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Press release from Business Wire

National Oilwell Varco Announces First Quarter 2011 Earnings and Backlog

Wednesday, April 27, 2011

National Oilwell Varco Announces First Quarter 2011 Earnings and Backlog07:00 EDT Wednesday, April 27, 2011 HOUSTON (Business Wire) -- National Oilwell Varco, Inc. (NYSE: NOV) today reported that for its first quarter ended March 31, 2011 it earned net income of $407 million, or $0.96 per fully diluted share, compared to fourth quarter ended December 31, 2010 net income of $440 million, or $1.05 per fully diluted share. The first quarter 2011 results included charges related to Libya asset write-downs and the Company's acquisition of APL totaling $19 million pre-tax, or $0.04 per share after-tax. Net income for the first quarter of 2011 excluding the Libya and APL charges was $422 million, or $1.00 per fully diluted share. Reported revenues for the first quarter of 2011 were $3.15 billion, a decrease of one percent from the fourth quarter of 2010 and an increase of four percent from the first quarter of 2010. Operating profit for the quarter, excluding the Libya and APL charges, was $628 million or 20 percent of sales. Capital equipment orders for the Company's Rig Technology segment increased significantly, both sequentially and year-over-year, to $2.28 billion during the first quarter, reflecting higher demand for drilling equipment for new build offshore rigs. At March 31, 2011 the segment's backlog was $6.16 billion, up 23 percent from the end of the fourth quarter. Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, “Our Company got off to a good start in the first quarter of 2011. Our Petroleum Services & Supplies segment performed exceptionally well, and helped offset expected lower revenues from new rig projects. The high levels of oilfield activity are spurring demand for all our products and services, serving to reload our backlog of Rig Technology capital equipment, and enabling our Distribution Services team to put up very solid revenues and margins once again. We are very excited that bookings into our capital equipment backlog were more than double our shipments this quarter. Overall, efficient execution of orders in our backlog, our leading technologies, great service, and, most importantly, the best workforce in the industry, led to solid earnings this quarter. Gradually recovering economies, high oil prices, a pressing need for modern, efficient drilling and well stimulation equipment, and rising consumption of drillpipe, downhole tools, and other critical oilfield products provide a great outlook for National Oilwell Varco.” Rig Technology First quarter revenues for the Rig Technology segment were $1.61 billion, a decrease of eight percent from the fourth quarter of 2010 and a decrease of 15 percent from the first quarter of 2010. Operating profit for this segment was $422 million, or 26.2 percent of sales. Revenue out of backlog for the segment declined 25 percent year-over-year, and was down 12 percent from the fourth quarter of 2010, to $1.1 billion for the first quarter of 2011, reflecting the completion of many new offshore rig projects which were won in preceding years. Petroleum Services & Supplies Revenues for the first quarter of 2011 for the Petroleum Services & Supplies segment were $1.27 billion, up 11 percent compared to fourth quarter 2010 results and up 37 percent from the first quarter of 2010. Operating profit was $246 million, or 19.4 percent of revenue, an increase of 45 percent from the fourth quarter of 2010. Operating profit flow-through, or the change in operating profit divided by the change in revenue, was 59 percent sequentially and 39 percent from the first quarter of 2010 to the first quarter of 2011. Distribution Services The Distribution Services segment generated first quarter revenues of $410 million, which were down three percent from the fourth quarter of 2010 and represented a 23 percent increase from the first quarter of 2010. First quarter operating profit was $28 million or 6.8 percent of sales. Operating profit flow-through was 22 percent from the first quarter of 2010 to the first quarter of 2011. The Company has scheduled a conference call for April 27, 2011, at 8:00 a.m. Central Time to discuss first quarter results. The call will be broadcast through the Investor Relations link on National Oilwell Varco's web site at www.nov.com, and a replay will be available on the site for thirty days following the conference. Participants may also join the conference call by dialing 1-800-446-1671 within North America or 1-847-413-3362 outside of North America five to ten minutes prior to the scheduled start time, and ask for the “National Oilwell Varco Earnings Conference Call.” National Oilwell Varco is a worldwide leader in the design, manufacture and sale of equipment and components used in oil and gas drilling and production operations, the provision of oilfield services, and supply chain integration services to the upstream oil and gas industry. 