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Home / Business / National Oilwell Varco, Inc. took a step back in the first quarter – The Motley Fool

National Oilwell Varco, Inc. took a step back in the first quarter – The Motley Fool



After having improved for six quarters, National Oilwell Varco (NYSE: NOV) results decreased by 2018, when sales dropped from the fourth quarter to 9% 1 , 8 billion dollars, although it was 3% higher than a year ago. By contrast, the Company's $ 68 million ($ 0.18 per share) net loss improved sequentially while declining year-on-year. However, due to some headwinds during the quarter, which the company believes will soon ease off, it still remained well below expectations.

Drilldown to the first quarter

On the one hand, National Oilwell Varco benefited from the continued improvement of the oil market thanks to higher prices. Drilling activity in the shale fields of North America remains strong thanks to the good economic situation with the current oil prices, which drove the demand for the company's products and services. "Unfortunately, the protracted budget cycle that we saw earlier this year has led to a slower-than-expected start to our capital goods businesses and resilience in our operations in the Eastern Hemisphere," said CEO Clay Williams. He added that "this more than made up for the improvements in North America and nullified our six-quarter line of steadily improving results."

This lukewarm start to the year spared none of the company's three operating segments:

  A graph showing the results of National Oilwell Varco's segments in the first quarter of 201<div class="e3lan e3lan-in-post1"><script async src="//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>
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</script></div>8 and 2017 as well as the fourth quarter of last year.

Data source: National Oilwell Varco. Diagram from the author. In millions of dollars.

The most affected were rig technologies, where revenue decreased by 21% compared to the fourth quarter and 17% year-on-year. The main problem is still the clumsiness of the offshore drilling sector, which leads to less progress in the construction of new drilling rigs. The Company received $ 211 million in new orders during the quarter, compared to $ 153 million in backlog, however, for two Middle East owned land rigs and multiple land rig upgrades, not for more lucrative offshore rigs ,

Manufacturing and Production Systems business revenue was down 3% sequentially despite 3% higher than in the first quarter of the prior year. Decreases on the prior quarter were driven by delivery delays and order commitments due to the slow budget cycle

. Income from drilling technologies decreased by only 1% compared to the fourth quarter, up 28% year-on-year. The driver of the sequential decline was the slow start to the year in the eastern hemisphere and a decline in drill pipe sales.

  An offshore oil rig at sunset

Image source: Getty Images

A look at what lies ahead

While the first quarter was weaker than the company expected, Williams said, "We expect soon to be back on track. " He pointed out that "most deliveries of capital goods postponed by customers at the end of the quarter were accepted early in the second quarter," which makes us confident that the general upward trend of the business will continue in the second quarter. "

The CEO also said three things that are good for the company's future beyond the current quarter: First, he reported that the shortage is returning to many corners of the oil field, suggesting that customers will be ready Paying more for their products to make sure they get what they need, increasing margins, and secondly, he said, "We saw a good uptake of the technologies we introduced through the downturn," meaning That the company developed the right products to meet the growing demands of its customers, and concluded that these two demand engines are taking place "while the picture of oil supply and demand is further intensifying," suggesting higher oil prices and more money suggesting for their customers that they can spend on upgrading their equipment.This combination of factors shows that National Oilwell Varc o see a significant acceleration of its business over the next year.

Just a Whack on the Road to Recovery

While National Oilwell Varco's results fell a step back in the first quarter, this was due to timing problems rather than renewed oil sector problems. Instead, oil spill prospects are brightening day by day as crude oil continues to rise, which should incentivize producers to spend more on equipment. As the largest provider of oilfield equipment, National Oilwell Varco is profiting from this trend, which will finally pull the company's shares out of the doldrums.

Matthew DiLallo holds shares in National Oilwell Varco. The Motley Fool owns shares of and recommends National Oilwell Varco. The Motley Fool has a disclosure policy.


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