National Oilwell Varco Reports Third Quarter 2016 Results

National Oilwell Varco, Inc. (NYSE: NOV) today reported a third quarter
2016 net loss of $1.36 billion, or $3.62 per share. Excluding other
items, net loss for the quarter was $128 million, or $0.34 per share.
Other items totaled $1.09 billion, pretax, consisting of a $972 million
goodwill impairment and $116 million of other charges primarily
associated with severance, facility closures and write-offs of certain
assets. Other items, net of tax, totaled $1.23 billion and included a
$213 million valuation allowance against foreign tax credits.

Revenues for the third quarter of 2016 were $1.65 billion, a decrease of
five percent compared to the second quarter of 2016 and a decrease of 50
percent from the third quarter of 2015. Operating loss for the third
quarter was $1.19 billion, or 72.1 percent of sales. Excluding other
items, operating loss was $108 million, or 6.6 percent of sales.
Adjusted EBITDA (operating profit excluding other items before
depreciation and amortization) for the third quarter was $68 million, or
4.1 percent of sales, an increase of $43 million from the second quarter
of 2016.

“Our ability to post a higher Adjusted EBITDA on a five percent
sequential decline in revenue was the result of our team’s continued
progress in improving our efficiencies and lowering our costs,”
commented Clay Williams, Chairman, President and CEO. “While
consolidated revenues continued to contract in the third quarter, two of
our four reporting segments posted sequential revenue growth, and three
of our four segments posted higher margins.”

“We are encouraged by the early signs of a recovery in the North
American marketplace. Our short cycle businesses within our Wellbore
Technologies Segment account for over 80% of total segment revenue.
Within North America these posted sequential revenue growth of
approximately 15%. Even though international, offshore and capital
equipment markets remain challenging, we believe declining global
production and improving commodity prices are setting the stage for a
broader recovery in 2017. In the meantime, we continue to aggressively
reduce costs, improve efficiencies, and invest in our comprehensive
technology portfolio. So far in 2016 we have added significant new
technologies in completion tools, directional drilling tools,
condition-based monitoring services and drilling optimization services.
All are winning significant customer interest, and all better position
NOV for the inevitable recovery.”

Rig Systems

Rig Systems generated revenues of $470 million in the third quarter of
2016, a decrease of 17 percent from the second quarter of 2016 and a
decrease of 69 percent from the third quarter of 2015. Operating loss
was $962 million, which includes the Company’s charge against goodwill.
Adjusted EBITDA was $50 million, or 10.6 percent of sales, an increase
of two percent sequentially and a decrease of 84 percent from the prior
year.

Backlog for capital equipment orders for Rig Systems at September 30,
2016 was $2.76 billion. New orders during the quarter were $185 million,
representing a book-to-bill of 51 percent when compared to the $363
million shipped out of backlog.

Rig Aftermarket

Rig Aftermarket generated revenues of $322 million, down 12 percent from
the second quarter of 2016 and down 44 percent from the third quarter of
2015. Operating profit was $72 million, or 22.4 percent of sales.
Adjusted EBITDA was $81 million, or 25.2 percent of sales, an increase
of 11 percent sequentially and a decrease of 51 percent from the prior
year.

Wellbore Technologies

Wellbore Technologies generated revenues of $526 million, an increase of
three percent from the second quarter of 2016 and a decrease of 37
percent from the third quarter of 2015. The segment reported an
operating loss of $94 million, or 17.9 percent of sales. Adjusted EBITDA
was $26 million, or 4.9 percent of sales, an increase of $25 million
sequentially and a decrease of $100 million from the prior year.

Completion and Production Solutions

Completion and Production Solutions generated revenues of $543 million,
an increase of one percent from the second quarter of 2016 and a
decrease of 32 percent from the third quarter of 2015. The segment
reported an operating loss of $61 million, or 11.2 percent of sales.
Adjusted EBITDA was $43 million, or 7.9 percent of sales, down 25
percent sequentially and down 66 percent from the prior year.

Backlog for capital equipment orders for Completion and Production
Solutions at September 30, 2016 was $812 million, down 14 percent from
the second quarter of 2016, and down 31 percent from the end of the
third quarter of 2015. Revenues out of backlog during the quarter were
$319 million. New orders were $184 million, achieving a book-to-bill of
58 percent.