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 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 BALANCE SHEETS(In millions, except share data)   March 31, December 31, 2011 2010 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 3,060 $ 3,333 Receivables, net 2,757 2,425 Inventories, net 3,570 3,388 Costs in excess of billings 744 815 Deferred income taxes 297 316 Prepaid and other current assets   311   258 Total current assets 10,739 10,535   Property, plant and equipment, net 1,861 1,840 Deferred income taxes 158 341 Goodwill 5,908 5,790 Intangibles, net 4,026 4,103 Investment in unconsolidated affiliate 402 386 Other assets   62   55 $ 23,156 $ 23,050   LIABILITIES AND STOCKHOLDERS' EQUITY   Current liabilities: Accounts payable $ 656 $ 628 Accrued liabilities 1,989 2,105 Billings in excess of costs 571 511 Current portion of long-term debt and short-term borrowings 203 373 Accrued income taxes 284 468 Deferred income taxes   429   451 Total current liabilities 4,132 4,536   Long-term debt 512 514 Deferred income taxes 1,832 1,885 Other liabilities   279   253 Total liabilities   6,755   7,188   Commitments and contingencies   Stockholders' equity: Common stock – par value $.01; 422,957,697 and 421,141,751 shares issued and outstanding at March 31, 2011 and December 31, 2010 4 4 Additional paid-in capital 8,432 8,353 Accumulated other comprehensive income 192 91 Retained earnings   7,661   7,300 Total Company stockholders' equity 16,289 15,748 Noncontrolling interests   112   114 Total stockholders' equity   16,401   15,862 $ 23,156 $ 23,050     NATIONAL OILWELL VARCO, INC.CONSOLIDATED STATEMENTS OF INCOME (Unaudited)(In millions, except per share data)   Three Months Ended March 31,   December 31, 2011   2010 2010   Revenue: Rig technology $ 1,608 $ 1,886 $ 1,757 Petroleum services and supplies 1,265 923 1,137 Distribution services 410 334 423 Eliminations   (137 )   (111 )   (145 ) Total revenue 3,146 3,032 3,172 Gross profit 994 973 998 Gross profit % 31.6 % 32.1 % 31.5 % Selling, general, and administrative 366 325 373 Transaction and devaluation costs   19     38     1   Operating profit 609 610 624   Interest and financial costs (14 ) (13 ) (12 ) Interest income 4 2 4 Equity income in unconsolidated affiliate 13 6 14 Other income (expense), net   (19 )   11     (7 )   Income before income taxes 593 616 623   Provision for income taxes   189     197     186   Net income 404 419 437   Net loss attributable to noncontrolling interests   (3 )   (3 )   (3 ) Net income attributable to Company $ 407   $ 422   $ 440     Net income attributable to Company per share:   Basic $ 0.97   $ 1.01   $ 1.05     Diluted $ 0.96   $ 1.01   $ 1.05     Weighted average shares outstanding:   Basic   420     417     418     Diluted   423     419     421       NATIONAL OILWELL VARCO, INC.OPERATING PROFIT – AS ADJUSTED SUPPLEMENTAL SCHEDULE (Unaudited)(In millions)   Three Months Ended March 31,   December 31, 2011   2010 2010   Revenue: Rig technology $ 1,608 $ 1,886 $ 1,757 Petroleum services and supplies 1,265 923 1,137 Distribution services 410 334 423 Eliminations   (137 )   (111 )   (145 ) Total revenue $ 3,146   $ 3,032   $ 3,172     Operating profit: Rig technology $ 422 $ 581 $ 501 Petroleum services and supplies 246 113 170 Distribution services 28 11 30 Unallocated expenses and eliminations   (68 )   (57 )   (76 ) Total operating profit (before transaction and devaluation costs) $ 628   $ 648   $ 625     Operating profit %: Rig technology 26.2 % 30.8 % 28.5 % Petroleum services and supplies 19.4 % 12.2 % 15.0 % Distribution services 6.8 % 3.3 % 7.1 % Other unallocated   --     --     --     Total operating profit (before transaction and devaluation costs)   20.0 %   21.4 %   19.7 %     NATIONAL OILWELL VARCO, INC.AS ADJUSTED EBITDA RECONCILIATION EXCLUDING TRANSACTION AND DEVALUATION COSTS(Unaudited)(In millions)   Three Months Ended March 31,   December 31, 2011   2010 2010   Reconciliation of EBITDA (Note 1): GAAP net income attributable to Company $ 407 $ 422 $ 440 Provision for income taxes 189 197 186 Interest expense 14 13 12 Depreciation and amortization 135 127 129 Transaction and devaluation costs   19   38   1 EBITDA (Note 1) $ 764 $ 797 $ 768 Note 1: EBITDA means earnings before interest, taxes, depreciation, amortization, and transaction and devaluation costs, and is a non-GAAP measurement. Management uses EBITDA because it believes it provides useful supplemental information regarding the Company's on-going economic performance and, therefore, uses this financial measure internally to evaluate and manage the Company's operations. The Company has 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. National Oilwell Varco, Inc.Clay Williams, 713-346-7606Clay.Williams@nov.com