NOV - Earnings call transcript Q2 2022

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Operator

Good day, ladies and gentlemen, and welcome to the NOV Second Quarter 202 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Blake McCarthy, Vice President of Corporate Development and Investor Relations. begin. may you Sir,

Blake McCarthy

CFO. NOV's are XXXX President Clay Bayardo, President and to With and Conference me Jose and Vice Senior today Williams, our Second everyone, Earnings Quarter Call. CEO; Welcome, our Chairman,

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

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

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

term morning's will me host our call session. Our in Clay. the we earnings call, EBITDA in to use Instructions) Now the (Operator throughout release. defined over with of call the a adjusted as this turn the Later EBITDA term let corresponds question-and-answer

Clay Williams

Blake. Thank you,

revenues grew an EBITDA driving margin a The come. improvement For the exceeded book-to-bill further were Orders posted XXX%. quarter more Despite to to profitability to sequentially We disruptions, able improve of of the of yielding expect to of XXXX, up share our at pleased of XX% chain once again and for $X.XX quarter. second leverage, second to revenue backlog, out earnings supply company XX% per NOV's EBITDA continuing million. $XXX teams were X.X%. see

the withering most to in ecosystem. recent outlook tools, the it and pandemic through productive entering emerging a NOV order companies pushed gas and economic this pipe needs a and prices its gas increase or gas unique are constructive. the oilfield and the idled, the come in cannibalized world they a produced to provide upcycle energy out industry ever has shortfall within significant activity has is urgent real industry will seen. highs, to exploration have potential the in position that greater ecosystem, recession downturn the from Oil The need capacity the oil of gas been in at the operators development the oil in and when security chain benefiting a to higher time facing a food and the and oilfield production is activity pandemic the and through the Although top oil our time energy prices. pumps remains industry. of shutdown has global the industry's at depleted, Lack rigs, has worn economy. That and off investment reduced years preceding and sharply several of live drill

XX% XX% groups, to The directly the XX% cost In oilfield reflect drifting spare to fact, higher operators were at now revenues oilfield mix capital, supply that do companies and step historic balance to price produce gas customers. more, mix. of some may consumables, activity operators companies and other to are Despite inventories equipment be the back to quarter both lower, sales and signals different moving and oil, were constrained engineers up recovery. of capacity reserve results commodity stages generating second lows. of petroleum keep its service in product to and argue about our releases, fact approaching chain. access that, and its speaking, broadly ecosystem and that including participants skilled NOV's and of for of revenues service drill CapEx sales and work, was through industrial emerging their its given less of and to necessary bit can, the they return the amongst shareholders extent NOV the spares capital to workers constraints their are actual are broken they demands globally these finding greater currently a strategic

debt largely our a by ways oil have continue or and access oilfield duress healed contracts acute while and for expire higher external through critical trickle replaced to still news. still While down to lockdown. many in price underway. good and under are gas pandemic It items. loads have food to no shortages against rapidly with prices, battling contracts chain, high lack capital. labor, but prosperity customers the trickle Month-by-month, signed Many finances service takes strain contracts. to labor materials of execute the the due a operators here's still better the costs The is oilfield margin certain of under and to during of low-margin inflation the been low go, down They rising older

of different evaporating out, It on order continues and and bring That's steps of companies why demanding additional the in requires so improving that been are worn these healing now day from capacity evidence service going outlook. healing are to starting the incremental investments all rigs enterprises, are and towards service to statements to capital For business land admittedly a service financial but The at to is way. right cannibalized per categories, pressure points these for are models leverage X has pumper now. deepwater example, demand capacity to our oilfield north $XX,XXX contractually guaranteed NOV. diminishing rates the they expect we in all customers. equipment and leading-edge per These the Idled day constructive would is reactivate. future pricing different directionally, our to first overhang of $XXX,XXX quarter. are And of day or squarely day facilitating Utilization One this reflect major and body super-spec equipment rising driller rates quickly across are announced fraccing prices that oilfield incremental payback grow. Tier the for drillship marketplace. north of are with oilfield well sheets more all balance one per stage it. for rate desperation of

costs As produce. food to the chain barrel the in X above these both you ultimately, us reduce competitive with business in position of The the setbacks and explain in tend of operators time tens per can let be and high, experience more. unique me to extremely Failure equipment, very leadership in in in outfits has time or millions construction well dollars even is to know, the from of why. advantage our oilfield subcontractors that very, risk yields cost oilfield used the successful, operators service companies, and market tools work concert part our technology very means very, matter. every very which an reliability Therefore, NOV scale levels our for value NOV highly. to customers make them averse, in market customers making of service targeted share experience of upcycle. and and oilfield always NOV expensive

advantage. the high-value distinct an choice is competitive service low-risk, being operators For oilfield top-of-mind, of a company

reach we NOV product competitive that including As the than market that also seeking efficiencies That industry smaller gas for leader, the drives arise additional advantage experience occasionally expensive new in successfully their is global valuable operations. launches. for as purchasing that competitors. to has and gain market leader marketing more efficiencies oil NOV and in this real-world to has XXX through Scale obstacles years, and our our facilitates been headaches navigated encountered avoid operators

geographic management decades fleet in oilfield of come to enhance customers a a spare market expansion. service customers leader consumables equipment, to competitive sometimes fleet their parts their by and equipment be and of gravitate well their workforce. will advantage future like standardizing around oilfield of and simplifies These their naturally training to capitalized for which Our operates is and to that support who NOV globally will for be there one helps

largest into extraordinarily our revenue over Max abrasives leadership capital-intensive. the Oilfield high installed as of service competitive equipment, NOVOS miles are aftermarket When pump The computing. another Plus, apps and the advantage. of NOV's on upgrades market horsepower by consumption additional equipment like you earth, of jam makes and rates and equipment. the day-to-day oilfield choice super makes digital yielded and installed oilfield for operations at provides important systems companies pressures the physical equipment which tough oilfield support. thousands suffers. Our operating operations time products edge with very our OEM us base new opportunities, base and presents spares has preferred industry's position

