makes GRE high-pressure line pipe and downhole tubing
and casing. Using NOV’s locally manufactured composite Fiberspar™
and STAR™ products will allow customers in the region to reduce
costs and eliminate corrosion. The facility will drive new levels
of efficiency, safety, and environmental stewardship in operations
across the Middle East while helping NOV’s composite solutions
expand into additional markets. Coinciding with the opening of the
new facility, NOV was awarded a $49 million initial purchase
order.
NOV expanded the international reach of its
measurement-while-drilling (MWD) and steerable technologies
portfolio during the first quarter of 2019. NOV secured its first
long-term rental contract to deploy Vector™ rotary steerable system
(RSS) tools in the MENA region based on the successful use of the
tool to maintain verticality in a hard, interbedded, and highly
dipping formation. NOV also deployed its iSeries™ MWD tools in
Mexico, Turkey, and the Middle East for the first time.
NOV signed an agreement with a major operator in Oman for
onshore treatment of oil-based-mud drill cuttings using NOV’s hot
oil thermal desorption unit, a novel thermal treatment technology.
The equipment will help the operator treat legacy cuttings and
backfill old, open drill pits, reducing drilling footprint. NOV’s
introduction of this technology into Oman provides the Company with
a stronger market position while adhering to the country’s strict
rules on limiting drilling impact in environmentally sensitive
areas. The project will first treat legacy cuttings and then
integrate into the operator’s drilling program to treat waste
directly from the wellsite.
NOV secured a 93-pump order from a major mid-stream company for
a major pipeline infrastructure buildout from the Permian Basin to
the Gulf Coast in Texas. The large order adds to NOV’s
industry-leading installed base of more than 50,000 units.
NOV Completion Tools successfully introduced its BPS™ Maxx and
i-Opener™ TD (Time Delay) systems. The BPS Maxx offers a
significant increase in flow area compared to earlier generations
of BPS products, allowing for flowrates greater than 100 barrels
per minute, significantly improving productivity from the toe
sections of extended-reach horizontal wellbores. The Company has
already deployed BPS Maxx in the Eagle Ford Shale, Permian Basin,
Mid-Continent, Bakken Shale, and Powder River Basin. NOV’s i-Opener
TD incorporates a simple and robust time delay mechanism to allow
intervention-less activation and opening of the sleeve to establish
injectivity. NOV installed its first i-Opener TD system for a major
operator in the Norwegian North Sea, providing savings of
approximately $250,000 by eliminating the need for conventional
wireline-tractor-conveyed perforating. In addition, there were
substantial improvements to HSE by eliminating the need for
explosives with perforating guns.
NOV introduced BW Shield™, a proprietary coating technology that
reduces corrosion-related damage to bias welds on coiled tubing
strings. Operations in shale plays present coiled tubing service
companies with persistent corrosion challenges, including pitting
corrosion due to microbes, leftover acid, chloride-rich solutions,
and other harsh conditions found in downhole environments. These
issues can cause premature failures of bias welds, leading to early
coiled tubing string retirements and costly downtime. BW Shield
prevents localized bias weld corrosion, helping customers improve
string life, increase reliability, and avoid service
interruptions.
NOV was made the primary fixed-cutter drill bit supplier for a
major operator in India. The Company will provide the operator with
a minimum of 60% of their fixed-cutter bit requirements over 3
years, a contract that encompassed 120 rigs and an expected 1,500
wells.
NOV received the 2019 OTC Spotlight on New Technology Award, the
second award in as many years, for its subsea automated pig
launcher (SAPL). The SAPL allows pig launching from the subsea to
topside and enables a wide range of pigging operations that help
avoid pipeline blockages and production shutdowns while improving
system integrity. The system also eliminates the need for a second
flowline solely for pigging and wax handling and reduces the number
of days required for vessel mobilization compared to conventional
systems.
