National Oilwell Varco, Inc. (NYSE: NOV) today reported a second
quarter 2017 net loss of $75 million, or $0.20 per share. Excluding
other items, net loss for the quarter was $54 million, or $0.14 per
share. Other items totaled $30 million, pretax, and primarily
consisted of charges related to severance and facility
closures.
Revenues for the second quarter of 2017 were $1.76 billion, an
increase of one percent compared to the first quarter of 2017 and
an increase of two percent from the second quarter of 2016.
Operating loss for the second quarter was $62 million, or 3.5
percent of sales. Excluding other items, operating loss was $32
million, or 1.8 percent of sales. Adjusted EBITDA (operating profit
excluding other items before depreciation and amortization) for the
second quarter was $142 million, or 8.1 percent of sales, an
increase of $37 million from the first quarter of 2017. Cash flow
from operations for the second quarter was $168 million.
“Our team executed exceptionally well during the second quarter,
driving substantial sequential improvements in adjusted EBITDA and
free cash flow, as we continue to navigate a challenging market,”
commented Clay Williams, Chairman, President, and CEO. “Efficiency
gains from our investments in operations through the last two years
and rising demand support our drive to return the company to
acceptable levels of financial performance. The second quarter
results reflect our steady progress.”
"Scarcity is returning to the oilfield, and, around the world,
customers are steadily exhausting excess stocks of the critical
products, equipment and technologies we supply, laying the
groundwork for future demand. The strong recovery we’ve seen thus
far in North America, combined with many international markets
stabilizing and offshore markets nearing bottom, makes us
optimistic in our outlook.”
Rig Systems
Rig Systems generated revenues of $346 million, a decrease of 12
percent from the first quarter of 2017 and a decrease of 39 percent
from the second quarter of 2016. Operating loss was $7 million, or
2.0 percent of sales. Adjusted EBITDA was $26 million, or 7.5
percent of sales, a decrease of 21 percent sequentially and a
decrease of 47 percent from the prior year. Revenue from backlog
declined to $224 million as backlog waned and certain capital
equipment deliveries were deferred to the third quarter. Rig
Systems held adjusted EBITDA decrementals (the change in adjusted
EBITDA divided by the change in revenue) to 15% through strong
execution of cost control and efficiency improvement
initiatives.
Backlog for capital equipment orders for Rig Systems at June 30,
2017 was $2.22 billion. New orders during the quarter were $124
million, representing a book-to-bill of 55 percent. Land-related
orders represented 60% of the order book and included one 1,500-HP
AC Ideal Rig and a complete land rig equipment package that
included the Company’s NOVOSTM process automation platform.
Rig Aftermarket
Rig Aftermarket generated revenues of $341 million, an increase
of six percent from the first quarter of 2017 and a decrease of six
percent from the second quarter of 2016. Operating profit was $76
million, or 22.3 percent of sales. Adjusted EBITDA was $83 million,
or 24.3 percent of sales, an increase of 17 percent sequentially
and an increase of 14 percent from the prior year. Rising demand
for spare parts, service, and repair supported revenue
growth. Favorable mix and improved absorption drove 60%
adjusted EBITDA incrementals.
Wellbore Technologies
Wellbore Technologies generated revenues of $614 million, an
increase of 11 percent from the first quarter of 2017 and an
increase of 20 percent from the second quarter of 2016. Operating
loss was $24 million, or 3.9 percent of sales. Adjusted EBITDA was
$66 million, or 10.7 percent of sales, an increase of 74 percent
sequentially and an increase of $65 million from the prior year.
Robust U.S. activity growth and modest improvements in many
international markets, partially offset by Canadian spring
break-up, increased customer demand for the segment’s products and
services. Higher volumes improved absorption across many of the
segment’s North American manufacturing and service facilities,
resulting in 47% adjusted EBITDA incrementals.
Completion & Production Solutions
Completion and Production Solutions generated revenues of $652
million, an increase of one percent from the first quarter of 2017
and an increase of 21 percent from the second quarter of 2016.
