Key Takeaways NOV shares have dropped 22% in a year, badly trailing its sub-industry and sector peers.Q2 2025 net income plunged 52% and gross margin fell to 20.4% amid rising costs and tariffs.New orders fell 57% with a book-to-bill ratio of 66%, pointing to future revenue softness.NOV Inc. (NOV) has grown into a global leader in oilfield equipment and technology with operations spanning 548 locations across six continents. NOV delivers integrated systems, drilling equipment and services that help reduce t ...

Key Takeaways NOV will provide its APL Submerged Swivel and Yoke system for Argentina's first offshore FLNG project.The SSY system enables secure mooring and gas transfer without jetty infrastructure, reducing costs and risks.This award marks NOV's first FLNG engagement in Argentina, reinforcing its global offshore LNG presence.NOV Inc. (NOV) , a Houston-based oil and gas equipment and services company, has secured a significant contract to supply its APL Submerged Swivel and Yoke (“SSY”) system for Argenti ...

Core Insights - NOV Inc. is a global leader in oilfield and energy equipment, known for innovation and reliability, but its share price has dropped 19.1% over the past six months, raising investor concerns [1][15] Financial Performance - In Q2 2025, NOV reported adjusted earnings of 29 cents per share, missing the Zacks Consensus Estimate of 30 cents, primarily due to margin pressures in the Energy Equipment segment [4] - The backlog in the Energy Equipment segment fell to $4.30 billion, with new orders dropping to $420 million in Q2, down from $977 million the previous year, indicating potential revenue growth challenges [12] Market Challenges - Aftermarket spare parts demand has sharply declined, particularly in the Drilling Equipment business, with a projected mid-teen decline in aftermarket revenues for the full year [5] - North America's oil-directed drilling market has softened, with a 9% decline in the U.S. rig count since March 2025, leading to reduced capital expenditures and further revenue dampening [6] - Delays in offshore projects due to supply-chain constraints and macroeconomic uncertainty are impacting near-term revenue visibility, reflected in a book-to-bill ratio of 66 for the Energy Equipment segment in Q2 [7] International Market Dynamics - International markets, including Saudi Arabia and Latin America, are experiencing slowdowns, with repositioning costs affecting results, although long-term potential remains [8] Operational Efficiency - NOV's working capital as a percentage of revenues was 30% in Q2 2025, with expectations to remain elevated at 27-29% for the full year, which may limit free cash flow conversion [10] - The company plans to cut $100 million in annual costs by the end of 2026, but rising tariffs and inflation may offset these savings [11] Competitive Landscape - Increasing price competition in the market is squeezing margins, particularly in the Energy Products and Services segment, as competitors use concessions to regain market share [13] - Despite returning $176 million to shareholders in Q2 2025 through dividends and buybacks, the sustainability of this capital return is uncertain due to declining profitability [14] Relative Performance - NOV has underperformed compared to peers and the broader oil and energy sector, with a 19.1% decline over the past six months, which is steeper than competitors like Oil States International and Solaris Energy Infrastructure [15]

Summary of Key Points from the Conference Call Transcript Industry Overview - The focus is on the Energy Services & Equipment sector in North America, with particular attention to companies like GTLS (Chart Industries), NBR (Nabors Industries), NOV (National Oilwell Varco), and TS (Tenaris) [1][2][6]. Core Insights and Arguments - **Earnings Estimates Revision**: The 2025 and 2026 EBITDA estimates for GTLS, NBR, NOV, and TS have been lowered by 2% and 4% respectively, indicating a cautious outlook for these companies [4][19]. - **M&A Activity**: Baker Hughes (BKR) is reportedly preparing a bid to acquire GTLS, which would value GTLS at approximately $210 per share, a 22% premium over its recent closing price of $171.65. This acquisition could significantly impact GTLS's market position [5][19]. - **Market Sentiment**: The near-term outlook for GTLS and TS is constructive due to their exposure to gas and non-oil & gas sectors, while NBR is viewed cautiously due to declining activity in North America and Saudi Arabia [9][19]. - **Performance Metrics**: NOV's 2Q results showed a revenue increase of 2%, but EBITDA decreased by 4%, leading to expectations of a modestly negative market reaction. The guidance for 3Q indicates a revenue increase of 1% but a further EBITDA decline of 2% [9][13]. Additional Important Insights - **Tariff Impacts**: The potential impacts of tariffs on the companies' operations and pricing strategies are a key focus area, especially given the current geopolitical climate [9]. - **Capital Allocation**: Companies are expected to discuss their capital allocation plans, including updates on 2025 capex and shareholder returns, which are critical for investor confidence [9][13]. - **Market Conditions**: The overall market conditions for oilfield services (OFS) are soft, particularly in the US land, Saudi Arabia, Mexico, and offshore deepwater markets, which could affect pricing and activity levels [9][19]. - **Stock Ratings and Price Targets**: The current stock ratings and price targets for the companies are as follows: - GTLS: Overweight, PT $225.00 - NOV: Overweight, PT $15.00 - NBR: Overweight, PT $50.00 - TS: Underweight, PT $34.00 [10][19]. Conclusion - The Energy Services & Equipment sector is facing a mix of challenges and opportunities, with M&A activity potentially reshaping the landscape. Companies are navigating soft market conditions while focusing on strategic capital allocation and managing tariff impacts. The upcoming earnings reports will be critical in assessing the health and outlook of these firms.

