Is National Oilwell Varco’s Net Debt Falling?

National Oilwell Varco’s (NOV) net debt (total debt less cash & marketable securities) fell 20% in 3Q15. Its net debt amounted to $1.7 billion in 3Q16. However, compared to 2Q16, NOV’s net debt rose marginally. Oil States International’s (OIS) net debt was $13.1 million in 3Q16.

National Oilwell Varco’s total debt fell ~19% in 3Q16 over a year ago. Cash and marketable securities fell 18% during the same period. In effect, net debt fell in the past one year. National Oilwell Varco makes up 0.06% of the iShares Russell 1000 ETF (IWB), but for investors looking for exposure to the energy sector, energy makes up ~7% of IWB.

NOV’s trailing-12-month (or TTM) EBITDA (earnings before interest, tax, depreciation, and amortization) was negative in 3Q16. So, net-debt-to-EBITDA ratio (or indebtedness) was not meaningful in 3Q16. EBITDA is a measure of operating income. NOV has seen losses at the operating level in the past three quarters until 3Q16.

Next, we’ll discuss National Oilwell Varco’s historical valuation multiples.