NOV WANT TO AQUIRE MORE ASSETS TO GROW INCOME!
HOUSTON — National Oilwell Varco said Tuesday it expects to continue making acquisitions amid low oil prices that have strained profits in the oil service and equipment industry.
Chairman and CEO Clay Williams didn’t specify which companies NOV had in its sights, but said it was in talks with several rivals and would be interested in expanding any of its major businesses, which include a broad spectrum of oil equipment manufacturing and repair.
“Generally in a cyclical downturn, our view is that it becomes a buyer’s market,” Williams said. “We’ve had three (deals) closed so far this year, and we’ve got another half-dozen letters of intent along with some larger transactions that we’ve reached out to some companies to explore.”
The Houston-based oil equipment fabricator said it’s casting such a wide net in order to find deals it can push through.
“It can be a challenging market to get deals done, because most companies don’t particularly want to sell at the bottom,” Williams said. “The way we’ve adjusted our strategy is to increase the number of conversations we’re having.”
Executives at NOV said they’d boosted their revolving credit line to $4.5 billion during the second quarter in order to fund acquisitions. Williams also hinted that the company may dial back its share repurchases in favor of buying other companies after it completes the final $300 million of a $3 billion share repurchase program NOV began in September 2014.
NOV and the entire oil service sector have seen some of their business dry up recently as producers have cut back on drilling due to lower crude oil prices.
“Almost all of our business units posted lower sequential sales due to lower oil prices and lower activity around the globe, with only a few areas like Argentina and the Middle East bucking a trend, ” Williams said. “We also felt the full-quarter effect of customer discounts implemented during the first quarter.”
NOV reported Tuesday second-quarter net income of $286 million, down from $620 million in the second quarter of 2014. Revenues in the second quarter of 2015 were $3.91 billion, down 19 percent from the first quarter and down 26 percent from the second quarter of 2014. The company reported a $17 million, pre-tax charge for layoffs and facilities closure.
NOV said its backlog for capital equipment orders for drilling rigs fell to $9.03 billion, down 13 percent from the first quarter of 2015 and 41 percent from the end of the second quarter of last year. The company saw $313 million in new orders during the quarter.
NOV’s business in maintenance and oil field repairs was also hit hard, executives said, as drillers have used parts off of idled rigs to save money on repairs. NOV said it expects orders to pick up as oilfield service companies gradually exhaust their inventories of parts and are forced to order new ones.
“We believe spending levels are not sustainable,” Williams said. But a recovery may not be right around the corner, he added: “Customers living hand to mouth aren’t sure if a particular unit will ever get another job and sure don’t want to put cash into equipment.”
Shares of National Oilwell Varco gained $1.28 or 3.1 percent to $42.93 on Tuesday. The company’s shares have lost about 34.5 percent so far in 2015 and about 47.5 percent over the past 12 months.
Categories: Crude oil
Tags: National Oilwell Varco | NOV