Operating profit was $27 million, or 4.1 percent of sales. Adjusted
EBITDA was $98 million, or 15.0 percent of sales, an increase of 27
percent sequentially and an increase of 72 percent from the prior
year. Revenue improvements in the segment’s land-oriented
operations were offset by declines in offshore businesses. Strong
execution on offshore projects, FX benefits, and cost savings
initiatives resulted in a 310 basis point improvement to adjusted
EBITDA margins.
Backlog for capital equipment orders for Completion &
Production Solutions at June 30, 2017 was $881 million. New orders
during the quarter were $501 million, representing a book-to-bill
of 127 percent when compared to the $393 million of orders shipped
from backlog. Nearly all of the segment’s business units secured
orders well in excess of 100% book-to-bill. Included in the order
book was a total of 107,500HP of pressure pumping equipment, orders
for seven new coiled tubing units, and a subsea soft yoke system
for a floating storage regassification unit.
Significant Events and Achievements
NOV signed a 10-year service and support agreement with
Transocean to maximize uptime and reduce total cost of ownership
for the drill-floor equipment on 15 Transocean drilling rigs. The
collaborative arrangement will leverage the operational expertise
of both organizations and incorporate NOV’s leading drilling
technologies, global aftermarket service and repair capabilities,
and data-driven solutions, including the
Company’s RigsentryTM condition-monitoring system.
Rigsentry merges the power of Big Data analytics with design
insight only available as the original equipment manufacturer to
enable customers to operate and maintain rig equipment more
effectively.
NOV introduced the latest version of its MD TotcoTM autodriller,
e-Wildcat™ 2.0. Equipped with a more robust data acquisition
system than previous models, the e-Wildcat 2.0 combines
high-resolution sensors with rig-specific algorithms so
conventional rigs can maintain a constant rate of penetration,
allowing customers to improve drilling times up to 30%. Across
North America, multiple customers have switched from competitor
systems to the e-Wildcat 2.0, citing the system’s increased control
and visibility as well as the additional ability to drill
surface-hole sections more effectively.
NOV won a large thru-tubing tools order in North America from an
independent service company, booking 60 TerraMax™ milling systems,
totaling over 260 tools. The TerraMax milling system is a complete
bottomhole assembly (BHA) for coiled tubing mill-out that includes
thru-tubing connectors, twin flapper check valves, a dual
circulation sub, a Bowen™ TerraForce™ coiled tubing jar, Bowen
hydraulic disconnect, a PowerPlus™ coiled tubing motor, and a
ShredR™ bit. NOV delivered the first 20 BHAs, and the customer is
now using them in the Eagle Ford and Permian basins for
extended-reach operations.
NOV introduced a new, more powerful, higher-torque top drive to
enable drilling contractors to drill longer laterals faster and
more efficiently. The 1,200-HP high-torque, induction-motor-powered
TDS-11HD builds upon the field-proven performance and brand of
NOV’s TDS-11SA top drive, offering extra power and 45% more torque
for increased drilling requirements. NOV now also offers an upgrade
package to provide its large installed base of market-leading
TDS-11SA top drives with similar performance characteristics,
including retrofitting two new 600-HP induction motors, a 400-HP
increase, and upgrading the gear box and other components.
NOV booked meaningful international orders for its tubular
coating and inspection services. In Egypt, NOV booked an order for
Tube-Kote™ internal line pipe coatings, Thru-Kote™ sleeves, and
corrosion-resistant custom fittings and accessories, and in Oman,
NOV won an order to provide Tube-Kote internal coating on 220,000
ft of 2⅞-in. production tubing. The Company’s Tuboscope™ TK™
Corrosion Control Services product line consistently sets the
industry standard for preventing corrosion and wear, improving
hydraulic efficiency and limiting internal-diameter deposits. In
Mexico, NOV won a three-year contract for sucker rods and rod
inspection, positioning NOV well to win future
artificial-lift-related inspection opportunities there.
