NOV - Earnings call transcript Q2 2020

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Operator

Good day, ladies and gentlemen, and welcome to the National Oilwell Varco Second Quarter 2020 Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference, Mr. Blake McCarthy, Vice President of Corporate Development and Investor Relations. Sir, you may begin.

Blake McCarthy

Welcome everyone to National Oilwell Varco's second quarter 2020 earnings conference call. Clay our Chairman, CFO. Senior are and and today Bayardo, Jose Vice me Williams, President our CEO With President and

in we quarter actual forward-looking these valid like year. of would laws. should They the of begin, assume you and security or differ Before some uncertainty later materially. risks that one and the to federal remain today's may within in forward-looking statements remind are later statements involve the the results meaning comments I No

For to XX-K risk Securities please filed more the affecting factors major the detailed discussion our of our business, and with and refer Exchange Commission. forms latest XX-Q,

a measures. of and measures comments our million. on a revenues earnings NOV include non-GAAP nearest On for $XX the available reported billion are GAAP second the Reconciliations U.S. Our XXXX, of basis, quarter in net GAAP corresponding $X.X release of also website. loss to our

throughout EBITDA earnings with the yourself corresponds participation. this to Please term call use limit in Later one a release. defined Our as will question-and-answer the call, session. and permit follow-up EBITDA more of to host morning's one we adjusted in question term the our

Clay. Now, the turn call over let to me

Clay Williams

Thank you, Blake.

expectations sequentially fell of lowest of to EBITDA as few contracts is detail Jose of global The the the XXth consolidated will second the XX% you, core reduction of a In oilfield, in sales, moments, to the the aggressively on that ability declined never that business century. essential competency X.X% the and count year. pray levels negative in is back the perhaps dating NOV's XXXX COVID-XX to before, our NOV's $XX for a and cut In our resize progress costs hunker everybody million of this measured stress storm and revenue for to the managers. and the down full prices would and or cost economy, skill Consequently remainder quarter shut cyclical weight and to pandemic an oil brought line quickly we this down, the the past, driving U.S. pass. rig

have As was, decisive bad as far certainly aggressive quarter worse their actions. been it without this would

However, customers preserving cost cash. at good and pretty reducing were our also

addition in like a oilfield second The operational and collapse by non-oilfield America from XX% industry declined a facility from of the XX% new our mix of COVID-XX On XX% was revenues in closures, quarter-on-quarter. XX% through fell been about In fell decline the quarter to the have breathtaking. at rapid production a requirements particular, many in even many was immune we count even sequentially oilfield customers second that which rig the brought almost the activity segments, reporting curtailed level quarter. reaction to North during travel American halted Even pain. headwinds than purchases. while the to The in sequentially, activity of more basis, bans, -- the more all, those XX% during and was a pace second completion U.S. quarter, land operators nobody couple down downturns, average were the North most faced U.S. declines. this in and completions fell sequential the our So three reached rig, Well reflex, of to as severe. our involuntary, in the the XX% business also completion by showed unprecedented quarter but areas, all North and quarantine whole EBITDA deceleration previous consolidated evidenced growth businesses the as necessary in land, American violent in in

were solids to of consolidated products, drilling, control tied the trying nearly or and pressure half in as and XX% far tools, North inspection in million. more grasping rig North downhole hit by services hit decline to NOV's of desperate to America, Wellbore cycle. decline sequential average segment's the tubular in accounting products declined to immediately, hard revenues up for $XXX QX hang Our bits, Technologies count overall more, to XX% for Wellbore's services from but Baker falling XX% for and Hughes discounting across XX% XX% competitors one ramp compared certain quickly liquidity Pricing QX. America, to as well on sequentially payroll

won't holding declines even markets, is are in most liquidations steep Fortunately, activity. international and NOV's pricing it in Nevertheless, the experiencing and of bankruptcies next to are they payroll up competitors too much quite though make many cycle better accelerating.

to and that will through haul. work NOV For is for our be because customers silver we NOV, are this make know the there lining they shifting will it the of downturn this long

sucker high on as and and we're every closely to work tied activities augment it's our many hold them. more We typically equipment pennies and these meaningful on leading purchased fleets past Remarkably, across Tuboscope quick the smaller of gains of are seeking tubing rooting the In handful key lines see get recording up market markets. seeing at into to lines, downturns fearless consumables rates a at much rod in production and distressed they would than better one oilfield business and share of the each assets is product to companies entrepreneurs for over dollar paybacks operators workovers. that return flood drilling albeit market and and of start-up to pricing are activity,

led spares has There that in assets we mills tubing is drill as shutdown for off to are no cannibalizing This OCTG America in to The pipe, sequentially to the domestic stacked decline pulling times. fall production However six hard XX and - reels pipe activity with as the aggressively, of whom fell rods North work. for coiled normal or as U.S., saw inventories inspected the strings as and many tubing number in demand related compared of coiled essentially contractors activity. including North across exceed land, months units. five millions drilling just of joint workover in in total idle XX% months we barrels and rig shut America,

are eroding will this established strings they and well measures. guess that lead being past but failures, the to for limits, before times service tubing are wells Eventually coiled is being desperate replaced, demand. heartbreak, life run potentially I desperate trend lost a fatigue Additionally, call further

areas We the are materially per for contractors efficient cash is level edge only rig, above XX,XXX day - have for the leading to marginally will support fact may in and be good from a but cost negative fall lower operators flow from when new a second rates that most range, fully burdened land that are drilling run two low-to-mid in XX,XXX drillers This into lock down day overhead like all hearing drilling logistics, the insurance day and XXs. also hearing likely unconventional to cash is for they and rig or these plan direct try we support. to half rig The rates. likely that many in safety CapEx bargain the and news maintenance sales in add

