NOV(NOV) - 2023 Q4 - Annual Report

FORM 10-K Filing Information Details NOV Inc.'s 2023 Annual Report on Form 10-K, identifying it as a large accelerated filer and well-known seasoned issuer Filing Details NOV Inc.'s 2023 Annual Report on Form 10-K identifies it as a large accelerated filer and well-known seasoned issuer - NOV Inc. is filing its Annual Report on Form 10-K for the year ended December 31, 2023[2] Filer Status | Indicator | Status | | :--- | :--- | | Filer Type | Large accelerated filer | | Well-known seasoned issuer | Yes | | Required to file reports | Yes | | Interactive Data File submitted | Yes | | Internal control over financial reporting attestation | Yes | Key Market Metrics | Metric | Value | | :--- | :--- | | Aggregate market value of voting and non-voting common stock held by non-affiliates (as of June 30, 2023) | $6.3 billion | | Shares of Common Stock outstanding (as of February 3, 2024) | 394,003,549 | | Common Stock Trading Symbol | NOV | | Exchange Registered | New York Stock Exchange | PART I Covers NOV Inc.'s business overview, strategy, energy transition initiatives, segment performance, markets, and human capital ITEM 1. BUSINESS NOV Inc. is a leading global energy equipment and technology provider, transitioning to sustainable energy, with a new two-segment structure effective 2024 - NOV Inc. is a leading independent equipment and technology provider to the global energy industry, with a history dating back to 1862[10] - Effective January 1, 2024, NOV consolidated its reporting structure from three segments into two new segments: Energy Equipment and Energy Products and Services[12][40] - NOV's strategy focuses on generating above-average capital returns by lowering energy development costs and environmental footprint across oil, gas, and renewables, leveraging scale, proprietary technology, and a capital-light model[13][22] General Business Overview NOV leverages 162 years in oil and gas to advance sustainable energy, providing proprietary technology for drilling, completion, and production - NOV has 162 years of experience in oil and gas field development and is now applying its expertise to sustainable energy transition[10] - The company's technology portfolio supports full-field drilling, completion, and production, focusing on automation, predictive analytics, and condition-based maintenance[11] Business Strategy and Competitive Strengths NOV leverages scale, global network, installed base, and digital solutions with a capital-light model to reduce energy costs and environmental impact - NOV leverages global leadership for economies of scale in procurement and manufacturing, and a worldwide distribution network for new product commercialization[14][15] - The company benefits from a large installed equipment base, providing essential OEM aftermarket support, and is developing digital solutions like the Max™ platform for real-time data analytics and equipment monitoring[17][18] - NOV employs a capital-light business model, enabling quick scaling and efficient adaptation to market cycles, focusing on internal efficiency and technological advancement during down-cycles[22][23] Energy Transition Initiatives NOV drives energy transition with solutions for offshore/onshore wind, geothermal, carbon capture, and reducing oil/gas carbon footprint - NOV is a key participant in the energy transition, developing proprietary solutions to improve renewable energy's economic competitiveness, with an estimated $71 trillion global investment needed by 2040[25] - The company is a leading global equipment and design provider for fixed offshore wind turbine installation vessels and is developing new products for floating offshore wind, including a patent-pending Tri-Floater semi-submersible foundation[26][27] - NOV is developing technology to lower onshore wind's LCOE by enabling taller wind towers, holding a controlling interest in Keystone Tower Systems for automated production, and provides critical equipment for geothermal and carbon capture and sequestration[28][29][31][32] - NOV is committed to reducing the oil and gas industry's carbon footprint with solutions like the Ideal eFrac™ equipment for hydraulic stimulation and the PowerBlade™ Kinetic Energy Recovery System[21][33][34][38] Business Segment Overview (Pre-2024 Structure) Prior to 2024, NOV operated three segments: Wellbore Technologies, Completion & Production Solutions, and Rig Technologies, serving distinct energy sectors - Prior to January 1, 2024, NOV operated under three segments: Wellbore Technologies, Completion & Production Solutions, and Rig Technologies[40] - Wellbore Technologies provided critical technologies and services to maximize oil and gas drilling efficiencies, including downhole tools, tubular coating, and real-time data transmission[40][41] - Completion & Production Solutions offered technologies for well completion and production, such as solids control, drill bits, intervention and stimulation equipment, composite piping, and integrated processing equipment[42][43][44] - Rig Technologies was a global leader in advanced drilling equipment packages for oil and gas, also designing, building, and supporting renewable energy equipment, particularly for wind and solar[45][50] Markets and Competition NOV serves global energy customers, facing intense competition and high dependency on volatile oil and gas activity levels and commodity prices - NOV's customers are primarily service companies, oil and gas companies, and shipyards, with products sold and rented worldwide through direct sales and representatives[46] - Competition comes from publicly traded oilfield service and equipment companies and smaller independent manufacturers across oil and gas, industrial, and renewable energy markets[47] - The company's business is heavily influenced by volatile oil and gas industry activity levels, driven by oil and gas prices, drilling activity, and capital expenditures[49] Seasonal Nature of the Company's Business NOV's business experiences seasonal trends, with Q4 spending peaks and Q1 declines due to budgetary cycles and winter weather - NOV's business experiences seasonal trends, with more pronounced spending in the fourth quarter and a decline in the first quarter, partly due to annual budgetary cycles and winter weather[51] - First quarter revenues have historically declined 9.1% sequentially from the fourth quarter, and severe weather can reduce oilfield