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National Oilwell Varco’s Growth Prospects in 2017

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National Oilwell Varco’s growth prospects in 2017

National Oilwell Varco’s (NOV) management identified the requirements for rig upgrades for the small and large upstream players. NOV’s management believes it can benefit from this process. NOV’s management also thinks that offshore drilling could present opportunities in building automation capabilities.

Jose A. Bayardo, National Oilwell Varco’s CFO, commented during the 1Q17 conference call, “We see near-term opportunities with smaller independent contractors to add more modern rigs to their fleets, but anticipate most larger rig contractors and international players will invest and upgrades to their existing fleet’s pressure, torque and automation capabilities rather than buying new until day rates creeps a bit higher, possibly by late 2017 or 2018.”

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What are NOV’s challenges in 2017?

Clay C. Williams, National Oilwell Varco’s chairman and CEO, noted during the 1Q17 conference call, “Offshore, we did not see empirical evidence of economics working for E&Ps yet at current oil prices. Major project FIDs remain scarce, and we’re still yet to see significant tieback demand for subsea flexible pipe, and account of offshore rigs under contract declined 3% or 15 rigs during the first quarter.”

National Oilwell Varco comprises 0.06% of the iShares Russell 1000 ETF (IWB). For investors looking for some exposure to the energy sector, energy makes up 6.0% of IWB.

National Oilwell Varco’s outlook for 1Q17

  • The Rig Systems segment’s revenues should decline 5%–10% in 1Q17 over 4Q16.
  • NOV expects the Rig Systems decremental margins to be in the mid-20%–30% range.
  • The company expects the Rig Aftermarket revenues to increase slightly over 4Q16.
  • NOV expects the Wellbore Technologies segment revenues to increase 5%–7% over 4Q16.
  • The company expects the Completions & Production Solutions segment revenues to tick up slightly over 4Q16.

Next, we’ll discuss National Oilwell Varco’s revenues and earnings.

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