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NOV Posts $217 Million Net Loss in Q2; Revenues Drop 56% YOY

Share Print Bookmark    |    Monday,August 22,2016

National Oilwell Varco, Inc. reported a second quarter 2016 net loss of $217 million, or $0.58 per share. Excluding other items, net loss for the quarter was $114 million, or $0.30 per share. Other items included $143 million in pre-tax charges ($103 million net of tax) primarily associated with severance, facility closure costs, and write-off of certain fixed assets.

Revenues for the second quarter of 2016 were $1.72 billion, a decrease of 21 percent compared to the first quarter of 2016 and a decrease of 56 percent from the second quarter of 2015. Operating loss for the second quarter was $270 million, 15.7 percent of sales. Excluding other items, operating loss was $153 million, or 8.9 percent of sales. Adjusted EBITDA (operating profit excluding other items before depreciation and amortization) for the second quarter was $25 million, or 1.5 percent of sales. Decremental Adjusted EBITDA leverage (the change in Adjusted EBITDA as a percent of the change in revenue) from the first quarter of 2016 to the second quarter of 2016 was 22 percent.

Clay Williams, Chairman, President and CEO, said: “Our second quarter results reflect further declines, as global oilfield spending again fell sharply following the crude oil price bottom we saw in February. We are responding by aggressively reducing costs and restructuring our operations to match this market reality. I am grateful for our experienced team, which continues to focus relentlessly on costs and efficiencies.

"Importantly, our team also continues to invest in our future, leveraging our global resources and installed base of equipment to expand our considerable technology portfolio. National Oilwell Varco has a long history of delivering innovative solutions and crisp execution to the oil and gas industry. We will continue to help drive our industry to better economic returns and a brighter future.”

Rig Systems

Rig Systems generated revenues of $564 million in the second quarter of 2016, a decrease of 39 percent from the first quarter of 2016 and a decrease of 71 percent from the second quarter of 2015. Operating profit was$7 million, or 1.2 percent of sales. Adjusted EBITDA was $49 million, or 8.7 percent of sales, down 64 percent sequentially and down 89 percent from the prior year.

Backlog for capital equipment orders for Rig Systems at June 30, 2016 was $2.94 billion. New orders during the quarter were $66 million, representing a book-to-bill of 15 percent when compared to the $441 millionshipped out of backlog.

Rig Aftermarket

Rig Aftermarket generated revenues of $364 million, down 7 percent from the first quarter of 2016 and down 45 percent from the second quarter of 2015. Operating profit was $62 million, or 17.0 percent of sales. Adjusted EBITDA was $73 million, or 20.1 percent of sales, down 11 percent sequentially and down 55 percent from the prior year.

Wellbore Technologies

Wellbore Technologies generated revenues of $511 million, down 19 percent from the first quarter of 2016 and down 47 percent from the second quarter of 2015. The segment reported an operating loss of $146 million, or 28.6 percent of sales. Adjusted EBITDA was $1 million, or 0.2 percent of sales, down 98 percent sequentially and down 99 percent from the prior year.

Completion and Production Solutions

Completion and Production Solutions generated revenues of $538 million, down 4 percent from the first quarter of 2016 and down 38 percent from the second quarter of 2015. The segment reported an operating loss of $33 million, or 6.1 percent of sales. Adjusted EBITDA was $57 million, or 10.6 percent of sales, an increase of 19 percent sequentially and a decrease of 61 percent from the prior year.

Backlog for capital equipment orders for Completion and Production Solutions at June 30, 2016 was $947 million, down 5 percent from the first quarter of 2016, and down 20 percent from the end of the second quarter of 2015. Revenues out of backlog during the quarter were $333 million. New orders were $269 million, achieving a book-to-bill of 81 percent, and the effect of foreign currency adjustments was $17 million.

Significant Events and Achievements

NOV continues to develop and introduce technology that improves the performance and reliability of its industry-leading subsea blowout preventers (BOPs). NOV’s new RCX Low Shock SPM valves dramatically reduce the hydraulic shock in the BOP system for improved reliability of stack components, in addition to being designed for longer life and reduced potential for incorrect assembly. Additionally, our RIGSENTRY™ BOP monitoring service, introduced last quarter, identified potential failure of subsea regulators before it occurred on four separate occasions, allowing our drilling contractor customers to address these issues during planned out of service intervals and maximize up time.

NOV’s eVolve™ optimization and closed loop drilling automation services continue to gain traction in the marketplace, signing an additional contract for downhole drilling automation with a large independent E&P customer in the Permian Basin.

NOV’s recently acquired completion tools business won a significant five-year contract for completions work in the Norwegian North Sea from a large independent E&P. The company's advanced sliding sleeve technology enables horizontal multi-stage production in one of the most demanding offshore environments.

NOV’s recently introduced Horizontal Gun Barrel separators offer a new direction for saltwater disposal, replacing outdated and inefficient vertical gun barrels and tanks frequently used for Saltwater Disposal (SWD) facilities. This new process lowers power consumption, improves worker safety, and reduces environmental hazards. The horizontal Gun Barrel recovers more oil at higher quality, so our customers can sell pipeline quality oil rather than accepting a discounted price for typical SWD oil that requires further treatment.

NOV reached a definitive agreement to acquire the subsea production product portfolio from Kongsberg Oil & Gas Technologies AS, a subsidiary of Kongsberg Gruppen ASA (OSE: KOG). The acquired technology fits broadly into two categories: tie-in and structures and process and controls, and will be highly complementary to NOV’s existing solutions in Subsea Umbilicals, Risers, and Flowlines (SURF) and subsea infrastructure.

NOV completed the acquisition of Geological Rentals and Services (GRS), a provider of gas detection equipment and geological software. The company’s GEOgas Analyzer™ is the first patented Fourier Transform Infrared Spectrometer analyzer specifically designed for wellsite gas sampling. The DDS Geological Services group, which delivers remote geosteering and logging services, can use the gas analyzer to provide real-time gas ratio analysis for formation hydrocarbons identification that helps maximize contact with the desired pay zone and minimize wellsite personnel.

NOV completed the acquisition of DJ Oilfield Services Co., Ltd., which offers OCTG inspection and tubular maintenance services in Thailand and the Gulf of Thailand. The acquisition further solidifies NOV’s presence in Southeast Asia, and combined with NOV’s existing premium tubular and services offering provides a platform to enhance lifecycle and asset management for operators and service companies.

NOV began supplying proprietary composite corrosion-resistant products at its newly inaugurated Resin Infusion Composite Engineering facility in Plymouth, UK, expanding its offering beyond jointed and spoolable fiberglass pipe and into non-tubular composite corrosion resistance with potential applications in floating production vessels and subsea structures.