NOV booked its first international order for a Genesis™ coiled
tubing unit from a large independent service company operating in
the Middle East, demonstrating growing demand for leading-edge
completion equipment in international markets. The Genesis unit
handles the greater lengths and diameters of the coiled tubing
strings required in long horizontal wells, including up to 24,000
ft of 2⅜-in. tubing. NOV’s new HR-6120 injector head, which can
handle tubing sizes up to 2⅞ in. and features a unique remote
gooseneck alignment system, can also be used with the Genesis
unit.
NOV’s TerraPULSE™ CT Agitator™ tool achieved success for an
operator on a two-well project in South Texas. The tool was used to
reduce friction in the wellbore while milling out frac plugs during
a coiled tubing operation. The wells included lateral lengths
exceeding 13,000 ft, which were longer laterals for this operator.
Each well included 13 dissolvable plugs in the last section of the
lateral, which were installed with the perception that they could
not be drilled out on coiled tubing. The TerraPULSE tool allowed
the service company to drill out all the plugs and reach TD. NOV
has now completed seven runs with the TerraPULSE tool and is
producing a large fleet of rental tools in anticipation of demand
uptick in late Q2.
NOV’s MPowerD™ managed-pressure-drilling (MPD) product line
continues to gain international traction. The Company introduced
the first MPD system integrated with an MPD application on the
NOVOS™ platform to a pilot project in Canada. In addition, NOV
expanded its global footprint into Latin America with a major order
from an operator in Argentina for an MPD system with the NOVOS
application. Offshore, NOV delivered its second integrated MPD
control system to an ultradeepwater drillship, with successful
completion of installation and commissioning in March.
NOV signed a 3-year, 10-rig contract for its solids control and
waste management equipment services in the Permian for a major
integrated oil company. This award comes from a successful field
trial showcasing NOV’s Advanced Fluid Recovery System (AFRS), which
transfers whole wellbore cuttings directly from the shale shakers
to a processing centrifuge. This patent-pending process produces a
dryer waste stream and yields a cleaner recoverable drilling fluid,
which reduces overall disposal numbers and provides savings to the
operator on base fluid usage. The award will mobilize five AFRS
packages and five centrifuge packages along with various other
surface rental pieces.
First Quarter Earnings Conference Call
NOV will hold a conference call to discuss its first quarter
2019 results on April 26, 2019 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 March 31, December 31, 2019
2018 2018 Revenue: Wellbore Technologies $ 807 $ 711
$ 884 Completion & Production Solutions 581 670 788 Rig
Technologies 603 483 804 Eliminations (51 ) (69 )
(78 ) Total revenue 1,940 1,795 2,398 Gross profit 256 287
409 Gross profit % 13.2 % 16.0 % 17.1 % Selling, general,
and administrative 304 288 322 Operating
profit (loss) (48 ) (1 ) 87 Interest and financial costs (25 ) (24
) (22 ) Interest income 6 7 7 Equity income (loss) in
unconsolidated affiliates — 2 (2 ) Other income (expense), net
(18 ) (47 ) (29 ) Income (loss) before income
taxes (85 ) (63 ) 41 Provision (benefit) for income taxes
(10 ) 3 26 Net income (loss) (75 ) (66 ) 15 Net
(income) loss attributable to noncontrolling interests 2
2 3 Net income (loss) attributable to Company $ (77 )
$ (68 ) $ 12 Per share data: Basic $ (0.20 ) $ (0.18 ) $ 0.03
Diluted $ (0.20 ) $ (0.18 ) $ 0.03 Weighted average shares
outstanding: Basic 380 377 379 Diluted
380 377 383
NATIONAL OILWELL VARCO, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
March 31, December 31, 2019 2018
ASSETS Current
assets: Cash and cash equivalents $ 1,270 $ 1,427 Receivables, net
1,793 2,101 Inventories, net 3,131 2,986 Contract assets 539 565
Other current assets 205 200 Total current assets
6,938 7,279 Property, plant and equipment, net 2,605 2,797
Lease right-of-use assets 789 — Goodwill and intangibles, net 9,234
9,284 Other assets 436 436 Total assets $ 20,002 $
19,796
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable $ 679 $ 722 Accrued liabilities 876
1,088 Contract liabilities 412 458 Current portion of lease
liabilities 115 7 Accrued income taxes 21 66 Total
current liabilities 2,103 2,341 Lease liabilities 728 222
Long-term debt 2,483 2,482 Other liabilities 848 862
Total liabilities 6,162 5,907 Total stockholders’ equity
13,840 13,889 Total liabilities and stockholders’
equity $ 20,002 $ 19,796
The Company adopted ASC 842, Leases, effective
January 1, 2019 resulting in the addition of $590 million in assets
and liabilities on the Company’s first quarter 2019 consolidated
balance sheet.
