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National Oilwell Varco Inc. Reports Operating Results (10-Q)

November 02, 2012 | About:
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10qk

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National Oilwell Varco Inc. (NOV) filed Quarterly Report for the period ended 2012-09-30.

National Oilwell Varco, Inc. has a market cap of $31.8 billion; its shares were traded at around $71.73 with a P/E ratio of 12.9 and P/S ratio of 2.2. The dividend yield of National Oilwell Varco, Inc. stocks is 0.6%. National Oilwell Varco, Inc. had an annual average earning growth of 27.3% over the past 10 years. GuruFocus rated National Oilwell Varco, Inc. the business predictability rank of 4-star.

Highlight of Business Operations:

Three and Nine Months Ended September 30, 2012 and 2011. Revenue from Rig Technology was $2,547 million for the three months ended September 30, 2012, compared to $1,970 million for the three months ended September 30, 2011, an increase of $577 million (29.3%). For the nine months ended September 30, 2012, revenue from Rig Technology was $7,211 million compared to $5,472 million for the nine months ending September 30, 2011, an increase of $1,739 million (31.8%). Both deepwater offshore drilling worldwide and active shale plays in North America were the primary driving forces for the increase in revenue for this segment during the first half of 2012, resulting in increased rig construction as well as demand for well intervention and stimulation equipment and aftermarket spare parts. In addition, the acquisitions of NKT and Enerflow, occurring towards the beginning of the second quarter of 2012, contributed to the increase in revenue for Rig Technology. Moving into the second half of 2012, the Company saw continued strong deepwater offshore demand as well as a strong demand in international markets. North American markets, however, have begun to see a decrease in demand for land drilling as both gas and oil plays have begun to decrease production. This is evidenced by a slightly lower rig count in the U.S. and has resulted in lower sales of land rigs and jackups as the Company moved into the second half of 2012.

Operating profit from Rig Technology was $598 million (which included $12 million in other costs related to acquisitions) for the three months ended September 30, 2012 compared to $523 million for the three months ended September 30, 2011, an increase of $75 million (14.3%). Operating profit percentage decreased in the three months ended September 30, 2012 to 23.5%, from 26.5% in the three months ended September 30, 2011. For the nine months ended September 30, 2012, operating profit from Rig Technology was $1,699 million compared to $1,456 million for the nine months ended September 30, 2011, an increase of $243 million (16.7%). Operating profit percentage decreased to 23.6% in the nine months ended September 30, 2012, from 26.6% in the nine months ended September 30, 2011. The decrease in operating profit percentage was primarily due to decrease in the average margin of revenue out of backlog as contracts signed during 2009 and 2010 contain less favorable margins compared to contracts won during the order ramp-up from 2005 to 2008. The integration of the NKT and Enerflow acquisitions made during the second quarter of 2012 also contributed to lower operating profit percentages.

Three and Nine Months Ended September 30, 2012 and 2011. Revenue from Petroleum Services & Supplies was $1,717 million for the three months ended September 30, 2012 compared to $1,460 million for the three months ended September 30, 2011, an increase of $257 million (17.6%). For the nine months ended September 30, 2012, revenue from Petroleum Services & Supplies was $5,197 million compared to $4,084 million for the nine months ended September 30, 2011, an increase of $1,113 million (27.3%). Strong shale plays in North America lead to a an increase in revenue for the Petroleum Services & Supplies segment during the first half of 2012 compared to the same period in 2011. Full period results of Ameron as well as other strategic acquisitions made during 2011 in the U.S., the U.K., the Netherlands, Singapore, Malaysia and Brazil also contributed to the increase in revenue for this segment in 2012 compared to 2011. Moving into the three months ended September 30, 2012, while stronger than the same period in 2011, compared to the first half of 2012, the Company began to see a decrease in North American activity as evidenced in the slight decrease in U.S. rig count. The three months ended September 30, 2012 saw a slower than normal recovery out of the breakup in Canada and the segment showed signs of slowing in a number of product lines, most notably drill pipe but also in composite pipe, coiled tubing, conductor pipe connectors and inspection equipment when compared to the first half of 2012.

Operating profit from Petroleum Services & Supplies was $383 million for the three months ended September 30, 2012 compared to $298 million for the three months ended September 30, 2011, an increase of $85 million (28.5%). Operating profit percentage increased to 22.3% in the three months ended September 30, 2012, up from 20.4% in the three months ended September 30, 2011. For the nine months ended September 30, 2012, operating profit from Petroleum Services & Supplies was $1,161 million compared to $777 million for the nine months ended September 30, 2011, an increase of $384 million (49.4%). Operating profit percentage increased to 22.3% in the nine months ended September 30, 2012, up from 19.0% in the nine months ended September 30, 2011. This increase is primarily due to increased volume, favorable pricing and cost reductions within most business units within the segment during the first half of 2012 compared to the same period in 2011. As the segment ended the three months ended September 30, 2012, it began to see pricing pressures as North American activity declined, the effects of which will likely be seen in quarters to come.

Operating profit from Distribution & Transmission was $42 million for the three months ended September 30, 2012 compared to $37 million for the three months ended September 30, 2011, an increase of $5 million (13.5%). Operating profit percentage decreased in the three months ended September 30, 2012 to 3.2%, from 7.7% in the three months ended September 30, 2011. For the nine months ended September 30, 2012, operating profit from Distribution & Transmission was $131 million compared to $90 million for the nine months ended September 30, 2011, an increase of $41 million (45.6%). Operating profit percentage decreased to 4.9% in the nine months ended September 30, 2012 from 6.9% in the nine months ended September 30, 2011. Increased volume, greater cost efficiencies and continued favorable pricing which related to strong demand for this segment contributed to an increase in operating profit percentages for this segment during the first half of 2012. Towards the end of the first half of 2012 and moving into the second half of 2012, the increase was offset by the integration of acquired, slightly lower operating profit percentage, businesses made during the second and third quarters of 2012. In addition, other costs incurred for the expense recognition associated with acquired current assets stepped up to fair value during purchase accounting also contributed to the decrease in operating profit percentage. The majority of the stepped up value related to inventory and was fully amortized by September 30, 2012. For the three and nine months ended September 30, 2012, operating profit for Distribution & Transmission included other costs related to acquisitions of $36 million and $44 million, respectively, compared to nil and $1 million for the three and nine months ended September 30, 2011.

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