However, oilfield the over capital the paying the for equipment. Instead, commanded several And of to when close service turned come most subsectors south. oilfield by utilization physical even rates service there's plenty past it the consumed years XXXX consumed. excess haven't since been has industry

our in improvements many recent the equipment the pricing of diminishing rapidly. point customers overhang for However, to

should so equipment As too for demand oilfield provide. that we activity oilfield rises,

manufacturing utilization which this vendors expect intensity. further our in manufacturing as redirect enhance times flexibility, all respond, with manufacturing us our serve along NOV's growing valued assets plant to demand, we flex is flexibility, to asset to fixed We of reduce that ability as up to enable needed our our

levels low shareholder for go demonstrate CapEx technology returns. that financials in for historical Low of EBITDA asset cash reinvestment fixed allow to more to needs and NOV Our free convert -- intensity. with CapEx flow low

by when Operators their customers impacts activity just fall. Oilfield position the activity existing parts, their and drilling first, which who service oil companies Our are demonstrate in they few outsized and the and decade the due throughout who now. on past starting volatile. from operators as that results programs cut left blooms followed reliance they cycle rising be draw aftermarket in inventories cannibalize business turn past prices, shows down idled on ecosystem cut and companies oilfields rely later they to to service cyclical operators' the prosperity support X models prices our have an see on from decades highly cycle, enjoy down equipment, equipment in can benefit gas running. to unique our ecosystem consumables and revenue the The who spare than our see units expenditures are

XXXX, witnessed Following the to the in downturn that in fell demand, NOV from XXXX growth followed. revenues extraordinary sharply our

commodity in parts through sheet; of two, relentless through: not, across gas producers differently operators to changes Little oilfield can oil our the recent and history have of more three, that upcycle, All than or companies, as and model different during the tied on Demand ways, diversifying across across when oil who and and and some land within that NOV even first customers oilfield diversification, as be different producers. diversifying NOV strong demonstrated will quickly one, business but back possess completion offshore. rocketing respond shown. managed goes in part ecosystem participate. where cutting less oil necessary; can diversifying our are optionality in a extraordinary way, and It since gas to the between balance and come and gas maintaining does the prices, drilling diversifying respond and activities, diversifying aggressive events XXXX downturn geographically, growth. However, cost service

operators and independent American North react usually national example, companies up move oil much quickly, in whereas changes to oil For prices, deliberately. both down more

Our times respond as differently the different at in X segments cycle well.

results financial model the year-to-date out for laid you. ecosystem I've that for Our XXXX fit

our coating products the recover, contractors equipment but directly other that oilfield and and downhole and or instance, but purchased drilling later. by and segment drill provides and tied first companies by the to Technologies to it Wellbore its are at like pretty revenues services solid services inspection also categories bits, its while and like controls are tubular shakers. have least pipe For purchased operators. real-time recovering drilling drilling, directly oilfield tools drill goods to provides also shell to to global been closely provides services Overall, to operator mostly operators specified tied as service directly It capital tools are such activity

the completion On well perform the is Solutions Production activities oilfield like expenditures to Completion tied providers service other fraccing. hand, by segment who & capital

now sheets through just many these to oilfield ecosystem challenged As I is and whom low-priced contracts. noted trickling oilfield of customers, balance prosperity legacy the face service earlier, still

for mostly to These as the a segment also placed sheet also projects our the blooms lag conductor customers orders by operators business we'll This see emerging our is expectation continued the that growth very modules bid cycle, offshore are Even and recover. capital activity CAPS production pipe and as new winners. next balance natural the few as directly flexible and to margin strengthens, later and and the in provides are offshore there's operators, operators market. low by purchases Separately, from expansion levels. years,

book-to-bill expansion. the has the sector of backlog a margin & years Solutions should Production significantly few one Notably, So X and more of XX Completion for north recovers. this now grow posted continued quarters continue has point than portion segment our as business Orders over to growth offshore of the in row future past the doubled to and months. next its

engineering, to sheets, in manufacturing be the confidence Finally, make available segment contracts very supporting Rig global investments. rates this large at in and investments. high balance our contractors drilling rigs these to in possess day all capital Drilling strong segment high access to is of Drilling support must Technology kinds. leader rigs all of cycle and nature. levels combines This will late are

the rigs to off equipment they go New the and that Brazil, rigs we've to operators West large get programs also the offshore probably Arabian fleet renewed segment, of work, announced is Guyana resumption is and rigs. rigs rig downturn. coming on to or reactivations means rig for older, fleet monitoring help that so the market. to reactivate, at the resumption is X pay to in Recently way a offshore in to Nevertheless, requiring should through aftermarket status call drilling NOV's rigs very And cannibalized to and seeking which higher rig in an and are rising are evaporated jack-ups we condition-based OEM once constructed part for a activity work newly willing for and back and new drilling incremental these to point recertify the dozen developed in day for frequently as long the contracted Africa driving and view. offshore CAPS engineering again global upgrade rigs new my plans to increasingly rigs the the all support of additional market-leading until drilling existing Gulf, demand never added in are drilling a all of rates in the technologies through too. activity access high interest put downturn gain up and Demand tenders

its second helped installation vessel Technology's lower subsistence, has the years. also through base of largely to its as accounted mix oilfield revenues has It benefited for quarter turbine XX% support of the packages, for the its which mix. through few of which Rig leading position from Importantly, its offshore shifted downturn, aftermarket provider past installed wind offset

different upcycle & recap, to at lag. and responding the as Rig times So earliest NOV's Technologies while these, to of Wellbore Completion Broadly are Production Technologies segments is Solutions the expected.