operations and demand[51] Research and New Product Development and Intellectual Property NOV leads in technology development, holding extensive IP, while also emphasizing product quality, timely delivery, and technical expertise - NOV is a leader in new technology and equipment development, with sales and earnings partly reliant on successful product introductions[52] - The company possesses an extensive portfolio of intellectual property, including granted patents and pending applications worldwide, with expiration dates ranging from 2024 to 2042[53] - Beyond intellectual property, NOV emphasizes product quality, timely delivery, customer service, and the technical knowledge of its personnel as crucial competitive factors[54] Manufacturing and Service Locations NOV conducts global manufacturing and service operations, primarily using alloy steel, with key facilities across multiple countries and segments - NOV's manufacturing processes include machining, welding, fabrication, heat treating, assembly, and testing, primarily using alloy steel[55] - Wellbore Technologies has primary facilities in Houston, Conroe, Navasota, Cedar Park (Texas), Veracruz (Mexico), Nisku (Canada), Dubai (UAE), China, and Saudi Arabia[56] - Completion & Production Solutions operates primary facilities in Houston, Fort Worth (Texas), Tulsa (Oklahoma), Senai (Malaysia), Qingdau (China), Kalundborg (Denmark), Superporto du Acu (Brazil), Manchester (England), Dammam (Saudi Arabia), Aberdeenshire (Scotland, UK), and Mt. Union (Pennsylvania)[57] - Rig Technologies' primary facilities are in Houston (Texas), Dubai (UAE), Al Jubail (Saudi Arabia), New Iberia (Louisiana), Stavanger and Kristiansand (Norway), Mexicali (Mexico), Pune (India), Singapore, and Korea[58] Raw Materials NOV sources materials globally, with prices influenced by energy, steel, and commodities; costs mitigated but future impacts possible - NOV's raw materials and components are generally available from multiple sources, but prices are influenced by energy, steel, commodity prices, tariffs, and foreign currency exchange rates[59] - The company has successfully mitigated higher raw material costs through surcharges and price adjustments, but future periods may face adverse impacts from rising prices and reduced availability[59] Backlog NOV monitors backlog for orders over three months, with Completion & Production Solutions at $1.8 billion and Rig Technologies at $2.9 billion - NOV's backlog includes firm orders typically requiring more than three months to manufacture and deliver, though customer defaults may occur with cost reimbursement[60][61] Capital Equipment Backlog (in billions) | Segment | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | :--- | | Completion & Production Solutions | $1.8 | $1.6 | $1.3 | | Rig Technologies | $2.9 | $2.8 | $2.8 | Human Capital NOV employs 33,676 diverse individuals globally, prioritizing employee health, safety, diversity, and career development through comprehensive programs - NOV has 33,676 global employees, with 36% in the United States and significant operations across 61 countries[12][62][64] - The workforce comprises diverse professionals, including engineers, sales, supply chain, production, and field service personnel, crucial for designing, manufacturing, and supporting complex energy equipment[63] - NOV is committed to safeguarding and supporting employee health, safety, diversity, and career satisfaction, offering competitive benefits, training programs, and fostering a culture of inclusion[65][66][67][69][70] Available Information NOV Inc.'s principal executive offices are in Houston, Texas; SEC filings and Code of Ethics are available free online - NOV Inc.'s principal executive offices are located at 10353 Richmond Avenue, Houston, Texas 77042[71] - The company's SEC filings (10-K, 10-Q, 8-K) and Code of Ethics are available free of charge on its investor relations website: www.nov.com/investor[71](index=71&type=chunk) ITEM 1A. RISK FACTORS Details risks from volatile industry environment, operational challenges, legal and regulatory non-compliance, and geopolitical events Industry Environment and Operations Related Risks NOV faces risks from volatile oil/gas markets, competition, IP infringement, supply chain, personnel, weather, goodwill impairment, and regulatory changes - NOV's demand is primarily tied to the volatile oil and gas industry, influenced by oil/gas prices, drilling activity, and capital expenditures, which can cause significant fluctuations in operating results[74][75][76] - The company faces risks from contract cancellations or delays on its $4.7 billion backlog, intense competition, potential intellectual property infringements, and supply chain disruptions leading to increased costs or inability to deliver[77][79][80][81][84] - Operational risks include challenges in hiring and retaining qualified personnel, disruptions from severe weather, potential impairment of $1.6 billion in goodwill due to market downturns, and integration risks from acquisitions[92][93][95][97] - Future federal, state, or local laws limiting or banning hydraulic fracturing could make it more difficult to complete natural gas and oil wells, materially affecting NOV's business[98] Legal and Regulatory Related Risks NOV faces risks from non-compliance with U.S./foreign laws, environmental liabilities, evolving ESG policies, tax changes, and operations in sensitive regions - Failure to comply with complex U.S. and foreign laws (e.g., FCPA, trade controls) could lead to investigations, sanctions, and civil/criminal prosecution, materially impacting business and financial results[99][100] - NOV is exposed to environmental, product, or personal injury liabilities from its operations, and while it maintains liability insurance, coverage limits or exclusions could result in material adverse effects[103][104] - Future ESG laws, climate change regulations (e.g., GHG reporting), and increased activism could increase compliance costs, reduce demand for oil/gas, and negatively impact NOV's business and stock price[105][106] - The company faces risks from changes in tax rates, new tax legislation, and ongoing tax audits (e.g., $51 million assessment in Denmark, IRS adjustment for 2017/2018), which could materially affect financial condition[108][209][210] - Operations outside the U.S., particularly in Russia due to ongoing conflicts and sanctions, expose NOV to complex compliance