NOV Inc. (NYSE: NOV) reported first quarter 2021 revenues of $1.25 billion, a decrease of six percent compared to the fourth quarter of 2020 and a decrease of 34 percent compared to the first quarter of 2020. Net loss for the first quarter of 2021 was $115 million, or 9.2 percent of sales, which included non-cash, pre-tax charges (“other items”, see Other Corporate Items for additional detail) of $9 million. Adjusted EBITDA (operating profit excluding depreciation, amortization, and other items) decreased $17 million sequentially to $0.
“We are encouraged by signs of an emerging global recovery for our industry,” stated Clay Williams, Chairman, President and CEO. “However, NOV’s weak first quarter results reflect the extreme austerity that descended on the oilfield following the economic shutdown of 2020, as our oilfield service customers preserved cash by cannibalizing idle equipment rather than buying new. Severe winter weather in Texas and Oklahoma, additional COVID lockdown measures in Asia, and supply chain disruptions further impacted first quarter results.
“Higher rig activity in North America and certain international markets, resulting from stronger oil prices, is leading to tangible improvements. We are seeing better volume and pricing for our products and services tied to activity, including drill bits, downhole tools, oilfield pipe inspection and wellsite services. Additionally, improving tendering activity is expected to drive additional capital equipment orders in the second half of 2021.
“NOV has undertaken extraordinary cost reduction measures over the past several quarters while continuing to invest in its next generation of products, leaving the Company well-positioned for a recovery. Global economic growth, shrinking crude inventories, stronger oil and gas prices, and recovering oilfield activity are expected to provide the foundation for a meaningful improvement in financial results as the year progresses,” concluded Williams.
Wellbore Technologies generated revenues of $413 million in the first quarter of 2021, an increase of 11 percent from the fourth quarter of 2020 and a decrease of 40 percent from the first quarter of 2020. The sequential increase in revenue was driven by improving drilling activity in the Western Hemisphere, partially offset by seasonality in the Eastern Hemisphere. Operating loss improved $64 million sequentially to $14 million, or 3.4 percent of sales, and included $6 million of other items. Adjusted EBITDA increased $22 million sequentially to $34 million, or 8.2 percent of sales.
Completion & Production Solutions
Completion & Production Solutions generated revenues of $439 million in the first quarter of 2021, a decrease of 20 percent from the fourth quarter of 2020 and a decrease of 35 percent from the first quarter of 2020. The sharp sequential decline in revenue was primarily the result of severe weather disruptions, certain project delays, COVID-19 shutdowns in Southeast Asia, and raw material shortages for the segment’s Fiberglass business unit. Operating loss improved $14 million sequentially to $17 million, or 3.9 percent of sales, and included -$2 million in other items. Adjusted EBITDA decreased $32 million sequentially to -$4 million, or -0.9 percent of sales.
New orders booked during the quarter totaled $338 million, representing a book-to-bill of 127 percent when compared to the $267 million of orders shipped from backlog. For 2021, the segment began including Denali brand underground fiberglass tanks in its capital equipment backlog, increasing the January 1, 2021 backlog balance by $57 million. Book-to-bill for the quarter was 115 percent excluding Denali. At March 31, 2021, backlog for capital equipment orders for Completion & Production Solutions was $810 million.
Rig Technologies generated revenues of $431 million in the first quarter of 2021, a decrease of one percent from the fourth quarter of 2020 and a decrease of 23 percent from the first quarter of 2020. Revenue declined due to soft orders and lower backlog in the segment’s rig equipment business, partially offset by growing demand for offshore wind related equipment and the initial progress on the first two rigs to be built at the Company’s new manufacturing facility in Saudi Arabia. Operating loss improved $124 million to $8 million, or 1.9 percent of sales, and included $3 million of other items. Adjusted EBITDA decreased $6 million sequentially to $13 million, or 3.0 percent of sales. Profitability was negatively impacted by the decline in revenue, a less favorable product mix and costs associated with severe weather disruptions.
New orders booked during the quarter totaled $112 million, representing a book-to-bill of 59 percent when compared to the $190 million of orders shipped from backlog. At March 31, 2021, backlog for capital equipment orders for Rig Technologies was $2.59 billion.
Other Corporate Items
During the first quarter, the Company recognized $9 million in net restructuring charges, primarily due to severance costs and facility closures. See reconciliation of Adjusted EBITDA to Net Income.
As of March 31, 2021, the Company had total debt of $1.85 billion, with $2.00 billion available on its revolving credit facility, and $1.61 billion in cash and cash equivalents. Subsequent to quarter end, the Company repaid the entire outstanding balance ($183 million) of its 2.60% unsecured Senior Notes due December 2022 using available cash balances. Following the repayment, the Company’s earliest bond maturity is in 2029.