Significant Events and Achievements

NOV entered into an agreement with Akastor ASA (OSE: AKA) to acquire
Fjords Processing (“Fjords”), a global leader in the provision of
processing technology, systems and services to the upstream oil and gas
industry. The acquisition provides technology that is complementary to
NOV’s Process and Flow Technology Business Unit, which provides
production and process solutions. The combined operations will be able
to leverage the collective organizations’ global infrastructure and
channels to market.

NOV Rig Systems received two new land rig orders during the third
quarter, including an order for a state-of-the-art Extended Reach
Drilling (ERD) rig for Alaska’s North Slope. This highly-specialized rig
will be able to drill to 33,000-plus feet, or 6.25 miles, as compared to
the approximate 22,000-foot, or 4.17 mile, reach of current rigs
utilized by the production company.

NOV was awarded a study for its HoneyBee FPSO, as the Company continues
to advance its FPSO strategy and garner interest from operators. The
HoneyBee design is a smaller, more flexible design that enables economic
production and testing from initial wells in a field and economic full
development of marginal fields.

NOV was awarded new contracts in the North Sea and Asia Pacific for its
Hot Oil Thermal Desorption Units (HTDU), which enables the safe and
efficient treatment of oil-based mud drill cuttings. NOV’s HTDU
technology cleans cuttings to meet zero discharge requirements, and
recovers oil for reuse in drilling fluid. NOV is the worldwide leader in
the design, manufacture, operation and use of this
environmentally-friendly technology that allows customers to operate in
increasingly stringent regulatory environments.

NOV designed and manufactured a record-setting string of 2-5/8-inch
coiled tubing measuring 25,595 feet and 149,748 pounds for a service
company in the Permian basin. This record-setting string enabled the
customer to mill out composite bridge plugs and perform logging runs in
a well with a 12,500-foot lateral, far beyond the typical maximum
lateral lengths for coiled tubing mill outs in West Texas. Every step of
the process, including string design, planning, milling and shipping,
and spooling and installation, was executed by NOV’s trained engineers
and technicians in less than 10 days.

NOV launched its XTH™ power section elastomer which complements the
Company’s high-performance motor product line. The new elastomer has
increased fluid resistance and enhanced mechanical properties designed
to provide more power and longer life for extreme drilling environments.

Six NOV technologies were selected as 2016 World Oil Awards Finalists,
and the Company’s BlackStream™ along-string measurement (ASM) tool was
named the “Best Data Management & Application Solution” award winner.
The BlackStream ASM tool acquires temperature, annular and bore
pressure, rotational velocity, and three-axis vibration data at high
frequencies to identify drilling challenges in real time. The tool is
designed to connect to IntelliServ™ networked drillstring, another World
Oil Award Finalist, to provide streaming visualization of downhole data.

NOV recently launched its BlackStar™ II dual-telemetry MWD system which
combines the capabilities of electromagnetic (EM) and mud-pulse data
transmission in one tool, allowing customers to switch transmission
modes while the tool is downhole to avoid costly trips to change out
equipment and maximize uptime. On customer trials in West Texas, the
tool was used from the kickoff point at 7,800 feet to a total depth of
15,878 feet, maintaining the EM signal the whole time due to the tool’s
enhanced power capabilities that expand the possible utilization of EM
telemetry.

Other Corporate Items

As of September 30, 2016, the Company had $1.51 billion in cash and cash
equivalents and total debt of $3.22 billion, a decrease of $64 million
from June 30, 2016. NOV had $4.5 billion available on its revolving
credit facility as of September 30, 2016. The unsecured facility, which
matures in September of 2018, is subject to one primary covenant which
is a maximum debt-to-capitalization ratio of 60 percent. As of September
30, 2016 NOV had a debt-to-capitalization ratio of 17.8% percent.

Third Quarter Earnings Conference Call

NOV will hold a conference call on Thursday, October 27, 2016 at 8:00
a.m. (Central Time) to discuss results for the third quarter of 2016.
Participants may join the conference call by dialing (844) 464-3148
within North America or (574) 990-9849 outside of North America five to
ten minutes prior to the scheduled start time and by asking for the
“National Oilwell Varco Conference Call.” The call will be broadcast
simultaneously at www.nov.com/investors
on a listen-only basis. A replay will be available on the website for 30
days.

About National Oilwell Varco

National Oilwell Varco (NYSE: NOV) is a worldwide leader in the design,
manufacture and sale of equipment and components used in oil and gas
drilling and production operations and in the provision of oilfield
services to the upstream oil and gas industry.

