National Oilwell Varco Reports Third Quarter 2018 Earnings

National Oilwell Varco, Inc. (NYSE: NOV) today reported third quarter
2018 revenues of $2.15 billion, an increase of two percent compared to
the second quarter of 2018 and an increase of 17 percent from the third
quarter of 2017. Operating profit for the third quarter of 2018 was $73
million, or 3.4 percent of sales, Adjusted EBITDA (operating profit
excluding depreciation and amortization) was $245 million, or 11.4
percent of sales, and net income was $1 million. Operating profit
increased 40 percent sequentially, and Adjusted EBITDA increased eight
percent sequentially and 47 percent compared to the third quarter of
2017.

“Our revenues and Adjusted EBITDA continued to grow in the third
quarter, underpinned by higher sequential demand for downhole tools,
drill pipe, and wellsite services in support of drilling operations
globally,” commented Clay Williams, Chairman, President, and CEO.
“However, the slowdown in North American completions activity late in
the period led to lower sequential well-stimulation equipment sales.
This together with weaker demand for offshore equipment offset some of
our sequential revenue gains.

We believe the industry is poised to achieve higher levels of activity
in 2019 as it works through near-term logistical challenges in North
American unconventional basins, navigates end-of-year budget
constraints, and sanctions more offshore projects. During the third
quarter we saw rising demand for conductor pipe connections—a leading
indicator of future offshore wells—as well as increased inquiries around
offshore rig reactivations, pointing to more offshore activity ahead. We
also see pockets of demand strengthening in certain international land
markets, as operators respond to generally higher commodity prices. In
the meantime, we continue to develop and deliver technology that helps
lower the industry’s marginal production costs, and position our
business as a leading innovator and provider of critical well
construction tools. National Oilwell Varco is well-positioned to
capitalize on the opportunities that lie ahead.”

Wellbore Technologies

Wellbore Technologies generated revenues of $847 million in the third
quarter of 2018, an increase of seven percent from the second quarter of
2018 and an increase of 22 percent from the third quarter of 2017. The
segment realized meaningful growth for the second consecutive quarter as
domestic revenue outpaced the percentage growth in the U.S. rig count,
and international operations capitalized on an increasing number of
opportunities associated with the emerging recovery in the Eastern
Hemisphere. Operating leverage was limited to four percent mostly due to
higher steel and labor costs, which outpaced the segment’s price
increases. Operating profit was $40 million, or 4.7 percent of sales.
Adjusted EBITDA increased two percent sequentially and 44 percent from
the prior year to $135 million, or 15.9 percent of sales.

Completion & Production Solutions

Completion & Production Solutions generated revenues of $735 million in
the third quarter of 2018, a decrease of $3 million from the second
quarter of 2018 and an increase of eight percent from the third quarter
of 2017. Slowing demand for pressure pumping equipment in North America
and sharper-than-anticipated declines in offshore-focused businesses
more than offset strong growth in demand for land production equipment.
Operating profit was $46 million, or 6.3 percent of sales. Adjusted
EBITDA increased five percent sequentially and two percent from the
prior year to $99 million, or 13.5 percent of sales.

New orders booked during the quarter were $372 million, representing a
book-to-bill of 85 percent when compared to the $439 million of orders
shipped from backlog. Backlog for capital equipment orders for
Completion & Production Solutions at September 30, 2018 was $880 million.

Rig Technologies

Rig Technologies generated revenues of $637 million in the third quarter
of 2018, a decrease of two percent from the second quarter of 2018 and
an increase of 25 percent from the third quarter of 2017. Improving
aftermarket sales and better progress on offshore projects did not fully
offset lower land rig sales from inventory. Operating profit was $58
million, or 9.1 percent of sales. Adjusted EBITDA decreased seven
percent sequentially and increased 95 percent from the prior year to $78
million, or 12.2 percent of sales.

New orders booked during the quarter totaled $151 million, representing
a book-to-bill of 59 percent when compared to the $256 million of orders
shipped from backlog. At September 30, 2018, backlog for capital
equipment orders for Rig Technologies was $3.40 billion.

