National Oilwell Varco swings to loss

The crash in oil prices has affected more than just exploration and production companies, expanding into oilfield service companies like National Oilwell Varco.

The Houston-based oil equipment manufacturer reported on Thursday that it lost $217 million, or 58 cents per share in the second quarter, swinging from a profit of of $286 million, or 75 cents per share from the same period a year earlier. Company revenues dropped 56 percent to $1.72 billion.

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Executives said the results were worse than expected. Customers in the oilfield haven’t been placing orders, and have been delaying deliveries to save money, said chief financial officer Jose Bayardo. “For the third straight quarter, we received no new rig orders,” he said in a call with analysts.

Clay Williams, Varco’s chairman, president and chief executive said the company has responded by “aggressively reducing costs and restructuring our operations to match this market reality.”
In April, the company cut 6,000 workers, or about 10 percent of its staff. Williams said the cuts helped the company save about $2 billion in personnel costs. He lauded his team for doing the “tough, grim work of downsizing.”

But Williams said he expected to see business continue to decline, especially internationally. “Frankly, we’re not ready to call bottom yet,” he said.

“Better days lie ahead for NOV,” he continued. But he called the recovery a “slow grind” with “a lot of swamp to traverse.”

Bayardo said, however, that conversations with customers leave executives “cautiously optimistic” that the oil rig business is at or near its bottom. But he said that the two years of trauma in the oilfield will likely delay a meaningful recovery until next year.

 

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