NOV Inc. filed its quarterly report for the period ended September 30, 2024. The company reported net income of $123 million, a decrease of 15% compared to the same period last year. Revenue decreased by 10% to $1.4 billion, primarily due to lower sales in the company’s drilling and evaluation segment. The company’s operating margin decreased to 12.5% from 14.5% in the same period last year. NOV Inc. had cash and cash equivalents of $543 million and total debt of $2.3 billion as of September 30, 2024. The company’s diluted earnings per share were $0.32, a decrease of 17% compared to the same period last year.
Critical Accounting Policies and Estimates
In the company’s annual report, they identified their most critical accounting policies as related to revenue recognition under long-term construction contracts, impairment of goodwill and other indefinite-lived intangible assets, and income taxes. The company makes assumptions, estimates, and judgments that affect the amounts reported in the financial statements, and these estimates are based on historical experience and future expectations.
Executive Summary
For the third quarter of 2024, the company generated revenues of $2.19 billion, an increase of $6 million compared to the prior year. Net income increased 14% to $130 million, and operating profit increased $11 million to $194 million. Adjusted EBITDA increased 7% to $286 million.
Segment Performance
The Energy Products and Services segment saw a 3% decrease in revenues and a 21% decrease in operating profit, primarily due to lower drilling activity in North America. The Energy Equipment segment saw a 2% increase in revenues and a 32% increase in operating profit, driven by strong execution on the segment’s improving backlog and better demand for aftermarket parts and services.
Oil & Gas Equipment and Services Market and Outlook
The macro environment and geopolitical uncertainties continue to drive volatility and pressure commodity prices. However, management believes the industry remains in an extended recovery due to factors like lower inventory levels, natural production decline rates, and increased focus on energy security. The company remains committed to improving organizational efficiencies and developing innovative products and services, including technologies to reduce environmental impact and accelerate the energy transition.
Operating Environment Overview
Key industry indicators show a 3.5% decrease in worldwide quarterly average rig count and a 7.4% decrease in West Texas Intermediate Crude Oil prices compared to the prior year quarter. The company is also becoming increasingly engaged with energy transition related opportunities.
Results of Operations
The Energy Products and Services segment saw a 3% decrease in revenues and a 21% decrease in operating profit for the quarter, while the Energy Equipment segment saw a 2% increase in revenues and a 32% increase in operating profit. The company’s capital equipment backlog increased $485 million from the prior year quarter to $4.48 billion.
Liquidity and Capital Resources
The company had $985 million in cash and cash equivalents and $1.75 billion in total debt as of September 30, 2024. The company entered into a new $1.5 billion five-year unsecured revolving credit facility and had no borrowings under this facility as of the end of the quarter. Cash flows from operating activities were $713 million for the first nine months of 2024.
Forward-Looking Statements
The company cautions that actual results could differ materially from the forward-looking statements due to factors like changes in oil and gas prices, customer demand, and worldwide economic activity. The company undertakes no obligation to update any forward-looking statements.