Cautionary Statement for the Purpose of the “Safe Harbor” Provisions
of the Private Securities Litigation Reform Act of 1995

Statements made in this press release that are forward-looking in nature
are intended to be “forward-looking statements” within the meaning of
Section 21E of the Securities Exchange Act of 1934 and may involve risks
and uncertainties. These statements may differ materially from the
actual future events or results. Readers are referred to documents filed
by National Oilwell Varco with the Securities and Exchange Commission,
including the Annual Report on Form 10-K, which identify significant
risk factors which could cause actual results to differ from those
contained in the forward-looking statements.

NATIONAL OILWELL VARCO, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited)
(In millions, except per share data)
				Three Months Ended															Nine Months Ended
				September 30,										June 30,					September 30,
					2016					2015					2016					2016				2015
Revenue:
Rig Systems				$	470				$	1,496				$	564				$	1,960			$	5,949
Rig Aftermarket					322					570					364					1,077				1,946
Wellbore Technologies					526					834					511					1,668				2,961
Completion & Production Solutions					543					798					538					1,639				2,619
Eliminations					(215	)				(392	)				(253	)				(785	)			(1,440	)
Total revenue					1,646					3,306					1,724					5,559				12,035
Gross profit (1)					79					672					35					358				2,675
Gross profit %					4.8	%				20.3	%				2.0	%				6.4	%			22.2	%
Selling, general, and administrative					293					383					305					1,031				1,378
Goodwill and intangible asset impairment					972					55					-					972				55
Operating profit (loss)					(1,186	)				234					(270	)				(1,645	)			1,242
Interest and financial costs					(25	)				(24	)				(30	)				(80	)			(76	)
Interest income					3					2					3					11				9
Equity income (loss) in unconsolidated affiliates					(6	)				-					(7	)				(19	)			16
Other income (expense), net					(30	)				(20	)				(34	)				(85	)			(106	)
Income (loss) before income taxes					(1,244	)				192					(338	)				(1,818	)			1,085
Provision for income taxes					120					36					(121	)				(119	)			330
Net income (loss)					(1,364	)				156					(217	)				(1,699	)			755
Net income (loss) attributable to noncontrolling interests					(2	)				1					-					(1	)			1
Net income (loss) attributable to Company				$	(1,362	)			$	155				$	(217	)			$	(1,698	)		$	754
Per share data:
Basic				$	(3.62	)			$	0.41				$	(0.58	)			$	(4.53	)		$	1.92
Diluted				$	(3.62	)			$	0.41				$	(0.58	)			$	(4.53	)		$	1.92
Weighted average shares outstanding:
Basic					376					380					375					375				392
Diluted					376					381					375					375				393

(1)

Gross profit excluding other items was $185 million and $624 million for the three and nine months ended September 30, 2016, respectively. Gross profit excluding other items was $139 million for the three months ended June 30, 2016. See GAAP to Non-GAAP reconciliation on page 9.

NATIONAL OILWELL VARCO, INC.
CONSOLIDATED BALANCE SHEETS
(In millions)
				September 30,				December 31,
				2016				2015
				(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents				$	1,510			$	2,080
Receivables, net					1,808				2,926
Inventories, net					4,161				4,678
Costs in excess of billings					765				1,250
Other current assets					467				491
Total current assets					8,711				11,425
Property, plant and equipment, net					3,261				3,124
Goodwill and intangibles, net					9,641				10,829
Other assets					581				592
Total assets				$	22,194			$	25,970
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable				$	396			$	623
Accrued liabilities					1,628				2,284
Billings in excess of costs					550				785
Current portion of long-term debt and short-term borrowings					6				2
Accrued income taxes					35				264
Total current liabilities					2,615				3,958
Long-term debt					3,210				3,907
Other liabilities					1,481				1,645
Total liabilities					7,306				9,510
Total stockholders’ equity					14,888				16,460
Total liabilities and stockholders’ equity				$	22,194			$	25,970

