NOV(NOV) - 2022 Q4 - Annual Report

Form 10-K Filing Information This section provides the basic identification details for NOV Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, including its incorporation state, address, contact number, and stock exchange listing Registrant Information This section provides the basic identification details for NOV Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, including its incorporation state, address, contact number, and stock exchange listing - NOV Inc. filed its Annual Report on Form 10-K for the year ended December 31, 2022[1] - The registrant is a well-known seasoned issuer and a large accelerated filer, indicating its significant market capitalization and compliance history with SEC filing requirements[2] Registrant Information | Detail | Value | | :--- | :--- | | Registrant Name | NOV Inc. | | State of Incorporation | Delaware | | Principal Executive Offices | 10353 Richmond Avenue, Houston, Texas 77042-4103 | | Telephone Number | (346) 223-3000 | | Trading Symbol | NOV | | Exchange | New York Stock Exchange | ITEM 1. BUSINESS NOV Inc. is a global energy technology and equipment provider, with a 161-year history in oil and gas, expanding into sustainable energy solutions across three segments: Wellbore Technologies, Completion & Production Solutions, and Rig Technologies General Business Overview NOV Inc. is a leading independent equipment and technology provider to the global energy industry, with a 161-year history in oil and gas field development and a growing focus on sustainable energy transition. The company operates in 62 countries across three segments: Wellbore Technologies, Completion & Production Solutions, and Rig Technologies - NOV Inc. is a leading independent equipment and technology provider to the global energy industry, with a history dating back to 1862[3] - The company supports full-field drilling, completion, and production needs with proprietary technology, focusing on automation, predictive analytics, and condition-based maintenance[3] - NOV serves customers in 62 countries through three segments: Wellbore Technologies, Completion & Production Solutions, and Rig Technologies[3] Business Strategy and Competitive Strengths NOV's strategy focuses on generating above-average, long-term capital returns by leveraging its market position, proprietary technology, and core capabilities to reduce the marginal cost and environmental footprint of energy production from oil, gas, and renewable sources. The company emphasizes a capital-light manufacturing model and a conservative capital structure - NOV's primary objective is to generate above-average, long-term capital returns and enhance its position as a leading global energy technology and equipment provider[4] - The strategy involves capitalizing on economies of scale, proprietary technology development, and applying core competencies to advance the energy transition[4] - NOV maintains a capital-light manufacturing business model and a conservative capital structure with ample liquidity[4][10][12] Leverage NOV's advantages of size, scope, scale, and market position NOV leverages its global leadership, efficient distribution, and strong customer relationships to achieve economies of scale and first-mover advantages in energy markets - NOV benefits from economies of scale in procurement and manufacturing due to its global leadership and footprint in major oil and gas markets[5] - The company has an efficient worldwide distribution network and strong customer relationships, accelerating new product commercialization and creating first-mover advantages[5] - NOV's reputation, experience, and large installed equipment base position it as a lower-risk purchase for customers and a preferred OEM for aftermarket support[5] Digital Products and Technologies NOV invests in digital solutions like the Max™ platform for data collection, analytics, and condition-based monitoring to enhance energy operations - NOV leverages its size, scale, and knowledge to develop comprehensive digital energy solutions, including capital equipment, control systems, sensors, and data acquisition systems[6] - The company is investing in its Max™ platform and Max™ edge devices for large-scale data collection, aggregation, and big-data analytics, initially for predictive analytics and condition-based monitoring[6] Proprietary Technologies and Solutions NOV continuously develops its technology portfolio, including closed-loop drilling systems, to deliver innovative productivity solutions to customers - NOV continuously develops its substantial technology portfolio to introduce innovative customer productivity solutions, such as closed-loop drilling technologies that link real-time data to rig controls[7] End-Market Fragmentation Strategy NOV's business model provides equipment to all industry participants, fostering market fragmentation and expanding its customer base without vertical integration - NOV's business model provides equipment and technology to all industry participants, preventing proprietary advantages and driving market fragmentation, which expands its customer base[8] - The company has resisted vertical integration, maintaining its position as the largest global independent technology and equipment provider to the oilfield service sector[8] Energy Transition and Environmental Footprint Reduction NOV applies its engineering and manufacturing expertise to reduce the environmental footprint of energy production and advance energy transition technologies - NOV leverages its engineering expertise, global supply chain, and manufacturing capabilities to assist customers in reducing environmental footprints and advancing energy transition[9] - Innovations include Ideal eFrac™ equipment for emissions reduction in hydraulic stimulation and PowerBlade™ Kinetic Energy Recovery System for energy recapture[9] - The company is a leading provider of geothermal equipment and technology, and a key supplier for offshore wind tower and turbine installation vessels[9] Capital-Light Business Model NOV maintains a capital-light manufacturing model, enabling efficient production scaling and recurring aftermarket sales from demanding equipment use - NOV's manufacturing facilities require relatively low investment and maintenance, allowing for efficient production shifts and quick scaling of operations during industry expansionary phases[10][11] - The demanding nature of customer equipment use in extreme environments creates recurring sales opportunities for equipment replacement and aftermarket services[10] Conservative Capital Structure and Liquidity NOV maintains an investment-grade credit rating and ample liquidity, ensuring financial flexibility through industry volatility - NOV maintains an investment-grade credit rating and ample liquidity, carefully managing cash