issues, potential criminal penalties, and impairment charges (e.g., $4.2 million in 2023, $126.8 million in 2022 related to Russia/Belarus)[110][111] GLOSSARY OF OILFIELD TERMS Provides definitions for key terminology used within the oilfield industry ITEM 1B. UNRESOLVED STAFF COMMENTS Addresses any unresolved comments from the SEC staff regarding the company's filings Unresolved Staff Comments NOV Inc. reports no unresolved staff comments - NOV Inc. has no unresolved staff comments[120] ITEM 1C. CYBERSECURITY Outlines NOV Inc.'s comprehensive cybersecurity program, its Board oversight, and the absence of material adverse cyber incidents Cybersecurity Program and Oversight NOV maintains a comprehensive cyber risk program led by a CISO, with Board oversight, and no material adverse cyber incidents to date - NOV maintains a cyber risk program led by a CISO with 30 years of experience, based on NIST Cybersecurity Framework and ISO 27001 standards[120][121] - The program includes an incident response plan with senior management escalation, third-party risk assessments, and continuous vulnerability/penetration testing[122] - The Board of Directors provides oversight of the cybersecurity program through quarterly updates and annual enterprise risk management discussions[123] - NOV has not experienced any cybersecurity incidents that have had a material adverse effect on its business, financial condition, results of operations, or cash flows[124] ITEM 2. PROPERTIES Details NOV Inc.'s global property footprint, including owned and leased facilities for manufacturing, service, and administration Global Facilities Overview As of December 31, 2023, NOV owned or leased 548 facilities globally, including manufacturing, service, and administrative sites - As of December 31, 2023, NOV owned or leased approximately 548 facilities globally[126] - These facilities include 302 repair and manufacturing facilities, 110 service centers, and 136 engineering, sales, and administration facilities[127] Selected Principal Facilities (Owned/Leased) | Segment | Location | Description | Owned/Leased | | :--- | :--- | :--- | :--- | | Wellbore Technologies | Navasota, Texas | Manufacturing Facility & Administrative Offices | Owned | | Wellbore Technologies | Conroe, Texas | Manufacturing Facility of Drill Bits and Downhole Tools | Owned | | Completion & Production Solutions | Senai, Malaysia | Manufacturing Facility of Fiber Glass Products | Owned* | | Completion & Production Solutions | Kalundborg, Denmark | Flexibles Manufacturing | Owned | | Rig Technologies | Houston, Texas | Bammel Facility, Repairs, Service, Aftermarket Parts | Leased | | Rig Technologies | Al Jubail, Saudi Arabia | Manufacturer and Service of Drilling Rigs and Equipment | Leased | ITEM 3. LEGAL PROCEEDINGS Refers to the detailed information on NOV Inc.'s legal proceedings in Note 12 – Commitments and Contingencies Legal Proceedings Reference Legal proceedings information is incorporated by reference from Note 12 – Commitments and Contingencies - Legal proceedings information is detailed in Note 12 – Commitments and Contingencies (Part IV, Item 15)[128] ITEM 4. MINE SAFETY DISCLOSURES Provides information on mine safety and other regulatory actions, included in Exhibit 95 of this Form 10-K Mine Safety Disclosures Mine safety and regulatory actions information is provided in Exhibit 95 of this Form 10-K - Mine safety and regulatory actions information is included in Exhibit 95 of this Form 10-K[129] PART II Covers market information for common equity, financial performance, liquidity, accounting policies, and market risk disclosures ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES NOV's common stock trades on NYSE, with 1,738 holders, declared $0.05 quarterly dividends, and Q4 2023 share repurchases for tax withholding - NOV Inc.'s common stock is traded on the New York Stock Exchange under the symbol "NOV", with 1,738 holders of record as of February 2, 2024[132] Cash Dividends Declared | Year | Dividends Declared (per share) | Total Dividends (millions) | | :--- | :--- | :--- | | 2023 | $0.05 per quarter | $79 | | 2022 | $0.05 per quarter | $78 | Cumulative Total Shareholder Return (Base $100 on 12/31/2018) | Index | 12/18 | 12/19 | 12/20 | 12/21 | 12/22 | 12/23 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | NOV Inc. | 100.00 | 98.32 | 54.20 | 53.71 | 83.63 | 82.09 | | S&P 500 | 100.00 | 131.49 | 155.68 | 200.37 | 164.08 | 207.21 | | S&P Oil & Gas Equipment & Services Index | 100.00 | 110.54 | 70.50 | 89.93 | 148.21 | 150.90 | | PHLX Oil Service Index | 100.00 | 99.45 | 57.60 | 69.55 | 112.31 | 114.47 | | S&P Oil & Gas Equipment Index | 100.00 | 91.36 | 51.72 | 58.05 | 94.34 | 101.02 | - Shares purchased in Q4 2023 (12,899 shares at an average price of $20.32) were withheld from employee vested restricted stock grants for income taxes and were not part of a publicly announced buyback program[140] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NOV Inc. reported $8.58 billion revenue in 2023, with significant operating profit and net income growth, driven by industry activity and energy transition Key Financial Highlights (Year Ended December 31) | Metric | 2023 (millions) | 2022 (millions) | 2021 (millions) | 2023 vs 2022 Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $8,583 | $7,237 | $5,524 | 18.6% | | Operating Profit (Loss) | $651 | $264 | $(134) | 146.6% | | Net Income (Loss) Attributable to Company | $993 | $155 | $(250) | 540.6% | | Diluted EPS | $2.50 | $0.39 | $(0.65) | 541.0% | - Net income in 2023 included a $485 million release of valuation allowances on deferred tax assets, contributing $2.50 per fully diluted share[152][177] Key Industry Indicators (Averages for the Years Indicated) | Indicator | 2023 | 2022 | 2021 | 2023 vs 2022 Change (%) | | :--- | :--- | :--- | :--- | :--- | | Worldwide Active Drilling Rigs | 1,814 | 1,747 | 1,362 | 3.8% | | West Texas Intermediate Crude Prices (per barrel) | $77.64 | $94.81 | $67.99 | (18.1%) | | Natural Gas Prices ($/mmbtu) | $2.54 | $6.38 | $3.88 | (60.2%) | - NOV is increasingly engaged in energy transition opportunities, including wind, solar, geothermal, and carbon sequestration, expecting continued growth in these areas[150] General Overview NOV is a leading global provider of equipment and technology to the upstream oil and gas industry, with performance tied to volatile commodity prices - NOV is a leading independent