National Oilwell Varco’s Performance in 2Q17 and What to Expect



National Oilwell Varco’s revenue by segment

From 1Q17 to 2Q17, National Oilwell Varco’s (NOV) Rig Systems segment revenue fell ~12%—which was the most significant revenue slump among NOV’s operating segments. Its Wellbore Technologies segment, on the other hand, witnessed 11% revenue growth during the period.

Article continues below advertisement

National Oilwell Varco’s segments by operating income

By adjusted EBITDA[1. Earnings before interest, tax, depreciation, and amortization], the Rig Systems segment saw a steep 21% fall in 2Q17 from 1Q17. The Completion & Production Solutions segment saw a remarkable operating earnings improvement, generating $98 million in adjusted EBITDA versus a $33 million adjusted loss in 1Q17.

National Oilwell Varco is 0.94% of the Vanguard Energy ETF (VDE). VDE fell 6% in the past year, which was the same as NOV’s stock price fall during the period.

Net income: NOV versus peers

Compared to NOV’s $74 million net loss in 2Q17, Schlumberger (SLB) recorded an $81 million net loss in 2Q17. Halliburton (HAL) recorded a ~$28 million net income in 2Q17, and Oil States International (OIS) recorded a ~$14 million net loss in 2Q17. Read more about Schlumberger in Market Realist’s Schlumberger: Bumpy Roads Might Be in Its Future.

Article continues below advertisement

NOV’s growth drivers: Negatives

  • the Rig Systems segment’s lower backlog
  • the Completion & Production Solutions segment’s offshore business decline

NOV’s growth drivers: Positives

  • robust US upstream activity growth, followed by a higher US rig count in 2Q17
  • the Rig Aftermarket segment benefitting from higher demand for spare parts, service, and repair work
  • modest improvements in many of NOV’s international markets
  • a higher operating margin in the Wellbore Technologies segment, resulting from higher sales volume and leading to improved cost absorption in NOV’s North American manufacturing and service facilities

How much does National Oilwell Varco’s business depend on the US rig count? We’ll find out in the next part of this series.


More From Market Realist