activity. stocks growth otherwise gas, can and in cannibalized a rate. back energy, the usually depleted becoming growing battle, flatten lot oilfield physically reduce reducing avoided by for Month of world's of which acknowledge under, parts to evident getting more prices reassembling having month, available off secure equipment With the we and idle consumables term. I'll makes or extreme maintenance the face expenditures industry increasing faces of laid the short is of during an itself that workers work, is that and increasingly Recessions to global duress many they the spare having consume and that NOV uphill are would our view will skilled oil been just at be oilfield a the recession that assets an economic in accurately, customers support demand and have having demand operations. near thereby

continued levels to of that years. the growth of it's However, North and all with down SPR sector pandemic in excess man, DUCs nearly low of anything product in end significantly the oilfield next years. past the release viable shutdown inventories oil falling, America in number other to marketplace for the activity and with drawn historically of marked me the low imagine the back of for soon with coming the than OpEx gas hard and And this several out with expected few

near would oil shortage solved. the somewhat candidly, orders presently ease stresses will continue be must a chain and workforce Our mild but constraints industry. energy moderate in intense in customers gas their with NOV capital to recession on supply and the the still the ultimately, And term, face that

world, upcycles, of In thing, about compelling challenges a the out and thing up multiyear once plays changes. time. report is our it company, In the the our I'm of for NOV. growth. thing is and a down However, setup thing cycles, our This be key will to pleased for orders the always more we that part the upcycle are care customers a but again solution for is one to price

early are see We of for we you flourish. do. where around questions the I conversations This thank all me very who our and that are beginning many employees to can customer cost in with will is get cycle it. best listening distinct it in change to of designed a the much the today, more around fewer innings how yet to of part you the evidence NOV that To was the NOV are when

me to that, You let are With the turn it best. Jose. over

Jose Bayardo

actions seeing deliveries for average supply demand, execution the in that source taken third-party in of the better continuing our To from second to second segments realize compared our diligently lead EBITDA to quarter, in All with Despite less increased plan billion, $X.XX build against on-time revenue and market better oil continued raw the a times. increase certainty X.X% our or by second the quarter X second challenges. improvement million for vendors fundamentals lead profitability for improvement $XXX and team quarter, ongoing and sequential revenue the Clay. comes quarter our you, compared have we to to sequential reported chain-related recap XX% first XX% in throughput was the and Adjusted working average in consolidated quarter operating execution from equipment and of deliveries times expected buffers inventory extend no totaled components NOV's gas and sales. a of customers. the the Thank and forecast XXXX. materials quarter growth improvements within in The as increase

the years flow. our metrics. the the use improvement CapEx the described of release, cash was few million $XXX $XX debt billion capital assessment build working supply The to the while with in we billion and on management press increases, impact of delivering us $XXX flow over operations allowed an sequentially, a $X.XX all which capital in resulting chain fund inventories, with $XXX and quarter increase on negative a million, negative working in cash our primary Inventory quarter capital. has of in million ended and buffers in to million in cash. our $X.XX working free tax the in working along and for million, resulted Despite growth increased working revenue in building cash better $XX million. course, flow from risk capital, second $XXX past mitigate contributed still Of focus capital

and Continued challenges top certain working supply projects remainder will of continue on capital for drag of a line chain of growth, the the percent the year. timing on payments to completion be

However, half in point, of of second flow modest to generate expect at we amount the this a cash free XXXX.

to segment results. on Moving

Our in compared generated on revenue pricing growth revenue global increase $XXX realized increase second the million second quarter, most of to and revenue. flow-through segment Wellbore in during challenges. or compared EBITDA sequential million chain ongoing improving XX% to was $XXX to quarter Technologies in levels, in segment or supply better XX%, million EBITDA of regions The execution XXXX. quarter first million $XX a gains the drilling and the XX% resulting against activity an XX.X% $XX of

increase mid-single-digit a and and Africa, for by partially an Growth in they the Western by extensions placing under revenue Our pricing on drill the are the the growth nearing led of was Gulf business large new their in customers Hemisphere we Eastern before contracts resets urgency project Mexico. bit expiration, from request and spring Hemisphere in where and East are agreements. delays XX% Eastern customer-driven orders revenues, offset Middle breakup seeing ReedHycalog Canadian posted with

of figuratively are in serve the inflection drill of earliest today confidence broader for of The tip as our the the and are cycle our taking growing segment Eastern indicators of in literally products upcoming ReedHycalog spear leading giving the actions tip the Hemisphere customers one activity. serve being Our businesses. as string an NOC us

revenue single-digit second quarter. the a reported improvement high business percentage during downhole in Our

steel in of manufacturing operational While to quarters motors, the products. demand The has worked certain throughput. high-spec used last limited improvement, second and special availability to were half into grades of finding by elastomers we agitators alternate unit which seen and year. healthy led and of in its the over has the constrained off of has increase pricing to pay the significantly materials. second team Higher robust for due output sources expect hard efforts Their business's of QX been carry able output began mitigate half to the in will to when several margin the they disruptions qualifying a

cuttings, Our MPD equipment offset of system as the in shipped strong our product the rebound sequential WellSite a core from operation decline control growth resulting to our packages first operation managed Outlook control revenues drilling quarter. solid in by from for decrease in a in revenues large anticipate solid reported Services environmental revenue. In and in business the that continued remains was the small operation, Healthy we from capital pressure to second costs higher year. Outlook efforts for solid, footprint higher control reduce in a our to half NOV for line driving international and diesel rates significantly dramatically demand recovery is MPD thermal improve an in recovery which [indiscernible] X.X%. centrifuge, oil acquisition as a activity. which decrease that pullback desorption to preparing our to strong which to continue barite on increase can best-in-class as the Sea, cuttings with efforts focus More will additional third new from productivity in to are system, the from the offset upward These resulting and wells benefits which solutions. well range our service. projects efficiencies, East place drill solid year. relatively trajectory recognizing services our an Totco will WellSite wire eVolve drill that of moving legacy QX revenue pipe in the transitory to allow services. in in Similar few a completing flat the our demand markets and in on us Improving our a wired eVolve MD by and premium optimization differentiation eVolve revenue drive its to focused capacity data expect provide, Services, customers absorb Despite with return business North improved Middle from and will during to modestly customers from solid posted rigs low operations improve and quarter. technology various operations, offshore greater and results well half adding for recoveries adoption growth on U.S. can drilling in as the expect creating and are on we safety turn rates, the of North the we second pipe our and reduce its achieve increase in locations, the remains greater Sea surface