provider of equipment and technology to the upstream oil and gas industry, operating in approximately 548 locations across six continents[142] - The company's financial performance is primarily dependent on worldwide oil and gas drilling and production activities, which are affected by volatile oil and gas prices[143] - NOV is actively advancing the transition toward sustainable energy by applying its deep knowledge and technology[142] Operating Environment Overview NOV's results are influenced by global oil and gas activity and commodity prices; 2023 saw rig activity increase while WTI crude and natural gas prices decreased - NOV's performance is driven by worldwide oil and gas drilling, well remediation, commodity prices, capital spending, and renewable energy investments[146] Key Industry Indicators (2023 vs 2022) | Indicator | 2023 Average | 2022 Average | % Change | | :--- | :--- | :--- | :--- | | Worldwide Active Drilling Rigs | 1,814 | 1,747 | 3.8% | | West Texas Intermediate Crude Prices (per barrel) | $77.64 | $94.81 | (18.1%) | | Natural Gas Prices ($/mmbtu) | $2.54 | $6.38 | (60.2%) | - As of February 2, 2024, North American rig activity increased 6% from Q4 2023, but WTI crude oil prices decreased 8% and natural gas prices decreased 24% from Q4 2023 averages[149] Executive Summary NOV Inc. achieved $8.58 billion revenue in 2023, with $651 million operating profit and $993 million net income, boosted by a deferred tax asset release NOV Inc. Financial Performance (2023) | Metric | 2023 (millions) | | :--- | :--- | | Revenue | $8,580 | | Operating Profit | $651 | | Net Income Attributable to Company | $993 | | Net Income Attributable to Company (per fully diluted share) | $2.50 | | Q4 2023 Revenue | $2,340 | | Q4 2023 Net Income | $598 | | Q4 2023 Net Income (per fully diluted share) | $1.51 | | Q4 2023 Adjusted EBITDA | $294 | - The 2023 net income included a $485 million release of valuation allowances on deferred tax assets[152] - Adjusted EBITDA for Q4 2023 was $294 million, an increase from $267 million in Q3 2023 and $231 million in Q4 2022[154] Segment Performance (Q4 2023) In Q4 2023, all three segments reported sequential revenue and Adjusted EBITDA increases, driven by international demand and strong capital equipment sales Q4 2023 Segment Performance (Sequential and YoY Changes) | Segment | Q4 2023 Revenue (millions) | Seq. Change (%) | YoY Change (%) | Q4 2023 Adjusted EBITDA (millions) | Seq. Change (millions) | YoY Change (millions) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Wellbore Technologies | $824 | +3% | +8% | $160 | -$6 | +$14 | | Completion & Production Solutions | $803 | +6% | +9% | $86 | +$19 | +$20 | | Rig Technologies | $766 | +12% | +24% | $109 | +$9 | +$21 | - Completion & Production Solutions booked $676 million in new orders in Q4 2023 (book-to-bill of 132%), increasing its backlog to $1.82 billion[157] - Rig Technologies booked $214 million in new capital equipment orders in Q4 2023 (book-to-bill of 68%), with backlog at $2.87 billion[159] Oil & Gas Equipment and Services Market and Outlook Management anticipates an extended industry recovery, expecting increased oilfield activity despite near-term commodity volatility, while focusing on efficiency and energy transition - Management believes the industry is in the early stages of an extended recovery, initiated in 2021, driven by improving economic activity and diminished productive capacity[160] - Despite near-term commodity price volatility from geopolitical risks and global economic slowdowns, diminished global oil and gas production capacity and rising energy security risks are expected to increase oilfield activity and demand for NOV's equipment[161] - NOV is committed to improving organizational efficiencies and developing innovative products, including those that reduce environmental impact and accelerate the energy transition[162] Results of Operations (2023 vs 2022) In 2023, all three segments reported significant revenue and operating profit growth, driven by international and offshore demand, with increased corporate costs Revenue and Operating Profit by Segment (Year Ended December 31, in millions) | Segment | 2023 Revenue | 2022 Revenue | % Change (2023 vs 2022) | 2023 Operating Profit | 2022 Operating Profit | % Change (2023 vs 2022) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Wellbore Technologies | $3,172 | $2,777 | 14.2% | $423 | $304 | 39.1% | | Completion & Production Solutions | $3,034 | $2,588 | 17.2% | $188 | $69 | 172.5% | | Rig Technologies | $2,608 | $2,034 | 28.2% | $314 | $144 | 118.1% | | Eliminations | $(231) | $(162) | (42.6%) | | | | | Eliminations and corporate costs | | | | $(274) | $(253) | (8.3%) | | Total | $8,583 | $7,237 | 18.6% | $651 | $264 | 146.6% | - Wellbore Technologies' improved results were driven by growing demand from international and offshore markets, improved manufacturing throughput, and market share gains, offsetting North American declines[165] - Completion & Production Solutions' operating profit improvement was due to growing demand and a higher rate of progress on higher-margin international and offshore projects, despite softening North American demand[168] - Rig Technologies' growth in revenue and profitability stemmed from improved demand for drilling equipment and aftermarket services in international and offshore markets, along with progress on offshore wind-related backlog[172] - Other expense, net, increased to $98 million in 2023 from $35 million in 2022, primarily due to higher foreign exchange losses[176] Provision for Income Taxes NOV Inc.'s 2023 effective tax rate was (60.9%), primarily due to a $485 million release of deferred tax asset valuation allowances - The effective tax rate for 2023 was (60.9%), favorably impacted by the release of $485 million in valuation allowances on deferred tax assets[177] - The valuation allowance release included $299 million in the United States and $186 million outside the United States, driven by a growing trend of profitability and expectations of future taxable income[177] - NOV continues to maintain a valuation allowance of $346 million, primarily related to foreign tax credit carryforwards in the U.S. and deferred tax assets in certain other international jurisdictions[177] Results of Operations in 2022 Compared to 2021 Operating results comparison for 2022 and 2021 is incorporated by reference from the 2022 Form 10-K - Comparison of 2022 