National Oilwell Varco, Inc. (NYSE: NOV) today reported second
quarter 2020 revenues of $1.50 billion, a decrease of 21 percent
compared to the first quarter of 2020 and a decrease of 30 percent
compared to the second quarter of 2019. Net loss for the second
quarter of 2020 was $93 million, or -6.2 percent of sales, which
included non-cash, pre-tax charges (“other items”, see Other
Corporate Items for additional detail) of $102 million. Adjusted
EBITDA (operating profit excluding depreciation, amortization, and
other items) decreased $94 million sequentially to $84 million, or
5.6 percent of sales.
“The oil & gas industry is bearing the full brunt of the
economic damage wrought by the COVID-19 pandemic that has driven
drilling activity to record lows,” commented Clay Williams,
Chairman, President, and CEO. “Against this backdrop, NOV is
continuing to aggressively reduce its cost structure and boost cash
flow through more efficient operations and better working capital
management.”
“We are determined to re-size the organization to fit lower
levels of demand and continue to make good progress executing the
numerous initiatives required to meet our objective. During the
second quarter, we exceeded our cost reduction targets and
generated $378 million in cash flow from operations, further
solidifying our balance sheet and positioning us well to capitalize
on future opportunities.”
“To the extent oil and gas companies and oilfield service
companies continue to work, we find them gravitating to NOV as
their supplier of choice. They know they can depend on us for
superior quality, technology, value, and to be there to support
their efforts for the long-term. With our market-leading
technology, global footprint, diverse product portfolio, and
customer-centric business model, NOV is positioned to exit this
down-cycle stronger than ever before.”
Wellbore Technologies
Wellbore Technologies generated revenues of $442 million in the
second quarter of 2020, a decrease of 36 percent from the first
quarter of 2020 and a decrease of 48 percent from the second
quarter of 2019. The sequential decline in revenue was driven
primarily by the severe fall in global drilling activity,
particularly in North America and Latin America. Operating loss was
$67 million, or -15.2 percent of sales, and included $62 million of
other items. Adjusted EBITDA decreased 59 percent sequentially to
$42 million, or 9.5 percent of sales.
Completion & Production Solutions
Completion & Production Solutions generated revenues of $611
million in the second quarter of 2020, a decrease of nine percent
from the first quarter of 2020 and a decrease of eight percent from
the second quarter of 2019. Operating profit was $42 million, or
6.9 percent of sales, and included $12 million in other items.
Deteriorating conditions in the global completions market and
logistical disruptions from COVID-19-related restrictions were
partially offset by strong execution on existing backlog. Adjusted
EBITDA decreased four percent sequentially to $68 million, or 11.1
percent of sales.
New orders booked during the quarter totaled $196 million,
representing a book-to-bill of 51 percent when compared to the $388
million of orders shipped from backlog. At June 30, 2020, backlog
for capital equipment orders for Completion & Production
Solutions was $1.0 billion.
Rig Technologies
Rig Technologies generated revenues of $476 million in the
second quarter of 2020, a decrease of 15 percent from the first
quarter of 2020 and a decrease of 29 percent from the second
quarter of 2019. Operating loss was $25 million, or -5.3 percent of
sales, and included $20 million of other items. Adjusted EBITDA
decreased 75 percent sequentially to $14 million, or 2.9 percent of
sales. Declining global rig activity combined with COVID-19-related
logistics issues, which were particularly acute in the aftermarket
business, drove the sequential decline in revenue and
profitability.
New orders booked during the quarter totaled $74 million,
representing a book-to-bill of 34 percent when compared to the $219
million of orders shipped from backlog. At June 30, 2020, backlog
for capital equipment orders for Rig Technologies was $2.79
billion.
Other Corporate Items
During the second quarter, the Company recognized $102 million
in restructuring charges, primarily due to severance costs,
facility closures and inventory reserves. See reconciliation of
Adjusted EBITDA to Net Income.
As of June 30, 2020, the Company had total debt of $2.03
billion, with $2.00 billion available on its revolving credit
facility, and $1.45 billion in cash and cash equivalents.
Significant Achievements
NOV continued to gain market adoption and expand the
capabilities of its eVolve™ optimization and automation services.
NOV’s M/D Totco business unit commenced operations on two new
multi-year projects in the North Sea. Each contract calls for the
use of NOV’s full suite of optimization services, downhole drilling
tools and sensors. Additionally, during the quarter, M/D Totco
introduced several new wired drill pipe web applications that
provide enhanced equivalent fluid density and vibration views,
real-time torque & drag from a NOVOS™ friction test, and
envelope protection.
