Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NOV Inc (NOV, Financial) reported a significant improvement in EBITDA, up 7% year-over-year, with margins increasing to 13.1%.
- The company achieved a record backlog for flexible pipe for deepwater developments, surpassing $1 billion for the first time.
- NOV Inc (NOV) saw a substantial increase in orders for offshore drill pipe, up 64% sequentially, indicating strong future demand.
- The Energy Equipment segment posted a 2% increase in offshore revenues compared to the third quarter of last year, driven by strong demand for offshore production-related equipment.
- NOV Inc (NOV) generated $277 million of free cash flow in the third quarter, contributing to a year-to-date total of $480 million, surpassing their target of converting at least 50% of EBITDA to free cash flow for the year.
Negative Points
- Consolidated revenues for NOV Inc (NOV) declined by 1% compared to the second quarter of 2024, indicating some challenges in maintaining growth momentum.
- The Energy Products & Services segment experienced a 3% decrease in revenues compared to the third quarter of 2023, primarily due to a decline in drill pipe sales and lower US drilling activity.
- The company anticipates a modest decline in demand for offshore drilling equipment and aftermarket spares in early 2025 due to production-related constraints and white space in drilling contractor calendars.
- North American land activity remains subdued, with no significant improvement expected through the end of the year, impacting short-cycle business performance.
- NOV Inc (NOV) acknowledged that achieving their 2024 exit margin target will be challenging, indicating potential difficulties in meeting profitability goals.
Q & A Highlights
Q: Can you provide more color on the subsea flexible orders and how you see this impacting next year?
A: Clay Williams, CEO: We've seen strong demand for flexible pipes used in deepwater to connect wellheads to FPSO vessels. This demand is part of a broader trend of supply chain constraints around deepwater developments. Deliveries are starting to push out into 2026, indicating robust growth in this area.
Q: How are you thinking about revenue growth rates for next year given recent market changes?
A: Clay Williams, CEO: While there are emerging challenges, we have good momentum going into 2025. Our backlog has increased for the fourth consecutive year, and we expect continued demand for production equipment. However, North American market conditions remain a wildcard.
Q: Can you explain the margin progression guidance for the fourth quarter?
A: Clay Williams, CEO: We have some business-specific mix shifts that are not favorable. For example, strong bit shipments in Q3 won't recur in Q4, and demand for ESPs is expected to be down. These will be offset by higher drill pipe and composite pipe shipments, but at lower margins.
Q: What are the expectations for rig capital equipment and production equipment demand?
A: Jose Bayardo, CFO: We expect a modest decline in rig aftermarket and capital equipment demand. However, strong bookings for production equipment, particularly offshore, should offset this decline. Our backlog in production equipment is robust, supporting this outlook.
Q: How are digital applications being adopted in the marketplace?
A: Clay Williams, CEO: Our digital initiatives are gaining traction both internally and externally. Internally, we're using AI for operational improvements. Externally, our edge compute and digital services are seeing increased adoption, with a 25% increase in users of our Max Edge portal in Q3.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