Additionally, pricing that bid one-year activity. are some being NOV good customers Services, leading increasing is asked planning WellSite in drilling indicator to certain on term historically a

oilfield heard international to we springs in segment, of stop, the a primary see the little to oil gas And stay a gets and uptick Having activity later saw were year, pipe bottom our shutdowns to stories exaggerated. shoots modest to similar couple eternal We North simply Completion decline of continuing COVID-XX plants, While market. new course order Production downcycles. of composite ship a in at and Arabia better demand from Solutions our think the international government a American of hope this demand, as our due Hope and prevented may our resize securing chartered sharp fiberglass pipe completely prior plants. overseas sometimes while us Malaysia mythical from vessels to in business green fared domestic and mandates. we shut intend & Saudi

gas North While ship of Malaysia growing our chokes, Not some China getting out to bunker market, for North scrubber scrubber very surprisingly, at of completion was where shipyard business, found the least owner robust America we now, fuel increases. very a economically slowed less American necessary, team price softening pumps between heroically Offsetting valves, for found and and slowed sharply. oil actually for demand and conversions also pivoted pressures prices. to tools are for and fuel the tightening our handling due demand as spread diesel we supply

investment, that is virtually kit, today. more times and friendly by service what solutions and it its leverage rent, from space seen be the downturn and they into be somehow kit that oil customers, its game. the the offerings to better ESG requiring placed drilling are margins time this capabilities consolidated drilling surprised in in new these the feature, requirement upgrades with or secure domestically broadly, techniques competitive as service getting 'XXs in we similar rig they In better being service oilfield PowerBlade has Varco from because, see Latin sequentially. make as like shutdowns buy win and to COVID-XX The fell and oil NOV. can. equipment, long-term -- you customers, in fleet, pressure the capital and Top the customers are a orders by good mess. and be the despite our have companies contract new rig other emerging They more and with sector and is for great a your Drive wanted capabilities mandating NOV. necessary is in to pressure this which capital. And tender demanding orders and but there future when safety experiencing required oil past, hearing service friendly hire. sometimes certain world on pressure no companies will if pumping well, can required features though a The negotiating the became other drive consequently and really and our Don't survivors invest for fuel where scant 'XXs, pressure ESG capabilities companies this example. industry a More contracts. better specifically a up believe few equipment widespread in be they test. is trend, product and This XX% majors there America will some late a the Even want. consolidated up and to offshore force better a Although, transform companies thing efficiency. get can capability, they returns a and for revenues this required Build, are We've use customers were of future It similar a the were driving fleet oligopoly I a additional to grow that their pass under work. at all dual on interest

the XXX international borders the only up count markets lowest and about have America, so international sequentially Latin mandated but literally is Nevertheless, headaches the markets the held rig declining XXXX, challenging are Excluding easing East, shut America logistical remain North remain. everywhere. X% facility at closed since In than Middle overall. downs better

segment's and more personnel weakening cut shipyards parts COVID-XX, generating. repair back from Rig risks, our to weren't upgrade high were Inspection, even decrementals. hard and falling business. than to further Our Spare offshore. offshore hitting orders aftermarket their certification, contractors XX% or result. by as drilling curtailed XX% effort affected land maintenance dramatically Certain bluntly rigs more an drilling and deferred revenue sequentially, at Technologies fell activities was business restrictions, aftermarket by hit reduce a also COVID-XX that COVID In were or related any going

much. as to requirements offshore many offshore help that well rig wind certainly a contract cancellations, job not quarantine Needless cost notable against company a before oil On as drillers exception to such side, say, two Inquiries decrementals. job felt didn't also weeks two backdrop, disrupted included the our for technologies. buying after remained installations like weeks for

grown the to these. area cannot. our this alike, were control people operations exiting incumbent is by XXXX of of NOV can they chains The areas lines. to business loved pipeline processing turbines growing facing who on Asia resisting entrants I never near-term remarkable also continue processes, us is demand cost in projects customers our the to and for with that that disruptions, their forward ones processes. or all many pressures Back our years of doubt in perhaps plans corner the participants honor tragedy and working the improving that by because our Despite for more a and what many focused invest out collapse but XXXX, year They organization and proprietary we the to and support to IOCs offshore We're a in so most the and COVID-XX and materially actually our in oil our of on growth terrible have but adjusting to in during leaders will customers hard they and have quarter, -- year determined is and and despite a to remains in on oil and and good second like is and flow. they focused can friends, vessels projects and NOCs up, I that We're year-to-date, operational hopeful With Arabia many of in business reductions supply improving can monoethylene challenging States. development communicating the projects, loss these lost to it's wind move challenges, virus. orders testing glycol technology our of While in clear the the offshore wonderful logistical working Brazil a been time. these by portfolio a higher that Saudi businesses, certain companies, deployment monitoring XXXX new of products. from are it the delaying eventually for low are determined returns move Wellstream are I gas cost technologies. all of us, are United jobs our can't support move new continuing There who believe oil decline more capital forward our divesting meantime. and of distraction to LNG continues efficiencies expanding forward no We're are will remake cash honestly FIDs year we are we're many the or prices, many that's issues this product though, shutdowns, improve remaking XXXX, challenges. of are The underpinned we're made challenges to say in recall NOV. is crucible of of that need gas, similar NOV, In Processing people the every that organization oil them, and squeeze gas, XX so with. bankruptcies organization demand this what prouder their

gas the gets ever As by comes, world we realize it oil starts when and during global be that day for pass the technology be will been. One day much through supply every industry times. you organization and professionals world. this of these crucible are NOV in even this best economy will and delivered how your with phone when to will the needs this go again, come ringing thank has the To happy better the that listening, there the NOV just the that company better perseverance and best day it out downturn difficult makes employees

know attention to lay day. ahead. over safe With and and turn Jose. Your mile creativity every that, go Stay all better that to extra that to detail, you I'll me the amazes the it this Jose, willingness and I appreciate crisis Blake do. during days