Core Insights - NOV Inc. reported second-quarter 2025 adjusted earnings of 29 cents per share, slightly missing the Zacks Consensus Estimate of 30 cents, and down from 57 cents in the same quarter last year, primarily due to margin pressures in the Energy Equipment segment [1][9] - Total revenues reached $2.2 billion, exceeding the Zacks Consensus Estimate by 1.9%, driven by strong performance in the Energy Equipment and Energy Products and Services segments, although revenues declined 1.3% year-over-year [2][9] Financial Performance - The Energy Products and Services segment generated revenues of $1.1 billion, surpassing predictions of $966 million but down 2.4% from the prior year due to reduced worldwide drilling operations [4] - Adjusted EBITDA for the quarter was $146 million, below the estimate of $150.5 million and down from $184 million in Q2 2024 [5] - The Energy Equipment segment reported revenues of $1.2 billion, a 0.2% year-over-year decrease, and adjusted EBITDA of $158 million, which increased from $142 million a year ago but missed the estimate of $171.2 million [5] Shareholder Returns - In Q2 2025, NOV repurchased approximately 5.5 million shares for $69 million and returned a total of $176 million to shareholders through dividends and stock buybacks [3][9] Order and Backlog Insights - The Energy Equipment segment secured $420 million in new orders, a significant decrease from $977 million in Q2 2024, with a book-to-bill ratio of 66 compared to 177 in the previous year [6] - As of June 30, 2025, the backlog for Energy Equipment capital orders stood at $4.3 billion, reflecting a $31 million decline from the previous year [7] Balance Sheet Overview - As of June 30, 2025, NOV had cash and cash equivalents of $1.1 billion and long-term debt of $1.7 billion, resulting in a debt-to-capitalization ratio of 20.5% [8] Strategic Developments - NOV secured multi-year contracts for digital services and automation for drilling rigs, and advanced offshore wind capabilities, enhancing operational efficiency and safety [11] - The company introduced innovative drilling technologies that set new performance records in major shale plays, demonstrating a commitment to innovation across energy sectors [12] Future Outlook - For Q3 2025, NOV anticipates a 1% to 3% decrease in consolidated revenues year-over-year, with adjusted EBITDA expected between $230 million and $250 million [13] - The company plans to return at least 50% of excess free cash flow to shareholders through dividends and stock repurchases [14] - NOV expects tariff costs to rise and anticipates a drop in drilling equipment aftermarket revenues by the mid-teens in 2025, while projecting an acceleration in offshore activity by 2026 [15][16][17]

Core Viewpoint - NOV reported revenues of $2.2 billion for the second quarter of 2025, indicating a significant performance metric for the company [4]. Group 1: Company Participants - The earnings call featured key company executives including Clay C. Williams (Chairman & CEO), Jose A. Bayardo (President & COO), and Rodney C. Reed (Senior VP & CFO) [1][3]. - Amie D'Ambrosio served as the Director of Investor Relations and led the conference call [2][3]. Group 2: Earnings Call Context - The earnings call was held to discuss NOV's financial performance for the second quarter of 2025, with a focus on forward-looking statements and potential risks [3][4]. - The company emphasized that actual results may differ from forward-looking statements due to inherent risks and uncertainties [3].

[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial information for NOV Inc., including financial statements, management's discussion, and market risk disclosures [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents NOV Inc.'s unaudited consolidated financial statements for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, income statements, comprehensive income, cash flows, and stockholders' equity, along with detailed notes explaining accounting policies, segment performance, revenue recognition, debt, and other financial instruments [Consolidated Balance Sheets](index=2&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Consolidated Balance Sheets (In millions) | ASSETS (In millions) | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------- | :------------------------ | :------------------ | | Cash and cash equivalents | $1,080 | $1,230 | | Receivables, net | $1,902 | $1,819 | | Inventories, net | $1,929 | $1,932 | | Total current assets | $5,781 | $5,770 | | Property, plant and equipment, net | $1,990 | $1,922 | | Goodwill | $1,623 | $1,630 | | Total assets | $11,363 | $11,361 | | LIABILITIES AND STOCKHOLDERS' EQUITY (In millions) | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :------------------ | | Accounts payable | $823 | $837 | | Accrued liabilities | $742 | $861 | | Total current liabilities | $2,239 | $2,347 | | Long-term debt | $1,690 | $1,703 | | Total liabilities | $4,805 | $4,933 | | Total stockholders' equity | $6,558 | $6,428 | | Total liabilities and stockholders' equity | $11,363 | $11,361 | [Consolidated Statements of Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income) This section details the company's financial performance over specific periods, presenting revenues, expenses, and net income Consolidated Statements of Income (In millions, except per share data) | (In millions, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $2,188 | $2,216 | $4,291 | $4,371 | | Gross profit | $446 | $590 | $893 | $1,048 | | Operating profit | $143 | $313 | $295 | $475 | | Net income attributable to Company | $108 | $226 | $181 | $345 | | Basic EPS | $0.29 | $0.57 | $0.48 | $0.88 | | Diluted EPS | $0.29 | $0.57 | $0.48 | $0.87 | | Cash dividends per share | $0.285 | $0.075 | $0.360 | $0.125 | - Net income attributable to Company decreased by **52.2%** for the three months ended June 30, 2025, compared to the same period in 2024, from **$226 million** to **$108 million**. For the six months ended June 30, 2025, it decreased by **47.5%** from **$345 million** to **$181 million**[11](index=11&type=chunk) - Cash dividends per share significantly increased for the three months ended June 30, 2025, to **$0.285** from **$0.075** in the prior year, and for the six months ended June 30, 2025, to **$0.360** from **$0.125**[11](index=11&type=chunk) [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the total comprehensive income, including net income and other comprehensive income items, for the reported periods Consolidated Statements of Comprehensive Income (In millions) | (In millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $114 | $223 | $188 | $344 | | Currency translation adjustments | $104 | $(31) | $193 | $(57) | | Comprehensive income | $230 | $194 | $402 | $288 | | Comprehensive income attributable to Company | $224 | $197 | $395 | $289 | - The Company reported a significant positive currency