flow, capital spending, and debt capacity[12] - A strong balance sheet provides flexibility to execute strategy and advance technological offerings through industry volatility and commodity price cycles[12] Energy Transition Initiatives NOV is actively participating in the global energy transition by developing proprietary solutions to improve the economic competitiveness of renewable energy. The company is involved in fixed and floating offshore wind, onshore wind, geothermal, and carbon capture and sequestration markets - NOV aims to be a key participant in the world's transition to a low-carbon future, recognizing the enormous economic opportunity in improving renewable energy's competitiveness[13] - The company is developing proprietary solutions to improve project execution, drive higher capital returns, and lower the levelized costs of energy (LCOE) for renewable sources[13] Fixed Offshore Wind NOV provides leading equipment and design for offshore wind turbine installation vessels, leveraging its marine expertise for critical jacking systems and cranes - NOV is a leading global equipment and design provider for offshore wind turbine installation vessels, leveraging its expertise in oil and gas jack-up vessel design and marine equipment[14] - Offerings include critical jacking systems, cranes, mooring equipment, vessel designs, and aftermarket support, with expected growth driven by larger vessel needs for increasingly large turbines[14] Floating Offshore Wind NOV is developing new products like the Tri-Floater semi-submersible foundation to reduce project risk in the nascent floating offshore wind market - NOV views the nascent floating offshore wind market as a significant opportunity, developing new products like its patent-pending Tri-Floater semi-submersible foundation[15] - The company aims to reduce project execution risk by leveraging its technology portfolio, complex marine project management track record, shipyard relationships, and global supply chain[15] Onshore Wind NOV develops technology to lower onshore wind's LCOE by enabling taller wind towers and efficient erection systems, including a minority interest in Keystone Tower Systems - NOV is developing technology to lower onshore wind's LCOE by economically constructing taller wind towers, which capture stronger winds and improve farm economics[16] - The company acquired a minority interest in Keystone Tower Systems (KTS), which developed a patented tapered spiral-welding process for automated, lower-cost wind tower section production[16][17] - NOV is also developing a mobile tower crane system for tall wind tower erection, built on its mobile drilling rig design expertise, to improve safety, reliability, and efficiency[17] Geothermal NOV adapts its oil and gas products for geothermal drilling and develops new proprietary solutions to address unique geothermal production challenges - Many of NOV's oil and gas products (e.g., top drives, BOPs, drill pipe) are currently used for drilling geothermal wells[18] - NOV has developed new proprietary products addressing unique geothermal production challenges and is exploring novel geothermal energy forms to expand the market[18] Carbon Capture and Sequestration NOV leverages its Wellstream Processing and APL businesses to provide technology for CO2 separation, liquefaction, and offshore re-injection sites - NOV is positioned to play a significant role in carbon capture and sequestration, with technology for CO2 separation, dehydration, and liquefaction from its Wellstream Processing business[19] - The APL business's turret and mooring systems support the development of offshore carbon re-injection sites[19] Lowering Carbon and Environmental Footprint in Oil & Gas NOV is dedicated to providing products and services that economically reduce carbon intensity and improve the safety and environmental footprint of the oil and gas industry. This includes a range of innovative solutions for emissions reduction, energy recovery, and waste management - NOV offers solutions like closed-loop solids control systems, dual-containment flowline technologies, solar pumping systems, and hydrocarbon leak detection systems to improve safety and environmental impact[20] - The PowerBlade™ Kinetic Energy Recovery System uses regenerative braking to significantly reduce fuel consumption and emissions from drilling and hoisting[20] - Maestro™ smart power management system optimizes power consumption on rigs to reduce fuel use and emissions, while the Ecoboost system achieves up to 80% emissions savings in hydraulic power systems[20] - iNOVaTHERM™ waste management system uses thermal desorption to treat drilling waste on-site, minimizing carbon-emitting transport activities[20] - Ideal eFrac™ pressure pumping equipment dramatically reduces emissions and ownership costs for well stimulation, enhancing safety and reducing environmental disruption[20] - The eDrive™ system for wireline skids and hybrid wireline trucks provides a more sustainable solution for interventions[22] Business Segment Overview NOV operates through three primary segments: Wellbore Technologies, Completion & Production Solutions, and Rig Technologies, each providing specialized equipment, technologies, and services to maximize efficiency and optimize operations across the oil and gas lifecycle, with increasing integration of digital solutions - NOV's business strategy is executed through three segments: Wellbore Technologies, Completion & Production Solutions, and Rig Technologies[23] - Certain products and systems across segments are integrated with NOV's Max™ digital ecosystem for real-time condition monitoring, data analytics, and process optimization[26] Wellbore Technologies The Wellbore Technologies segment provides critical technologies, equipment, and services to maximize oil and gas drilling efficiencies and economics. Its business units include Downhole, Tuboscope, Grant Prideco, IntelliServ, Directional Drilling Technologies, WellSite Services, ReedHycalog, and M/D Totco, offering a range of tools from drilling motors and tubular inspection to real-time data telemetry and waste management - Wellbore Technologies offers a constantly evolving product portfolio including downhole drilling motors, agitator systems, fishing tools, and thru-tubing tools[23] - Tuboscope provides tubular coating and inspection, while Grant Prideco is a leading premium drill-stem tubular manufacturer[23] - IntelliServ enables real-time broadband data transmission using wired drill-pipe, and M/D Totco provides data and digital solutions for improved safety and operational efficiency[23] - Directional Drilling Technologies designs tools for real-time wellbore location and formation data, and WellSite Services offers solids control, waste management, and managed-pressure-drilling systems[23] - ReedHycalog