NOV Inc., a Texas company with drilling rigs throughout Oklahoma, reported second quarter 2023 revenues of $2.09 billion, an increase of seven percent compared to the first quarter of 2023 and an increase of 21 percent compared to the second quarter of 2022.
Net income for the second quarter of 2023 was $155 million, or 7.4 percent of sales. Operating profit was $181 million, or 8.6 percent of sales. Under Other Items the Company recorded a net pre-tax credit of $7 million (see Corporate Information for additional details). Adjusted EBITDA increased sequentially to $245 million, or 11.7 percent of sales.
“NOV’s consolidated revenue increased seven percent sequentially, which helped lift fully diluted earnings per share to the highest level since 2015,” stated Clay Williams, Chairman, President, and CEO. “Rising demand in offshore and international land markets led to a two percent sequential increase in capital equipment orders for the Company, despite economic uncertainty and continued declines in North American rig activity. We believe the substantial backlog of oil and gas development projects across offshore and international land markets will continue to push oilfield service asset utilization higher, prompting continued demand for NOV’s critical equipment and technologies.”
“Encouragingly, the Company’s global supply chain is continuing to improve, which is positively impacting sales growth and profitability. However, compressing delivery times from most, but not all, of our vendors led to higher inventories in the second quarter, which contributed to NOV’s working capital growth and cash draw. We expect inventory balances to remain elevated as supply chains normalize, before reversing out in the fourth quarter. As the pace of customer backlog conversion accelerates through the second half of the year, we expect both improved profitability and sequentially improving free cash flow, particularly in the fourth quarter and continuing into 2024.”
Wellbore Technologies
Wellbore Technologies generated revenues of $804 million in the second quarter of 2023, an increase of eight percent from the first quarter of 2023 and an increase of 21 percent from the second quarter of 2022. Operating profit was $128 million, or 15.9 percent of sales, and included a credit of $1 million from Other Items. Adjusted EBITDA increased $31 million sequentially and increased $42 million from the prior year to $164 million, or 20.4 percent of sales. Significantly improved manufacturing throughput from the segment’s drill pipe operations, market share gains and improving demand from international and offshore markets offset activity declines in North America to drive improved results.
Completion & Production Solutions
Completion & Production Solutions generated revenues of $753 million in the second quarter of 2023, an increase of five percent from the first quarter of 2023 and an increase of 18 percent from the second quarter of 2022. Operating profit was $53 million, or 7.0 percent of sales. Adjusted EBITDA increased $15 million sequentially and increased $37 million from the prior year to $69 million, or 9.2 percent of sales. Results reflect improving execution on a higher margin mix of international and offshore projects, partially offset by softening demand for completion equipment and aftermarket services in North America.
New orders booked during the quarter increased 11 percent and totaled $450 million, representing a book-to-bill of 94 percent when compared to the $477 million of orders shipped from backlog. As of June 30, 2023, backlog for capital equipment orders for Completion & Production Solutions was $1.59 billion, a decrease of $15 million from the first quarter of 2023 and an increase of $144 million from the second quarter of 2022.
Rig Technologies
Rig Technologies generated revenues of $606 million in the second quarter of 2023, an increase of 10 percent from the first quarter of 2023 and an increase of 31 percent from the second quarter of 2022. Operating profit was $64 million, or 10.6 percent of sales, and included a credit of $7 million from Other Items. Adjusted EBITDA increased $2 million sequentially and increased $30 million from the prior year to $71 million, or 11.7 percent of sales. Steadily improving demand drove the segment’s sequential revenue growth. Incremental margins were limited by a lower margin sales mix and sequentially higher costs related to a startup operation.
New capital equipment orders booked during the quarter totaled $222 million, representing a book-to-bill of 108 percent when compared to the $205 million of orders shipped from backlog. As of June 30, 2023, backlog for capital equipment orders for Rig Technologies totaled $2.89 billion, an increase of $17 million from the first quarter of 2023 and an increase of $54 million from the second quarter of 2022.
Corporate Information
NOV recorded a net credit of $7 million in Other Items, primarily related to gains on sales of previously reserved inventory (see Reconciliation of Adjusted EBITDA to Net Income) during the second quarter.
As of June 30, 2023, the Company had total debt of $1.73 billion, with $2.00 billion available on its primary revolving credit facility, and $592 million in cash and cash equivalents.
As previously disclosed, the Company is currently pursuing litigation against several companies involving royalties due under licenses for technology related to drill bits. During the second quarter of 2023, the Company accrued an incremental $10 million of accounts receivable owed by non-paying licensees, bringing the total amount accrued to $52 million.
Source: NOV press release