translation adjustment of **$104 million** for the three months ended June 30, 2025, a reversal from a **$(31) million** loss in the prior year. For the six-month period, this adjustment was **$193 million**, compared to a **$(57) million** loss in 2024[12](index=12&type=chunk) [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the cash inflows and outflows from operating, investing, and financing activities over specific periods Consolidated Statements of Cash Flows (In millions) | (In millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $326 | $354 | | Net cash used in investing activities | $(162) | $(226) | | Net cash used in financing activities | $(333) | $(113) | | Increase (decrease) in cash and cash equivalents | $(150) | $11 | | Cash and cash equivalents, end of period | $1,080 | $827 | - Net cash provided by operating activities decreased to **$326 million** for the six months ended June 30, 2025, from **$354 million** in the prior year. Net cash used in financing activities significantly increased to **$(333) million** from **$(113) million**, primarily due to higher cash dividends paid and share repurchases[15](index=15&type=chunk) [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in the company's equity accounts, including net income, dividends, and share repurchases, over time Consolidated Statements of Stockholders' Equity (In millions) | (In millions) | Balance at December 31, 2024 | Balance at June 30, 2025 | | :-------------------------- | :--------------------------- | :----------------------- | | Total Company stockholders' equity | $6,376 | $6,504 | | Total Stockholders' Equity | $6,428 | $6,558 | **Key Changes (December 31, 2024 to June 30, 2025):** * Net income attributable to Company: $181 million (sum of $73M and $108M for Q1 and Q2 2025, respectively) * Other comprehensive income: $214 million (sum of $98M and $116M for Q1 and Q2 2025, respectively) * Cash dividends paid: $(135) million (sum of $(28)M and $(107)M for Q1 and Q2 2025, respectively) * Share repurchases: $(150) million (sum of $(81)M and $(69)M for Q1 and Q2 2025, respectively) [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements, clarifying accounting policies and significant transactions [1. Basis of Presentation](index=7&type=section&id=1.%20Basis%20of%20Presentation) This note describes the accounting principles and assumptions used in preparing the interim financial statements - The financial statements are unaudited and prepared in accordance with GAAP for interim financial information, not including all footnotes required for complete annual statements. Management's estimates and assumptions are used, and actual results may differ[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk) [2. Inventories, net](index=7&type=section&id=2.%20Inventories%2C%20net) This note provides a breakdown of the company's inventory components and related reserves Inventories, net (In millions) | (In millions) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Raw materials and supplies | $450 | $394 | | Work in process | $216 | $181 | | Finished goods and purchased products | $1,541 | $1,643 | | Less: Inventory reserve | $(278) | $(286) | | Total | $1,929 | $1,932 | [3. Accrued Liabilities](index=7&type=section&id=3.%20Accrued%20Liabilities) This note details the various components of accrued liabilities, including compensation, vendor costs, and taxes Accrued Liabilities (In millions) | (In millions) | June 30, 2025 | December 31, 2024 | | :-------------- | :-------------- | :---------------- | | Compensation | $216 | $268 | | Vendor costs | $148 | $141 | | Taxes (non-income) | $100 | $119 | | Warranties | $71 | $68 | | Fair value of derivatives | $6 | $24 | | Other | $132 | $171 | | Total | $742 | $861 | [4. Accumulated Other Comprehensive Loss](index=8&type=section&id=4.%20Accumulated%20Other%20Comprehensive%20Loss) This note explains the changes in accumulated other comprehensive loss, primarily driven by currency translation adjustments Accumulated Other Comprehensive Loss (In millions) | (In millions) | Currency Translation Adjustments | Derivative Financial Instruments, Net of Tax | Employee Benefit Plans, Net of Tax | Total | | :------------------------------------------ | :------------------------------- | :----------------------------------------- | :------------------------------- | :---- | | Balance at December 31, 2024 | $(1,569) | $(10) | $(46) | $(1,625) | | Balance at June 30, 2025 | $(1,376) | $10 | $(45) | $(1,411) | - Accumulated other comprehensive loss improved from **$(1,625) million** at December 31, 2024, to **$(1,411) million** at June 30, 2025, primarily driven by positive currency translation adjustments[24](index=24&type=chunk) [5. Segments](index=8&type=section&id=5.%20Segments) This note provides financial information by reportable segment, detailing revenue, operating profit, and capital expenditures - NOV Inc. operates under two reportable segments: Energy Products and Services, and Energy Equipment. These segments are defined by product/service, customer base, and operating environment, with results regularly reviewed by the CEO for resource allocation and performance assessment[26](index=26&type=chunk) Segment Performance (In millions) | (In millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Revenue from external customers:** | | | | | | Energy Products and Services | $998 | $1,027 | $1,969 | $2,020 | | Energy Equipment | $1,190 | $1,189 | $2,322 | $2,351 | | **Operating profit:** | | | | | | Energy Products and Services | $83 | $128 | $166 | $249 | | Energy Equipment | $122 | $232 | $256 | $327 | | Eliminations and corporate costs | $(62) | $(47) | $(127) | $(101) | | **Capital expenditures:** | | | | | | Energy Products and Services | $48 | $68 | $97 | $124 | | Energy Equipment | $33 | $11 | $66 | $21 | [6. Revenue](index=10&type=section&id=6.%20Revenue) This note details revenue recognition policies, disaggregates revenue by destination and stream, and discusses remaining performance obligations and credit losses Revenue by Destination (Three Months Ended June 30, In millions) | (In millions) | 2025 | 2024 | | :------------ | :--- | :--- | | North America | $841 | $835 | | International | $1,347 | $1,381 | | Total | $2,188 | $2,216 | Revenue by Stream (Three Months Ended June 30, In millions) | (In millions) | 2025 | 2024 | | :-------------------------- | :--- | :--- | | **Energy Products and Services:** | | | | Services & rental | $501 | $498 | | Capital equipment | $335 | $326 | | Product sales | $162 | $203 | | **Energy Equipment:** | | | | Capital equipment | $733 | $641 | | Aftermarket | $457 | $548 | | Total consolidated | $2,188 | $2,216 | - Remaining performance obligations totaled **$4,675 million** as of June 30, 2025, with approximately **$1,043 million** expected to be recognized in the remainder of 2025[35](index=35&type=chunk) - Royalty revenue from drill bit licenses was **$19 million** for Q2 2025, up from **$17 million** in Q2 2024. The Company is pursuing litigation against non-paying licensees, with receivables recorded at a discount due to delayed collections[37](index=37&type=chunk) Allowance for Credit Losses (In millions) | Item | Amount | | :-------------------------- | :----- | | Balance at December 31, 2024 | $67 | | Provision for expected credit losses | $33 | | Recoveries collected | $(8) | | Write-offs | $(3) | | Balance at June 30, 2025 | $68 | [7. Leases](index=13&type=section&id=7.