Our premium the revenue solid among and a XXXX, sharp Grant business U.S. activity Prideco its Middle demand levels our posted business sense climbs, in while customers, inflection achieved secure drill renewed its inventory intake pipe drilling a to realizing pipe East. sequential causing them in drawing creating down growth are uncomfortable order levels to urgency of Customer-owned and manufacturing. the highest pipe with for since

demand the the sequential results. Tuboscope teens delivered in and a margins. higher fewer improved disruptions South in increase operational Our Increased prices and the drove revenue with business U.S. low incremental solid America,

to July blowing out, XXXX. of demand in lead plant that the U.S. inspection and growing growth recently pipe its in drill led realized times prevent quarter of by its a demand sequential coating mothball, for revenue the increased in down was coating In and third in the its from we in addition Amelia, coating unit operations, shut growth straight reopened double-digit solid meet To operations, pipe line Louisiana

of second the XXXX, Hemisphere of with expect to ahead Western we in in half a the solid growth Hemisphere. accelerating the Eastern Looking continuation demand

growth while we in the will which help segment, our American Hemisphere, we third the X% activity in North builds expect X% to For growth Technologies to Wellbore expect momentum drilling revenue Eastern drive moderate rates quarter. of

Continued in more mid-XX% should challenges strong improvement offset pressures, resulting than inflationary pricing of ongoing range. flow-through the in execution supply EBITDA and and the chain impact

of $XX shipyard million challenges Completion of components continue with shorter-cycle million increased quarter segments first the sales. improved strong quarter broad-based flow X X% Despite & first million the growth. revenue quarter segment Production of XX% the was $X.XX and business a limit than from improvement sequential of its units X. EBITDA in increase highest Adjusted X% pickup to second execution, generated XX%. double-digit improved the sequentially to or XXX%, quarter. book-to-bill achieving EBITDA of Our revenues of an and XXXX, X XXXX. sixth $XX Solutions Book-to-bill The $XXX reporting greater to straight in to Quarter level within projects the operations billion, pressure ending of since of through the margins was segment's a the backlog

and While we shipyards, continue commodity Higher significantly but costs lead large to right. to times, with bookings FIDs. project delaying existing all quarter for the to were suppliers log the customers pushed have are improved projects strong, struggling operators see economics, and higher workforces prices shipyard stretched and leading uncertain jams nervous who are

meaningful The to offshore XL Systems of and What year-over-year. customer Systems and historically upside our sustainability realized of in future served up prices will per value slowly leading XX% level potential. and we unit revenues FIDs this our QX. indicator it for sequential in the XL a solid confidence orders improvement that segment's pipe a has products business rebound. roughly both connection business is increased But contributes activity. commodity long-term Demand early year-over-year importantly, sequentially in inquiries conductor an growing order improving, saw XX% the drilling our XX%, of with inquiry as in project confidence large sequentially improved However, to see our more average

teams operations which for EBITDA margins chains will upper and the in disruptions, forward our APL teens upbeat business Technologies the cost business Flow low Wellstream growth revenue supply move flow-through unit are to affected in paid studies, as on are delays customers posted and and the ready working in Process teens. in our engineering Processing overruns Ongoing Our with and ensure Nevertheless, projects shipyard customers remain pressured normalize. unit. with fully projects interactions consumed FEED

the backlog revenue equal quarter. remains second strong, unit's its Additionally, the to during X.Xx added backlog

incremental operation the Our Hemisphere growth Improved continued margins. operations with began sales. relief in resulting with from particularly in the some in resulted significant outsized to the see delays, revenue chokes in a in production for our low generating midstream demand, vendor Western healthy deliveries production pickup and supplier teens

operations mixer the facility quarter first despite was the of quarter and for operation lockdowns. manufacturing the pump due Shanghai COVID-XX flat Our the to revenue with vast shutting majority down

team's heroic costs revenues quarter X. and near of pressured a allowed other with up freight and seventh high to and some solid, straight While pumps margins. to with X at remain Demand efforts its higher making overtime customer absorption mixers than tasked demand Shanghai, the in the remains plants book-to-bill realized greater incurred shortfall for the meet operation

subsea flexible a to one a polyvinyl solid caused the in suffering X-week fluoride. our Our quantities business procure of pipe after QX first in by X in quarter sufficient the rebound posted plants inability of manufacturing shutdown from

Additionally, Asia order the XXXX, and for realized strongest in in demand intake unit the strong projects Brazil Pacific since business with its region.