and 2021 operating results is incorporated by reference from the 2022 Form 10-K[179] Non-GAAP Financial Measures and Reconciliations NOV uses Adjusted EBITDA as a non-GAAP financial measure to evaluate operational performance and trends, defined as operating profit excluding specific items - NOV uses Adjusted EBITDA as a non-GAAP financial measure to evaluate operational performance and trends, considered supplemental to GAAP measures[180][181] - Adjusted EBITDA is defined as operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets, and 'Other Items' (e.g., Russia impairment, inventory charges, voluntary early retirement program, royalty discount, earnout, severance)[181][182] Total Adjusted EBITDA (in millions) | Period | Total Operating Profit | Total Other Items | Total (Gain)/Loss on Sales of Fixed Assets | Total Depreciation & Amortization | Total Adjusted EBITDA | | :--- | :--- | :--- | :--- | :--- | :--- | | Q4 2023 | $161 | $55 | $1 | $77 | $294 | | Q3 2023 | $183 | $7 | $0 | $77 | $267 | | Q4 2022 | $162 | $(8) | $1 | $76 | $231 | | Year Ended 2023 | $651 | $51 | $(3) | $302 | $1,001 | | Year Ended 2022 | $264 | $114 | $0 | $301 | $679 | Liquidity and Capital Resources As of December 31, 2023, NOV Inc. had $816 million in cash and $1.725 billion in debt, with a $2.0 billion available credit facility and improved operating cash flow Liquidity and Debt (in millions) | Metric | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $816 | $1,069 | | Total debt | $1,725 | $1,730 | | Revolving credit facility capacity | $2,000 | $2,000 | | Available funds under credit facility | $2,000 | $2,000 | | Debt-to-capitalization ratio | 23.9% | N/A | | Outstanding letters of credit | $495 | N/A | Net Cash Flows (in millions) | Activity | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $143 | $(179) | $291 | | Net cash used in investing activities | $(293) | $(238) | $(196) | | Net cash used in financing activities | $(103) | $(96) | $(189) | - Significant uses of cash in 2023 included $283 million for capital expenditures, $22 million for business acquisitions, and $79 million in dividends[192] - Approximately $728 million of cash and cash equivalents was held by foreign subsidiaries as of December 31, 2023, potentially subject to foreign withholding taxes and incremental U.S. taxation if repatriated[185] Critical Accounting Policies and Estimates NOV's critical accounting policies involve significant estimates for revenue recognition, goodwill impairment, inventory reserves, and income taxes - Critical accounting estimates include revenue recognition under long-term construction contracts, goodwill impairment, inventory reserves, and income taxes[196] - 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[197][198] - Goodwill, approximately $1.6 billion as of December 31, 2023, is tested annually for impairment using discounted cash flow analysis, with key assumptions being cash flow from operations and weighted average cost of capital[201][202] Inventory Reserves (in millions) | Year | Inventory Provision Charges (Credits) | Inventory Reserves (End of Year) | % of Gross Inventory | | :--- | :--- | :--- | :--- | | 2023 | $28 | $354 | 14.1% | | 2022 | $(18) | $378 | 17.3% | | 2021 | $73 | $444 | N/A | - Income tax accounting involves significant judgment in determining annual tax provisions, evaluating tax positions, and assessing deferred tax assets and liabilities, including a $346 million valuation allowance as of December 31, 2023[208][209][211] Recently Issued and Recently Adopted Accounting Standards In Q1 2023, NOV adopted ASU 2020-04, modifying debt and derivative instruments from LIBOR to SOFR, with no material financial impact - NOV adopted ASU 2020-04, "Reference Rate Reform (Topic 848)," in Q1 2023, modifying debt and derivative instruments from LIBOR to SOFR[212][324] - The adoption of this optional relief guidance did not have a material impact on the consolidated financial statements[212][324] Forward–Looking Statements This report contains forward-looking statements, which involve risks and uncertainties, and actual results may differ materially due to various factors - The document contains forward-looking statements, identified by terms such as "may," "believe," "plan," "will," "expect," "anticipate," "estimate," "should," and "forecast"[213] - Actual results could differ materially from forward-looking statements due to factors including changes in oil and gas prices, customer demand, worldwide economic activity, and Russian sanctions[213] - Investors are cautioned not to place undue reliance on forward-looking statements, and the company undertakes no obligation to update them[213] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Details NOV Inc.'s exposure to market risks, specifically foreign currency exchange rates and interest rate fluctuations Foreign Currency Exchange Rates NOV is exposed to foreign currency exchange rate risks, using forward contracts to mitigate, with $84 million in losses in 2023 - NOV's extensive foreign operations expose it to foreign currency exchange rate risks, resulting in net foreign currency transaction losses of $84 million in 2023, compared to $25 million in 2022[214][304] - The company uses foreign currency forward contracts for cash flow hedging (forecasted revenues/expenses) and non-designated hedging (nonfunctional currency monetary accounts) to mitigate risk[215][325][328][330] - A hypothetical 10% movement in applicable foreign currency exchange rates could affect net income by $37 million (transactional exposures) and Other Comprehensive Income by $37 million (translational exposures)[216] Forward Currency Contracts by Denomination (in millions) | Currency | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Colombian Peso (COP) | 57,487 | — | | Norwegian Krone (NOK) | 2,179 | 2,741 | | Japanese Yen (JPY) | 1,118 | 460 | | U.S. Dollar (USD) | 677 | 655 | | Brazilian Real (BRL) | 291 | 291 | | Mexican Peso (MXN) | 157 | 160 | | Euro (EUR) | 102 | 125 | | South African Rand (ZAR) | 25 | 149 | | Singapore Dollar (SGD) | 23 | 27 | | British Pound Sterling (GBP) | 5 | 16 | | Danish Krone (DKK) | 2 | 13 | | Canadian Dollar (CAD) | 1 | 2 | | South Korean Won (KRW) | — | 65,980 | Interest Rate Risk NOV's debt primarily consists of Senior Notes, with a strategy to maintain variable rate borrowings for flexibility and lower overall cost - As of December 31, 2023, NOV's borrowings included $1,091 