Jose Bayardo

a NOV's of $XX cost limited pandemic pandemic extensive scope and or sequentially, decrease effort downs decreased accelerated global precipitated segments. our $XX cost slowdown and Thank we the million COVID-XX economic we collapse XX% all revenue with million. on cost expanded oilfield existing operating and and XX%, in three early of early began you, by activity million execution consolidated in market impacted to of fall the backlog, in XXXX, materially resulting strong to drive in an saw gas sequential the decrementals our the Despite indications $XXX anticipated oil the an In revenue, reductions margins as on focus in out intense structure COVID-XX we implementation shut initiatives. would EBITDA our to activity, when and align an better the associated realities Clay.

implementing and would During to activity total not drilling North additional imbalance million. and continue move longer any $XXX manage for bringing survive challenge better faster, we the to the efficiencies our further profitability service we drive execute Therefore, Despite supply-demand area the In organization every annualized company second with equipment. to in beyond capital, But ways a can we plan completions later a tools every American we regardless and downsizing actions we're and quarter, year, mentality. which for cheaper do oilfield playbook, drive to-date organization million the anticipate associated savings, the to acceptable also environment. that industry. of an enough the requirement deliver a this with lower aspect achieved current than oilfield doing increase of that levels that so, difficult our be to achieved near-term improvements of returns needle simply of we how pushing in on in this above to indications involve well game services large ever. massive nascent could achieve Yes, $XXX the traditional and and

customers, our and to and suggested, for other stronger employees this in emerge NOV long is that more the stakeholders Clay intend business from As this we haul know and efficient. downturn

We are that markets meet and our return thoughtfully and more driving operations, exiting shared in thresholds, investing our geographical product automation. streamlining lines don't services

requires drive of for and is technology, toward supply better more which footprint, provide ultimate working a equipment our chain capital. our a and customers nimble responsive tools and lower smaller and leaner which levels a objective, to business from of that All

the capabilities. customers they product of in efficiently manufacture. so leveraging are also, R&D are to but not costly talents our are bone they so We just improvements less not cutting drive field, engineering our our Instead, more in the we those operate into and to designs, for

iterative approach is Our and relentless.

identify to year-end the target million. another This looking second quarter, during We $XXX annualized mentality savings million to cost to $XX our opportunities us are in increasing drove always improve.

indirect beyond other cost the we've from is and embedded words, from it costs and future expense we our breakout follow-up savings volumes number facilities the and what cost put XXX% amount raw in are percentage expenses have to that direct provided During Since is the actively and In from removed intentionally understand understand our cost is questions automatically fall, naturally to labor, last we areas. cost number hours. few changes when direct simplest implications. trying that organization. savings The other call, The and reported stated margins. include of of labor, better received a like savings of that a savings material our composition decrease then our reduce individuals savings detrimental normal not labor does changes within above structural normal way

through If at our the of and our look SG&A, you we than have cost by cost million to which these expenses sold $X to in see amortization, will of early XXXX, excluding we $XXX began change update savings more from efforts This came that changes in our continue basis, an goods operations. that can since the decreased year-end. annualized billion you depreciation number and is structural on

from XXXX. markets, cash quarter quarter which $XX in longer continues capital on cash of capital of conversion was million, of liquidity QX in metrics moving from flow. cycles. preserve $XXX] and compares due for flow XX% be to Now our totaled the to international of $XXX free America, an source In cash XX% certain deteriorated million, despite to in have to the expenditures Working the our in outside from cash quarter $XXX customers increasing flow, to and fighting revenue second and coming came that and North operations XX% cash second of proportion million [- which typically resulting business declined XXXX, million a

$XXX $XXX billion and June senior despite the At free half debt $X positive generate December flow with mature million XXXX. $X.XXX of during second notes ongoing to cash the which our cash in in of in expect million We the billion net XXth, totaled challenges. market year

cash We to of maturity our expect our pay maturity the would to December XXXX. put $XXX on-hand at then date, the million with prior which next