NATIONAL OILWELL VARCO, INC.
OPERATING PROFIT (LOSS) – AS ADJUSTED SUPPLEMENTAL SCHEDULE (Unaudited)
(In millions)
				Three Months Ended															Nine Months Ended
				September 30,										June 30,					September 30,
				2016					2015					2016					2016					2015
Revenue:
Rig Systems				$	470				$	1,496				$	564				$	1,960				$	5,949
Rig Aftermarket					322					570					364					1,077					1,946
Wellbore Technologies					526					834					511					1,668					2,961
Completion & Production Solutions					543					798					538					1,639					2,619
Eliminations					(215	)				(392	)				(253	)				(785	)				(1,440	)
Total revenue				$	1,646				$	3,306				$	1,724				$	5,559				$	12,035
Operating profit (loss):
Rig Systems				$	(962	)			$	278				$	7				$	(888	)			$	1,176
Rig Aftermarket					72					157					62					203					514
Wellbore Technologies					(94	)				(2	)				(146	)				(331	)				141
Completion & Production Solutions					(61	)				10					(33	)				(132	)				183
Eliminations and corporate costs					(141	)				(209	)				(160	)				(497	)				(772	)
Total operating profit (loss)				$	(1,186	)			$	234				$	(270	)			$	(1,645	)			$	1,242
Other items:
Rig Systems				$	994				$	22				$	23				$	1,069				$	65
Rig Aftermarket					3					1					5					16					11
Wellbore Technologies					24					29					50					112					83
Completion & Production Solutions					51					60					38					123					92
Eliminations and corporate costs					6					-					1					16					-
Total other items				$	1,078				$	112				$	117				$	1,336				$	251
Operating profit (loss) excluding other items:
Rig Systems				$	32				$	300				$	30				$	181				$	1,241
Rig Aftermarket					75					158					67					219					525
Wellbore Technologies					(70	)				27					(96	)				(219	)				224
Completion & Production Solutions					(10	)				70					5					(9	)				275
Eliminations and corporate costs					(135	)				(209	)				(159	)				(481	)				(772	)
Total operating profit (loss) excluding other items				$	(108	)			$	346				$	(153	)			$	(309	)			$	1,493

NATIONAL OILWELL VARCO, INC.
AS ADJUSTED BEFORE DEPRECIATION & AMORTIZATION SUPPLEMENTAL SCHEDULE (Unaudited)
(In millions)
				Three Months Ended															Nine Months Ended
				September 30,										June 30,					September 30,
					2016					2015					2016					2016					2015
Operating profit (loss) excluding other items:
Rig Systems				$	32				$	300				$	30				$	181				$	1,241
Rig Aftermarket					75					158					67					219					525
Wellbore Technologies					(70	)				27					(96	)				(219	)				224
Completion & Production Solutions					(10	)				70					5					(9	)				275
Eliminations and corporate costs					(135	)				(209	)				(159	)				(481	)				(772	)
Total operating profit (loss) excluding other items				$	(108	)			$	346				$	(153	)			$	(309	)			$	1,493
Depreciation & amortization:
Rig Systems				$	18				$	21				$	19				$	55				$	63
Rig Aftermarket					6					6					6					17					17
Wellbore Technologies					96					99					97					289					304
Completion & Production Solutions					53					55					52					157					171
Eliminations and corporate costs					3					3					4					11					9
Total depreciation & amortization				$	176				$	184				$	178				$	529				$	564
Adjusted EBITDA (Operating profit excluding other
items before depreciation & amortization) (Note 1):
Rig Systems				$	50				$	321				$	49				$	236				$	1,304
Rig Aftermarket					81					164					73					236					542
Wellbore Technologies					26					126					1					70					528
Completion & Production Solutions					43					125					57					148					446
Eliminations and corporate costs					(132	)				(206	)				(155	)				(470	)				(763	)
Total Adjusted EBITDA				$	68				$	530				$	25				$	220				$	2,057
Adjusted EBITDA % (Note 1):
Rig Systems					10.6	%				21.5	%				8.7	%				12.0	%				21.9	%
Rig Aftermarket					25.2	%				28.8	%				20.1	%				21.9	%				27.9	%
Wellbore Technologies					4.9	%				15.1	%				0.2	%				4.2	%				17.8	%
Completion & Production Solutions					7.9	%				15.7	%				10.6	%				9.0	%				17.0	%
Total Adjusted EBITDA %					4.1	%				16.0	%				1.5	%				4.0	%				17.1	%
Total Adjusted EBITDA:				$	68				$	530				$	25				$	220				$	2,057
Other items in operating profit					(1,078	)				(112	)				(117	)				(1,336	)				(251	)
Interest income					3					2					3					11					9
Equity income (loss) in unconsolidated affiliates					(6	)				-					(7	)				(19	)				16
Other income (expense), net					(30	)				(20	)				(34	)				(85	)				(106	)
Net (income) loss attributable to noncontrolling interest					2					(1	)				-					1					(1	)
EBITDA (Note 1)				$	(1,041	)			$	399				$	(130	)			$	(1,208	)			$	1,724
Reconciliation of EBITDA (Note 1):
GAAP net income (loss) attributable to Company				$	(1,362	)			$	155				$	(217	)			$	(1,698	)			$	754
Provision for income taxes					120					36					(121	)				(119	)				330
Interest expense					25					24					30					80					76
Depreciation & amortization					176					184					178					529					564
EBITDA					(1,041	)				399					(130	)				(1,208	)				1,724
Other items in operating profit					1,078					112					117					1,336					251
Other items in other income (expense), net					10					-					26					42					9
EBITDA excluding other items (Note 1)				$	47				$	511				$	13				$	170				$	1,984