million in 3.95% Senior Notes and $495 million in 3.60% Senior Notes, plus $139 million in other debt[218][349] - The company's objective is to maintain a portion of debt in variable rate borrowings (SOFR, NIBOR, CDOR, or U.S. prime rate) for flexibility and lower overall cost[218] - A consolidated joint venture has a $120 million bank line of credit with interest based on SOFR plus 1.40%[218][350] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Refers to the consolidated financial statements and supplementary data included in the report, listed in Item 15 Financial Statements and Supplementary Data Reference Financial statements and supplementary data are attached and listed in Item 15 - Financial statements and supplementary data are attached and listed in Item 15[219] ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Reports no changes in or disagreements with accountants regarding accounting and financial disclosure Accountant Disagreements NOV Inc. reports no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[219] ITEM 9A. CONTROLS AND PROCEDURES Details management's evaluation of disclosure controls and internal control over financial reporting, both deemed effective Evaluation of Disclosure Controls and Procedures NOV's management concluded that disclosure controls and procedures were effective as of December 31, 2023, providing reasonable assurance - NOV's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 31, 2023, at the reasonable assurance level[220] - Disclosure controls are designed to ensure timely and accurate accumulation, communication, processing, summarization, and reporting of information required by the Securities Exchange Act of 1934[220] Internal Control Over Financial Reporting Management concluded that NOV's internal control over financial reporting was effective as of December 31, 2023, with no material changes - Management concluded that NOV's internal control over financial reporting was effective as of December 31, 2023, based on the 2013 COSO framework[250] - There were no changes in internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[222] ITEM 9B. OTHER INFORMATION Reports no other information required to be disclosed under Item 9B Other Information No other information is reported under Item 9B - No other information is reported under Item 9B[223] ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Reports no disclosures concerning foreign jurisdictions that prevent inspections for NOV Inc. Foreign Jurisdictions Preventing Inspections NOV Inc. has no disclosures regarding foreign jurisdictions that prevent inspections - No disclosures regarding foreign jurisdictions that prevent inspections[224] PART III Incorporates by reference information on directors, executive compensation, security ownership, related transactions, and accounting fees ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Annual Meeting of Stockholders Proxy Statement[227] ITEM 11. EXECUTIVE COMPENSATION Executive compensation information is incorporated by reference from the 2024 Proxy Statement - Executive compensation information is incorporated by reference from the 2024 Annual Meeting of Stockholders Proxy Statement[228] ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OW NERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Security ownership information is incorporated by reference from the 2024 Proxy Statement, with 19.975 million securities to be issued under equity plans - Security ownership information is incorporated by reference from the 2024 Annual Meeting of Stockholders Proxy Statement[229] Securities Authorized for Issuance Under Equity Compensation Plans (as of December 31, 2023) | Plan Category | Number of securities to be issued upon exercise of warrants and rights (a) | Weighted-average exercise price of outstanding rights (b) | Number of securities remaining available for equity compensation plans (excluding securities reflected in column (a)) (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 19,975,103 | $38.85 | 12,893,863 | | Equity compensation plans not approved by security holders | — | — | — | | Total | 19,975,103 | $38.85 | 12,893,863 | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Annual Meeting of Stockholders Proxy Statement[231] ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Principal accounting fees and services information is incorporated by reference from the 2024 Proxy Statement - Principal accounting fees and services information is incorporated by reference from the 2024 Annual Meeting of Stockholders Proxy Statement[232] PART IV Includes exhibits, financial statements, management's report on internal control, the independent auditor's report, and detailed notes to the financial statements ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES This section lists the financial statements, schedules, and exhibits included or incorporated by reference into the Form 10-K - The section presents the consolidated financial statements, including Balance Sheets, Statements of Income (Loss), Comprehensive Income (Loss), Cash Flows, Stockholders' Equity, and Notes to Consolidated Financial Statements[235] - Schedule II – Valuation and Qualifying Accounts is included, while other schedules are omitted as not applicable or included elsewhere[236] - Exhibits include corporate governance documents (Certificate of Incorporation, By-laws), debt instruments (Indentures, Credit Agreements), equity compensation plans, employment agreements, and certifications (e.g., Sarbanes-Oxley Act)[236][238] SIGNATURES The Form 10-K is signed by key executives and the Board of Directors, all dated February 14, 2024 - The report is signed by key executives including Clay C. Williams (Chairman, President and CEO), Jose A. Bayardo (Senior Vice President and CFO), and Christy H. Novak (Vice President, Corporate Controller and Chief Accounting Officer)[245][247] - The Board of Directors also signed the report, with all signatures dated February 14, 2024[247] MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management concluded that NOV Inc.'s internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework - Management is responsible for internal control over financial reporting and concluded it was effective as of December 31, 2023, based on the 2013 COSO framework[248][250] - Internal control over financial reporting, while subject to inherent limitations like human error or circumvention, is