National Oilwell Varco income drops, but backlog, new orders are up

National Oilwell Varco Friday became the latest oilfield equipment and services company hit by the weak North American market, reporting a 17 percent drop in net income for the first quarter.

“We continue to face market headwinds,” President and Chief Operating Officer Clay Williams said during a conference call after the first-quarter results were released. “We are very cautious about North America.”

But the company reported $3.04 billion in new orders for its rig technology division for the quarter which ended March 31, up 24 percent from the first quarter of 2012. Overall, the division’s backlog for capital equipment was $12.9 billion.

Net income for the quarter was $502 million, or $1.17 per share, compared to $606 million and $1.42 per share for the first quarter of 2012.

The company said those results were affected by transaction costs related to the acquisition of Robbins & Myers and the devaluation of Venezuela’s currency in February. Without that, it said net income for the quarter would have been $553 million, or $1.29 per share.

Baker Hughes and Schlumberger reported drops in first-quarter earnings earlier this month, citing challenging North American conditions. Baker Hughes also noted a loss from the Venezuela currency devaluation.

Houston-based National Oilwell Varco has grown aggressively over the past few years and manufactures everything used in the oil fields, both onshore and offshore. But production activity has slowed as energy prices weakened, and the company’s stock price has fallen.

It continued to slide in early trading Friday after the first-quarter results showed a larger-than-expected decline in profits.

Chairman and CEO Pete Miller focused on the company’s international business during the conference call, particularly its prospects for doing business in Russia, Latin America and China.

“No. 1, I think, is China,” he said during the conference call. “You should take a look at the shipyards there. They’re becoming much more active. We’re positioned to take advantage of that.”

Pemex, the national oil company in Mexico, will begin moving more aggressively by the end of the year, he predicted. “That has good implications for manufacturers.”

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And he said Brazil will “continue to be a linchpin for what we’re doing.”

Jeremy Thigpen, senior vice president and chief financial officer, said Brazil has ordered three deepwater rigs, out of eight in the company’s backlog. Orders for another six could come from Brazil, he said, but payment hasn’t yet been received.

Orders for the other five deepwater rigs already in the queue came from around the globe, Thigpen said.

He said 92 percent of the backlog was for offshore projects, and the same percentage was destined for international markets.

Marshall Adkins, an analyst with Raymond James & Associates, said the biggest question he gets from investors is how long the backlog for capital equipment might last.

“The reports of my death have been greatly exaggerated,” Miller said. “The fact of the matter is, we feel very good about the prospects for the future.”