NOV recently introduced its IQ™ Monitoring System, the
industry’s first wear and vibration monitoring product for
underreamers. A unique sensor arrangement within the Anderreamer™
cutting structure provides detailed performance data used primarily
to eliminate the need for caliper and cleanout runs. A companion
application on any smartphone, tablet, or laptop is used on the rig
for rapid analysis of drilling parameters, vibration severity, and
tool diameter throughout a run. Recently, the tool was successfully
used in high-pressure and high-temperature applications in the Gulf
of Mexico and the North Sea. In both applications, the operators
eliminated the need for secondary reaming runs required in offset
wells.
In the North Sea, a major oil company avoided a potential
expensive stuck pipe situation by detecting packoff, or plugging of
the wellbore around the drillstring, using NOV’s BlackStream™
along-stream measurement (ASM) tool, IntelliServ™ wired drill
pipe, and real-time equivalent fluid density software. The
combination of tools allowed the operator to acquire high-frequency
information on downhole drilling conditions, transmit the
information in real time to the surface, and view the large amounts
of data on a single display. By doing so, the operator was able to
identify the root cause of packoff, change drilling practices, and
eliminate the problem from reoccurring.
NOV introduced a remote monitoring and analytics platform for
its production, process, and fluid transfer technologies. The
Company’s new Process and Flow Technologies GoConnect platform
collects, stores, and analyzes field-operation data to improve
equipment performance and ultimately provide operators
conditioned-based maintenance, predictive failure analytics, and
process optimization.
NOV successfully trialed its ReedHycalogTM Tektonic™ drill bits
Chainsaw design concept, featuring ION™ 3D cutters on primary
blades and full round ION cutters on secondary blades. This
configuration improves point loading to the formation for much
greater drilling efficiency while maintaining durability. The
12¼-in. TK66 Tektonic bit drilled the entire vertical section in a
single run, setting a field record for rate of penetration, 8%
faster than a competitor’s previous record.
NOV installed more than 2.5 miles of Bondstrand™
glass-reinforced epoxy (GRE) pipework on the HMS Queen Elizabeth,
the largest warship ever built for the UK Royal Navy. The Company
supplied more than 2,000 GRE pipe spools, specialist bulkhead
penetrations, MARRSTM OFFSHORE phenolic handrails and structures,
and more than 4,311 ft² of phenolic fiberglass-reinforced polymer
grating for the forward and aft islands and flight deck catwalks.
NOV supplied the same solution to the HMS Prince of Wales,
currently in fabrication. Between the two vessels, NOV’s fiberglass
solutions saved approximately 390 metric tons of weight compared to
metallic alternatives, offered significantly more corrosion
resistance, and reduced maintenance needs.
Other Corporate Items
As of June 30, 2017, the Company had $1.53 billion in cash and
cash equivalents and total debt of $3.21 billion. On June 27, 2017,
the Company replaced its existing credit facility with a new $3.0
billion unsecured revolving credit facility that matures in June of
2022 and is subject to one primary covenant, a maximum
debt-to-capitalization ratio of 60 percent. As of June 30, 2017,
NOV had $3.0 billion available on the new facility and a
debt-to-capitalization ratio of 18.6 percent.
Second Quarter Earnings Conference Call
NOV will hold a conference call to discuss its second quarter
2017 results on July 28, 2017 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 National Oilwell Varco
National Oilwell Varco (NYSE: NOV) is a leading provider of
technology, equipment, and services to the global oil and gas
industry. NOV has been pioneering innovations that improve the
cost-effectiveness, efficiency, safety, and environmental impact of
oil and gas operations since 1862. The depth and breadth of NOV’s
offerings support customers’ full-field, drilling, completion, and
production needs. NOV powers the industry that powers the
world.
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.
NATIONAL OILWELL VARCO, INC.