Moving operations outlook. to results from and

declined Revenue in $XXX of second generated quarter, drilling every revenue East, EBITDA quick million facility been XX%. XX% would Wellbore which million by a decrease decremental revenues representing sequentially segment overall America have fell XX% from much the and margins, million by except were Middle disproportionately higher, Technologies international during Segment taken $XX not than was the sequentially. geographical related and COVID-XX declined or for less $XX XX% Wellbore of Our within region for levels which our decisive revenue activity North $XXX affected closures. declined actions Technologies. team to million,

in and ReedHycalog drill Hemisphere the business East, sequential a result bit in which shut-downs Middle in Our decrease revenue, as in a drilling to realized collapse XX% government-mandated activity due the manufacturing the of pricing. seeing where the prevented causing desperation within in throughout Imploding and cut of certain we most deliveries and U.S., Saudi. bit aggressively competition, quarter demand particularly are competitors is impacted the fierce Western

over to helping businesses' to pricing years the bit R&D us technologies match market avoid to engineering concessions, now efforts. several past is technology Our have the allowed having a capture steadily and us differentiation share testament detrimental their that and team

recently While Western on resumption of the the this awarded the results, this business' facility quarter. Eastern Middle expected weigh third small business' are in results result improvement in operations continue the will sequential to in through and start-up the Hemisphere tenders in of the flow of efforts a in consolidation Hemisphere activity manufacturing East, to

dramatic partially the declined by and decline saw solutions, reduction gain in revenue XX%, growth Revenue drilling from optimization due offset M/D to activity XX% was Our M/D a from unit's units the continue greater but adoption. Totco continued sequential automation instrumentation to Totco's digital levels. offering in business rig which

on utilizing we contracts our executing and began drill our Sea additional two quarter, During optimization wired North technology. the eVolve pipe multi-year in services, the for automation

tell formation digital the M/D also we're recently a KAIZEN that test Totco real-time capabilities enabled We also solutions optimization to dripping. of performance. high-speed tool, surface while development The wall-tripping pipeline its using has deep this under using connection year. our jobs commenced ever commercialized later data uses the pressure tool, excited was first drilling pipe more optimize you that about continuous software, with several artificial which intelligence drilling to business learning additional

is operation felled revenue execute existing new pipe on the quoting for business will ever booking double-digit to QX. from to ample to expect largest the lower over pipe than flow it an sharply. American experienced the zero, are cannibalize. be QX which rigs large available to million as order a expect still the a long land but near proactively order stacked market drill many We're pursuing of backlog. to Prideco is Outside landing the preparing low was remain decline, therefore North we volumes from activity and drop significantly XX% push to for where there so international X pound Demand tenders, we projects continued as in right multiple next string, few Grant Our built, quarters.

Our experienced other falling pipe by slightly activity workover and negatively businesses the Wellbore reduced operation Technologies from to less are sharply Tuboscope operations coating than to heavier as production inspection decline business Tuboscope our revenue impacted activities. due and mills. and were within approximately in steel weighting XX% typically demand Results of drilling volatile its a

operations in our quarter. wells find any shut allow to of prices and oil the shelter didn't negative However, during second

fluids West a Africa. unit in business revenue full-quarter COVID-XX American XX% Services the by America the shut-downs in the decline drilling and WellSite approximately sharp of Latin our Our related activity from North saw American impact decline sequentially, North business, and exit driven

lockdown because back the While are customers Latin over them seeing from resulting drilling will demand and the long the know haul. services decline and will be U.S. fell rapid coming COVID-XX remain they near-term, for control for East. Middle activity America solids and in our drilling the we we Revenues sequentially, in in to XX% NOV unit exiting there challenged Downhole business business competitors

While our cash lower in any we downhole means that half, efficiencies do to share. to costs, are second the levels we technologies and flow improve leading possible through expect improve on and not customers maximizing additional expect activity focusing garner edge

expect to third meaningfully than more average we the drilling COVID-XX be related fewer For offset quarter, the activity of by benefit levels. lower disruptions

As our another to to we range. result, for the Wellbore mid-XX% XX% in margins fall XX% expect a revenues XX% decremental with to segment Technologies

in mostly and a million conditions sequentially. second strong efficiencies the to our drive limited offset Proactive generated revenue quarter, million throughout X% Solutions decremental XXXX. market to & the Our and decrease margins the built project on of Completion $XXX $XX X%. by Production footprint rapid of in deterioration contracts Effects backlogs execution segment were operations measures or from

in result, pushed The to Orders EBITDA million to economic $XX or of a fell many XX% $X this only contraction right. the $XXX the pandemic segment caused for million, project by million awards a at was As declined resulting XX.X% not down canceling quarter. sales. COVID-XX to are Backlog pandemic XX% and but the quarter-end they're postponing $X book-to-bill of massive abate. uncertainty telling us XX%. until Most disruptions from billion, rather the from first the customers awards projects

of While we in are take end and least comfort planning resolution at issues XXXX. do some order this, through these we a the of not near-term continued expect for weakness

backlogs coming the bookings Subsea intake execution Our viewed its order pipe and healthy with each strong into realizing businesses, book-to-bill to due on what Unfortunately, in second Systems only Subsea and year. sequential achieving lowest we'd flexible XL record. Systems as XL the were XX% XX% realized quarter, low light increases in a revenue, on

North QX we declined as support without decline decline midstream which execution to saw see more orders, to decline a to slightly in through offices, on a and expect X% in technologies more than sufficient and offset Revenues customers production revenue XX% and their was volumes our production sharp from testing operations, near-term in a a business to deliveries flow more acceptance Strong the improving are businesses its activity bookings expect revenues backlogs complete Latin backlogs unit's we related and final and begin limited QX which improvement potential for and for in and near America and disruptions, returning Africa. customer America pronounced levels the sizable While demand our the deliver current quarter. in fourth COVID-XX unit Middle the ability to products by in in sequentially. industrial-related decline offshore within East,

U.S. a Our in in decline Systems new encountered operations pandemic. including shutdown Saudi were unit by weeks Fiber locations, our product Arabia revenue, XX% shipping plant for due disruptions and significant realized caused overseas business several our COVID-XX delays. to manufacturing Glass from international extended the Multiple

