NOV(NOV) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2021, NOV reported revenues of $1.25 billion, a sequential decline of $78 million or 6% [31] - The company experienced a net loss of $115 million, with EBITDA falling to breakeven, which is considered unacceptable [6][10] - Cash and capital expenditures totaled $49 million, with the company ending the quarter with $1.61 billion in cash and $1.85 billion in gross debt [32] Business Line Data and Key Metrics Changes - The Wellbore Technologies segment generated $413 million in revenue, an increase of $40 million or 11% sequentially, driven by cost-cutting and improved pricing [33] - Completion & Production Solutions segment revenue decreased by $107 million or 20% sequentially to $439 million, primarily due to depleted backlogs and severe weather disruptions [39] - Rig Technologies segment revenues were $431 million, a slight decrease of $6 million or 1% sequentially, with weak orders for rig capital equipment [47] Market Data and Key Metrics Changes - North American oilfield activity showed signs of recovery, with March revenues up sharply from January [9] - Average rig counts in Q1 were down 46% for North America land, 36% for international land, and 31% for offshore year-over-year [12] - Global OCTG demand appears to be picking up, leading to double-digit sequential growth in pipe inspection services [28] Company Strategy and Development Direction - The company is focused on reducing costs, improving cash flow, and investing in next-generation technologies, including renewables [24][25] - NOV aims to capitalize on the recovery in oilfield activity, particularly in Wellbore Technologies, and expects to see a significant improvement in results as the year progresses [30] - The company is exploring opportunities in renewables, leveraging its oilfield service expertise to adapt to new markets [58][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in international markets, particularly in Latin America and the Middle East, supported by higher crude prices [56] - The company anticipates a synchronized global economic recovery, which is expected to lead to rising oil consumption and improved market conditions [19][20] - Risks include excess OPEC capacity and the potential return of Iranian crude production, which could impact oil prices [20][21] Other Important Information - The company achieved $52 million in annualized cost savings during Q1 and identified an additional $31 million in opportunities for 2021 [32] - The Wellbore Technologies segment saw share gains for ReedHycalog bits in key markets despite increasing prices [26] - The company is optimistic about the renewables business, with over $400 million in potential projects being pursued [51] Q&A Session Summary Question: Insights on the international Wellbore business and capacity building - Management is optimistic about the international market recovery, particularly in Latin America and the Middle East, with tenders for bulk sales indicating readiness to resume operations [55][56] Question: Transferable skills to renewables - Management highlighted the transferable skills and technology from oilfield services to renewables, particularly in offshore wind and geothermal operations [58][60] Question: Free cash flow expectations - Management is confident in being free cash flow positive for the year, with improvements in working capital management expected [63][64] Question: CapEx for offshore wind opportunities - Management indicated no significant incremental CapEx is needed for offshore wind opportunities, as existing plants can be utilized [66] Question: Margin progression and return to double-digit EBITDA margins - Management expects Wellbore Technologies to return to mid-teens EBITDA margins, while other segments may reach mid- to upper single-digit margins [72][73] Question: Future of Rig Aftermarket revenues - Management believes aftermarket revenues could return to pre-downturn levels as offshore drillers emerge from bankruptcy and increase spending [75]