CONSOLIDATED STATEMENTS OF INCOME
(LOSS) (Unaudited)
(In millions, except per share
data)
Three Months Ended
Six Months Ended June 30, March 31, June 30, 2017
2016 2017 2017 2016 Revenue: Rig
Systems $ 346 $ 564 $ 393 $ 739 $ 1,490 Rig Aftermarket 341 364 321
662 755 Wellbore Technologies 614 511 555 1,169 1,142 Completion
& Production Solutions 652 538 648 1,300 1,096 Eliminations
(194 ) (253 ) (176 ) (370 ) (570
) Total revenue 1,759 1,724 1,741 3,500 3,913 Gross profit (1) 231
35 209 440 279 Gross profit % 13.1 % 2.0 % 12.0 % 12.6 % 7.1 %
Selling, general, and administrative 293
305 306 599 738
Operating loss (62 ) (270 ) (97 ) (159 ) (459 ) Interest and
financial costs (26 ) (30 ) (25 ) (51 ) (55 ) Interest income 4 3 4
8 8 Equity loss in unconsolidated affiliates (2 ) (7 ) - (2 ) (13 )
Other income (expense), net (2 ) (34 ) (11 )
(13 ) (55 ) Loss before income taxes (88 ) (338 )
(129 ) (217 ) (574 ) Provision for income taxes (14 )
(121 ) (9 ) (23 ) (239 ) Net loss (74 ) (217 )
(120 ) (194 ) (335 ) Net income attributable to noncontrolling
interests 1 - 2 3
1 Net loss attributable to Company $ (75 ) $
(217 ) $ (122 ) $ (197 ) $ (336 ) Per share data: Basic $
(0.20 ) $ (0.58 ) $ (0.32 ) $ (0.52 ) $ (0.90 ) Diluted $ (0.20 ) $
(0.58 ) $ (0.32 ) $ (0.52 ) $ (0.90 ) Weighted average shares
outstanding: Basic 377 375 376
377 375 Diluted 377
375 376 377
375 (1) Gross profit excluding other items was
$261 million and $497 million for the three and six months ended
June 30, 2017, respectively. Gross profit excluding other items was
$139 million and $439 million for the three and six months ended
June 30, 2016, respectively. Gross profit excluding other items was
$236 million for the three months ended March 31, 2017. See GAAP to
Non-GAAP reconciliation on page 10.
NATIONAL OILWELL VARCO, INC.
CONSOLIDATED BALANCE SHEETS
(In millions)
June 30, December
31, 2017 2016 (Unaudited) ASSETS Current assets: Cash and cash
equivalents $ 1,530 $ 1,408 Receivables, net 2,086 2,083
Inventories, net 3,207 3,325 Costs in excess of billings 599 665
Other current assets 319 395 Total current assets
7,741 7,876 Property, plant and equipment, net 3,052 3,150
Goodwill and intangibles, net 9,567 9,597 Other assets 527
517 Total assets $ 20,887 $ 21,140 LIABILITIES AND
STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $
448 $ 414 Accrued liabilities 1,489 1,568 Billings in excess of
costs 337 440 Current portion of long-term debt and short-term
borrowings 506 506 Accrued income taxes 71 119 Total
current liabilities 2,851 3,047 Long-term debt 2,708 2,708
Other liabilities 1,306 1,382 Total liabilities 6,865
7,137 Total stockholders’ equity 14,022 14,003
Total liabilities and stockholders’ equity $ 20,887 $ 21,140
NATIONAL OILWELL VARCO, INC.