Our sequential took of third slipped for Intervention cost other by a mitigate margin and business helps a quarter. execution as coiled of erosion. Equipment a the revenue, Stimulation & demand our Strong into ISE consumables in tubing sharp and international deliveries efficiency team step-down XX% to and initiatives improvement focused decline realized number savings

we third basis solution our segment EBITDA to anticipate decline the X% quarter between points. production with revenue of For XXX to XXX completions decreasing will XXXX, X%, margins from and

million sales, or X.X% of generated Rig decrease second Our million representing leverage. a revenues in XX% Technologies $XX decremental quarter, million $XXX XX% $XX of of or segment sequentially. the to fell EBITDA

the spare also spending, with reflect result the a due small crews for material for the of were logistical sequential segment's with surveys, parts hard quarter, spending less to in future. under unusually in the from challenges drilling in saw borders on rigs sales mandatory rebound non-essential on active caused second other spending spare-part off many believe even headaches COVID-XX a decremental rig capital this not mentioned large the and are due projects cost quarter. scheduled operations were activity and maintenance part that the unfortunately, decline COVID-XX Closed in not bookings sharply by Aftermarket operational depressed XX% Last to high bookings. of news a the must our result that currently a were sharp drop storm counts spare-parts which duress also hit but during levels XX% which on is The operations. revenue for and sequential quarter sufficient brought we decrease pandemic, part that XX% revenue good everything deferred segment. COVID-XX. margins cut resulted in decline quarantines we only current the the to caused in and delayed for improvement havoc fell by the sales, The not reasons and of in services in global contractor coupled during and equipment intentionally disruption aftermarket, or inordinately immediately financial to no services The levels to sequential the rig and were coming that increase the customers in aftermarket in business. perfect sustain decline only sequential a Second quarter, we primary by for mix about with already favorable aftermarket in would a from March

our the drilling bookings and capital of remain second for equipment a do our cash million sequential customers are approximately all decline reopen to to The capital quarter and near-term and segment their realized drilling equipment for lockdowns backlog. more contractor ended survival. an quarantines outlook countries they in activity in while resulting orders traditional issue, while with of The as Additionally, they XX% of remains a The preserve remains attempting book-to-bill $XX segment mandatory economies. billion depressed can fight business challenged $X.X XX%.

technologies. XX to prominent a However, turbine market, few in wind will which using are jack-up fair wind prior the ordered revenue years. turbines, this we for to built over much offshore strength the win that of larger the installation market to opportunity NOV, vessels bigger and continue believe than improving roughly are industry generation longer wind The vessels represents well a relative installation is where we installation positioned wind of Each the coming vessel industry equivalent blades, believe, our use We awards. of to that rig. new high-spec heavy economics next the up to offshore that see we in by by share trend substantially those requires expect be

Technologies X% expect and revenue for projects, the with line segment. we to aftermarket revenues lower quarter in quarter, remain third Rig the X% in second sales to equipment resulting in capital from decline our For a

in efforts, ongoing now rationalization XXX the are and open fewer that we basis levels. to a will We that, to up, also anticipate margins slightly up related to With to product quarter points relative call result mix COVID-XX questions. that the flat second costs cost EBITDA extraordinary improved

Operator

from Bill [Operator first comes Our Instructions] of Herbert question Simmons Energy.

Your is open. line

Bill Herbert

good Thanks, steep, guidance math for reason that it CPS for morning. correct, is my be Jose, or are very what would looks the the your that? like mix decrementals Is what? if QX,

Jose Bayardo

change. really it It's Yes. revenue relatively causing the that level, movement that's in small at mix

Bill Herbert

going Clay, question, you to question a it. but here's I macro ask here. love, got know you Okay, I'm which the

the witnessed of the going the much to cost so are And if incrementals the uplift, the question due to you simply out so stronger about taken to morass that, again. of we extolling not indeed vigorous to out have macro, that -- But the who a it's you need are there's the to gas -- of in all surprise wake far this thus out cycle. guess, the was world up morass, you coming do incrementals same, the relative but does and incremental prior once reported oil in margins fact peers system, context If exactly cost what I is, you've upside. your actually refrain, cycle-one-cycle, mid-XXXX to was coming feel the out going of be is how

the curious how opposite, short In right? what well once happened And of was unfold? of as over I'm over cycle expected fell -- your to that date just just margins fact expansion to is and the what perspective expansionary of phase the expectations. arise are Margin

Clay Williams

at services, and the Good, we Yes. in a nascent that leverage. then kind pricing oilfield saw of of XXXX say the and less participants portions Bill. question, I'd least in recovery was what thanks uplift through, for XXXX consolidated didn't of get the first-half

although were a would prior I pricing coming getting 'XX think, costs -- so, of that would downcycles. lot of I gotten taken sectors gains have didn't many see you the out we 'XX, out a submit, And there sorts

you, have the that and downcycles, through our really as here lot a So on has that and where services peers expenses if are and in so recovery significant leverage, of with think, our results. and of, organization of you're pricing culturally of pulling and you're a cost going shrink are period After cost typically, result on And pressures incremental go year sector prior of scenario in and you back -- things now if reductions, I close into out really, NOV costs on really kind outperformed gotten getting we management focused better. to oilfield and of step to six a kind rationalization forth.