designed to provide reasonable assurance regarding financial reporting reliability[249] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP issued unqualified opinions on NOV Inc.'s internal control and 2023 financial statements, highlighting key audit matters - Ernst & Young LLP issued an unqualified opinion on NOV Inc.'s internal control over financial reporting as of December 31, 2023, based on COSO criteria[254] - They also issued an unqualified opinion on the company's 2023 consolidated financial statements[255][263] - Critical audit matters included the subjectivity in auditing management's estimates for revenue recognition under long-term construction contracts and the complex judgment involved in measuring the valuation allowance against deferred tax assets[268][269][272][273] NOV INC. CONSOLIDATED FINANCIAL STATEMENTS Presents NOV Inc.'s Consolidated Balance Sheets, Statements of Income, Comprehensive Income, Cash Flows, and Stockholders' Equity for 2021-2023 Consolidated Balance Sheet Highlights (in millions) | Metric | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total assets | $11,294 | $10,135 | | Total liabilities | $5,052 | $5,001 | | Total stockholders' equity | $6,242 | $5,134 | | Cash and cash equivalents | $816 | $1,069 | | Inventories, net | $2,151 | $1,813 | | Goodwill | $1,562 | $1,505 | | Long-term debt | $1,712 | $1,717 | Consolidated Statements of Income (Loss) Highlights (in millions, except per share data) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenue | $8,583 | $7,237 | $5,524 | | Gross profit | $1,833 | $1,334 | $774 | | Operating profit (loss) | $651 | $264 | $(134) | | Net income (loss) attributable to Company | $993 | $155 | $(250) | | Diluted EPS | $2.50 | $0.39 | $(0.65) | | Cash dividends per share | $0.20 | $0.20 | $0.05 | Consolidated Statements of Cash Flows Highlights (in millions) | Activity | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $143 | $(179) | $291 | | Net cash used in investing activities | $(293) | $(238) | $(196) | | Net cash used in financing activities | $(103) | $(96) | $(189) | | Cash and cash equivalents, end of period | $816 | $1,069 | $1,591 | Consolidated Statements of Comprehensive Income (Loss) Highlights (in millions) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net income (loss) | $985 | $155 | $(245) | | Other comprehensive income (loss) | $113 | $(30) | $(34) | | Comprehensive income (loss) attributable to Company | $1,093 | $108 | $(287) | NOV INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The notes provide detailed information on NOV Inc.'s organization, significant accounting policies, financial instruments, and critical accounting estimates - The notes detail NOV's nature of business as a designer, manufacturer, and seller of systems, components, and products for oil and gas drilling, production, and certain industrial and renewable energy sectors[292] - Significant accounting policies cover fair value of financial instruments, derivative instruments (including cash flow and non-designated hedges), inventory valuation (lower of cost or net realizable value), property, plant and equipment, and acquisitions[294][295][296][299][301] - Revenue recognition policies are detailed, including over-time recognition for long-term construction contracts (cost-to-cost method) and point-in-time recognition for most other revenue streams[305][307][308] - Critical accounting estimates are highlighted for revenue recognition, goodwill impairment, inventory reserves, and income taxes, emphasizing the use of judgment and potential for material differences from actual results[196][201][203][208][321] 1. Organization and Basis of Presentation NOV Inc. designs, manufactures, and sells systems for oil and gas and renewable energy, with financial results tied to volatile industry activity - NOV Inc. designs, constructs, manufactures, and sells comprehensive systems, components, and products for oil and gas drilling, production, and certain industrial and renewable energy sectors[292] - The company's revenues and operating results are directly related to the volatile worldwide oil and gas drilling and production activities[292] - The consolidated financial statements include NOV Inc. and its consolidated subsidiaries, with reclassifications made to prior year statements to conform with the 2023 presentation[293] 2. Summary of Significant Accounting Policies Outlines NOV's key accounting policies, including fair value measurement, derivatives, inventory, property, acquisitions, and revenue recognition - Financial instruments like cash, receivables, and payables are carried at fair value due to short maturity[294] - Derivative financial instruments are recorded at fair value, designated as cash flow hedges or non-designated hedges, to manage foreign currency exchange rate risk[295] - Inventories are stated at the lower of cost or estimated net realizable value, with charges to reserves of $28 million in 2023[296][297] - Revenue is recognized either at a point in time (when control transfers) or over time for long-term construction contracts (cost-to-cost method) and service/repair work (output or cost-to-cost method)[305][307][308][311] - Other significant policies include accounting for service and product warranties, income taxes (liability method with valuation allowances), concentration of credit risk, stock-based compensation, environmental liabilities, and the pervasive use of management estimates[315][317][318][319][320][321] 3. Derivative Financial Instruments NOV uses forward currency contracts as cash flow and non-designated hedges to manage foreign currency risk, with a $2 million net fair value liability - NOV uses forward currency contracts to manage foreign currency exchange rate risk, designating them as cash flow hedges or non-designated hedges[325] - As of December 31, 2023, the net fair value of foreign currency forward contracts was a $2 million net liability[326] - The company expects $3 million from accumulated other comprehensive loss related to cash flow hedges to be reclassified into earnings within the next twelve months[329] Fair Values of Derivative Instruments (in millions) | Type | Balance Sheet Location | Dec 31, 2023 Fair Value (Asset) | Dec 31, 2022 Fair Value (Asset) | Balance Sheet Location | Dec 31, 2023 Fair Value (Liability) | Dec 31, 2022 Fair Value (Liability) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Designated as hedging