OPERATING PROFIT (LOSS) – GAAP to
Non-GAAP RECONCILIATION (Unaudited)
(In millions)
Three Months Ended
Six Months Ended June 30, March 31, June 30, 2017
2016 2017 2017 2016 Revenue: Rig
Systems $ 346 $ 564 $ 393 $ 739 $ 1,490 Rig Aftermarket 341 364 321
662 755 Wellbore Technologies 614 511 555 1,169 1,142 Completion
& Production Solutions 652 538 648 1,300 1,096 Eliminations
(194 ) (253 ) (176 ) (370 ) (570
) Total revenue $ 1,759 $ 1,724 $ 1,741 $
3,500 $ 3,913 Operating profit (loss): Rig
Systems $ (7 ) $ 7 $ 9 $ 2 $ 74 Rig Aftermarket 76 62 61 137 131
Wellbore Technologies (24 ) (146 ) (57 ) (81 ) (237 ) Completion
& Production Solutions 27 (33 ) 8 35 (71 ) Eliminations and
corporate costs (134 ) (160 ) (118 )
(252 ) (356 ) Total operating profit (loss) $ (62 ) $ (270 )
$ (97 ) $ (159 ) $ (459 ) Other items: Rig Systems $ 16 $ 23
$ 7 $ 23 $ 75 Rig Aftermarket 1 5 5 6 13 Wellbore Technologies (4 )
50 - (4 ) 88 Completion & Production Solutions 17 38 15 32 72
Eliminations and corporate costs - 1
- - 10 Total other items
$ 30 $ 117 $ 27 $ 57 $ 258
Operating profit (loss) excluding other items: Rig Systems $
9 $ 30 $ 16 $ 25 $ 149 Rig Aftermarket 77 67 66 143 144 Wellbore
Technologies (28 ) (96 ) (57 ) (85 ) (149 ) Completion &
Production Solutions 44 5 23 67 1 Eliminations and corporate costs
(134 ) (159 ) (118 ) (252 ) (346
) Total operating profit (loss) excluding other items $ (32 ) $
(153 ) $ (70 ) $ (102 ) $ (201 )
NATIONAL OILWELL VARCO, INC.
AS ADJUSTED BEFORE DEPRECIATION &
AMORTIZATION SUPPLEMENTAL SCHEDULE (Unaudited)
(In millions)
Three Months Ended
Six Months Ended June 30, March 31, June 30, 2017
2016 2017 2017 2016 Operating profit
(loss) excluding other items: Rig Systems $ 9 $ 30 $ 16 $ 25 $ 149
Rig Aftermarket 77 67 66 143 144 Wellbore Technologies (28 ) (96 )
(57 ) (85 ) (149 ) Completion & Production Solutions 44 5 23 67
1 Eliminations and corporate costs (134 ) (159 )
(118 ) (252 ) (346 ) Total operating profit
(loss) excluding other items $ (32 ) $ (153 ) $ (70 ) $ (102 ) $
(201 ) Depreciation & amortization: Rig Systems $ 17 $
19 $ 17 $ 34 $ 37 Rig Aftermarket 6 6 5 11 11 Wellbore Technologies
94 97 95 189 193 Completion & Production Solutions 54 52 54 108
104 Eliminations and corporate costs 3 4
4 7 8 Total
depreciation & amortization $ 174 $ 178 $ 175
$ 349 $ 353 Adjusted EBITDA (Operating
profit excluding other items before depreciation &
amortization) (Note 1): Rig Systems $ 26 $ 49 $ 33 $ 59 $ 186 Rig
Aftermarket 83 73 71 154 155 Wellbore Technologies 66 1 38 104 44
Completion & Production Solutions 98 57 77 175 105 Eliminations
and corporate costs (131 ) (155 ) (114 )
(245 ) (338 ) Total Adjusted EBITDA $ 142 $ 25
$ 105 $ 247 $ 152 Adjusted
EBITDA % (Note 1): Rig Systems 7.5 % 8.7 % 8.4 % 8.0 % 12.5 % Rig
Aftermarket 24.3 % 20.1 % 22.1 % 23.3 % 20.5 % Wellbore
Technologies 10.7 % 0.2 % 6.8 % 8.9 % 3.9 % Completion &
Production Solutions 15.0 % 10.6 % 11.9 % 13.5 % 9.6 % Total
Adjusted EBITDA % 8.1 % 1.5 % 6.0 % 7.1 % 3.9 %
Reconciliation of Adjusted EBITDA (Note 1): GAAP net income (loss)
attributable to Company $ (75 ) $ (217 ) $ (122 ) $ (197 ) $ (336 )
Net income attributable to noncontrolling interest 1 - 2 3 1
Provision for income taxes (14 ) (121 ) (9 ) (23 ) (239 ) Interest
expense 26 30 25 51 55 Interest income (4 ) (3 ) (4 ) (8 ) (8 )
Equity income (loss) in unconsolidated affiliates 2 7 - 2 13 Other
income (expense), net 2 34 11 13 55 Depreciation & amortization
174 178 175 349 353 Other items in operating profit 30
117 27 57
258 Total Adjusted EBITDA: $ 142 $ 25 $ 105
$ 247 $ 152
NATIONAL OILWELL VARCO, INC.