NATIONAL OILWELL VARCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three Months Ended March 31, 2019 2018
Cash flows from operating activities: Net loss $ (75 ) $ (66 )
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation and amortization 177 173 Working capital
and other operating items, net (140 ) (236 ) Net cash
used by operating activities (38 ) (129 ) Cash
flows from investing activities: Purchases of property, plant and
equipment (43 ) (39 ) Business acquisitions, net of cash acquired
(65 ) (36 ) Other 1 14 Net cash used in investing
activities (107 ) (61 ) Cash flows from
financing activities: Cash dividends paid (19 ) (19 ) Other
(1 ) 1 Net cash used in financing activities (20 ) (18 )
Effect of exchange rates on cash 8 7 Decrease in cash
and cash equivalents (157 ) (201 ) Cash and cash equivalents,
beginning of period 1,427 1,437 Cash and cash
equivalents, end of period $ 1,270 $ 1,236
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 include restructure costs for facility
closures, inventory write downs, severance payments and adjustments
of certain reserves. Three Months Ended March 31,
December 31, 2019 2018 2018 Operating profit
(loss): Wellbore Technologies $ 19 $ 12 $ 41 Completion &
Production Solutions (35 ) 16 64 Rig Technologies 31 18 75
Eliminations and corporate costs (63 ) (47 )
(93 ) Total operating profit (loss) $ (48 ) $ (1 ) $ 87
Other items: Wellbore Technologies $ (2 ) $ (3 ) $ 24 Completion
& Production Solutions 11 3 (3 ) Rig Technologies 2 6 —
Corporate — (18 ) — Total other items $ 11 $
(12 ) $ 21 Depreciation & amortization: Wellbore
Technologies $ 100 $ 94 $ 90 Completion & Production Solutions
52 54 51 Rig Technologies 23 21 27 Corporate 2 4
3 Total depreciation & amortization $ 177 $ 173 $ 171
Adjusted EBITDA: Wellbore Technologies $ 117 $ 103 $ 155
Completion & Production Solutions 28 73 112 Rig Technologies 56
45 102 Eliminations and corporate costs (61 ) (61 )
(90 ) Total Adjusted EBITDA $ 140 $ 160 $ 279
Reconciliation of Adjusted EBITDA: GAAP net income (loss)
attributable to Company $ (77 ) $ (68 ) $ 12 Noncontrolling
interests 2 2 3 Provision (benefit) for income taxes (10 ) 3 26
Interest expense 25 24 22 Interest income (6 ) (7 ) (7 ) Equity
(income) loss in unconsolidated affiliate — (2 ) 2 Other (income)
expense, net 18 47 29 Depreciation and amortization 177 173 171
Other items 11 (12 ) 21 Total Adjusted EBITDA
$ 140 $ 160 $ 279
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version on businesswire.com: https://www.businesswire.com/news/home/20190425006035/en/
National Oilwell Varco, Inc.Loren Singletary (713)
346-7807Loren.Singletary@nov.com
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