National Oilwell Varco, Inc. (NYSE: NOV) today reported third
quarter 2020 revenues of $1.38 billion, a decrease of seven percent
compared to the second quarter of 2020 and a decrease of 35 percent
compared to the third quarter of 2019. Net loss for the third
quarter of 2020 improved $38 million sequentially to $55 million,
or -4.0 percent of sales, which included non-cash, pre-tax charges
(“other items,” see Other Corporate Items for additional detail) of
$62 million. Adjusted EBITDA (operating profit excluding
depreciation, amortization, and other items) decreased $13 million
sequentially to $71 million, or 5.1 percent of sales.
“Despite the sharp contraction in demand for oil and gas-related
products and services caused by the global pandemic, our team’s
solid execution on cost reduction and working capital initiatives
continues to exceed expectations, resulting in $323 million in cash
flow from operations and a reduction in net debt to $339 million
during the third quarter of 2020,” commented Clay Williams,
Chairman, President and CEO.
“While our third quarter bookings were light and market
conditions remain challenging, we are seeing some encouraging
signals in the marketplace. In North America, we believe drilling
activity has bottomed and is likely to rise modestly from current
levels. In our international markets, we are seeing more of our
customers return to work and fewer COVID-19-related logistical
disruptions. As a result, our Rig Technologies and Completion &
Production Solutions segments have both seen significant increases
in tendering activity, giving us confidence that order intake is
likely to improve in the fourth quarter.”
Wellbore Technologies
Wellbore Technologies generated revenues of $361 million in the
third quarter of 2020, a decrease of 18 percent from the second
quarter of 2020 and a decrease of 54 percent from the third quarter
of 2019. The sequential decline in revenue was a result of a full
quarter impact of sharp reductions in North American drilling
activity that occurred during the second quarter and continued
declines in international drilling activity. Operating loss was $50
million, or -13.9 percent of sales, and included $26 million of
other items. Adjusted EBITDA was $21 million, or 5.8 percent of
sales, as cost-savings initiatives limited decremental leverage
(the change in Adjusted EBITDA divided by the change in revenue) to
26 percent.
Completion & Production Solutions
Completion & Production Solutions generated revenues of $601
million in the third quarter of 2020, a decrease of two percent
from the second quarter of 2020 and a decrease of 17 percent from
the third quarter of 2019. Operating profit was $25 million, or 4.2
percent of sales, and included $23 million in other items. Strong
execution on international and offshore project backlogs partially
offset declines in shorter-cycle businesses. Adjusted EBITDA
decreased seven percent sequentially to $63 million, or 10.5
percent of sales.
New orders booked during the quarter totaled $169 million,
representing a book-to-bill of 43 percent when compared to the $394
million of orders shipped from backlog. At September 30, 2020,
backlog for capital equipment orders for Completion &
Production Solutions was $789 million.
Rig Technologies
Rig Technologies generated revenues of $449 million in the third
quarter of 2020, a decrease of six percent from the second quarter
of 2020 and a decrease of 31 percent from the third quarter of
2019. Lower sales of rig capital equipment and aftermarket parts
and services were partially offset by higher project revenues in
the segment’s Marine Construction business, which continues to
benefit from a growing number of offshore wind construction
opportunities. Operating loss was $3 million, or -0.7 percent of
sales, and included $12 million of other items. Adjusted EBITDA
increased $14 million sequentially to $28 million, or 6.2 percent
of sales.
New orders booked during the quarter totaled $57 million,
representing a book-to-bill of 29 percent when compared to the $199
million of orders shipped from backlog. At September 30, 2020,
backlog for capital equipment orders for Rig Technologies was $2.66
billion.
Other Corporate Items
During the third quarter, NOV generated $323 million in cash
flow from operations and invested $49 million in capital
expenditures. Additionally, NOV recognized $62 million in
restructuring charges, primarily due to severance costs, facility
closures and inventory reserves. See reconciliation of Adjusted
EBITDA to Net Income.