specializes in performance-engineered drill bits and borehole enlargement products[23] Completion & Production Solutions The Completion & Production Solutions segment delivers critical technologies to optimize well completion and production. Its diverse business units, including Intervention and Stimulation Equipment (ISE), Fiber Glass Systems (FGS), Process and Flow Technologies (PFT), Subsea Production Systems (SPS), XL Systems (XLS), Completion Tools, Fluid Motion Systems, and Pole Products, cover everything from hydraulic stimulation and composite piping to subsea infrastructure and industrial pumps - ISE designs and manufactures capital equipment for oilfield pressure pumpers, coiled tubing, wireline, and well testing, including next-generation fracturing pumping units and control systems[25] - FGS leads in composite piping systems, pressure vessels, and structures for corrosion and weight challenges, serving oil and gas, marine, and industrial applications[25] - PFT provides integrated processing, production, and pumping equipment, including artificial lift systems and turret mooring systems, and is expanding into carbon capture technology[25] - SPS offers flexible subsea pipe systems and critical subsea production equipment, supporting offshore wind developments and infrastructure electrification[26] - Completion Tools provides technologies like multistage frac products and liner hangers to lower well costs and increase production[28] - Fluid Motion Systems supplies specialized progressive cavity pumps and mixers for high-viscosity liquids across various industrial markets, while Pole Products manufactures poles for connectivity, lighting, and power infrastructure[29] Rig Technologies The Rig Technologies segment is a global leader in engineering, manufacturing, and support for advanced drilling equipment packages for oil and gas wells, and also designs and supports renewable energy equipment. Its business units, Rig Equipment and Marine Construction, provide everything from complete land and offshore drilling packages to heavy-lift cranes and jacking systems for wind turbine installation - Rig Equipment designs, manufactures, and sells land rigs, offshore drilling packages, and rig components, including automation control systems like NOVOS™ and ATOM™ RTX Robotics[29] - The segment's portfolio includes solutions to reduce energy consumption and enable energy regeneration, along with comprehensive aftermarket products and services for maximizing rig uptime[29] - Marine Construction designs and manufactures heavy-lift cranes, mooring machinery, jacking systems for drilling rigs and wind turbine installation jack-ups, and solutions for offshore wind towers and pipelay[29] - GustoMSC, within Marine Construction, provides design solutions for drilling jack-ups, floaters, and floating offshore wind solutions like the Tri-Floater[29] Markets and Competition NOV's customers are primarily service companies, oil and gas companies, and shipyards, with products distributed globally through direct sales and representatives. The company faces competition from publicly traded oilfield service and equipment companies, as well as smaller independent manufacturers in oil and gas, industrial, and renewable energy markets - NOV's customers are predominantly service companies, oil and gas companies, and shipyards[30] - Products are sold and rented worldwide through NOV's sales force and commissioned representatives[30] - Competition includes publicly traded oilfield service and equipment companies and smaller independent manufacturers in oil and gas, industrial, and renewable energy markets[30] - Foreign operations, which are significant, are subject to risks like foreign currency exchange, political and economic instability, and local content policies, sometimes requiring joint ventures[31] Influence of Oil and Gas Activity Levels NOV's business is highly dependent on the volatile global oil and gas industry activity levels, which are influenced by oil and gas prices. High drilling and well remediation activity directly drives demand for NOV's products and services, as well as increasing capital investment by industry participants - Demand for NOV's products and services is primarily dependent on the general level of activity in the volatile worldwide oil and gas industry[32] - Oil and gas activity is heavily influenced by global oil and gas prices, with high drilling and well remediation levels spurring demand and increasing investment capacity for customers[32] Seasonal Nature of Business Some of NOV's segments experience seasonal trends, with harsh winter weather and annual thaws in northern regions temporarily reducing demand. Fluctuations also occur due to national holidays and annual budgetary cycles, with a recent trend of pronounced spending in Q4 and a decline in Q1 - Harsh winter weather and annual thaws in northern regions (e.g., Canada, Russia, China) can temporarily reduce oilfield operations and demand for NOV's products and services[33] - Customer activity levels are also affected by national holidays and annual budgetary cycles, leading to temporary local decreases and increases in sales[33] - A recent trend shows more pronounced spending in the fourth quarter and a decline in the first quarter, linked to annual budgetary cycles[33] Research, New Product Development, and Intellectual Property NOV is a leader in developing new technology and equipment to enhance safety and productivity in drilling and well servicing, with sales and earnings partly dependent on successful product introductions. The company holds an extensive portfolio of intellectual property, including patents and trademarks, and invests in technologies for both traditional and renewable energy sectors - NOV is a leader in developing new technology and equipment for drilling and well servicing, and invests in non-oil and gas as well as renewable energy technologies[34] - The company holds a substantial number of granted patents and pending patent applications worldwide, with expiration dates ranging from 2023 to 2042[34] - While intellectual property is valued, NOV considers product quality, timely delivery, customer service, and personnel technical knowledge equally important for competition[34] Manufacturing and Service Locations NOV's manufacturing processes involve machining, welding, fabrication, heat treating, assembly, and testing, primarily using alloy steel. The company operates primary facilities for each segment in key global energy hubs, including Houston, Dubai, and Singapore, to support its diverse product lines and services - Manufacturing processes include machining, welding, fabrication, heat treating, assembly, and testing, primarily using alloy steel[35] - Wellbore Technologies facilities are in Houston, Conroe, Navasota, Cedar Park (TX), Veracruz (Mexico), Nisku (Canada), and Dubai (UAE)[36] - Completion & Production Solutions facilities are in Houston, Fort Worth (TX), Tulsa (OK), Senai (Malaysia), Qingdau (China), Kalundborg (Denmark), Superporto du Acu (Brazil), Manchester (England), Dammam (Saudi Arabia), Aberdeenshire (Scotland, UK), and Mt. Union (PA)[36] - Rig Technologies facilities are in Houston (TX), Dubai (UAE), Al Jubail (Saudi Arabia), New Iberia (LA), Stavanger and Kristiansand (Norway), Mexicali (Mexico), Pune (India), and Singapore[36] Raw Materials NOV sources materials and components from multiple suppliers, but prices are influenced by energy, steel, and other commodity prices, as well as tariffs and foreign exchange rates. The company has generally mitigated the financial impact of rising raw material costs through surcharges and price adjustments - Materials and components are generally available from multiple sources, but prices are affected by energy, steel, commodity prices, tariffs, and foreign currency exchange rates[37] - NOV has successfully mitigated the financial impact of higher raw material costs through surcharges and price adjustments[37] Backlog NOV monitors its backlog of firm orders, typically requiring over three months to manufacture and deliver, for planning purposes. While most orders require reimbursement for incurred costs if defaulted, there's no guarantee that backlog amounts will be realized as revenue or profit - Backlog includes firm written orders typically requiring more than three months to manufacture and deliver, with most requiring reimbursement for incurred costs if defaulted[38] Backlog | Segment | Dec 31, 2022 (Billion $) | Dec 31, 2021 (Billion $) | Dec 31, 2020 (Billion $) | | :--- | :--- | :--- | :--- | | Completion & Production Solutions | 1.6 | 1.3 | 0.7 | | Rig Technologies | 2.8 | 2.8 | 2.7 | Human Capital NOV's success relies on its 32,307 global, diverse employees who provide products and services across various disciplines, from engineering and manufacturing to field service and support functions. The company prioritizes employee health, safety, diversity, and career development through comprehensive policies, training, and benefits - NOV has 32,307 global employees across various skilled roles, including inventors, engineers, sales professionals, supply chain experts, production staff, field service technicians, and business leaders[39][41] - Employee distribution: 36% in the U.S., 21% in Europe, 15% in Latin America, 12% in Asia Pacific, 10% in the Middle East and Africa, 4% in Canada, and 2% in China[41] - The company emphasizes safeguarding and supporting employee health, safety, diversity, respect, skills, career satisfaction, and wellbeing as critical to business success[41] Safety NOV prioritizes employee health and safety through comprehensive monitoring, leadership reviews, and key programs like Stop Work Authority and Life Saving Rules - Protecting employee health and safety is a core value, with comprehensive monitoring of reportable injuries and quarterly reviews by leadership[42] - Key safety programs include Stop Work Authority, Life Saving Rules, Fresh-Eyes (peer facility safety walk-throughs), and Safety Stand Downs[42] Health and Wellbeing NOV offers competitive health benefits, paid time off, retirement plans, and wellness programs, adapting policies for remote work and social distancing during the pandemic - NOV offers locally competitive health benefits, paid holidays, time off, and retirement benefits, including health, vision, dental, life, and disability insurance, 401(k) plans, and wellness programs in the US[43] - Employer contributions to the 401(k) plan were reinstated in Q4 2021 after being suspended during the pandemic[43] - During COVID-19, NOV implemented tailored programs such as remote work, virtual meetings, social distancing, masking, and staggered shifts[43] Diversity and Inclusion NOV is committed to a diverse and inclusive workforce, believing it fosters innovation and talent retention, supported by CEO statements and training programs - NOV is committed to a diverse workforce, individual inclusion, and equal opportunities, believing it fosters innovation, informed decision-making, and better talent retention[44] - The company has a Diversity and Inclusion Statement from the CEO and implements training programs on Code of Conduct, Unconscious Bias, and Harassment[45] Diversity and Inclusion | Metric | Percentage | | :--- | :--- | | Women in Workforce | 15% | | Women in Salaried Employees | 22% | | Women in C-Suite | 10% | | Women on Board of Directors | 20% | Career Satisfaction and Skills NOV tracks employee experience and invests in education and development through technical, managerial, and soft skills training programs to enhance career satisfaction - NOV tracks employee experience data (hiring, turnover, promotion) and uses 'pulse' surveys to measure satisfaction and identify improvement areas[46] - The company invests in employee education and development through comprehensive technical, managerial, and soft skills training programs, including dedicated Technical Training Centers[46] Available Information NOV Inc. provides public access to its SEC filings, including 10-K, 10-Q, and 8-K reports, and its Code of Ethics, on the Investor Relations section of its website - NOV's annual, quarterly, and current reports (10-K, 10-Q, 8-K) and amendments are available free of charge on its investor relations website (www.nov.com/investor)[47](index=47&type=chunk) - The company's Code of Ethics is also posted on its website[47] ITEM 1A. RISK FACTORS NOV faces significant risks from volatile oil and gas markets, operational challenges, supply chain disruptions, and complex legal and regulatory environments, including evolving climate change policies Industry Environment and Operations Related Risks NOV's business is highly susceptible to the volatile oil and gas industry, influenced by commodity prices, global economic activity, and geopolitical factors. The company faces risks related to contract execution, intense competition, supply chain disruptions, and the ability to attract and retain skilled personnel - NOV is dependent on the volatile oil and gas industry, with demand for products and services influenced by oil and gas prices, drilling activity, and capital expenditures[50] - Risks associated with capital equipment contracts include financial challenges for customers, cost estimation failures, inability to meet technical requirements, and unexpected increases in raw material costs[51][53] - The industry is highly competitive, with risks from price changes, competitor product introductions, and expiration of NOV's intellectual property rights[54] - Supply chain disruptions, price escalation, labor shortages, and increased costs for raw materials and transportation can materially affect