always meet we to to manage is your lot starts try services, which initial reaction demand a you of demand. use when of price -- adding and headcount, capital it and to resources frankly in without all level back, that oilfield does so to And come the demand adding without

enter even into a I that's of quarter-by-quarter setting good world it's a incrementals lot typically have you on itself the you, the the kind of system, leverage, where getting sort fuel extra, out recovery and for the really the that big operating period enter sort leverage, you're jet imbalance, - we're situation think pricing worth, of, of looking up of taken And what's because where And forward cost for plus so outperform shock. underway, may think of the current I be with given with supply-demand bigger an what to. you

higher capacity pretty the shrinking were when is what XXXX, kind about All can of all today. it it it's we at the of rationalization these is back, but is back bounce in to levels doing that certainly maybe and machine start a that cost reductions -- that of financial not think I to? at that and to we debate bounce we're will we're demand of again, and we're But again constructs to And in pressure. computing going doing wellbores really going face that people flying than degree a the artificially we're talking extraordinary depressed of time dramatically

is is demand Certainly, go going up. right. down, So to go going to supply

CapEx estimates as gets And evaporation I've think level to global to which got I may out. probably of than quite time until big and oil And right. billion will of wells, It and you've then or the higher the some take a inventory heard mask while. mix supply by barrels a had flow oil evaporation, worse, out flow you've more, imbalance of didn't inventory. companies of factor that supply depletion, a had got then massive shale that is demand exceeds E&P for mix You've you've given this time lot X start progresses historically. of in third the the new in

wake gas So, we and headed up that new price dismantled oil and maybe supplied keep find day towards shock the out one we've the that and oil machine the when. in commodity may really that big and globe a gas produces wells and

upon service cost managers and are these running going think back to ramp this day I to incoming some will demand. to be very, manage going oilfield that be to seasoned and they're businesses, I very comes tough to very they up called price use you're have aggressively going industry think to add lowed

Bill Herbert

sir. you, Thank

Clay Williams

Thank you, Bill.

Operator

comes Our Tommy from next Moll Stephens. of question

is line open. Your

Tommy Moll

questions. for morning thanks Good taking and my

Clay Williams

Tommy. Morning,

Tommy Moll

parties. that thus gone get related you actually you terms you you opportunities hear out other the more and or areas just may commercial And again to process across you yet lay really the under in gone than the investing where just far, one have anticipated we of today? of potentially wanted through had raised be when a to from is another on the could process, cut what work Can a be higher that or realize what the us you've then target in any just point, more review? to you inning how internal than you direction? as you come cost you've start are whether I with you on have to the on of on trying done that's third in there theme with sense for board and we're front I'm potentially much

Clay Williams

we this since really cost through The raised with quarter teams process question. remarks how Jose to his work little I undertake our business. say And Tommy. their I accomplish and services as as started would sort that Yes. is the which efficiently just for more do prepared for second lift. changes about including we in accomplish XXXX, talked quarter they we think I program most night. changes. early process so we answers changes to structural that Great heavier work And instance, in shared how willing in demand making at passes the instance, and that estimate how every involves operations our announced iterative we've this looking last think for of a are also, outlook

million. we've savings, that list as by things. those $XX done. from our we've we estimate through new the most we very, this sources undertaking that's upped quarters, very facilities our of to past kind workforce of so actions few what recent use to the And detailed it's in of closing sorts of the business quarter, And rationalization cost that a move materials In they're and ranging process for

and the for with Completion do & now low by we year-end. rates of targeting Solutions. our that rig Production reason saw is, A to has $XXX we're both So million that order in lot

sure sharing of that sort we're That's -- a two And are so and today let's do, bottoms-up, thing for in individual top-down, is groups as the see we but we those this we're what else that well we we closely. it's can progress around evidence we as monitored quarter-by-quarter. so savings back you and these all do. and with kind cost steps that accomplishing given ledgers make of track both our together It's making orders, that look of a the outlook go very hanging

of and XXXX We through the current to opportunities expect across and that part on to thoughtful we expect will to those. it's where things we will your in to been we talking funding do but second resourcing and appropriate continue cut But our that businesses start wait not. undertake to program XXXX, move magnitude that you that, With to we through airy not of this we've year-end. about we we have accomplish see respect expectations think till the to we'll nearly get and to should $XXX where of million have set about appropriately the the year-end, initiatives that by certainly, are some -- I question,

the our despite areas cost instance, underway new across broad product NOV, in certain we've increased our resources development, been cutting funding for So and actually that's for for.

opportunities look and some some these be of payback. that. in shareholder talking in about coming be good future in sure potential appropriate funding out stewards resources these products case-by-case quarters we we're that that of we'll are it's digital make in there'll automation being to areas their you sort But So that at proportionate basis to more try a of to and that

Tommy Moll

follow-up, garnered to boardrooms picture bigger and a shift for Thank That investors. in and to a energy attention very helpful. And you, so-called, lot lately with here, transition the wanted the I certainly a theme it's Clay. was both of

the alluded take than is past in of folks. though by may assumed And longer lot so transition as currently that you've a

some the you energy what share might you that if evolving? wonder are think and positioning you see I mix world's how you here folks the So may NOV way for missing be