%20Leases) This note provides information on the company's lease liabilities, distinguishing between current and long-term portions Lease Liabilities (In millions) | (In millions) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Current portion of lease liabilities | $103 | $102 | | Long-term portion of lease liabilities | $540 | $544 | [8. Debt](index=13&type=section&id=8.%20Debt) This note details the company's debt structure, including senior notes, revolving credit facilities, and joint venture borrowings Debt Structure (In millions) | (In millions) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | $1.1 billion Senior Notes (3.95%, due 2042) | $1,091 | $1,091 | | $0.5 billion Senior Notes (3.60%, due 2029) | $497 | $496 | | Other debt | $140 | $153 | | Total debt | $1,728 | $1,740 | | Less current portion | $38 | $37 | | Long-term debt | $1,690 | $1,703 | - The Company has a **$1.5 billion** revolving credit facility with no outstanding borrowings or letters of credit as of June 30, 2025, maintaining a debt-to-capitalization ratio of **23.4%**, well below the **60%** covenant[42](index=42&type=chunk) - A consolidated joint venture has **$89 million** in borrowings from a **$150 million** bank line of credit for a facility in Saudi Arabia, with **$11 million** due in the next twelve months[43](index=43&type=chunk) Fair Value vs. Carrying Value of Unsecured Senior Notes (In millions) | Date | Fair Value | Carrying Value | | :---------------- | :----------- | :------------- | | June 30, 2025 | $1,308 | $1,588 | | December 31, 2024 | $1,285 | $1,587 | [9. Income Taxes](index=15&type=section&id=9.%20Income%20Taxes) This note provides details on the company's effective tax rate and the impact of significant tax adjustments Effective Tax Rate | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three months ended June 30 | 0.9% | 23.9% | | Six months ended June 30 | 20.3% | 24.9% | - The effective tax rate for the six months ended June 30, 2025, was positively impacted by a **$58 million** release of reserves for uncertain tax positions, partially offset by other adjustments[46](index=46&type=chunk) [10. Stock-Based Compensation](index=15&type=section&id=10.%20Stock-Based%20Compensation) This note outlines the company's stock-based compensation plan, including shares available for grants and total expense recognized - The NOV Inc. Long-Term Incentive Plan has **17.1 million** shares available for future grants as of June 30, 2025. Total stock-based compensation expense was **$17 million** for Q2 2025 and **$33 million** for the six months ended June 30, 2025[47](index=47&type=chunk)[48](index=48&type=chunk) [11. Derivative Financial Instruments](index=15&type=section&id=11.%20Derivative%20Financial%20Instruments) This note describes the company's use of derivative instruments to manage foreign currency exchange rate risks - The Company uses forward currency contracts to manage foreign currency exchange rate risk for forecasted revenues/expenses (cash flow hedges) and nonfunctional currency monetary accounts (non-designated hedges)[50](index=50&type=chunk)[53](index=53&type=chunk)[55](index=55&type=chunk) Fair Values of Derivative Instruments (In millions) | Type | Balance Sheet Location | June 30, 2025 | December 31, 2024 | | :-------------------------- | :--------------------- | :-------------- | :---------------- | | Designated as hedging (Assets) | Prepaid and other current assets | $13 | $1 | | Designated as hedging (Liabilities) | Accrued liabilities | $1 | $13 | | Non-designated (Assets) | Prepaid and other current assets | $6 | $4 | | Non-designated (Liabilities) | Accrued liabilities | $5 | $11 | | Total Assets | | $19 | $5 | | Total Liabilities | | $7 | $26 | [12. Net Income Attributable to Company Per Share](index=18&type=section&id=12.%20Net%20Income%20Attributable%20to%20Company%20Per%20Share) This note presents basic and diluted earnings per share calculations and discusses anti-dilutive stock options Net Income Attributable to Company Per Share | Period | Basic EPS (2025) | Basic EPS (2024) | Diluted EPS (2025) | Diluted EPS (2024) | | :-------------------------- | :--------------- | :--------------- | :----------------- | :----------------- | | Three months ended June 30 | $0.29 | $0.57 | $0.29 | $0.57 | | Six months ended June 30 | $0.48 | $0.88 | $0.48 | $0.87 | - The Company had **19 million** anti-dilutive stock options outstanding for the three months ended June 30, 2025, compared to **16 million** in the prior year[58](index=58&type=chunk) [13. Cash Dividends](index=18&type=section&id=13.%20Cash%20Dividends) This note provides details on the cash dividends declared and paid by the company during the reporting periods Cash Dividends Paid (In millions) | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three months ended June 30 | $107 | $30 | | Six months ended June 30 | $135 | $50 | - Cash dividends paid increased significantly, from **$30 million** to **$107 million** for the three months ended June 30, 2025, and from **$50 million** to **$135 million** for the six months ended June 30, 2025[59](index=59&type=chunk) [14. Share Repurchase Program](index=18&type=section&id=14.%20Share%20Repurchase%20Program) This note describes the company's share repurchase program and the volume and value of shares repurchased - The Company established a **$1 billion** share repurchase program on April 25, 2024, over 36 months. During the three months ended June 30, 2025, **5.5 million** shares were repurchased for **$69 million**, and **10.9 million** shares for **$150 million** during the six months ended June 30, 2025[60](index=60&type=chunk)[61](index=61&type=chunk) [15. Commitments and Contingencies](index=19&type=section&id=15.