Will the US Rig Count Affect National Oilwell Varco in 4Q16?



US rig count

From September 30, 2016, until the week ended January 20, 2017, the US rig count rose ~33% to close at 694. A higher US rig count could increase the 4Q16 revenues and earnings of oilfield equipment and services providers such as National Oilwell Varco (NOV) and Oil States International (OIS).

Crude oil’s price has risen 9% since September 30, 2016. Higher crude oil prices have driven the higher US rig count. The US rig count reached a multiyear high in September 2014. Since then, it has fallen 64% as of January 20, 2017. Read the latest on crude oil prices and energy stocks in Market Realist’s EIA and IEA Data: Do Inventories Influence Crude Oil Prices?

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NOV’s US revenue

In 2015, NOV’s revenue share from the United States fell. In 2015, NOV’s US revenue share fell to 25%, compared to 28% in 2014. During the same period, NOV’s aggregate revenue fell 31%. By comparison, McDermott International’s (MDR) 2015 revenue rose 33% over 2014. NOV makes up just 0.06% of the iShares Russell 3000 ETF (IWV). The energy sector makes up 6.8% of IWV’s holdings.

Next, we’ll discuss how upstream operators’ capital expenditures affect NOV’s operating margin.


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