Other Corporate Items

Revenue eliminations decreased $11 million sequentially due to a
reduction in intersegment sales. This decrease, along with lower
compensation and third-party service expenses, resulted in a $17 million
reduction in eliminations and corporate costs.

Cash flow provided by operations for the third quarter of 2018 was $190
million. As of September 30, 2018, the Company had $1.3 billion in cash
and cash equivalents, total debt of $2.7 billion and $3.0 billion
available on its revolving credit facility.

Significant Events and Achievements

NOV completed the first commercial field trial of the Vector™
SelectShift™ downhole adjustable motor in West Texas, where the tool
successfully reached section total depth. This brings the field trial
tally up to 13 in total, including seven internal trials on test wells
in Navasota, five runs in the Bakken, and this one in West Texas. The
SelectShift tool has drilled over 45,000 ft to date, with more than 500
drilling and circulating hours and over 100 bend angle shifts downhole.
Customers are embracing the new technology after seeing significant
drilling improvements when drilling in straight mode versus bent mode,
including substantial ROP increases and reductions in torque and
vibration.

NOV’s highly engineered drill bits with 3D shaped cutter technology
helped a prominent operator in the Permian Basin drill their wells 6.5
days faster. The shaped cutters provided a 14% increase in ROP in the
12¼-in. intermediate, a 44% increase in ROP in the 8¾-in. intermediate,
and a 47% increase in ROP in the 6-in. horizontal intervals. The
operator also realized a more than 200% improvement in footage per 6-in.
bit, allowing them to drill their 6-in. horizontal sections with 1.8
bits per well on average compared to 5.8 bits per well with other
products, a savings of four bit trips per well.

NOV recently completed several successful installations of its
packer-setting system, which features the latest product from its
d-Solve™ dissolvable platform, the i-Seat ball, with a major North Sea
operator. The integrated system reduced the necessary amount of rig time
by six days on average versus traditional packer-setting operations, and
it eliminated the cost and risk associated with the wireline and tractor
run involved in setting production packers and removing the equipment
prior to well startup.

NOV achieved several wins in its directional measurement and steerable
technologies business. In Russia, a customer used the VectorZIEL rotary
steerable system (RSS) to drill a 1,610-ft long horizontal section, with
the tool maintaining target inclination and azimuth within 0.3° and
2.5°, respectively, across the entire section. After this successful
field trial, the two tools used to conduct the field trial were
purchased, with additional tools sales expected next quarter. The
Company also received, in Russia, the first order for its symmetric
propagation resistivity LWD tool, which provides high-quality recorded
and real-time resistivity data.

NOV, in consortium with Subsea 7, was awarded an engineering,
procurement, construction, and installation (EPCI) contract by Tullow
Oil. NOV will provide Tullow with an oil offloading system using its
buoy turret loading (BTL) system, which will be retrofitted to the Kwame
Nkrumah FPSO located in the Jubilee field offshore Ghana. The BTL
offshore loading terminal, which is designed for deepwater applications
requiring large and frequent offloading operations, will be moored in
800 m of water, weigh approximately 900 tons, and have an offloading
capacity to transfer 1 million barrel parcels of oil within 27 hours.

NOV’s drill bits helped a major operator in Oman set a new drilling
record in their 12¼-in. section. The 12¼-in. TK66 drill bit with ION™ 3D
cutters achieved a normalized average ROP through the section of 28.8
m/hr, more than a meter per hour ahead of the closest competitor bit and
previous record holder. The operator noted that the new performance
record was the result of continuous improvement in drill bit design,
effective after-action review and learning implementation, superior
support and follow-up from field engineers and office staff, consistent
application of recommended drilling parameters and practices, and open
communication between NOV and the customer.

NOV customers continue to see the benefits of using Agitator™ systems in
conjunction with an RSS in global operations, including in technically
challenging laterals greater than 10,000 ft. On a project in the Middle
East, a customer using a 6¾-in. Agitator system in their RSS bottomhole
assembly (BHA) recorded a 66% reduction in vibration, significantly
reducing their risk of tool failure. In Asia, an operator ran a 4¾-in.
Agitator system with an international directional company’s RSS and MWD
systems due to consistently experiencing severe stick-slip activity and
associated directional control challenges. The Agitator system reduced
the stick-slip shock count and severity levels induced by BHA/string
interaction with the borehole by over 50%, improving directional
performance and borehole quality. The market for NOV’s Agitator system
is expanding, including various applications in the Permian, as service
companies seek efficiency gains, reduced equipment damage, and improved
geosteering/directional control.