%20Commitments%20and%20Contingencies) This note discloses the company's involvement in legal actions, regulatory matters, and the potential impact of geopolitical events - The Company is involved in various claims, regulatory audits, investigations, and legal actions, including intellectual property disputes related to drill bit technology licenses. Several licensees have unilaterally stopped royalty payments, leading to ongoing litigation[63](index=63&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) - The Company maintains insurance for material risks and has recorded reserves for probable contingent liabilities, including reclamation costs and product liability claims. While outcomes are uncertain, management believes ultimate liabilities should not materially affect financial position, cash flows, or results of operations[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - Geopolitical events, such as the conflict in Ukraine and related sanctions, have led to the deconsolidation of Russian subsidiaries in Q1 2025 and pose ongoing supply chain, labor, and trade regulation risks[70](index=70&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on NOV Inc.'s financial performance, including an executive summary, detailed segment results, an overview of the operating environment, and an analysis of liquidity and capital resources. It also includes reconciliations of non-GAAP financial measures [Introduction](index=22&type=section&id=Introduction) This introduction provides an overview of NOV Inc.'s role as a leading equipment and technology provider to the global energy industry - NOV is a leading independent equipment and technology provider to the global energy industry, with over **160 years** of experience in oil and gas development and a growing focus on alternate energy sources[76](index=76&type=chunk) - The Company's technology portfolio supports drilling, completion, and production needs, emphasizing digital solutions like automation and predictive analytics. It serves customers in **57 countries** through two segments: Energy Products and Services, and Energy Equipment[77](index=77&type=chunk)[78](index=78&type=chunk) [Energy Products and Services (Segment Description)](index=22&type=section&id=Energy%20Products%20and%20Services%20(Segment%20Description)) This section describes the Energy Products and Services segment's offerings, including products for drilling, intervention, completion, and production, and its market drivers - This segment designs, manufactures, rents, and sells products for drilling, intervention, completion, and production, including drill bits, downhole tools, and composite pipe. It also provides services, software, and digital solutions for operational performance[80](index=80&type=chunk)[81](index=81&type=chunk) - Demand for this segment's offerings is primarily driven by oilfield drilling activity and industrial activity, infrastructure spend, and population growth for composite solutions outside oil and gas[82](index=82&type=chunk) [Energy Equipment (Segment Description)](index=22&type=section&id=Energy%20Equipment%20(Segment%20Description)) This section describes the Energy Equipment segment's focus on manufacturing and supporting capital equipment for oil and gas, marine, industrial, and renewable energy markets - This segment manufactures and supports capital equipment and integrated systems for oil and gas exploration and production (onshore/offshore), marine-based, industrial, and renewable energy markets[83](index=83&type=chunk)[84](index=84&type=chunk) - Demand is primarily dependent on capital spending by drilling contractors, service companies, and oil and gas companies, and secondarily on overall oilfield activity. The segment also serves marine, industrial, and energy transition markets[85](index=85&type=chunk)[86](index=86&type=chunk) [Critical Accounting Policies and Estimates](index=23&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights key accounting policies and estimates that require significant management judgment and assumptions - Key critical accounting policies and estimates include revenue recognition under long-term construction contracts, impairment of goodwill and other indefinite-lived intangible assets, and income taxes. These involve significant management judgment and assumptions[87](index=87&type=chunk) [Executive Summary](index=23&type=section&id=Executive%20Summary) This section provides a high-level overview of the company's financial performance, segment results, and the prevailing macroeconomic environment Q2 2025 Financial Highlights (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------- | :------ | :------ | :--------- | | Revenue | $2.19B | $2.22B | -1% | | Net income | $108M | $226M | -52% | | EPS | $0.29 | $0.57 | -49% | | Operating profit | $143M | $313M | -54% | | Adjusted EBITDA | $252M | $281M | -10% | - The decline in net income and operating profit was primarily due to a pre-tax gain of approximately **$130 million** on a business sale in Q2 2024. The Company recorded **$19 million** in 'Other Items' in Q2 2025, mainly for severance and restructuring[88](index=88&type=chunk) Segment Performance and Energy Equipment Backlog (Q2 2025 vs. Q2 2024) | Segment | Revenue (Q2 2025) | Revenue Change (%) | Operating Profit (Q2 2025) | Operating Profit Change ($M) | Adjusted EBITDA (Q2 2025) | Adjusted EBITDA Change ($M) | | :-------------------------- | :------------------ | :----------------- | :------------------------- | :--------------------------- | :------------------------ | :-------------------------- | | Energy Products and Services | $1.03B | -2% | $83M | -$45 | $146M | -$38 | | Energy Equipment | $1.21B | Flat | $122M | -$110 | $158M | +$16 | **Energy Equipment Backlog:** * New orders booked: $420M (Q2 2025) vs. $977M (Q2 2024) * Orders shipped from backlog: $632M (Q2 2025) vs. $553M (Q2 2024) * Book-to-bill: 66% (Q2 2025) vs. 177% (Q2 2024) * Backlog as of June 30, 2025: $4.30B (down $31M YoY) - Macroeconomic uncertainties, geopolitical conflicts, and changing trade policies are creating a difficult capital investment environment, with lower oil prices and increased market volatility. However, management expects continued growth in offshore/international resources, natural gas, and emerging technologies[92](index=92&type=chunk)[93](index=93&type=chunk) [Operating Environment Overview](index=25&type=section&id=Operating%20Environment%20Overview) This section provides an overview of key industry indicators, including drilling rig counts and commodity prices, influencing the company's operations Key Industry Indicators | Indicator | Q2 2025 | Q2 2024 | Q1 2025 | % Change (2Q25 vs 2Q24) | % Change (2Q25 vs 1Q25) | | :-------------------------- | :------ | :------ | :------ | :---------------------- | :---------------------- | | Active Drilling Rigs (Worldwide) | 1,597 | 1,695 | 1,708 | (5.8%) | (6.5%) | | WTI Crude Prices (per barrel) | $64.63 | $81.71 | $71.84 | (20.9%) | (10.0%) | | Natural Gas Prices ($/mmbtu) | $3.19 | $2.08 | $4.15 | 53.4% | (23.1%) | - Worldwide quarterly average rig count decreased **6%** in Q2 2025 compared to Q1 2025. WTI crude prices decreased **10%** and natural gas prices decreased **23%** QoQ[100](index=100&type=chunk) - As of July 25, 2025, North American active rigs increased to **724** from the Q2 average of **700**. WTI crude price was **$65.16/barrel** (up **1%** from Q2 average) and natural gas was **$3.16/mmbtu** (down **1%** from Q2 average)[101](index=101&type=chunk) [Results of Operations (Detailed)](index=27&type=section&id=Results%20of%20Operations%20(Detailed)) This