business and liquidity[57] - The ability to hire and retain qualified personnel at competitive costs is crucial, as many products and services are complex and technologically advanced[63] Legal and Regulatory Related Risks NOV is exposed to significant legal and regulatory risks, including compliance with complex U.S. and foreign laws (e.g., FCPA, trade controls), environmental protection regulations, and potential liabilities from harmful substances or product failures. The company also faces risks from evolving climate change policies, ESG activism, and local content requirements in foreign jurisdictions, which can impact operations and financial performance - Failure to comply with U.S. and foreign laws and regulations (e.g., FCPA, anti-bribery, trade controls, tax laws) could lead to investigations, sanctions, fines, and criminal prosecution[69] - Businesses are subject to numerous environmental protection, zoning, and other laws, with potential for significant unanticipated capital and operating expenditures if regulations change[70] - Exposure to environmental, product, or personal injury liability from harmful substances or product failures could result in personal injury, property damage, or environmental damage[72] - Future laws, regulations, and activism related to greenhouse gases (GHG), climate change, and ESG could reduce demand for oil and natural gas, increase compliance obligations, and negatively impact stock price[74][75] - Operations outside the U.S. require compliance with both U.S. and international regulations, with violations potentially having material adverse effects, particularly concerning current political conflicts and sanctions (e.g., Russia/Belarus)[78][81] GLOSSARY OF OILFIELD TERMS This section provides a comprehensive glossary of specialized terms commonly used in the oil and gas industry, sourced from company management and 'A Dictionary for the Petroleum Industry,' to aid in understanding the technical language within the report - The glossary defines key oilfield terms such as Annulus, Blowout Preventer (BOP), Coiled Tubing, Directional Well, Drawworks, Drill Pipe, Flexible pipe, FPSO, Hydraulic Fracturing, Jack-up rig, Kelly, Kick, Levelized Cost of Energy (LCOE), Mooring system, Nacelle, Pressure control equipment, Riser pipe, Rotary table, Slips, Sucker rod, Top drive, Turret, Well completion, Wellhead, Well stimulation, Wellbore, and Wireline[84][85][86][87][88][89][90][91][92][93][94][95][96][97][98][99][100][101][102][103][104][105][106][107][108][109][110] ITEM 1B. UNRESOLVED STAFF COMMENTS This section indicates that there are no unresolved comments from the SEC staff regarding the company's previous filings - The company has no unresolved staff comments[111] ITEM 2. PROPERTIES NOV Inc. owned or leased approximately 554 facilities worldwide as of December 31, 2022, including manufacturing, service, distribution, and administrative offices. The report details key properties by segment, indicating whether they are owned or leased and their size - As of December 31, 2022, NOV Inc. owned or leased approximately 554 facilities globally[112] - These facilities include 321 repair and manufacturing facilities, 101 service centers, and 132 engineering, sales, and administration facilities[113] Selected Principal Facilities by Segment (as of Dec 31, 2022) | Segment | Location | Description | Building Size (SqFt) | Property Size (Acres) | Owned / Leased | Lease Termination Date | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Wellbore Technologies | Navasota, Texas | Manufacturing Facility & Administrative Offices | 562,112 | 196 | Owned | - | | | Conroe, Texas | Manufacturing Facility of Drill Bits and Downhole Tools | 275,383 | 28 | Owned | - | | | Dubai, UAE | Manufacturing Facility of Downhole Tools, Distribution Warehouse | 184,492 | 8 | Leased | 1/29/2031 | | Completion & Production Solutions | Senai, Malaysia | Manufacturing Facility of Fiber Glass Products | 284,701 | 14 | Owned* | 10/31/2027 | | | Kalundborg, Denmark | Flexibles Manufacturing, Warehouse, Shop & Administrative Offices | 485,067 | 38 | Owned | - | | | Houston, Texas | Manufacturing of Wireline and Pressure Performance Equipment | 383,750 | 26 | Leased | 6/30/2041 | | Rig Technologies | Houston, Texas | Bammel Facility, Repairs, Service, Aftermarket Parts | 608,718 | 33 | Leased | 7/31/2028 | | | Al Jubail, Saudi Arabia | Manufacturer and Service of Drilling Rigs and Equipment | 668,293 | 113 | Leased | 11/17/2050 | ITEM 3. LEGAL PROCEEDINGS This section refers to Note 12 – Commitments and Contingencies in Part IV, Item 15 of the Form 10-K for a detailed discussion of legal proceedings - Details on legal proceedings are incorporated by reference from Note 12 – Commitments and Contingencies in Part IV, Item 15[115] ITEM 4. MINE SAFETY DISCLOSURES Information regarding mine safety and other regulatory actions at NOV's mines is included in Exhibit 95 of this Form 10-K - Mine safety and regulatory actions information is provided in Exhibit 95 to this Form 10-K[116] ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES This section details NOV Inc.'s common stock market information, including NYSE trading, shareholder count, dividend declarations, and a performance graph comparing its stock return against various indices Market Information NOV Inc.'s common stock is traded on the NYSE under the symbol 'NOV'. As of February 3, 2023, there were 1,864 holders of record. The company declared quarterly cash dividends of $0.05 per share in 2022, totaling $78 million for the year - NOV Inc. common stock is traded on the New York Stock Exchange (NYSE) under the symbol 'NOV'[116] - As of February 3, 2023, there were 1,864 holders of record of common stock, with 392,831,492 shares outstanding[2][116] Cash Dividends Declared (per share) | Year | Cash Dividends Declared (per share) | Total Dividends (Millions $) | | :--- | :--- | :--- | | 2022 | $0.20 (4 x $0.05) | $78 | | 2021 | $0.05 (Q4 only) | $20 | Performance Graph The performance graph compares the cumulative total shareholder return of NOV Inc.'s common stock against the S&P 500 Index, S&P Oil & Gas Equipment & Services Index, PHLX Oil Service Index, and S&P Oil & Gas Equipment Index, assuming a $100 investment on December 31, 2017, with dividend reinvestment - The graph compares NOV Inc.'s cumulative total shareholder return to several industry and broad market indices from December 31, 2017, to December 31, 2022[118] Cumulative Total Shareholder Return (Indexed to $100 on 12/31/17) | Index/Company | 12/17 | 12/18 | 12/19 | 12/20 | 12/21 | 12/22 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | NOV Inc. | 100.00 | 71.73 | 70.52 | 38.88 | 38.52 | 59.99 | | S&P 500 | 100.00 | 95.62 | 125.72 | 148.85 | 191.58 | 156.89 | | S&P Oil & Gas Equipment & Services Index | 100.00 | 58.53 | 64.70 | 41.26 | 52.64 | 86.75 | | PHLX Oil Service Index | 100.00 | 54.78 | 54.48 | 31.56 | 38.10 | 61.53 | | S&P Oil & Gas Equipment Index | 100.00 | 52.98 | 48.40 | 27.40 | 30.75 | 49.98 | Purchases of Equity Securities by the Issuer and Affiliated Purchasers During the fourth quarter of 2022, NOV Inc. purchased 2,413 shares of its common stock, primarily through withholding from employee vested restricted stock grants for income taxes, rather than as part of a publicly announced buyback program Equity Securities Purchased by Issuer (Q4 2022) | Period | Total Shares Purchased | Average Price Per Share ($) | | :--- | :--- | :--- | | October 1 - October 31, 2022 | 2,196 | 18.51 | | November 1 - November 30, 2022 | — | — | | December 1 - December 31, 2022 | 217 | 22.55 | | Total | 2,413 | 18.88 | - The shares purchased were withheld from employee vested restricted stock grants for income taxes and were not part of a publicly announced common stock purchase program[120] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's analysis of NOV Inc.'s financial condition, operational results, and liquidity, highlighting key drivers, industry trends, and critical accounting estimates General Overview NOV Inc. is a leading independent provider of equipment and technology to the upstream oil and gas industry, operating in approximately 554 locations across six continents. Its financial performance is directly tied to worldwide oil and gas drilling and production activities, which are influenced by volatile commodity prices. The company also increasingly engages in sustainable energy transition projects - NOV is a leading independent provider of equipment and technology to the upstream oil and gas industry, operating in approximately 554 locations across six continents[122] - Revenue and operating results are primarily linked to worldwide oil and gas drilling and production activities, profitability of energy companies, and volatile oil and gas prices[122] - The company conducts operations through three segments: Wellbore Technologies, Completion & Production Solutions, and Rig Technologies, and is increasingly involved in sustainable energy transition opportunities[122] Operating Environment Overview NOV's results are highly dependent on global oil and gas drilling, well remediation, and commodity prices, with increasing engagement in wind, solar, and geothermal energy. In 2022, average worldwide rig count increased by 28% YoY, WTI crude prices rose by 39%, and natural gas prices surged by 64%, reflecting a recovering market - NOV's results depend on worldwide oil and gas drilling, well remediation, crude oil and natural gas prices, capital spending by E&P companies, and investment in renewable energy products[123] - As of February 3, 2023, North American active rigs increased by 4% from Q4 2022 average, while WTI crude prices decreased by 11% and natural gas prices decreased by 56% from Q4 2022 average[128] - The company is increasingly engaged in energy transition opportunities (wind, solar, geothermal, carbon sequestration) and expects continued growth in these areas[129] Key Industry Indicators (Averages for the Years Indicated) | Indicator | 2022 | 2021 | 2020 | 2022 vs. 2021 (%) | 2022 vs. 2020 (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Active Drilling Rigs (Worldwide) | 1,747 | 1,362 | 1,351 | 28.3% | 29.3% | | WTI Crude Prices (per barrel) | $94.81 | $67.99 | $39.33 | 39.4% | 141.1% | | Natural Gas Prices ($/mmbtu) | $6.38 | $3.88 | $2.01 | 64.4% | 217.4% | Executive Summary NOV Inc. reported strong financial improvements in 2022, with revenue reaching $7.24 billion, driven by higher industry activity and commodity prices. The company achieved an operating profit of $264 million and net income of $155 million, a significant turnaround from losses in 2021. All three segments demonstrated improved performance, with increased revenues and Adjusted EBITDA - NOV Inc. generated $7.24 billion in revenue in 2022, an increase from the prior year due to higher industry activity and oil and gas prices[130] - Fourth quarter 2022 revenue was $2.07 billion, a 10% sequential increase, with net income of $104 million ($0.26 diluted EPS), an improvement of $72 million from Q3 2022[130] - Excluding Other Items, Q4 2022 Adjusted EBITDA was $231 million, up from $195 million in Q3 2022 and $69 million in Q4 2021[130] Key Financial Highlights (2022 vs. 2021) | Metric | 2022 (Millions $) | 2021 (Millions $) | Change | | :--- | :--- | :--- | :--- | | Revenue | 7,240 | 5,524 | +31% | | Operating Profit (Loss) | 264 | (134) | Turnaround | | Net Income (Loss) Attributable to Company | 155 | (250) | Turnaround | | Diluted EPS | $0.39 | ($0.65) | Turnaround | Wellbore Technologies Performance Wellbore Technologies reported Q4 2022 revenue of $762 million and operating profit of $110 million, driven by accelerating international demand despite supply chain disruptions - Performance was driven by accelerating demand in international markets, partially offset by lingering supply chain disruptions[131] Wellbore Technologies Performance (Q4 2022) | Metric | Q4 2022 (Millions $) | Sequential Change (%) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 762 | +3% | +32% | | Operating Profit | 110 | - | - | | Operating Profit (% of sales) | 14.4% | - | - | | Adjusted EBITDA | 146 | +$1M | +$58M | | Adjusted EBITDA (% of sales) | 19.2% | - | - | Completion & Production Solutions Performance Completion & Production Solutions achieved Q4 2022 revenue of $738 million and operating profit of $50 million, fueled by growing demand for completion equipment and offshore project progress - Improved results were driven by growing demand for completion equipment and greater progress on the segment's offshore projects backlog[132] - New orders booked increased 13% sequentially to $557 million, resulting in a book-to-bill ratio of 118%[132] - Backlog for capital equipment orders was $1.60 billion as of December 31, 2022, an 8% sequential increase and 24% YoY increase[132] Completion & Production Solutions Performance (Q4 2022) | Metric | Q4 2022 (Millions $) | Sequential Change (%) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 738 | +8% | +34% | | Operating Profit | 50 | - | - | | Operating Profit (% of sales) | 6.8% | - | - | | Adjusted EBITDA | 66 | +$10M | +$64M | | Adjusted EBITDA (% of sales) | 8.9% | - | - | Rig Technologies Performance Rig Technologies posted Q4 2022 revenue of $620 million and operating profit of $80 million, benefiting from strong aftermarket demand, improved supply chains, and increased capital equipment deliveries - Improved results were due to strong demand for aftermarket parts and services, improving global supply chains, and increased capital equipment deliveries[133] - New capital equipment orders totaled $254 million, with a book-to-bill ratio