NOV’s eVolve™ optimization and automation services continues to deliver
value for customers in North American land drilling projects, recently
completing the ninth successful well for a major independent operator in
the Permian running drilling automation services. The project has so far
reduced total bit runs and overall failures per well. Encouraged by the
cost and time savings delivered by these performance improvements, the
operator has extended the eVolve contract to an additional rig.

NOV’s MPowerD™ managed pressure drilling (MPD) group delivered an
integrated MPowerD MPD control system on a Cyberbase drilling control
system for a deepwater drillship. NOV and the drilling contractor worked
together very closely to introduce the system and fully embed MPD into
the drilling controls network, making this the first completely
integrated MPD control system installed on an offshore drilling rig.
Integration of MPD controls into the Cyberbase system will enable a
step-change in MPD efficiency and safety of operations for the drilling
contractor, and the company can now offer MPD as an integrated service
to their clients. The drilling contractor recently placed an order for a
second system, further reinforcing their commitment to a long-term MPD
strategy. In addition, NOV booked 10 land MPD projects for a large
independent operator in the Mid Continent.

Third Quarter Earnings Conference Call

NOV will hold a conference call to discuss its third quarter 2018
results on October 26, 2018 at 10:00 AM Central Time (11:00 AM Eastern
Time). The call will be broadcast simultaneously at www.nov.com/investors.
A replay will be available on the website for 30 days.

About NOV

National Oilwell Varco (NYSE: NOV) is a leading provider of technology,
equipment, and services to the global oil and gas industry that supports
customers’ full-field drilling, completion, and production needs. Since
1862, NOV has pioneered innovations that improve the cost-effectiveness,
efficiency, safety, and environmental impact of oil and gas operations.
NOV powers the industry that powers the world.

Visit www.nov.com
for more information.

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.

Certain prior period amounts have been reclassified in this press
release to be consistent with current period presentation.

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,
			2018				2017			2018					2018			2017
Revenue:
Wellbore Technologies		$	847			$	693			$	793			$	2,351			$	1,862
Completion & Production Solutions			735				682				738				2,143				1,982
Rig Technologies			637				510				651				1,771				1,638
Eliminations			(65	)			(50	)			(76	)			(210	)			(147	)
Total revenue			2,154				1,835				2,106				6,055				5,335
Gross profit			393				285				355				1,035				725
Gross profit %			18.2	%			15.5	%			16.9	%			17.1	%			13.6	%
Selling, general, and administrative			320				292				303				911				891
Operating profit (loss)			73				(7	)			52				124				(166	)
Interest and financial costs			(24	)			(26	)			(23	)			(71	)			(77	)
Interest income			6				11				5				18				19
Equity income (loss) in unconsolidated affiliates			(2	)			(2	)			(1	)			(1	)			(4	)
Other income (expense), net			(20	)			(16	)			(3	)			(70	)			(36	)
Income (loss) before income taxes			33				(40	)			30				—				(264	)
Provision (benefit) for income taxes			29				(13	)			5				37				(43	)
Net income (loss)			4				(27	)			25				(37	)			(221	)
Net (income) loss attributable to noncontrolling interests			3				(1	)			1				6				2
Net income (loss) attributable to Company		$	1			$	(26	)		$	24			$	(43	)		$	(223	)
Per share data:
Basic		$	0.00			$	(0.07	)		$	0.06			$	(0.11	)		$	(0.59	)
Diluted		$	0.00			$	(0.07	)		$	0.06			$	(0.11	)		$	(0.59	)
Weighted average shares outstanding:
Basic			379				377				378				378				377
Diluted			383				377				381				378				377