section provides a detailed analysis of the company's financial results, breaking down revenue and operating profit by segment and discussing key drivers Revenue and Operating Profit by Segment (In millions) | Segment | Q2 2025 Revenue | Q2 2024 Revenue | Q2 2025 Operating Profit | Q2 2024 Operating Profit | | :-------------------------- | :-------------- | :-------------- | :----------------------- | :----------------------- | | Energy Products and Services | $1,025 | $1,050 | $83 | $128 | | Energy Equipment | $1,207 | $1,204 | $122 | $232 | | Eliminations and corporate costs | $(44) | $(38) | $(62) | $(47) | | Total | $2,188 | $2,216 | $143 | $313 | - Energy Products and Services revenue decreased **2%** YoY in Q2 2025 due to lower global drilling activity impacting consumable products, partially offset by higher capital equipment sales. Operating profit decreased by **$45 million** due to unfavorable sales mix, tariffs, inflationary pressures, and Latin America charges[104](index=104&type=chunk)[105](index=105&type=chunk) - Energy Equipment revenue was flat YoY in Q2 2025, with a **14%** increase from backlog offsetting a **17%** decline in aftermarket sales. Operating profit decreased by **$110 million**, primarily due to a **$130 million** pre-tax gain on a business sale in Q2 2024. Excluding this, profitability improved from strong execution on higher-margin backlog[106](index=106&type=chunk)[107](index=107&type=chunk) - Energy Equipment's capital equipment backlog was **$4.30 billion** at June 30, 2025, with approximately **27%** expected to become revenue in the remainder of 2025. **52%** of the backlog is for offshore products and **92%** for international markets[108](index=108&type=chunk) - Corporate costs increased **35%** in Q2 2025 due to higher legal costs, self-insured property losses, and corporate reserves. For the six months, corporate costs rose **31%** due to these factors and a **$5 million** charge from deconsolidating Russian subsidiaries[111](index=111&type=chunk) - Equity income in unconsolidated affiliates decreased significantly to **$1 million** for Q2 and six months ended June 30, 2025, from **$8 million** and **$37 million** respectively in 2024, due to pricing pressures, lower volume for oil country tubular goods, and higher costs[114](index=114&type=chunk) - Other expense, net increased to **$17 million** for Q2 2025 and **$37 million** for the six months, primarily due to larger foreign currency fluctuations, particularly the devaluation of the U.S. Dollar[115](index=115&type=chunk) - The effective tax rate for the six months ended June 30, 2025, was **20.3%**, positively impacted by a **$58 million** release of uncertain tax position reserves. The recently enacted One Big Beautiful Bill Act (OBBBA) in the U.S. is being evaluated for its future impact[116](index=116&type=chunk)[117](index=117&type=chunk) [Non-GAAP Financial Measures and Reconciliations](index=29&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section defines and reconciles non-GAAP financial measures, such as Adjusted EBITDA and Excess Free Cash Flow, to their most comparable GAAP measures - Adjusted EBITDA is defined as operating profit excluding depreciation, amortization, gains/losses on sales of fixed assets, and 'Other Items'. It is used by management and investors to evaluate operational performance and trends[119](index=119&type=chunk) - Excess Free Cash Flow is defined as cash flows from operations less capital expenditures and other investments, including acquisitions and divestitures[120](index=120&type=chunk) Adjusted EBITDA Reconciliation (In millions) and Adjusted EBITDA % | Item | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | :------ | :------ | | GAAP net income attributable to Company | $108 | $226 | $181 | $345 | | Provision for income taxes | $1 | $70 | $48 | $114 | | Interest and financial costs | $22 | $22 | $44 | $46 | | Interest income | $(10) | $(8) | $(21) | $(16) | | Equity income in unconsolidated affiliates | $(1) | $(8) | $(1) | $(37) | | Other expense, net | $17 | $14 | $37 | $24 | | (Gain) loss on sales of fixed assets | $3 | $0 | $1 | $(1) | | Depreciation and amortization | $87 | $86 | $176 | $169 | | Other items, net | $19 | $(118) | $32 | $(121) | | **Total Adjusted EBITDA** | **$252** | **$281** | **$504** | **$522** | **Adjusted EBITDA %:** | Segment | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------------- | :------ | :------ | :------ | :------ | | Energy Products and Services | 14.2% | 17.5% | 14.4% | 17.3% | | Energy Equipment | 13.1% | 11.8% | 13.7% | 11.0% | | Total Adjusted EBITDA % | 11.5% | 12.7% | 11.7% | 11.9% | [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's ability to generate and manage cash, including cash balances, debt, and cash flow activities Cash and Debt (In millions) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $1,080 | $1,230 | | Total debt | $1,728 | $1,740 | | Foreign cash held by subsidiaries | $594 | N/A | | Revolving credit facility (available) | $1,500 | N/A | | Debt-to-capitalization ratio | 23.4% | N/A | - The Company has **$1.5 billion** available under its revolving credit facility and was in compliance with all debt covenants as of June 30, 2025. Approximately **$594 million** of cash is held by foreign subsidiaries, potentially subject to foreign withholding and U.S. taxation upon repatriation[123](index=123&type=chunk)[124](index=124&type=chunk) Cash Flow Summary (Six Months Ended June 30, In millions) and Significant Uses of Cash | Activity | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Net cash provided by operating activities | $326 | $354 | | Net cash used in investing activities | $(162) | $(226) | | Net cash used in financing activities | $(333) | $(113) | **Significant Uses of Cash (6M 2025):** * Capital expenditures: $167 million * Dividend payments: $135 million * Share repurchases: $150 million - The Company expects to return at least **50%** of Excess Free Cash Flow to shareholders through quarterly base dividends, opportunistic stock buybacks, and an annual supplemental dividend[130](index=130&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=32&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section warns that forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially - This section warns that forward-looking statements involve risks and uncertainties, and actual results may differ materially due to factors such as changes in oil/gas prices, customer demand, intellectual property, compliance, and worldwide economic activity, including Russian sanctions and U.S. trade policies[132](index=132&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details NOV Inc.'s exposure to market risks, specifically foreign currency exchange rates and interest rates, and the strategies employed to manage these risks [Foreign Currency Exchange Rates](index=33&type=section&id=Foreign%20Currency%20Exchange%20Rates) This