NATIONAL OILWELL VARCO, INC.
GAAP to Non-GAAP (Adjusted) RECONCILIATION (Unaudited)
(In millions, except per share data)
				Three Months Ended										Nine Months Ended
				September 30,						June 30,				September 30,
				2016			2015			2016				2016			2015
GAAP net income (loss) attributable to Company				$ (1,362)			$ 155			$ (217)				$ (1,698)			$ 754
Other items				106			57			117				364			196
Goodwill and other intangbile asset write-downs				972			55			-				972			55
Fixed asset write-down				10			-			26				42			-
Venezuela asset write-down				-			-			-				-			9
GAAP net income (loss) less pre-tax other items				(274)			267			(74)				(320)			1,014
Tax impact on other items				(67)			(36)			(40)				(156)			(85)
Tax items				213			-			-				213			69
Adjusted net income (loss) attributable to Company (Note 1)				(128)			231			(114)				(263)			998
Noncontrolling interest				(2)			1			-				(1)			1
Adjusted net income (loss) (Note 1)				$ (130)			$ 232			$ (114)				$ (264)			$ 999
				Three Months Ended										Nine Months Ended
				September 30,						June 30,				September 30,
				2016			2015			2016				2016			2015
GAAP net income (loss) attributable to Company per share				$ (3.62)			$ 0.41			$ (0.58)				$ (4.53)			$ 1.92
Other items				0.18			0.10			0.23				0.67			0.33
Goodwill and other intangible asset write-downs				2.51			0.10							2.51			0.09
Fixed asset write-down				0.02			-			0.05				0.08			-
Venezuela asset write-down				-			-			-				-			0.02
Tax items				0.57			-			-				0.57			0.17
Adjusted operating earnings per share (Note 1)				$ (0.34)			$ 0.61			$ (0.30)				$ (0.70)			$ 2.53
				Three Months Ended										Nine Months Ended
				September 30,						June 30,				September 30,
				2016			2015			2016				2016			2015
GAAP gross profit				$ 79			$ 672			$ 35				$ 358			$ 2,675
Other items included in gross profit				106			28			104				266			75
Adjusted gross profit (Note 1)				$ 185			$ 700			$ 139				$ 624			$ 2,750
GAAP selling, general, and administrative				$ 293			$ 383			$ 305				$ 1,031			$ 1,378
Other items included in selling, general, and administrative				-			(29)			(13)				(98)			(121)
Adjusted selling, general, and administrative (Note 1)				$ 293			$ 354			$ 292				$ 933			$ 1,257

Note 1: In an effort to provide investors with additional
information regarding our results as determined by GAAP, we disclose
various non-GAAP financial measures in our quarterly earnings press
releases and other public disclosures. The primary non-GAAP financial
measures we focus on are: (i) revenue excluding other items, (ii)
operating profit excluding other items, (iii) operating profit
percentage excluding other items, (iv) Adjusted EBITDA (operating profit
excluding other items before depreciation & amortization), (v) Adjusted
EBITDA percentage, (vi) EBITDA, (vii) EBITDA excluding other items,
(viii) Adjusted net income (loss), (ix) Adjusted operating earnings per
fully diluted share, (x) Adjusted gross profit, and (xi) Adjusted
selling, general, and administrative. Each of these financial measures
excludes the impact of certain other items and therefore has not been
calculated in accordance with GAAP. A reconciliation of each of these
non-GAAP financial measures to its most comparable GAAP financial
measure is included here within.

We use these non-GAAP financial measures internally to evaluate and
manage the Company’s operations because we believe it provides useful
supplemental information regarding the Company’s on-going economic
performance. We have chosen to provide this information to investors to
enable them to perform more meaningful comparisons of operating results
and as a means to emphasize the results of on-going operations.

View source version on businesswire.com: http://www.businesswire.com/news/home/20161026007024/en/

Source: Business Wire
(October 26, 2016 - 8:45 PM EDT)

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