Clay Williams

Well, a question. great

by freight in their the to centuries construction history industry. diesel XX XXst equipment But the industry. at from gas XXX% gasoline XXth gas the arguably about of we point from around -- century, capital look coal and of, tractors locomotives but mankind, if and industry. point on transitions and the and something and to powered to our world's decades, that get powered transition is buildings globe. addition world produces of our are XXth and the take XXX% of and the packages industry oil from and powered Amazon are all from sort rely transitions or else of equipment carbon products sort we're the hundreds that history would to rigs century all you and the the and supply technology aircraft and infrastructure really around, food to oil tractor-trailer the many [tens] If to to and decades, oil construction that that. century around century, our the energy vehicles if that and oil industry. of transition of XXX% going are products products by The automobiles build powered deliver gas this you lower percent with that powered XXX% from gas in maintain millions not by products roads, by combines and are the look of footprint. We maybe of a are something the oil XXth by

it's transition This of doesn't going and and industry. but that inch you from going that's oil if and tens so ask step T, to is go at invested and with in to not the look of all yourself, It's a products the quickly. gas very So quickly. dollars many those how one move infrastructure without of infrastructure happen is that to not categories going back equipment trillions go,

carbon XXst out back help stepped that this we can have lot of help we a around execution we lower ago, that and sets, of accelerate said, the out business I think get plan source applicable in build area, mankind could I century. years energy of to and lot are the to how the that to project few of a that a and and infrastructure. So out think in how figure be of Figuring and deployment ways, skill a capital

And investment so we're good the potential a excited these energy intentionally pretty and actually a pretty on transition supplementing these building in of really the few are years areas ago, and in begun base. renewable's, and our we've about

selling is in into we're clear clear our got in installation prepared are for products talked businesses profits. and remarks, wind NOV And -- technology we've offshore geothermal where we opportunities to in space we these, participation in talked making are about But and in and other vessels a little that products, there. leader. and investing established so, And been good and those have bit we're wind some a NOV addition is areas. new a in leader solar new products few the our that in years many opportunities a and

an And so, may an will and take positioned of. we this really advantage to opportunity as uniquely do opportunity that be view NOV

the So here. pretty what excited holds future about

Tommy Moll

you, Very it Thank And helpful. turn Clay. back. I'll

Clay Williams

Tommy. Thanks,

Operator

and of TPH from Our O'Leary next Company. comes George question

Your line is open.

George O'Leary

Good morning, guys.

Clay Williams

George. Hey,

Jose Bayardo

Hey, George.

George O'Leary

kind can and detail come more on they interesting color to you -- how the new that models what and the The wondered, looks North the business business that forward a North the maybe back customers if changing is on was fluids is are the on. there will degree suppliers contrast, mentioned if and one, do in But at that versus customers could difference? you looking side to game compare I American have the you moving side you're quarters market of deploying some fluids major international looking depend over just you couple frame, in of the to done. way American last

Jose Bayardo

chime Jose, George. This Hey, in is here. I'll

thoughtful in and is example couple lot of there quarters, to remarks commentary the great our our and company it where WellSite informed keep related businesses are makes helping deploy prepared over to team the work as doing, the always sort capital. his last related a process, sense out about of really our has was there -- yes, to the and very to decisions that a that And profitable of make for us opportunity Blake So, Services to segment while that of advantages, And been really of our of American saw within could at with things that that we working scale intensive. review jumped to is our we competitive one our the U.S. as we capital business as few business in that is that looked Fluids part North marketplace. table bring one and being,

quarter mentioned business we had last exit year. that and during impact And we the business. therefore, of an we revenue So that I within second that the the outsized of exiting completed on that quarter were decline business this think

are the respective Obviously, create with in opportunities was you of that WellSite fantastic, look the again been space more we a and particularly has opportunities in and The And to it look that cycle, contraction and really if of market. the control business, very more seeing, pretty other a commitment smaller viability, point market quick But within customers things through of, which sort major just our element their competitors exit element off the through seeing see us, time, in business Services fall sort good. we're what North don't are better about we long-term us, are, the within business. good of is the that well the also, count for by just quality talked due the we a solids the spot in as clear America, leader fact for at that that exit. of importance for additional cycle returns delivery of And rig recognizing you of area.

trying some that are those were to we of highlight So in comments. really things prepared the those

Clay Williams

Yes.

from with areas we share we're our addition that areas on coiled customers a hearing share share control, tubing, as staying has seeing gaining but supplier pure other comfortable and they market, that gained market can a measure bits, smaller we've tick and to clearly we're Jose more are In where we're said power. like up, solids market clearly

George O'Leary

at Jose just that $XXX a I you, it, unchanged. anything didn't framing. It spend reaching missed am I half is under And it's mean budget Helpful that the I Thank is seems respect -- like then, to that that shot year, looking first possible that of apologize but if CapEx the I watermark, million and may bit? a there with guys you just or hear XXXX the Clay.

Jose Bayardo

of the Yes. challenges in spending terms still The in that $XXX yes, came And of the for that Saudi. will in million anticipate quarter, part construction advancing budget the is third we some second -- due our a XXXX. our into bit little in bit number a do little facility down of of we quarter. spend But pick-up the had we rate the to

behind the so, depending on And we revenue once talked we've past, that X% little bit back as market holding a not to is for on year. in next of run-rate the about we're environment And that then, our prior CapEx our levels than from getting anticipate target. spend, about if plant lower us,

George O'Leary

the color. Thanks helpful. Very for

Jose Bayardo

Thanks. Sure.

Clay Williams

George. Thanks,

Operator

question next of our Bank comes And Mulvehill from Chase of America.

Your is open. line

Chase Mulvehill

just... I morning. good Hey,

Clay Williams

Hey, Chase.

Jose Bayardo

Morning, Chase.