On August 25, 2020, NOV completed a cash tender offer for $217
million of its 2.6 percent Unsecured Notes due 2022 using cash on
hand. As of September 30, 2020, NOV had total debt of $1.82
billion, with $2.00 billion available on its primary revolving
credit facility, and $1.49 billion in cash and cash
equivalents.
Significant Achievements
NOV posted several notable wins in the offshore wind market
including an order for the design and jacking system for the first
Jones Act wind turbine installation vessel and another order for
the design package of a large wind turbine installation vessel.
NOV was awarded a 10-year service contract by a major
international oil company for its proprietary hot oil thermal
desorption unit (HTDU) to treat oily drilling waste from rigs and
FPSOs. The fully-automated system is the only system that handles
waste with higher liquid contents that do not require dilution and
will treat processed solids to the point that the client can
dispose on-site or re-use the offtake in civil projects. Thus, the
system will safely reduce the customer’s drilling fluid and
handling expenses while also lowering its environmental
footprint.
NOV introduced its Ideal™ eFrac offering to multiple customers
and industry participants. The Ideal™ system is designed to
accelerate the transition to environmentally-friendly electric
fracturing by providing an eFrac option that has a total cost of
ownership lower than not only other eFrac options currently in the
market, but also lower than conventional diesel fleets. The Ideal™
system features a clean and simple rig up and significantly higher
power density than its competition while maintaining the redundancy
that efficient hydraulic fracturing operations require.
NOV continues to introduce new products and technologies that
allow customers to achieve their ESG goals while concurrently
improving their economics. NOV secured the first order for its
Hydraulic Power Unit (HPU) Eco Boost system to a Norwegian drilling
contractor. This system reduces power consumption by shaving power
peaks on ring-line HPUs, simultaneously reducing emissions and
lowering costs. In addition, NOV won a third order for its
PowerBlade™ hybrid system to a Norwegian drilling contractor. The
PowerBlade system captures the kinetic energy of the drilling
hoisting system and recycles it to the rig’s power grid, reducing
fuel consumption and lowering rig emissions.
NOV launched the Phoenix™ geothermal drill bit series, further
expanding its footprint in the renewable energy market. The
Phoenix™ drill bit series features high-performance ION™-shaped
cutter technology, advanced HydroShear™ nozzle design, thermal
index modeling, and NOV’s TORC™ components for superior
depth-of-cut control technology to increase torsional stability,
all combined into one design platform to drill farther and faster
in hard rock environments. NOV’s new 12½-in. Phoenix FTKC76 drill
bit drilled to total depth (TD) in a single run on a well in
Indonesia, even though it was drilling through a very hard
quartzite formation. This run saved the geothermal operator
approximately two rig days. The same drill bit was successfully
used on another well in Indonesia and managed to drill through
approximately 1,312 ft of quartzite and 492 ft of granite.
NOV continues to support customers in their performance
improvement initiatives through NOV’s automation lifecycle
management program. A land drilling contractor and a North American
operator jointly published data documenting that the NOVOS™
reflexive drilling system enabled a 50 percent average connection
time savings on a Permian Basin well. Additionally, a European
operator reported that NOV’s automation program improved
utilization significantly and slip-to-slip times by 25 percent on
the multi-machine control (MMC) system on one of its drilling
rigs.
NOV won a flexible pipe supply contract for the Sangomar Phase 1
project offshore Senegal. The contract covers up to eight dynamic
risers to be installed in a lazy wave configuration and up to 47
associated jumpers and flowlines, equaling approximately 28km of
flexible pipe and associated ancillary components.
NOV continues to push the boundaries of drill bit technology
through its ReedHycalog business unit, enabling record-setting
drilling performance in some of the world’s most challenging
conditions. In Saudi Arabia, NOV’s 12¼-in. TKC66 Falcon™ design
enabled a customer to extend the lateral from 10,000 to 16,000 feet
and achieve the highest ROP in the Dammam field. In Qatar, an IOC
customer utilized NOV’s 17½-in. TKC76 drill bit to achieve a record
run that was the first one-bit run achieved on a deepened section
to TD. Further, NOV’s premium ION™ SaberTooth™ 12¼-in. Tektonic™
drill bit design not only drilled one of the fastest runs thus far
in a Guyana campaign, but, after the run, the bit was deemed
re-runnable and will be used as the primary drill bit on the
12¼-in. section of the well.