NOV received work orders for the first two rigs to be built at its state-of-the-art manufacturing facility in Saudi Arabia. The plant has a commitment from Saudi Aramco Nabors Drilling Company to build 50 drilling rigs that are designed for the rugged conditions of the GCC region and incorporate NOV’s most cutting-edge technology suite.
NOV introduced a new design of its IntelliServ wired drill pipe technology that simplifies the process of embedding the coil and data cables, shortening the manufacturing process from 20 hours to only 20 minutes. In addition to the significant reduction in upfront manufacturing costs, the new design also enables field installation and simplifies repair and maintenance processes, resulting in a significantly lower total cost of ownership over the life-cycle of the pipe. The new IntelliServ offering provides the same instantaneous and bi-directional transmission of downhole data during the drilling process that enables operators to achieve greater downhole transparency and better overall well performance, at a fraction of the cost.
NOV won a large contract to supply Viper™, XLW, and XLW-GT large-diameter casing for the Gulf of Mexico North Platte 20,000-psi project, the first of its kind. Ideal for critical deepwater applications, XLW and XLW-GT casings combine the integrity of integral connectors with the strength of weld-on connectors. Viper technology’s proven performance in deepwater brings exceptional sealing properties, fatigue performance, and full pipe body strength to differentiate it from the competition.
NOV technology continues to drive efficiency improvements in harsh-environment drilling applications for geothermal development projects. NOV’s FluidHammer drilling tool, combined with a Vector™ Series 36i Drilling Motor, will be used by a customer in Switzerland to drill through 3,200 meters of extremely challenging granite. The Series 36i motor incorporates NOV’s Impulse technology that creates an axial impulse at the bit without restricting flow to the bit, increasing drilling efficiency in the most demanding applications.
NOV continued to grow its presence in the burgeoning offshore wind energy market with an order to order for the design, jacking systems, and heavy lift crane equipment for a wind turbine installation vessel for a European contractor.
NOV brought measurement-while-drilling (MWD) technologies to several new markets during the quarter. A geothermal contractor used the Tolteq™ MWD platform to drill a directional well in Japan for the first time. In another first, a customer in Namibia leveraged NOV’s Teledrift™ survey-on-connection tools to monitor the well trajectory in an operator’s first exploration well in a frontier play.
NOV’s ReedHycalog™ Fuego™ drill bit series, developed specifically for the challenging and diverse drilling applications of Latin America, continued to drive exceptional results across the region. In Mexico, a large service contractor achieved its best drilling performance ever in the country with the Fuego™ bit, reducing drilling time in every hole section to save more than 52 hours. On another project in Mexico, NOV provided a 14½-in. Fuego™ drill bit with SabertoothTM cutter configuration to enhance the durability and rate of penetration (ROP) while drilling through multiple formations in a high-pressure/high-temperature operation. The bit beat the ROP benchmark by 80% and saved approximately 90 hours in drilling time for the operator. Similarly, in Colombia, NOV supplied a 12¼-in. Fuego™ drill bit equipped with ION™ cutters, which was run with a downhole motor-powered rotary steerable assembly. The bit drove a 145% improvement in ROP and reduced drilling time by more than 19 hours.
NOV won a contract to provide Tuboscope’s TK-70™ internal coating for 43,000 ft of SCH80 10-in. line pipe and 1,400 Thru-Kote™ connections for a gathering system in South Texas. When used together, TK coated line pipe and the Thru-Kote welded connection system provide a seamless coated pipeline with improved flow efficiency and superior corrosion protection.
NOV continued its long history of providing emergency services during critical situations when its Portable Power team assisted numerous new and existing customers in Texas and Louisiana with emergency power generators during the freezing weather event in February. The Shreveport, Houston, Corpus Christi, and Odessa NOV field offices provided emergency power to an array of customers, including Texas government entities, local municipalities, and hospitals.
NOV was awarded a contract for an MPowerD™ managed-pressure-drilling (MPD) drilling campaign in West Africa starting later this year. NOV will provide critical engineering and field operations services, as the application requires a high-profile system to meet challenging well conditions with narrow drilling parameters.
NOV’s M/D Totco™ Downhole Broadband Solutions product line continued to expand the capabilities of the eVolve™ optimization and automation services. Customers saw the benefits of real-time, high-frequency along-string measurements in new applications of the eVolve service. A coring operator utilized the eVolve service to optimize parameters and prevent premature breaking of the core, as well as jamming in the core barrel. Additionally, IntelliServ™ Wired Drill Pipe (WDP) was used on subsea operations alongside a new third-party tool designed to eliminate the umbilical during well completions. The operator remotely controls the tool topside through a WDP interface, allowing them to eliminate significant amounts of equipment from the rig and reduce complex mechanical and hydraulic interfaces.