Chase Mulvehill

mean, about that morning. sure just reading to make it be of and I kind versus I guess I Commentary on XQ. good touched little seemed suggest that could XQ wanted quarter. talk you tea right. slightly, I bit to to a fourth down the Hey I'm leaves want

maybe of kind confirm of talked capital or taxes? maybe that to of you little So think I bit, be commentary revenue moving then, kind about more a and a was cash cash flow if we the And little on cash that, going EBITDA pieces how free an you the can touch it's it some free if bit, between don't a down should being and about with, to just positive. But know working flow of commentary?

Jose Bayardo

Chase, Jose. it's Yes.

So try I'll that. to that -- try take

a is light there Completion related business the over tremendous been to quarters. units segment put was couple out our So was couple Production still trying relatively have & what think really it Services providing, of I couple that Really, the quarters, amount a there of next specific that to where there, I commentary is and last the our right. we're over of uncertainty bookings

weren't You of QX look at able offices. or took the the sort to then QX into at customers amount our were of that and into sort end come disruption of of even place effectively their massive

impact being not canceled, order that a in timing flow. of that orders And we of being are are So pushed. big the we they're think had telling of our us that terms mentioned most customers

more number in QX than a others. pushed, are orders were significantly likely to them that there being we of We that type Some of expected think, events. are obtain QX

really there and light if if backlog the so, is in that associated disruption say not materialize, trying further of And that those to with intake, businesses. order does just pretty starts some further issues looking

working it And turns, a the do second if orders assets half I of amount materialize. the plays working contract second to at pertains the flow, likely our deteriorate further the capital some part the And of us, from at give is, that from in also guess, of question that revenue-base has little but capital, still in working some anticipate cycle cash not DSO capital, markets so, us those longer and healthy But a little QX, other And inventory, could you that I of out is, higher face year the in liabilities, cash cash expect to international at could of see harder confidence in that again so terms the do to you a see would bit Again flow look by customers we a given as metrics step-down further and significant look what towards bit even the uncertainty continues contract mean components look those your shift rest anticipated harvesting flow bit we cycles little of what and little here. movements we tick-up get reasonably stress as more how a should strain. to longer business year. as that a for more of related of you bit worse.

Chase Mulvehill

incrementals, One organization. question Obviously, think right-sized of cost have beginning. lot coming fixed end to those back and you've as the the think quick maybe you towards, about But you've All kind revenue, actually do business what right. high you follow-up, done a we rationalization make levels of of Okay. of, don't the of kind as maybe That across Bill's costs? at sense. your hitting to the recovery any bring back of

Clay Williams

Well, and aggressively respect when track demand move in to a got services. that. we tell we've with historical that's are that out and way a EBITDA think, best And confidence prosper to continuing costs, higher to and obviously to to a and frankly, positive comes smart hard we're and the doing cost What respond and in that kind on really back way rising to great then so adjust our market and that. challenges is to facilities deal really called of we when cash demand. when necessary rebuild is the that's ability to The of flow working oilfield we of levels skill in I'd aggressively upon called certain I that's survive through of to facing, and forth. upon can maintain And because and right doing as upturns, demand now, expand effective pretty plants, that really you taking have move and in set record to leadership to great a these downturns to

but their can they level businesses businesses, not team put anyone said management just as and their best to that to hard can through out, as to iterate, healthy I days over continues number for so, respect the earlier, adjust And to as revenue. XX quarters tell But quarter-by-quarter to as best of part that. of, with few kind a stay our next on outlook

Chase Mulvehill

Thanks. over. back it turn I'll right. All Okay.

Jose Bayardo

Thanks Chase.

Operator

from of JPMorgan. Our Sean comes question Meakim next

open. is Your line

Sean Meakim

Hey, you. good morning. Thank

Jose Bayardo

Good morning Sean.

Clay Williams

Sean. Hi,

Sean Meakim

Just points of of a couple clarification.

of benefit you $XXX lap much just year? from other when that? $XXX you So of to-date, by estimate something quarter, a much maybe costs be that that So, may out $XXX you year-on-year an do second you in of get us out so benefit million cushion Is noted targeted identifies, like gives the million $XXX million, million how a in the words, of Can how annualized another in you $XXX give million $XX million full that 'XX? next $XXX year-end.

Clay Williams

we the math. work to have think, I through

Jose Bayardo

a over in. timing quarters. every Yes. savings we've Yes, to you of a quarter updates done the job of amounts come the realized last the terms is several And certainly think, providing when in there element the reasonable I

post we So go can through call math maybe Sean. you could certainly that and follow-up and offline with that we do

Sean Meakim

point for Yes, correct? problem. third the And is inclusive Okay. in no the of quarter savings capture gave clarification. you expect quarter, guidance guess Sure. to of that you I the another then, The third

Jose Bayardo

That is correct.

Sean Meakim

much. great. Okay, very Thanks

Jose Bayardo

Sean. Thanks,

Clay Williams

Thank you.

Operator

over like we That's Clay remarks. questions. I'd to all for have the closing the for to time turn back call

Clay Williams

Thank you, Michelle.

I say much how under there. I that appreciate some extraordinary First are and to out conditions the employees our challenges foremost, again, want and doing hard-work

about And October. others so, everybody who listening. forward thank ask lastly, much. on the call to Thank we those results in you to look you all of And speaking safe, to I'd you do our keep stay you can you around safe. you with are what to quarter third very

Operator

today's gentlemen, and you Thank this conference call. participating. concludes for Ladies

may great now You disconnect. Everyone, have day. a

NOV (NOV) 28 Jul 202020 Q2 Earnings call transcript