NOV secured a contract with a drilling contractor in China to
upgrade 15 jack-up rigs with 60 Brandt™ shakers. NOV’s reputation
for performance and cost-effective solutions was the
differentiating factor that led the customer to choose NOV above
the competition.
NOV signed a joint industry project contract with two
multinational energy companies to launch a two-year research
project in Brazil for the development of a new deepwater subsea
automated pig launcher (SAPL). This new SAPL will be based on NOV’s
design that won the New Technology Award at the 2019 Offshore
Technology Conference. The SAPL will be ready for 10 pigs and have
a target water depth of 3,000 meters (compared to the previous
maximum of 1,000 meters). NOV’s solution provides automated,
unmanned pig launching, eliminating the need for a second flowline
for pigging purposes and reducing vessel time, which in turn lowers
costs and reduces CO2 emissions by approximately 80 percent.
Third Quarter Earnings Conference Call
NOV will hold a conference call to discuss its third quarter
2020 results on October 27, 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
Nine Months Ended
September 30,
June 30,
September 30,
2020
2019
2020
2020
2019
Revenue:
Wellbore Technologies
$
361
$
793
$
442
$
1,494
$
2,450
Completion & Production Solutions
601
728
611
1,887
1,972
Rig Technologies
449
649
476
1,482
1,923
Eliminations
(27
)
(44
)
(33
)
(100
)
(147
)
Total revenue
1,384
2,126
1,496
4,763
6,198
Gross profit
139
151
137
500
469
Gross profit %
10.0
%
7.1
%
9.2
%
10.5
%
7.6
%
Selling, general, and administrative
213
293
237
733
1,014
Goodwill and indefinite-lived intangible
asset impairment
—
—
—
1,378
3,186
Long-lived asset impairment
—
12
—
513
2,199
Operating loss
(74
)
(154
)
(100
)
(2,124
)
(5,930
)
Interest and financial costs
(21
)
(25
)
(22
)
(65
)
(75
)
Interest income
—
4
2
5
16
Equity loss in unconsolidated
affiliates
(11
)
(4
)
(6
)
(250
)
(6
)
Other income (expense), net
(8
)
(10
)
(8
)
(19
)
(36
)
Loss before income taxes
(114
)
(189
)
(134
)
(2,453
)
(6,031
)
Benefit for income taxes
(61
)
60
(47
)
(264
)
(323
)
Net loss
(53
)
(249
)
(87
)
(2,189
)
(5,708
)
Net (income) loss attributable to
noncontrolling interests
2
(5
)
6
6
2
Net loss attributable to Company
$
(55
)
$
(244
)
$
(93
)
$
(2,195
)
$
(5,710
)
Per share data:
Basic
$
(0.14
)
$
(0.64
)
$
(0.24
)
$
(5.72
)
$
(14.95
)
Diluted
$
(0.14
)
$
(0.64
)
$
(0.24
)
$
(5.72
)
$
(14.95
)
Weighted average shares outstanding:
Basic
385
382
385
384
382
Diluted
385
382
385
384
382
NATIONAL OILWELL VARCO,
INC.