GAAP to Non-GAAP (Adjusted)
RECONCILIATION (Unaudited)
(In millions, except per share
data)
Three Months Ended
Six Months Ended June 30, March 31,
June 30, 2017 2016 2017 2017
2016 GAAP net income (loss) attributable to Company $ (75 )
$ (217 ) $ (122 ) $ (197 ) $ (336 ) Other Items: Severance,
inventory charges, facility closures and other 30 117 27 57 258
Fixed asset write-down - 26 10
10 32 GAAP net income (loss)
less pre-tax other items (45 ) (74 ) (85 ) (130 ) (46 ) Tax impact
on other items (9 ) (40 ) (12 ) (21 ) (89 ) Tax items (Note 2)
- - 34 34
- Adjusted net income (loss) attributable to Company
(Note 1) (54 ) (114 ) (63 ) (117 ) (135 ) Noncontrolling interest
1 - 2 3
1 Adjusted net income (loss) (Note 1) $ (53 ) $ (114
) $ (61 ) $ (114 ) $ (134 ) Three Months Ended Six
Months Ended June 30, March 31, June 30, 2017 2016 2017 2017 2016
GAAP net income (loss) attributable to Company per share $ (0.20 )
$ (0.58 ) $ (0.32 ) $ (0.52 ) $ (0.90 ) Other items: Severance,
inventory charges, facility closures and other 0.06 0.23 0.04 0.10
0.48 Fixed asset write-down - 0.05 0.02 0.02 0.06 Tax items
- - 0.09 0.09
- Adjusted earnings (loss) per share (Note 1) $ (0.14
) $ (0.30 ) $ (0.17 ) $ (0.31 ) $ (0.36 ) Three
Months Ended Six Months Ended June 30, March 31, June 30, 2017 2016
2017 2017 2016 GAAP gross profit $ 231 $ 35 $ 209 $ 440 $ 279 Other
items included in gross profit 30 104
27 57 160 Adjusted gross
profit (Note 1) $ 261 $ 139 $ 236 $ 497
$ 439 GAAP selling, general, and administrative $ 293
$ 305 $ 306 $ 599 $ 738 Other items included in selling, general,
and administrative - (13 ) -
- (98 ) Adjusted selling, general, and
administrative (Note 1) $ 293 $ 292 $ 306 $
599 $ 640
Note 1: The Company discloses various non-GAAP financial
measures in its periodic earnings press releases and other public
disclosures to provide investors additional information about the
results of ongoing operations. The Company uses these same non-GAAP
measures internally to evaluate and manage the business. Each of
these non-GAAP financial measures excludes the impact of certain
other items and therefore has not been calculated in accordance
with GAAP. A reconciliation of each non-GAAP financial measure to
its most comparable GAAP financial measure is included herein. The
non-GAAP financial measures are not intended to replace GAAP
financial measures.
Note 2: The excluded Tax Item in Q1 2017 was foreign tax
credit valuation allowances (VAs) booked because the Company is in
a three-year cumulative tax loss position. In Q2 2017, similar VAs
were largely offset by other realized tax credits.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170727006686/en/
National Oilwell Varco, Inc.Loren Singletary,
713-346-7807Loren.Singletary@nov.com
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