of 99%[133] - Backlog for capital equipment orders was $2.79 billion as of December 31, 2022, a 1% increase from December 31, 2021[133] Rig Technologies Performance (Q4 2022) | Metric | Q4 2022 (Millions $) | Sequential Change (%) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 620 | +21% | +44% | | Operating Profit | 80 | - | - | | Operating Profit (% of sales) | 12.9% | - | - | | Adjusted EBITDA | 88 | +$36M | +$67M | | Adjusted EBITDA (% of sales) | 14.2% | - | - | Oil & Gas Equipment and Services Market and Outlook Following a recovery from the COVID-19 pandemic and the impact of the war in Ukraine, NOV believes the oil and gas industry is in the early stages of an extended recovery. Diminished global inventories, underinvestment, and energy security risks are expected to drive increased oilfield activity and demand for NOV's equipment and technology, including those supporting energy transition - The industry experienced demand destruction during COVID-19 in 2020, followed by stabilization and recovery in commodity prices and activity levels in 2021[134][135] - The war in Ukraine in early 2022 drove commodity prices to near decade-highs, prompting a re-evaluation of energy sources and security[135] - Despite recent commodity price pullbacks and recession concerns, management believes the industry is in the early stages of an extended recovery, driven by diminished inventories, underinvestment, and energy security risks[135] - NOV remains committed to improving efficiencies and developing innovative products, including those reducing environmental impact of oil and gas and accelerating energy transition[135] Results of Operations NOV's total revenue increased by 31% to $7,237 million in 2022 compared to 2021, with a significant turnaround in operating profit from a loss of $134 million in 2021 to a profit of $264 million in 2022. All three segments contributed to this growth, driven by increased activity and improved market conditions Revenue by Segment (Millions $) | Segment | 2022 | 2021 | 2020 | 2022 vs. 2021 (%) | 2021 vs. 2020 (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Wellbore Technologies | 2,777 | 1,959 | 1,867 | 41.8% | 4.9% | | Completion & Production Solutions | 2,588 | 1,963 | 2,433 | 31.8% | (19.3)% | | Rig Technologies | 2,034 | 1,739 | 1,919 | 17.0% | (9.4)% | | Eliminations | (162) | (137) | (129) | (18.2)% | (6.2)% | | Total Revenue | 7,237 | 5,524 | 6,090 | 31.0% | (9.3)% | Operating Profit (Loss) by Segment (Millions $) | Segment | 2022 | 2021 | 2020 | 2022 vs. 2021 (%) | 2021 vs. 2020 (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Wellbore Technologies | 304 | 74 | (858) | 310.8% | 108.6% | | Completion & Production Solutions | 69 | (65) | (977) | 206.2% | 93.3% | | Rig Technologies | 144 | 43 | (362) | 234.9% | 111.9% | | Eliminations and corporate costs | (253) | (186) | (228) | (36.0)% | 18.4% | | Total Operating Profit (Loss) | 264 | (134) | (2,425) | 297.0% | 94.5% | Wellbore Technologies (Annual) Wellbore Technologies' annual revenue increased by 42% to $2,777 million in 2022, with operating profit rising to $304 million, reflecting strong market recovery - Revenue for Wellbore Technologies increased by $818 million (42%) to $2,777 million in 2022 compared to 2021[136][137] - Operating profit was $304 million in 2022, a $230 million increase from 2021, with the operating profit percentage rising from 3.8% to 10.9%[136][137] - Operating profit included $60 million in Other Items related to Russia impairment and other charges in 2022, compared to $31 million in 2021[136] Completion & Production Solutions (Annual) Completion & Production Solutions' annual revenue grew by 32% to $2,588 million in 2022, turning an operating loss into a $69 million profit, driven by increased activity - Revenue for Completion & Production Solutions increased by $625 million (32%) to $2,588 million in 2022 compared to 2021[137][138] - Operating profit was $69 million in 2022, an improvement of $134 million from an operating loss of $65 million in 2021, with the operating profit percentage at 2.7% in 2022[137][138] - Operating profit included $36 million in Other Items related to Russia impairment, inventory gains, and severance costs in 2022, compared to $1 million in 2021[138] - Capital equipment backlog was $1,602 million at December 31, 2022, a 24% increase from 2021, with approximately 56% for offshore products and 69% for international markets[138] Rig Technologies (Annual) Rig Technologies' annual revenue increased by 17% to $2,034 million in 2022, with operating profit improving to $144 million, reflecting stronger market conditions - Revenue for Rig Technologies increased by $295 million (17%) to $2,034 million in 2022 compared to 2021[137][139] - Operating profit was $144 million in 2022, an improvement of $101 million from 2021, with the operating profit percentage rising from 2.5% to 7.1%[137][139] - Operating profit included Other Items related to Russia impairment, inventory gains, and severance costs in 2022 (amount not specified for 2022, but $22 million in 2021)[139] - Capital equipment backlog was $2,793 million at December 31, 2022, a 1% increase from 2021, with approximately 28% for offshore products and 95% for international markets[139] Eliminations and Corporate Costs Eliminations and corporate costs increased to $253 million in 2022, primarily due to an increase in intersegment sales. These costs include intercompany transactions eliminated in consolidation and corporate expenses not allocated to segments - Eliminations and corporate costs increased to $253 million in 2022 from $186 million in 2021, primarily due to increased intersegment sales[140] - These costs include intercompany transactions between segments (priced at estimated commercial selling prices) that are eliminated in consolidation, and corporate costs not allocated to segments[140] Other Expense, Net Other expense, net, increased to $35 million in 2022, primarily driven by higher foreign exchange losses compared to the previous year - Other expense, net, was $35 million in 2022, an increase from $23 million in 2021, primarily due to higher foreign exchange losses[141] Provision for Income Taxes The effective tax rate for 2022 was 34.9%, a significant change from (6.5)% in 2021. This was negatively impacted by current year losses in certain jurisdictions with no tax benefit, partially offset by favorable adjustments related to foreign currency translation gains and the utilization of prior year losses and tax credits - The effective tax rate for 2022 was 34.9%, compared to (6.5%) for 2021[142] - The 2022 rate was negatively impacted by current year losses in certain jurisdictions with no tax benefit, offset by favorable adjustments from foreign currency translation gains and utilization of prior year losses/tax credits[142] - The 