Our improvement sharp a a challenges posted and several during second book-to-bill quarter, capitalizing with have last the chain Fiber quarters plagued in on many the that over Glass Systems quarters. supply business operations revenue X straight X its unit over overcoming

shortages the the X recoveries. North achieve bookings in our second and gas now last this with of has reduced and American higher finally inflected from actions solid Demand business allowed insulate from material which to better pressures to While continue, disruptions. Outlook proactive freight raw markets years. market also demonstrating improved the manufacturing level from labor all headwinds end on customers quarter, oil highest inflationary operations materials, in from taken by us

to high rates began to by wind bond in marine fuels, and demand the spread power between scrubbers see epoxy sulfur customers' a sector reinforced remain while in its bring installation despite is increasing in growing rekindling the offshore benefiting reluctance vessels also a our turbine also appropriate piping use recovery for driven port shipping sector elevated. the our demand We low receiving in space and strand order provide for to glass The vessel. operation new to from with wind Marine installation

pumping the pressure book-to-bill Beginning activity Equipment unit's supply and from each XXX%. level to service tubing and lines. lead build XXXX, higher Demand demand and and chain solid of business dug new bookings build customers evolve higher in a improved in in resulting to fleets its its increasing equipment. wireline now coming as business the Our of of parts quarter. growing Intervention equipment the achieved deeper and fourth posted that for fleet growth strong growing shift operations pumping above the of stacks are & fourth from completion for equipment, pressure revenues are reactivation in and straight through quarters. mid-teens third times deliveries. The of as extending revenue coiled third Stimulation aftermarket continues where for also new activity quarter constraints a preparing with second Despite product dip straight rebuilds ongoing expect unit We service The pressure quarter are with quarter, quarter demand improvements of in for then service horsepower with during of stacked seeing market business' the XXXX large the in into saw America in a customers a orders, number the reactivating began are see towards booked their difficulty in and projects they North of fundamentals of the the XX,XXX quarter we parked equipment and overhauls pumping average realizing international improve. also from orders the second markets

Solutions X%. our backlog expect X% Completion We revenue growing between drive to & Production to segment's growth

the the the and and into continue the disruptions combination face the chain pressures third through EBITDA year, segment incremental supply mid-XX% should to of of drive margins growing range the execution in inflationary remainder demand improved quarter. will While

of segment quarter. growing improved demand [indiscernible] Our of the mid-XX% execution third range revenue disruptions the and through Rig remainder EBITDA in the the into combination should drive Technologies and incremental year, margins the pressures generated inflationary

of Technologies in generated million in revenues Rig the an $XXX second EBITDA improved quarter, million $XX aftermarket operations. to increase sales. the sequentially. or million segment line of Adjusted X% growth continued $X strength million $XX was led by Our of or segment's X.X% Top

quarter and New vessel. $X.XX for replacements jacking Total end the drives the equipment of equipment, included order pumps, BOP totaled orders billion. Orders The of $XXX was miscellaneous segment system book-to-bill power upgrades. wind at consisted components next-generation XX%. representing other controls the another handling and and installation rest backlog of for design book and million, a top for

this reflects a indicate that order market are many process is of type that this signs While healing, is still accelerating. book there

to contracts offshore our rates in in average remains X broader still touched recent customers equipment to U.S. leading since the encouraging, we again high-return once industry. continue key average flows means securing last market, the edge need which points and In access for can to with rapidly, Clay on, Until Xx needs. been very cash As customers' markets land seen is below investments public their expect the rate will challenge day equipment blended Permian This a rate XX% a the customers improving the day gas have than self-fund critical contracting rates. at with average in months reward more data financial than rates capital the XXXX. day XX% increased oil in more

Rig for is cash Fortunately, term, mentioned, to a rapid Near of improving upgrades we and equipment orders our customer bulk come existing replacement as I from Technologies expect pace. their just base our flow the from fleets. at segment's capital

the for to spare While rig are ability parts still rates pre-pandemic seen and our X in our recertification, manufacturing major Supply modest, a remain regions. We've operations. get reactivation, steadily improved for our quarters, QX to that driving customers. much our are resulting parts quickly outpace achieving for overhaul We're environment improving demand levels. increasing capital improve constraints continues also to projects upgrade limiting equipment output, all with orders growth over orders day backlog orders chain aftermarket seeing in past

our the us demand making for this bookings is materials improved segment ability of throughput While increasingly throughput and the on generate the manufacturing our results Growing backlog improved increased half ramp continuing an optimistic and the XXXX. increased. second our and gather X% to in and parts in about to for revenue second focus financial to prospects year momentum and spare secure improve also improved quarter, from

expect the EBITDA in with the to flow-through X% we XX% for sequentially, to revenue Rig segment third between our grow Technologies For quarter, mid-teens.

realizing growing While we're cycle in been not we from and remains of investments long-cycle will What pleased severe with early improvement businesses substantial we with upturn see than a are investor the innings recovery needed believe will We our in the profitability all, in believe the pressure creating business the demand multiyear in recovery. there pent-up very and and the has ramping be Short-cycle avoid results segments our address second of of the headwinds most, America more initially Every businesses with North Eastern their Hemisphere, each chain demand different, now prove rapidly We're equipment supply to to in capital in improving business line facing on our cycle operations. still driven energy by expect. increased operating we what supply operations and shifting prior in seeing is for transitory. room and shorter-cycle if what customers activity challenges is challenges quarter, security to global issues downturns. capital aftermarket down is that in little up. these global more are assets for this recent a equipment and

the and technologies XX% that should more in NOV achieved anticipate which XX% deliver to do expect in we XXXX not than that, of we these constraints demand improvement we'll call half. to inflect, to is to second greater allow expect significant results up products do open While in With first and our the we see a EBITDA for XXXX, what to our now half questions. alleviate

Operator

[Operator Instructions].

Gengaro Our first with Stifel. question comes from Stephen

Stephen Gengaro

equipment? sort could at given to going the items? be through conversations more. that was pressure willingness E&Ps you're pumpers curious mean somewhat as these sort having of customers as about you what Can mentioned thinking what and talk to when lead how willingness that for times their you invest this in about you are the long and/or I with and dig the I upgrade about saying a far you are Jose, of they're think little of lack end, So just seemed what if or

Jose Bayardo

Yes.

