National Oilwell Varco reported that for the third quarter ended September 30, 2010 it earned net income of $404 million, or $0.96 per fully diluted share, compared to second quarter ended June 30, 2010 net income of $401 million, or $0.96 per fully diluted share.
Transaction charges for the third quarter of 2010 were $2 million pre-tax. Net income for the third quarter of 2010 excluding transaction charges was $406 million, or $0.97 per fully diluted share. This compares to second quarter of 2010 net income of $405 million, or $0.97 per fully diluted share, and third quarter 2009 net income of $396 million or $0.95 per fully diluted share, excluding transaction charges from both periods.
The Company's revenues for the third quarter of 2010 were $3.01 billion, an increase of two percent from the second quarter of 2010 and a decrease of two percent from the third quarter of 2009. Operating profit for the third quarter of 2010 was $598 million or 19.9 percent of sales, excluding transaction charges. Year-over-year third quarter operating profit declined $20 million on $76 million lower revenue, resulting in operating profit flow-through (change in operating profit divided by the change in revenue) of 26 percent, excluding transaction and restructuring charges.
Backlog for capital equipment orders for the Company's Rig Technology segment at September 30, 2010 was $4.87 billion, which was up slightly from the end of the second quarter of 2010. New orders during the quarter were $1.18 billion, reflecting a broad mix of the Company's products including new offshore and land rigs, workover rigs, cranes, and well-stimulation equipment, from domestic and international customers.
Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, "High oil and gas activity across North America and continued outstanding execution of equipment orders enabled the Company to achieve solid earnings and cash flow again this quarter. We are pleased that bookings into our capital equipment backlog exceeded shipments during the third quarter, driving backlog a little higher sequentially and signaling renewed interest in drilling equipment construction and refurbishment, and improving credit markets. We are pursuing new orders aggressively, and remain well-positioned to execute strategic internal growth and acquisition opportunities.
"We expect to close our proposed acquisition of Advanced Production and Loading PLC, a subsidiary of BW Offshore Limited, during the fourth quarter. We believe this acquisition will help us expand our product offerings in the Floating Production, Storage and Offloading vessels (FPSO) market, which we consider to be the next phase of deepwater development in the oil and gas sector. FPSO's offer us a terrific opportunity to create value for our shareholders."
Third quarter revenues for the Rig Technology segment were $1.65 billion, essentially flat from the second quarter of 2010 and a decrease of 18 percent from the third quarter of 2009. Operating profit for this segment was $480 million, or 29.1 percent of sales. Revenue out of backlog for the segment decreased eight percent sequentially and decreased 28 percent year-over-year, but non-backlog revenue increased 17 percent sequentially and 23 percent year-over-year, reflecting higher demand for aftermarket parts, services and capital spares.
Petroleum Services & Supplies
Revenues for the third quarter of 2010 for the Petroleum Services & Supplies segment were $1.09 billion, up five percent compared to second quarter 2010 results and up 23 percent from the third quarter of 2009. Operating profit was $164 million, or 15.1 percent of revenue, up 19 percent from the second quarter of 2010. Operating profit flow-through was 46 percent sequentially and 38 percent from the third quarter of 2009 to the third quarter of 2010. Rising levels of rig activity in U.S. shale plays and seasonal recovery in Canada resulted in higher demand for products and services provided by the segment.
The Distribution Services segment generated third quarter revenues of $424 million, which were up 16 percent from the second quarter of 2010 and were up 39 percent from the third quarter of 2009. Third quarter operating profit was $24 million or 5.7 percent of sales. Operating profit flow-through was 19 percent sequentially and 14 percent from the third quarter of 2009 to the third quarter of 2010. This segment benefited from sequential seasonal sales improvements in Canada, as well as strong sequential gains in U.S. operations on higher rig counts.
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