2021 rate was negatively impacted by losses in certain jurisdictions with no tax benefit, partially offset by favorable adjustments related to utilization of losses and tax credits[143] Results of Operations (2021 vs. 2020) Information comparing operating results between 2021 and 2020 is incorporated by reference from the company's 2021 Form 10-K - Comparison of 2021 and 2020 operating results is incorporated by reference from the 2021 Form 10-K[144] Non-GAAP Financial Measures and Reconciliations This section defines and reconciles non-GAAP financial measures, specifically Adjusted EBITDA, which management uses to evaluate operational performance and trends. Adjusted EBITDA excludes depreciation, amortization, gains/losses on fixed asset sales, and 'Other Items' (impairment charges, inventory charges, severance, etc.) - Adjusted EBITDA is a non-GAAP financial measure used by management and investors to evaluate operational performance and trends[145][146] - Adjusted EBITDA is defined as operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets, and 'Other Items'[146] Other Items by Category (Millions $) | Category | Q4 2022 | Q3 2022 | Q4 2021 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | Russia Impairment and other charges | 2 | 76 | — | 127 | — | | Inventory | (10) | (13) | (1) | (35) | (13) | | Severance, facility closures and other | — | — | 9 | 22 | 72 | | Total Other Items | (8) | 63 | 8 | 114 | 59 | Adjusted EBITDA Reconciliation (Millions $) | Metric | Q4 2022 | Q4 2021 | Q3 2022 | FY 2022 | FY 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | GAAP Net Income (Loss) Attributable to Company | 104 | (40) | 32 | 155 | (250) | | Noncontrolling interests | (5) | (3) | 3 | — | 5 | | Provision for income taxes | 42 | 14 | 29 | 83 | 15 | | Interest expense | 21 | 19 | 19 | 78 | 77 | | Interest income | (7) | (2) | (6) | (19) | (9) | | Equity (income) loss in unconsolidated affiliate | (36) | (1) | (12) | (68) | 5 | | Other (income) expense, net | 43 | (2) | (10) | 35 | 23 | | Depreciation and amortization | 76 | 75 | 76 | 301 | 306 | | (Gain)/Loss on Sales of Fixed Assets | 1 | 1 | 1 | — | (2) | | Other Items | (8) | 8 | 63 | 114 | 59 | | Total Adjusted EBITDA | 231 | 69 | 195 | 679 | 229 | Liquidity and Capital Resources As of December 31, 2022, NOV had $1,069 million in cash and cash equivalents and $1,730 million in total debt. The company maintains a $2.0 billion revolving credit facility with ample liquidity and was in compliance with its debt covenants. Operating activities used $179 million in cash during 2022, primarily due to working capital changes - The company was in compliance with its debt-to-capitalization ratio covenant (max 60%) at 27.7% as of December 31, 2022, with $2.0 billion available under its revolving credit facility[150] - Significant uses of cash in 2022 included $179 million in operating activities (due to working capital changes), $214 million in capital expenditures, $49 million for business acquisitions, and $78 million in dividends[150] Liquidity and Debt (Millions $) | Metric | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and Cash Equivalents | 1,069 | 1,591 | | Total Debt | 1,730 | 1,713 | | Foreign Cash Held by Subsidiaries | 756 | - | | Revolving Credit Facility Capacity | 2,000 | 2,000 | | Debt-to-Capitalization Ratio | 27.7% | - | Net Cash Flows (Millions $) | Activity | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Operating Activities | (179) | 291 | 926 | | Investing Activities | (238) | (196) | (144) | | Financing Activities | (96) | (189) | (259) | Critical Accounting Policies and Estimates NOV's financial statements rely on significant assumptions, estimates, and judgments, particularly for revenue recognition under long-term construction contracts, impairment testing of goodwill and indefinite-lived intangible assets, inventory reserves, and income taxes. These estimates are based on historical experience and future expectations, but actual results may differ materially - Critical accounting estimates include revenue recognition under long-term construction contracts, impairment of goodwill and other indefinite-lived intangible assets, inventory reserves, and income taxes[155] - Estimates are based on historical experience and reasonable future expectations, but actual results may differ materially[155] Revenue Recognition under Long-Term Construction Contracts Revenue for long-term construction contracts is recognized over time using the cost-to-cost method, requiring significant judgment in estimating total revenue and costs at completion - Revenue for certain long-term construction contracts in Completion & Production Solutions and Rig Technologies is recognized over time using the cost-to-cost (input) measure of progress[156] - Estimating total revenue and cost at completion is complex and requires significant judgment, especially for variable consideration like late delivery fees or performance guarantees[156] - Net revenue recognized from performance obligations satisfied in previous periods was $37 million for 2022, primarily due to change orders[156] Goodwill Goodwill, totaling $1.5 billion, is tested annually for impairment using discounted cash flow analysis, which is sensitive to management's operating forecasts and market volatility - Goodwill totaled approximately $1.5 billion as of December 31, 2022, and is tested for impairment annually or when circumstances indicate impairment[157] - Impairment testing relies on discounted cash flow analysis based on management's operating performance forecasts for each reporting unit[157] - Key assumptions include cash flow from operations and the weighted average cost of capital, which are sensitive to financial and credit market volatility[157][158] Inventory Reserves Inventory is valued at the lower of cost or net realizable value, with reserves based on historical usage, future demand, and market conditions - Inventory is carried at the lower of cost or estimated net realizable value, based on historical usage, future demand, market conditions, and potential alternative uses[159] Inventory Provision Charges (Credits) (Millions $) | Year | Provision Charges (Credits) | | :--- | :--- | | 2022 | (18) | | 2021 | 73 | | 2020 | 367 | Inventory Reserves (Millions $) | Date | Total Reserves | % of Gross Inventory | | :--- | :--- | :--- | | Dec 31, 2022 | 378 | 17.3% | | Dec 31, 2021 | 444 | 25.0% | Income Taxes Income taxes are recorded based on tax laws and rates, involving significant judgment for income, deductions, and tax credits, with potential impacts from changes in tax laws or intercompany pricing - Income taxes are recorded based on tax laws and rates in various operating countries, involving significant judgment and estimates regarding income, deductions, and tax credits[160] - Changes in tax laws, regulation