NOV successfully completed the first commercial run of its
fully-integrated rotary steerable (RSS) and logging-while drilling
(LWD) system with a customer in Russia. The system combines
NOV’s VectorZIEL™ 400 tool with an integrated symmetric propagation
resistivity LWD tool and was used to successfully drill an entire
4,900-foot horizontal section while providing real-time LWD
measurements within 35 feet from the bit. The combination of
a rotary steerable device and a logging-while-drilling instrument
into the same tool significantly improves the capabilities of NOV’s
independent directional driller customers.
NOV continued to adapt and disseminate its leading technologies,
which helped drive the critical efficiency gains that enabled the
shale revolution, for use in international markets. During the
second quarter, a Vector™ Series 36E drilling motor with a 5-in.,
6/7 lobe 8.0 stage ERT™ power section, a drilling motor
configuration from NOV Downhole that had previously never been used
in the Middle East, set a field rate-of-penetration (ROP) record in
Saudi Arabia, driving a 20 percent improvement in ROP over four
offset wells.
NOV booked an order for a three-million-pound landing string,
the first in the history of the industry that will be used for a
20k PSI project in the Gulf of Mexico. This will be the largest
landing string ever manufactured and will help enable the operator
to drill in some of the most challenging conditions in the
world.
NOV successfully commercialized its new large-bore FracMaxx™
articulated frac arm, which complements its Elmar™ big-bore
QuickLatch™ system and Anson™ flow iron for multi-well frac
pads. To date, the FracMaxx™ has completed 120 stages with
pressures reaching 9,000 PSI and rates up to 90 BPM. By
significantly reducing time between stages and removing excess flow
iron from the wellsite, this technology aids operators in their
effort to improve efficiencies while significantly reducing crew
exposure to unnecessary risks.
NOV completed a milestone project for the first
mechanically-connected pipeline offshore Malaysia, utilizing our
mechanical-interference Zap-Lok™ connection system technology. The
62-kilometer pipeline project, took full advantage of the
time-saving characteristics of the Zap-Lok™ technology, reaching
completion in just 18 days and a best average lay-rate of
4.7km/day, three times faster than traditional pipelay methods.
NOV deployed the ReedHycalog™ 8⅜-in. TKC59 Tektonic™ Sabretooth™
drill bit in response to a request from a key customer in Oman for
bit technology that would enable improved ROP and drilling
efficiencies relative to the competition. Utilizing the latest ION™
4D-cutter technology, this NOV design completed an entire section
to a total depth of 2,874 feet with a ROP of 75.8 feet/hour, one of
the best performances ever seen in salt applications in Oman.
Second Quarter Earnings Conference Call
NOV will hold a conference call to discuss its second quarter
2020 results on July 28, 2020 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
Six Months Ended
June 30,
March 31,
June 30,
2020
2019
2020
2020
2019
Revenue:
Wellbore Technologies
$
442
$
850
$
691
$
1,133
$
1,657
Completion & Production Solutions
611
663
675
1,286
1,244
Rig Technologies
476
671
557
1,033
1,274
Eliminations
(33
)
(52
)
(40
)
(73
)
(103
)
Total revenue
1,496
2,132
1,883
3,379
4,072
Gross profit
137
62
224
361
318
Gross profit %
9.2
%
2.9
%
11.9
%
10.7
%
7.8
%
Selling, general, and administrative
237
417
283
520
721
Goodwill and indefinite-lived intangible
asset impairment
—
3,186
1,378
1,378
3,186
Long-lived asset impairment
—
2,187
513
513
2,187
Operating loss
(100
)
(5,728
)
(1,950
)
(2,050
)
(5,776
)
Interest and financial costs
(22
)
(25
)
(22
)
(44
)
(50
)
Interest income
2
6
3
5
12
Equity loss in unconsolidated
affiliates
(6
)
(2
)
(233
)
(239
)
(2
)
Other income (expense), net
(8
)
(8
)
(3
)
(11
)
(26
)
Loss before income taxes
(134
)
(5,757
)
(2,205
)
(2,339
)
(5,842
)
Benefit for income taxes
(47
)
(373
)
(156
)
(203
)
(383
)
Net loss
(87
)
(5,384
)
(2,049
)
(2,136
)
(5,459
)
Net (income) loss attributable to
noncontrolling interests
6
5
(2
)
4
7
Net loss attributable to Company
$
(93
)
$
(5,389
)
$
(2,047
)
$
(2,140
)
$
(5,466
)
Per share data:
Basic
$
(0.24
)
$
(14.11
)
$
(5.34
)
$
(5.57
)
$
(14.35
)
Diluted
$
(0.24
)
$
(14.11
)
$
(5.34
)
$
(5.57
)
$
(14.35
)
Weighted average shares outstanding:
Basic
385
382
383
384
381
Diluted
385
382
383
384
381
NATIONAL OILWELL VARCO, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions)
June 30,
December 31,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
1,447
$
1,171
Receivables, net
1,502
1,855
Inventories, net
1,929
2,197
Contract assets
508
643
Other current assets
204
247
Total current assets
5,590
6,113
Property, plant and equipment, net
2,010
2,354
Lease right-of-use assets
605
674
Goodwill and intangibles, net
2,018
3,659
Other assets
224
349
Total assets
$
10,447
$
13,149
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
556
$
715
Accrued liabilities
815
949
Contract liabilities
408
427
Current portion of lease liabilities
115
114
Accrued income taxes
60
42
Total current liabilities
1,954
2,247
Lease liabilities
637
674
Long-term debt
2,029
1,989
Other liabilities
294
393
Total liabilities
4,914
5,303
Total stockholders’ equity
5,533
7,846
Total liabilities and stockholders’
equity
$
10,447
$
13,149
NATIONAL OILWELL VARCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In
millions)
Six Months Ended
June 30,
2020
2019
Cash flows from operating activities:
Net loss
$
(2,136
)
$
(5,459
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
187
331
Goodwill and indefinite-lived intangible
asset impairment
1,378
3,186
Long-lived asset impairment
513
2,187
Working capital and other operating items,
net
475
(356
)
Net cash provided by (used in) operating
activities
417
(111
)
Cash flows from investing activities:
Purchases of property, plant and
equipment
(124
)
(97
)
Business acquisitions, net of cash
acquired
—
(65
)
Other
13
6
Net cash used in investing activities
(111
)
(156
)
Cash flows from financing activities:
Cash dividends paid
(19
)
(38
)
Other
(8
)
(1
)
Net cash used in financing activities
(27
)
(39
)
Effect of exchange rates on cash
(3
)
—
Increase (decrease) in cash and cash
equivalents
276
(306
)
Cash and cash equivalents, beginning of
period
1,171
1,427
Cash and cash equivalents, end of
period
$
1,447
$
1,121
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 impairment
charges, inventory charges and severance and other restructuring
costs.
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
2020
2019
2020
2020
2019
Operating profit (loss):
Wellbore Technologies
$
(67
)
$
(3,295
)
$
(663
)
$
(730
)
$
(3,276
)
Completion & Production Solutions
42
(1,932
)
(1,013
)
(971
)
(1,967
)
Rig Technologies
(25
)
(422
)
(202
)
(227
)
(391
)
Eliminations and corporate costs
(50
)
(79
)
(72
)
(122
)
(142
)
Total operating loss
$
(100
)
$
(5,728
)
$
(1,950
)
$
(2,050
)
$
(5,776
)
Other items:
Wellbore Technologies
$
62
$
3,345
$
715
$
777
$
3,343
Completion & Production Solutions
12
1,939
1,054
1,066
1,950
Rig Technologies
20
474
238
258
476
Corporate
8
11
16
24
11
Total other items
$
102
$
5,769
$
2,023
$
2,125
$
5,780
Depreciation & amortization:
Wellbore Technologies
$
47
$
84
$
51
$
98
$
184
Completion & Production Solutions
14
45
30
44
97
Rig Technologies
19
22
20
39
45
Corporate
2
3
4
6
5
Total depreciation & amortization
$
82
$
154
$
105
$
187
$
331
Adjusted EBITDA:
Wellbore Technologies
$
42
$
134
$
103
$
145
$
251
Completion & Production Solutions
68
52
71
139
80
Rig Technologies
14
74
56
70
130
Eliminations and corporate costs
(40
)
(65
)
(52
)
(92
)
(126
)
Total Adjusted EBITDA
$
84
$
195
$
178
$
262
$
335
Reconciliation of Adjusted EBITDA:
GAAP net loss attributable to Company
$
(93
)
$
(5,389
)
$
(2,047
)
$
(2,140
)
$
(5,466
)
Noncontrolling interests
6
5
(2
)
4
7
Benefit for income taxes
(47
)
(373
)
(156
)
(203
)
(383
)
Interest expense
22
25
22
44
50
Interest income
(2
)
(6
)
(3
)
(5
)
(12
)
Equity loss in unconsolidated
affiliate
6
2
233
239
2
Other (income) expense, net
8
8
3
11
26
Depreciation and amortization
82
154
105
187
331
Other items
102
5,769
2,023
2,125
5,780
Total Adjusted EBITDA
$
84
$
195
$
178
$
262
$
335
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200727005824/en/
Blake McCarthy Vice President, Corporate Development and
Investor Relations (713) 815-3535 Blake.McCarthy@nov.com
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