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.

KeyFacts Energy Industry Directory: National Oilwell Varco