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Analyzing National Oilwell Varco’s Growth Drivers

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Dec. 4 2020, Updated 10:53 a.m. ET

What does NOV’s CEO think?

National Oilwell Varco (NOV) believes that the energy market weakness will continue to hamper drilling activity in fiscal 4Q15. In the company’s fiscal 3Q15 earnings press release, Clay C. Williams, Chairperson and CEO, stated, “The sharp decline in oil prices and activity since late last year has impacted each of our segments, and will drive activity lower in the fourth quarter. We believe our strong financial resources will enable National Oilwell Varco to invest in the extraordinary opportunities that will arise from this downturn, and we expect to emerge with greater capability and efficiency.”

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NOV’s revenue growth by segment

All four of National Oilwell Varco’s segments recorded lower revenues in the past one year. Revenues from NOV’s Rig Systems and Wellbore Technologies segments fell the most. Revenues from these two segments fell 44% and 43%, respectively, from fiscal 3Q14 to fiscal 3Q15. Together, the Rig Systems and Wellbore Technologies segments accounted for ~73% of NOV’s fiscal 3Q15 revenues.

In comparison, Core Laboratories (CLB), NOV’s peer, recorded 29% lower revenues in fiscal 3Q15. Its revenues were $197 million in fiscal 3Q15 compared to $276 million a year earlier. NOV forms 3.7% of the SPDR S&P Oil & Gas Equipment & Services ETF (XES). You can read Is National Oilwell Varco Fundamentally Weak due to Downturn? for more on NOV.

National Oilwell Varco’s growth drivers in recent times

  • The lower Rig Systems revenue was affected by fewer orders. Meanwhile, foreign exchange adjustments affected earnings negatively.
  • The Wellbore Technology segment’s operating income fall was restricted by expense reduction and process efficiencies.
  • Rig Aftermarket performance was affected by a reduction in spare part sales.
  • The Completion and Production Solutions segment was negatively impacted by volume pricing pressure and a higher share of lower margin products.

Next, we’ll discuss how NOV’s management outlook transpired in the past three quarters.

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