I think that to a conservative salivate the the customers be opposing the seeing really fray being assets. pricing is such related improvement struggling to rapid the Those with we're forces, capital pressures that point unit where of our they're economics the of beginning type right? a standpoint very, sort sort at X over the into being received we're in are other from to and of that back very coming by per

So the the year of still year. the is But trigger out people the from ones a postpone those biased be to the that field, this, on so may They're out assets next are struggling having it's security meet when be just end figure point plays it's needs. this but rather that assets energy struggle, the able more back little types benefit the creating is quite to recognize the supply is primary in to most global here and imbalance I with right? be need they'll sooner and into frankly, determined more think to are the our than pent-up who and it. worse bit And think right demand into going the that we step deployed decisions, pull to that of it. to becomes, And to field through come those inevitable that continue I later to point the least at trying of supply/demand everyone making longer investment those sort how

Stephen Gengaro

what talk about think mean, side. -- then maybe bit about I And XXXX? how talked the follow-up you're you the on how cost price the And sort the impacts inflation margin third and was Wellbore as of think a on get you And the progression incrementals versus side? little Great. specifically you do that in quarter really seeing into you

Jose Bayardo

acceptable down supply that and challenges. pricing margins costs associated those in only eroded through disruptions, of but all to Look, levels back and improving were focused on place I order offset think to we execution our last have return recapturing pricing very also if the had chain-related operational course the several not the which over due to cycle also to more normal taking the quarters, the with you look been

mid-XX-plus mitigate fits the improvement our we so taking with in going to those over And quarter. kind margin spurts. an that to for of of be normalized which deliver in incremental to teams world sort that were see better forward, you a least But at segment, and range, an actions chain disruptions, able where starting period around will the those that's And supply we're continue and in incremental our of extended to margins, sort are of is recall, Technologies sort of this percent as the be Wellbore to hope we time.

Clay Williams

that Wellbore and in would for cutters of things each that on. and our motors customers that. performance, to are NOV I quarter of that technologies more we tools share really drilling out paying to enabled up performance like for We're translating demand are downhole our differences more our we've and differentiating in around add, new gain Technologies too, invested tools think competitors I highlight distance think each press terms in have the Stephen, bit us there, and in putting releases between were I

And so that's too. from Wellbore contributing Technologies, results the financial to strong

Operator

from question comes Anderson Barclays. next with Our David

David Anderson

So your both East or next XX, indication we'll offshore commentary and Middle months. results of and your the selecting, another activity clear in see and on expansion XX substantial

obviously, this, seen First in time. quite some of all, we've

see internal as of greatest start in leverage turn really of things where out think you East up. You and the guys you've your or certain Middle businesses the if some ton offshore took operating cost are to changes made. product lines there a of wondering operations you'll I'm

Clay Williams

Yes. and fits with kind this of prepared remarks. Right Jose's now,

back that going rigs from drill to pipe the pickup where go again, back As pipe our to for of QX isn't in increase greatest to part which sequentially required really the expected, to orders and rigs. see demand seen those where first in sort consumables things these to rigs back we've then pickup of work. nearly work I the but support backlog a in and orders it work. from the instance, support think you a orders or are And QX, report, was separately, the business that's big saw And double like the in those for drill that spares rig, to nice offshore we to going lift

forth. recertification our of And Saudi going offshore those places their elsewhere are and engaged so and a like in at for is go through engineers reactivation, customers, looking expectation in the so to Arabia shipyards needs number with in processes work our with to equipment rigs

will I so a think that And be later. little bit

the So of that progression in foresee we that's offshore drilling. demand of sort

Jose Bayardo

several spent future. it's really organization, And primarily rightsizing but the Dave, the it was not just you as the we've also for the last positioning just also, observed, contracting a effort really organization years but

we the contracted degree, we've to markets, so actually grown East. certainly enhanced a in including large footprint and certain footprint And the Middle our have while

the So market I way for positioned that feel like we're the evolve. well will really

we're positioned that, yes. for So well

David Anderson

do? what mean years. XX shape looks seeing, rigs curious like about deepwater feel revenue is the tenders talk sure where I'm I back Yes. of thing other in a [indiscernible] the for so? touches I And how of reactivations out months? its Middle a you market lot like what a of East can But your really -- guess imagine have bit of change potential? about you're there expands segments. talked X sitting idle or these I kind I'm all what kind you it rigs and they're over further about next I have after that does quite that the in few lot a like we per pretty would substantially side. rig your increases the been the how bad down Can stock, amount would jack-up the in go terms revenue think the the aftermarket of -- of that these potential I years

Clay Williams

gating for in step a the the requirement stacked are I period really of after have emerging touched back by sort to that with, with the else the work. customers expenditures on about other why are going rigs very, the It's constraint, constrained investments. get something and way restructuring. are again, deck end to facing term, change cold some very, really the of And on at of near up, to that on from sort -- a here they're and time. years, really vary access capital. I it's in we're engage the Yes, day, almost drillers X that engineering face think the for offshore rigs the and what the offshore rig. of there's about costs these these more They're of go rigs. teams But Jose underway. But that's They guess, and that's very working that that and And kind careful that is see our so their lot that's of go to many important function

that how expensive, the beginning the demand stack. be to levels of shortfall that's we more We of the We have going activity more we at cheap the and that's has deeper And that addressed. see rigs reactivated and easy to challenged foresee playing more progress of a -- support kind go things into easiest the rigs rising process to out. from as cycle supply will being rigs

Operator

Smith next comes David Pickering question Partners. from Our with Energy

David Smith

reactivation. growth, those that fillers guess talking back offshore I before ever announced. involved topic, demand times we'll on a follow-up you're deepwater on suspect one with in contract lead see I the to circling quick about XX-month conversations last

to are I on also look And any side, reactivation ask So wanted as you color interest what of opportunity candidates, the in those provide on might you can deepwater like? especially seeing reactivation? on equipment that upgrades part the