section discusses the company's exposure to foreign currency exchange rate fluctuations and its hedging strategies - The Company has extensive foreign operations, with net assets and liabilities exposed to foreign currency exchange rate changes. A foreign exchange loss of **$31 million** was recorded in the first six months of 2025, compared to **$17 million** in the prior year[134](index=134&type=chunk) - To mitigate risk, the Company uses foreign currency forward contracts to match the currency of revenues and associated costs, not for speculative purposes[135](index=135&type=chunk) - A hypothetical **10%** movement in foreign currency exchange rates could affect net income by **$43 million** (transactional exposures) and Other Comprehensive Income by **$32 million** (translational exposures)[136](index=136&type=chunk) [Interest Rate Risk](index=33&type=section&id=Interest%20Rate%20Risk) This section describes the company's exposure to interest rate fluctuations on its debt and its approach to managing this risk - As of June 30, 2025, borrowings included **$1,091 million** in **3.95%** Senior Notes and **$497 million** in **3.60%** Senior Notes. The Company aims to maintain a portion of debt in variable rates for flexibility and lower cost[138](index=138&type=chunk) - The Company's joint venture has **$89 million** outstanding under a bank line of credit with interest based on SOFR plus **1.40%**[138](index=138&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the last fiscal quarter - The Company's CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[139](index=139&type=chunk) - There have been no material changes in internal control over financial reporting during the last fiscal quarter[140](index=140&type=chunk) [PART II - OTHER INFORMATION](index=34&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including risk factors, equity purchases, and exhibit details [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors previously disclosed in the Company's 2024 Annual Report on Form 10-K, indicating that these risks continue to be relevant - The Company's operations remain subject to the risk factors previously disclosed in its 2024 Annual Report on Form 10-K[142](index=142&type=chunk) [Item 2. Purchases of Equity Securities by the Issuer and Affiliated Purchasers](index=34&type=section&id=Item%202.%20Purchases%20of%20Equity%20Securities%20by%20the%20Issuer%20and%20Affiliated%20Purchasers) This section details the Company's share repurchase activities during the second quarter of 2025 under its publicly announced program Share Repurchases (April 1 - June 30, 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value Remaining Under Program | | :-------------------------- | :--------------------- | :--------------------------- | :----------------------------------------------- | | April 1 through April 30, 2025 | 2,342,118 | $12.65 | $660,432,440 | | May 1 through May 31, 2025 | 1,332,472 | $12.50 | $643,789,329 | | June 1 through June 30, 2025 | 1,759,922 | $13.12 | $620,696,132 | | Total | 5,434,512 | $12.77 | N/A | - The Company repurchased **5,434,512** shares for an aggregate of approximately **$69.4 million** during the second quarter of 2025, as part of its **$1 billion** share repurchase program established on April 25, 2024[143](index=143&type=chunk) [Item 4. Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that information regarding mine safety and other regulatory actions is provided in Exhibit 95 - Mine safety information is included in Exhibit 95 to this Form 10-Q[144](index=144&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section refers to the Exhibit Index for a list of all exhibits filed with the Form 10-Q - The Exhibit Index, commencing on page 33, lists all exhibits[145](index=145&type=chunk) [INDEX TO EXHIBITS](index=35&type=section&id=INDEX%20TO%20EXHIBITS) This index provides a comprehensive list of all documents and certifications filed as exhibits to the Form 10-Q, including corporate governance documents, incentive plans, and regulatory certifications - The index lists various exhibits, including the Seventh Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, NOV Inc. Long-Term Incentive Plan, and certifications pursuant to the Securities and Exchange Act and Sarbanes-Oxley Act[151](index=151&type=chunk) [SIGNATURE](index=36&type=section&id=SIGNATURE) This section contains the signature of the duly authorized officer, Christy H. Novak, Vice President, Corporate Controller & Chief Accounting Officer, certifying the filing of the report - The report was signed on July 29, 2025, by Christy H. Novak, Vice President, Corporate Controller & Chief Accounting Officer[154](index=154&type=chunk)

Financial Data and Key Metrics Changes - For the second quarter of 2025, the company reported revenues of $2.2 billion, a 4% increase sequentially but a 1% decrease year-over-year [5][14] - Adjusted EBITDA was $252 million, representing 11.5% of sales, with margins pressured by a less favorable sales mix and inflationary cost headwinds [6][14] - Free cash flow generated during the quarter was $108 million, converting 83% of EBITDA to free cash flow over the last twelve months [15] Business Line Data and Key Metrics Changes - The Energy Products and Services segment generated revenue of $1.03 billion, a 2% decrease compared to 2024, with adjusted EBITDA declining to $146 million or 14.2% of sales [17][18] - The Energy Equipment segment's revenue was $1.21 billion, nearly unchanged from 2024, but EBITDA increased by $16 million to $158 million, resulting in a 130 basis point increase in EBITDA margins to 13.1% [22][24] - Capital equipment sales accounted for approximately 62% of the Energy Equipment segment's revenue mix, up nearly eight percentage points year-over-year [24] Market Data and Key Metrics Changes - Global drilling activity declined by 6% sequentially, with North American oil-directed rig counts down approximately 9% since March [8][9] - The company expects North American shale activity to drift modestly lower through year-end, while Saudi conventional drilling may not reaccelerate before 2026 [11] - The offshore drilling contractor customers expect utilization challenges to ease in 2026, with a forecast for year-over-year consolidated revenue to decline between 1% to 3% in Q3 [12][11] Company Strategy and Development Direction - The company is focused on three long-term trends: offshore production supplanting U.S. unconventional resources, accelerating demand for natural gas, and applying modern technologies for operational efficiencies [32] - Cost reduction initiatives are expected to remove over $100 million in annual costs by 2026, despite headwinds from tariffs and inflation [17][45] - The company is consolidating operations and exiting unprofitable product lines to improve margins and return on capital [48][49] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic uncertainty and geopolitical factors have made customers more cautious, impacting short-cycle activity [9][10] - Despite near-term challenges, management remains optimistic about the future, particularly regarding offshore activity and the demand for LNG and unconventional gas [12][32] - The company anticipates a meaningful recovery beginning in 2026, driven by increased offshore activity and demand for spare parts and upgrades [36][41] Other Important Information - The company repurchased 10.9 million shares for $150 million and paid a quarterly base dividend of $0.75 per share, totaling $135 million in dividends year-to-date [15] - Tariff expenses for the second quarter were approximately $11 million, with expectations for increases in the following quarters due to changing trade policies [16][44] Q&A Session Summary Question: Margin outlook and potential recovery - Management acknowledged frustration with margin declines but expressed optimism about cost reduction plans and a recovery in 2026 as offshore activity increases [52][54] Question: Indicators for market recovery - Management indicated that increased contracts and activity in offshore drilling would signal a market recovery, with expectations for improved demand in 2026 [66][68] Question: Working capital and CapEx outlook - Management projected working capital as a percentage of revenue to be in the range of 27% to 29%, with CapEx expected to remain consistent with the previous year [70] Question: Market preparation and cost reduction initiatives - Management is preparing for a larger market and continuing cost reduction efforts, emphasizing the importance of efficiency and strategic sourcing [75][80]

Financial Data and Key Metrics Changes - For Q2 2025, NOV reported revenues of $2.2 billion, a 4% increase sequentially but a 1% decrease year-over-year. Net income was $108 million, or $0.29 per fully diluted share [4][5] - Adjusted EBITDA for the quarter was $252 million, representing 11.5% of sales, with margins pressured by a less favorable sales mix and inflationary cost headwinds [12][14] - Free cash flow generated during the quarter was $108 million, resulting in an 83% conversion of EBITDA to free cash flow over the last twelve months [13] Business Line Data and Key Metrics Changes - The Energy Products and Services segment generated revenue of $1.03 billion, a 2% decrease year-over-year, while adjusted EBITDA declined to $146 million, or 14.2% of sales [16][22] - The Energy Equipment segment's revenue was $1.21 billion, nearly unchanged from the previous year, but EBITDA increased by $16 million to $158 million, resulting in a 130 basis point increase in EBITDA margins to 13.1% [22][23] - Capital equipment sales accounted for approximately 62% of the Energy Equipment segment's revenue mix, driven by production and drilling equipment [23] Market Data and Key Metrics Changes - Global drilling activity declined by 6% sequentially, with North American shale activity expected to drift lower through year-end [6][9] - In North America, exploration and production companies curtailed short-cycle activity, leading to a 9% decline in the U.S. oil-directed rig count since March [7] - The company expects a decline in revenues from the Energy Products and Services segment of 1% to 3% in Q3 compared to the previous year [29] Company Strategy and Development Direction - The company is focused on three long-term trends: offshore production supplanting U.S. unconventional resources, accelerating demand for natural gas, and the application of modern technologies to drive efficiencies [30] - NOV is implementing cost reduction initiatives expected to remove over $100 million in annual costs by 2026, despite headwinds from tariffs and inflation [15][44] - The company is optimistic about the future, anticipating a recovery in offshore drilling activity beginning in 2026 [34][57] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic uncertainty and geopolitical factors have made customers more cautious, impacting short-cycle activity and leading to a decline in rig counts [7][9] - Despite current challenges, management remains confident in the long-term outlook, particularly for offshore activity and LNG investments [10][32] - The company expects to see a slight rebound in aftermarket business in the latter half of the year, driven by a recovery in offshore drilling contractor confidence [33][34] Other Important Information - The company repurchased 10.9 million shares for $150 million during the year, returning over $1.2 billion in free cash flow to shareholders over the last five quarters [13] - Tariff expenses for Q2 were approximately $11 million, with expectations for increases in the following quarters due to rising tariff rates [14][43] - The company is consolidating operations and exiting unprofitable product lines to improve efficiency and margins [45][46] Q&A Session Summary Question: Margin outlook and potential recovery - Management acknowledged margin pressures but expressed optimism about recovery in 2026 as offshore activity increases [50][56] Question: Macro indicators for market recovery - Management indicated that increased contracts and activity in offshore drilling would signal a market turnaround [63] Question: Cash generation and working capital outlook - The company reported strong free cash flow conversion and expects working capital as a percentage of revenue to improve in the second half of the year [66] Question: Market preparation and cost reduction initiatives - Management is preparing for a larger market and continuing cost reduction efforts, emphasizing the importance of efficiency [72][76]

Financial Performance - Q2 2025 - NOV's consolidated revenue for Q2 2025 was $2.2 billion, a 1% decrease year-on-year but a 4% increase sequentially [11] - Energy Products and Services revenue was $1.025 billion, a 2% decrease year-on-year but a 3% increase sequentially [15] - Energy Equipment revenue was $1.207 billion, flat year-on-year but a 5% increase sequentially [19] - NOV's consolidated Adjusted EBITDA was $252 million [28] representing 11.5% of revenue [11] - Energy Products and Services Adjusted EBITDA was $146 million, representing 14.2% of revenue [15] - Energy Equipment Adjusted EBITDA was $158 million, representing 13.1% of revenue [19] Backlog and Orders - Energy Equipment ending backlog was $4.3 billion, a 1% decrease year-on-year and a 3% decrease sequentially [19] - Energy Equipment net orders were $420 million, a 57% decrease year-on-year and a 4% decrease sequentially [19] - Energy Equipment book-to-bill ratio was 66% [19] Capital Allocation and Returns - $536 million was returned to shareholders in the last twelve months [22] - Capital expenditures for Q2 2025 year-to-date were $167 million [24] Outlook - Q3 2025 - NOV expects a year-over-year revenue decrease of 1% to 3% [26] and Adjusted EBITDA between $230 million and $250 million [26]