CONSOLIDATED BALANCE
SHEETS
(In millions)
September 30,
December 31,
2020
2019
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
1,485
$
1,171
Receivables, net
1,382
1,855
Inventories, net
1,745
2,197
Contract assets
555
643
Other current assets
209
247
Total current assets
5,376
6,113
Property, plant and equipment, net
1,994
2,354
Lease right-of-use assets
575
674
Goodwill and intangibles, net
2,009
3,659
Other assets
214
349
Total assets
$
10,168
$
13,149
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
476
$
715
Accrued liabilities
852
949
Contract liabilities
371
427
Current portion of lease liabilities
111
114
Accrued income taxes
74
42
Total current liabilities
1,884
2,247
Lease liabilities
619
674
Long-term debt
1,824
1,989
Other liabilities
301
393
Total liabilities
4,628
5,303
Total stockholders’ equity
5,540
7,846
Total liabilities and stockholders’
equity
$
10,168
$
13,149
NATIONAL OILWELL VARCO,
INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited)
(In millions)
Nine Months Ended
September 30,
2020
2019
Cash flows from operating activities:
Net loss
$
(2,189
)
$
(5,708
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
270
433
Goodwill and indefinite-lived intangible
asset impairment
1,378
3,186
Long-lived asset impairment
513
2,199
Working capital and other operating items,
net
768
131
Net cash provided by operating
activities
740
241
Cash flows from investing activities:
Purchases of property, plant and
equipment
(173
)
(166
)
Business acquisitions, net of cash
acquired
—
(180
)
Other
13
78
Net cash used in investing activities
(160
)
(268
)
Cash flows from financing activities:
Payments against lines of credit and other
debt
(217
)
—
Borrowings against lines of credit and
other debt
36
—
Cash dividends paid
(19
)
(58
)
Other
(56
)
(15
)
Net cash used in financing activities
(256
)
(73
)
Effect of exchange rates on cash
(10
)
(14
)
Increase (decrease) in cash and cash
equivalents
314
(114
)
Cash and cash equivalents, beginning of
period
1,171
1,427
Cash and cash equivalents, end of
period
$
1,485
$
1,313
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
Nine Months Ended
September 30,
June 30,
September 30,
2020
2019
2020
2020
2019
Operating profit (loss):
Wellbore Technologies
$
(50
)
$
42
$
(67
)
$
(780
)
$
(3,234
)
Completion & Production Solutions
25
(24
)
42
(946
)
(1,991
)
Rig Technologies
(3
)
(110
)
(25
)
(230
)
(501
)
Eliminations and corporate costs
(46
)
(62
)
(50
)
(168
)
(204
)
Total operating loss
$
(74
)
$
(154
)
$
(100
)
$
(2,124
)
$
(5,930
)
Other items:
Wellbore Technologies
$
26
$
41
$
62
$
803
$
3,384
Completion & Production Solutions
23
79
12
1,089
2,029
Rig Technologies
12
194
20
270
670
Corporate
1
—
8
25
11
Total other items
$
62
$
314
$
102
$
2,187
$
6,094
Depreciation & amortization:
Wellbore Technologies
$
45
$
50
$
47
$
143
$
234
Completion & Production Solutions
15
27
14
59
124
Rig Technologies
19
21
19
58
66
Corporate
4
4
2
10
9
Total depreciation & amortization
$
83
$
102
$
82
$
270
$
433
Adjusted EBITDA:
Wellbore Technologies
$
21
$
133
$
42
$
166
$
384
Completion & Production Solutions
63
82
68
202
162
Rig Technologies
28
105
14
98
235
Eliminations and corporate costs
(41
)
(58
)
(40
)
(133
)
(184
)
Total Adjusted EBITDA
$
71
$
262
$
84
$
333
$
597
Reconciliation of Adjusted EBITDA:
GAAP net loss attributable to Company
$
(55
)
$
(244
)
$
(93
)
$
(2,195
)
$
(5,710
)
Noncontrolling interests
2
(5
)
6
6
2
Benefit for income taxes
(61
)
60
(47
)
(264
)
(323
)
Interest expense
21
25
22
65
75
Interest income
—
(4
)
(2
)
(5
)
(16
)
Equity loss in unconsolidated
affiliate
11
4
6
250
6
Other (income) expense, net
8
10
8
19
36
Depreciation and amortization
83
102
82
270
433
Other items
62
314
102
2,187
6,094
Total Adjusted EBITDA
$
71
$
262
$
84
$
333
$
597
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201026005924/en/
Blake McCarthy Vice President, Corporate Development and
Investor Relations (713) 815-3535 Blake.McCarthy@nov.com
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