Clay Williams

that's the of back those to rigs and in go to expect Yes, in rigs orders Many yes, put are achieving lot of markets that, managed involved That's standard, equipment requiring going and for additional those to becoming a drilling NOV. for capabilities forward as interest work. we're NPD. lead interest around pressure deepwater on But we A in are. of sort BSEE recertifications future definitely conversations we lot required globally. a BOP new

David Smith

to back I future undersupplied and public growth. companies need at undersupplied could and potential support seeing for a contracts you I U.S. term growth. share any you're opportunities that to your on hoping the of on And some evaluating push-pull appreciate in was then pickup it. front Great. what least demand of get circling XX sheets real balance maybe for to private market improving Lower just color and growth capital, kind

Clay Williams

pressure or David, is more about broadly? pumping asking this you're

David Smith

but pumping, works, broadly yes, too. Pressure

Clay Williams

Yes.

very, of look, -- be companies public expenditures. all think very to I pressure have careful capital lot a in

services are public opportunities private play emerging. way or in categories but in picking that more looks see candidly, And kind it sector. I in their how measured whereas up at activity. most rigs -- we'll seen operators the plays it there's the smart if going You've moving rigs lots of that is don't through in growth capital out put of the this be to wouldn't out know companies been back point in incremental space, are that that have to private inflection work E&P this oilfield the are where case not, now this of surprise me if We're of just equipment. some pricing the

You've drillers that day couple per investments as North rising sorts had just sort that those strong those point attractive. pressure of days, things the sharply American of land past and make and well by margins performance of per unit announcements as pumpers more to some

that we'll coming in oilfield space the how it think, I out. plays per so look, translating pricing that into a And we've to signal service prices addressed. back that, is see through And seeing price we're to to what our got a ultimately, in commodity strong of find shortfall address way view. capital couple be barrel its million day will ultimately has But

Jose Bayardo

is in but bit we things David, interesting saw space you does as are a to market, think, think prior be the And really if emerging quickly, investors global that little the it's just question, going market. But pertains to a appear not in I different about cycle what cycle. the the American the this what than it are North

of by more emerging overseas there's as home the funds certainly much well well, kicking sovereign activity but sort that's more case new getting within some going their markets. that outside to And of more same the potential NOCs to are also and in support territories. wealth around U.S. engaged helping going space driven investors So that probably forward as be as are affiliated the

look we at that phase are that when a differently draw which investors and of entering end providers But bit sector to things delivers going will So capital. this little the time. day, good the the of returns, are

Clay Williams

quarter transactions assets rig emerge to that jack-up That's is and jack-up by back around you're a space that And point. seeing into a of specifically. much been backed sovereign willing number the more last that, the to capital in some are players offshore. specifically that more X or bullish drilling in go There's offshore put great the more capital wealth new you

David Smith

outlook. second be appreciate the Yes. the quarter color, didn't That's I Really point. say and if and on a half great great I'd congrats remiss the

Clay Williams

you. Thank

Blake McCarthy

David. Thanks,

Operator

with next Our Cowen. comes Marc question Bianchi from

Marc Bianchi

of particular remember guidance. I that there, the going What's there, in thought terms if the can in that second quarter? this guess guys some a is on out there's first time you anything beyond this half process outlook I giving the quarter caused

Jose Bayardo

confidence a there's in bit to execute related Marc tremendous I through chain terms are challenges -- provided against particular, continue outpaced anything to that little outlook is, of in bit our this that to know get better a our related had exist -- year-end. number out. to ability little shaping look, guidance to going questions we're significantly supply don't think a quarter. of Blake we we we the we obviously, further and up Things I will a

the wanted So sort way fair wide seeing but least for alternatives half. range to second of a how at very we we're provided a you of provide

So that's it in a nutshell.

Marc Bianchi

below you rest so they XX%, of where in America Okay. distinction their versus below world? there and be is customer think are spending levels? a do to back current you North Super. it generally? sustaining and fleets maybe as Is customers look spending And And refurbishing How XX% big at CapEx forth. to the need activity much XX%,

Clay Williams

question. this Yes. anecdotal, great It's It's to say answer. admittedly. really hard What very -- is is really a it's would I

idle easier with land it's it is think drillers for cannibalize rigs the I to for offshore. than

Whereas shipyard. rig expensive, in underspend crew a terms in putting just the rigs a rig working, -- take are more as off they needed more offshore, of works stacked and in a that's so the of land a send draw rigs given can the it's to the number to more to they that dramatically capital sustain working. a a than because replace out of for challenging ongoing offshore far And do,

reactivations, to downturns don't sure to don't around That's what's benefit customers of out I'm answers insight we it's at hopefully, not So about I your work rig a some is earlier, you a and prior Jose into coiled kind anecdotal that this that they've that I that sort owned all I what dollars. have that they've not catch-up around where to was of period spend where our downturn. spending would skill -- some NOV. over tell expenditures rigs enthusiastically these though possible spring but see -- question, set that putting They to downturn. of are gives employed we're in great moving And there. are more through going talking going globally is here to rise some a that think are to What

Operator

comes Lynagh from with Stanley. Connor Our next Morgan question

Connor Lynagh

up there been and square like a past forward? I intake that comments highlighted in quarters caps just you things you order you wanted contributing sort that's your the of over still -- going bit. of been wondering to catch can X expect basically few if about seeing there disproportionately you're a to and orders is deferral that. I'm business strong, a and to just the of talk has portion certain the quite portion the The things but actually projects

Jose Bayardo

Yes.

in So It's quarter-on-quarter. last quarter. this strung together book-to-bill, obviously, within even but of really bookings importantly, XXX% of quarters a our row up number here CAPS a solid it's we've segment, more XX% in maybe

So everything is heading the right direction.