instruments | Prepaid and other current assets | $8 | $3 | Accrued liabilities | $2 | $3 | | Designated as hedging instruments | Other Assets | $0 | $0 | Other Liabilities | $1 | $1 | | Not designated as hedging instruments | Prepaid and other current assets | $11 | $5 | Accrued liabilities | $17 | $10 | | Not designated as hedging instruments | Other Assets | $0 | $0 | Other Liabilities | $1 | $0 | | Total derivatives | | $19 | $8 | | $21 | $14 | 4. Inventories, net NOV Inc.'s net inventories increased to $2.151 billion in 2023, with an inventory reserve of $354 million (14.1% of gross inventory) at year-end Inventories, net (in millions) | Category | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Raw materials and supplies | $479 | $479 | | Work in process | $230 | $308 | | Finished goods and purchased products | $1,796 | $1,404 | | Total Gross Inventory | $2,505 | $2,191 | | Less: Inventory reserve | $(354) | $(378) | | Total Net Inventory | $2,151 | $1,813 | - Inventory reserves totaled $354 million at December 31, 2023, representing 14.1% of gross inventory, compared to $378 million (17.3%) in 2022[297][332] 5. Property, Plant and Equipment, net NOV Inc.'s net property, plant and equipment increased to $1.865 billion in 2023, with operating and rental equipment as largest components Property, Plant and Equipment, net (in millions) | Category | Estimated Useful Lives | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | :--- | | Land | | $180 | $176 | | Buildings and improvements | 5-35 Years | $1,285 | $1,251 | | Operating equipment | 2-20 Years | $2,803 | $2,683 | | Rental equipment | 2-15 Years | $923 | $798 | | Total Gross | | $5,191 | $4,908 | | Less: Accumulated Depreciation | | $(3,326) | $(3,127) | | Total Net | | $1,865 | $1,781 | - Depreciation expense was $260 million in 2023, $250 million in 2022, and $264 million in 2021[299] 6. Goodwill and Intangible Assets NOV Inc. held $1.562 billion in goodwill and $450 million in identified intangible assets in 2023, with no impairment recorded - As of December 31, 2023, NOV had $1,562 million in goodwill and $450 million in identified intangible assets[334][336] Goodwill by Segment (in millions) | Segment | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Wellbore Technologies | $327 | $313 | | Completion & Production Solutions | $483 | $480 | | Rig Technologies | $752 | $712 | | Total Goodwill | $1,562 | $1,505 | Identified Intangible Assets by Major Classification (in millions) | Classification | December 31, 2023 Net Book Value | December 31, 2022 Net Book Value | | :--- | :--- | :--- | | Customer relationships | $125 | $148 | | Trademarks | $41 | $46 | | Patents | $54 | $62 | | Indefinite-lived trade names | $196 | $196 | | Other | $34 | $38 | | Total Identified Intangibles | $450 | $490 | - Identified intangible assets are amortized over estimated useful lives of 2-40 years, with expected amortization expense of $39 million in 2024[335] - No impairment of goodwill or indefinite-lived intangible assets was recorded in 2023 or 2022, based on annual impairment tests[342] 7. Accrued Liabilities NOV Inc.'s accrued liabilities decreased to $870 million in 2023, with compensation, vendor costs, and non-income taxes as largest components Accrued Liabilities (in millions) | Category | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Compensation | $294 | $329 | | Vendor costs | $133 | $168 | | Taxes (non-income) | $112 | $107 | | Warranty | $72 | $70 | | Insurance | $44 | $42 | | Commissions | $17 | $18 | | Fair value of derivatives | $19 | $13 | | Interest | $8 | $7 | | Other | $171 | $205 | | Total | $870 | $959 | 8. Leases NOV Inc.'s total lease liabilities were $652 million in 2023, with a total lease cost of $187 million and weighted-average lease terms provided Lease Liabilities (in millions) | Category | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Current portion of lease liabilities | $94 | $87 | | Long-term portion of lease liability | $558 | $549 | | Total Lease Liabilities | $652 | $636 | Components of Lease Expense (in millions) | Component | 2023 | 2022 | | :--- | :--- | :--- | | Finance lease cost (Amortization of ROU assets) | $23 | $24 | | Finance lease cost (Interest on lease liabilities) | $10 | $9 | | Operating lease cost | $85 | $73 | | Short-term lease cost | $77 | $90 | | Sub-lease income | $(8) | $(8) | | Total Lease Cost | $187 | $188 | Weighted Average Lease Terms and Discount Rates (as of December 31, 2023) | Lease Type | Remaining Lease Term | Discount Rate | | :--- | :--- | :--- | | Operating leases | 10 years | 5.17% | | Finance leases | 16 years | 4.15% | 9. Debt NOV Inc.'s total debt was $1.725 billion in 2023, primarily Senior Notes, with a $2.0 billion available credit facility and 23.9% debt-to-capitalization ratio Debt Composition (in millions) | Debt Type | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | $1.1 billion Senior Notes (3.95%, due 2042) | $1,091 | $1,090 | | $0.5 billion Senior Notes (3.60%, due 2029) | $495 | $495 | | Other debt | $139 | $145 | | Total Debt | $1,725 | $1,730 | | Less current portion | $13 | $13 | | Long-term debt | $1,712 | $1,717 | - NOV has a $2.0 billion revolving credit facility, with $2.0 billion available as of December 31, 2023, and a debt-to-capitalization ratio of 23.9%[349] - A consolidated joint venture has a $120 million bank line of credit, with a carrying value of $104 million as of December 31, 2023[350] - The fair value of the company's unsecured Senior Notes was approximately $1,316 million at December 31, 2023, compared to a carrying value of $1,586 million[352] 10. Employee Benefit Plans NOV's defined-contribution plan expenses were $84 million in 2023, with pension and postretirement plans showing deficits - Defined-contribution retirement plan expenses were $84 million in 2023, $67 million in 2022, and $34 million in 2021[353] - The company completed the termination of its U.S. defined benefit plan in 2023, with an immaterial non-cash charge[354] Funded Status of Benefit Plans (in millions) | Plan Type | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Defined Benefit Pension Plans (Funded Status) | $(26) | $(1) | | Postretirement Benefits (Funded Status) | $(48) | $(50) | Plan Assets by Fair Value Hierarchy (in millions) | Category | December 31, 2023 Total Fair Value | December 31, 2023 Level 2 | December 31, 2023 Level 3 | | :--- | :--- | :--- | :--- | | Equity securities | $0 |