NATIONAL OILWELL VARCO, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In millions)
		September 30,				December 31,
			2018			2017
ASSETS
Current assets:
Cash and cash equivalents		$	1,293			$	1,437
Receivables, net			2,005				2,015
Inventories, net			3,177				3,003
Contract assets			483				495
Other current assets			263				267
Total current assets			7,221				7,217
Property, plant and equipment, net			2,813				3,002
Goodwill and intangibles, net			9,411				9,528
Other assets			448				459
Total assets		$	19,893			$	20,206
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	675			$	510
Accrued liabilities			1,023				1,238
Contract liabilities			570				519
Current portion of long-term debt and short-term borrowings			8				6
Accrued income taxes			—				81
Total current liabilities			2,276				2,354
Long-term debt			2,706				2,706
Other liabilities			935				986
Total liabilities			5,917				6,046
Total stockholders’ equity			13,976				14,160
Total liabilities and stockholders’ equity		$	19,893			$	20,206

NATIONAL OILWELL VARCO, INC.

RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME (LOSS) (Unaudited)

(In millions)

The Company discloses Adjusted EBITDA (defined as Operating Profit
excluding Depreciation, Amortization and, when applicable, Other Items)
in its periodic earnings press releases and other public disclosures to
provide investors additional information about the results of ongoing
operations. The Company uses Adjusted EBITDA internally to evaluate and
manage the business. Adjusted EBITDA is not intended to replace GAAP
financial measures, such as Net Income. Other items in the three and
nine months ended September 30, 2018 were $0 and a net credit of $12
million, pre-tax, respectively, primarily from the reversal of certain
accruals, partially offset by restructure charges and severance
payments. Other items in 2017 consisted primarily of restructure charges
for inventory write-downs, facility closures and severance payments.

		Three Months Ended												Nine Months Ended
		September 30,								June 30				September 30,
		2018				2017				2018				2018				2017
Operating profit (loss):
Wellbore Technologies		$	40			$	—			$	38			$	90			$	(81	)
Completion & Production Solutions			46				44				40				102				79
Rig Technologies			58				18				62				138				37
Eliminations and corporate costs			(71	)			(69	)			(88	)			(206	)			(201	)
Total operating profit (loss)		$	73			$	(7	)		$	52			$	124			$	(166	)
Other items:
Wellbore Technologies		$	—			$	—			$	—			$	(3	)		$	(4	)
Completion & Production Solutions			—				—				—				3				32
Rig Technologies			—				—				—				6				29
Corporate			—				—				—				(18	)			—
Total other items		$	—			$	—			$	—			$	(12	)		$	57
Depreciation & amortization:
Wellbore Technologies		$	95			$	94			$	95			$	284			$	283
Completion & Production Solutions			53				53				54				161				161
Rig Technologies			20				22				22				63				67
Corporate			4				5				3				11				12
Total depreciation & amortization		$	172			$	174			$	174			$	519			$	523
Adjusted EBITDA:
Wellbore Technologies		$	135			$	94			$	133			$	371			$	198
Completion & Production Solutions			99				97				94				266				272
Rig Technologies			78				40				84				207				133
Eliminations and corporate costs			(67	)			(64	)			(85	)			(213	)			(189	)
Total adjusted EBITDA		$	245			$	167			$	226			$	631			$	414
Reconciliation of Adjusted EBITDA:
GAAP net income (loss) attributable to Company		$	1			$	(26	)		$	24			$	(43	)		$	(223	)
Noncontrolling interests			3				(1	)			1				6				2
Provision (benefit) for income taxes			29				(13	)			5				37				(43	)
Interest expense			24				26				23				71				77
Interest income			(6	)			(11	)			(5	)			(18	)			(19	)
Equity (income) loss in unconsolidated affiliate			2				2				1				1				4
Other (income) expense, net			20				16				3				70				36
Depreciation and amortization			172				174				174				519				523
Other items			—				—				—				(12	)			57
Total Adjusted EBITDA		$	245			$	167			$	226			$	631			$	414

View source version on businesswire.com: https://www.businesswire.com/news/home/20181025006101/en/

Source: Business Wire
(October 25, 2018 - 7:06 PM EDT)

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