that on trying and FID. I have some in through Asian pulling in businesses are still in customer's and host processes shipyards on trigger part challenges you're of working resulting that to that conducting had is are we're the the think that the of sort are terms make the business that of a distinction cautiousness to debottlenecking that commentary referring

if horizon is quarters, the those and pull getting of opportunities time several our smaller So several number little any years, just size triggers the been pursuing bit. we've they kicked is when certainly the getting a last out over that sense not

I of think those getting environment around pending issues. sorts resolution those bottlenecks, they're new cost all on in, arms the that

a so those project-intensive And more really, of for large almost it's orders more of sense come, optimism particularly businesses. that just there's to

Connor Lynagh

sense. makes that Yes,

updated some on think also your sort if you if frame you missed the in quarter through business any thinking want expectations about of it? of you of you cost quantification sort had just margins but think would be how I quantified next the few guys of highlighted I ongoing amount, delays that, have and to have shipyards. So that from thinking off? the those any to around third however those through to that the or quarters Just rolling was margins costs, obviously, beyond,

Jose Bayardo

Yes.

I give we specific were probably that improvement X any specific Look, margin out those progressive projects, last front. on on POC more called but quarters, took the can't think the you and we I project. type charges guidance

associated margins future pressures those that So with projects.

at anything margins where we guidance, the some quarter, This Obviously, have QX. and look of incremental saw we we're citing magnitude, didn't that mid-XX% improvement. into going

consistently delivering normally incremental of think. is are catch-up hopefully, which things little margins delivers, not but segment improving. the period coming, time to deliver types that's upper a we bit does back segment But type a incremental that's I soon high. a margins, obviously, on sort that get quite that got normally a range, where to of we're we're of that And So XX% XXs, lower

Connor Lynagh

Okay.

here. finalizing And thought sorry, this just

into shorter do as with sort of doing type to execute to back levels? So in is faster? getting order this consumable in, What you back cycle factors it these the margins profitability say, the projects starting was it see coming to swing those back to some and mix? Is of the margin mid-teens big higher to 'XX, 'XX get business biggest low items to that

Jose Bayardo

Yes...

Clay Williams

ahead. Go

Jose Bayardo

question, more fiberglass Connor. both, business those starting you been lot a surviving provide that of to It's And of our and of those it shorter-cycle life. hopefully, We've of a project-oriented quarters. provides that incrementals. that good within to better that our on So better obviously cycle. see in businesses business, cycle sort more Equipment equipment and right? and longer of to comments got Stimulation need the execution come on capital last the X/X to businesses upside And our shorter X/X about a we're basically and picked And aspect baseload Intervention of touched relates we've the really bit before segment juice consists longer right? have the to little up I projects. big life, components then on the think of short-cycle we That's we off about several those signs more that as prepared over that particularly larger cycle,

Clay Williams

cycle, Yes. supply like. are Asian heard has the our in to about -- And of glass fiberglass cetera, more et under short projects shipyard us of resins, chain supply, disruption, the lot both suffered you've talk and disruptions allocations, we, both our importantly, business cycle longer a exposed -- types

the So happen will few think quarters. hopefully I over next supply chain

out a think way us go I will towards helping here. that long

Operator

Arun next Jayaram The from comes with question JPMorgan.

Arun Jayaram

incremental the business. you within if maybe on if can a trends I you're us order to capital E&Ps bit equipment service side and your onshore maybe color frac CapEx services, sense North between in American some capacity. the start around wondering because, was offshore the call was trends companies give you I wondering more customers. of Jose, we And oil to us oil could versus are also as service characterize it, you in starting earlier, seeing from a see onshore adding Clay, give of of mentioned raise terms

Clay Williams

Yes. add for I want Well, a companies that So world don't by features else's operators, right? service that necessarily in happens are of to you're dictated benefit, lot this, aren't everyone by directed operators. oilfield our aware Arun, but know

to capacity pressure well earlier, laterals mentioned want requirement. BSEE managed drill -- big longer X.X-inch that offshore, in thing. sort e-frac the pumping so really like, emission, drilling provide NPEs the that's X,XXX the BOP mud the fleets side, will land better on fleets that hydraulics -- psi capacity. pump to lower of be high-pressure I a of pressure we sort -- like trend think, as or And move for we And a is at more it's I things setback on in pipe see or and as side They the influence the push continue dictating and on systems, to that frac drilling

the are out requiring the trends E&P from the we're oilfield they're some -- some of those seeing are So world of that the companies our customers, there. influencing of what that directionally, service

Arun Jayaram

Great. Great.

my just follow-up, then Clay. And Okay.

You in manufacturing given us much what this manufacturer. winter? upcoming Europe. an was does energy how could capacity you're of guys, Western And be sense risk wondering have a I are doing could NOV give crunch, any mitigation unfortunately, global if you obviously, a

Clay Williams

some States far or East have do far, America in in the Asia. or Middle but and We North Yes. have manufacturing in Europe, the less than we United

And to forgings watching of few so castings we're however, these respect our things of manufacturing. small rely and We and own close that buy. Europe out and of closely are on with. with in other communication do, a suppliers suppliers And we and footprint it's that polymers Western

us as winter And need from continue standpoint, to gas move we for prepare that. months, natural and so to the of ability we concerned constrained if about into they're very to know supply their that kind a

And very, watching situation closely. the there so very

Operator

remarks. not showing call this further any And back I'd to the closing to at any I'm questions for turn over time. like Clay

Clay Williams

this day, Thank day. a this have to you, Thank a Kevin. really a We so day, joining you. busy appreciate hope you [indiscernible] Good. I you I us been morning. forward look know news and I has great

Blake McCarthy

Ladies today's and does gentlemen, presentation. this conclude

disconnect You have a may and now day. wonderful

NOV (NOV) 28 Jul 222022 Q2 Earnings call transcript