The next oil and gas industry upturn will see the deployment of shale drilling technology to overseas markets as operators outside North America seek to replicate U.S. shale’s success, according to National Oilwell Varco (NOV) Chairman, President and Chief Executive Officer Clay Williams.
Technologies such as tier one land rigs with high torque capability, top drive automation, mechanization of pipehandling and premium pipe capable of drilling longer laterals are some of the technologies used by U.S. operators, Williams said during the company’s third quarter 2016 earnings conference call Thursday.
NOV reported a net loss of $1.36 billion, or $3.62 per fully diluted share on a U.S. GAAP basis. Excluding other items totaling $1.09 billion, the company incurred a quarterly net loss of $128 million, NOV said in an Oct. 26 press statement. The company’s third quarter 2016 revenues totaled $1.65 billion, down 5 percent from this year’s second quarter and down 50 percent from the third quarter of 2015.
Due to the continued deterioration in the offshore rig building market outlook, the company’s offshore rig systems business also took a $972 million non-cash goodwill impairment charge in the third quarter. In spite of such losses, company officials see reasons to be optimistic.
The company’s wellbore technologies segment generated $526 million in revenue during the third quarter, up 3 percent sequentially from $511 million and down 37 percent from the third quarter of 2015, according to the press release. NOV is “very encouraged” by the performance of its short-cycle businesses with the segment; these businesses posted sequential revenue growth of about 15 percent within the North America marketplace, said Jose Bayardo, senior vice president and chief financial officer, during the conference call.
NOV officials are also encouraged by the booking of two land rigs in the third quarter, including a high-specialized, harsh environment, extended reach rig headed to Alaska’s North Slope. The orders represent the first order for new rigs since this time last year, Bayardo commented.
The company is also optimistic about the near-term growth opportunities in land markets.
“In North America, smaller contractors are looking to add more modern rigs to their fleets, and while most larger contractors do not expect a need for newbuild orders until the second half of 2017, they are expressing strong interest in improving the pressure and torque capabilities of their existing AC rig fleets through upgraded 7,500 psi mud systems, new top drives and iron roughnecks,” Bayardo stated.
In the United States, the success of wired drillpipe and closed loop automation drilling that allows the use of machine learning software technology led to greater rig efficiency. International customers, particularly the Middle East, Russia and Latin America, have expressed interest in equipment upgrades and newbuild programs. While international rig tenders move more slowly, Williams is encouraged by the interest.
The company is seeing a shift away from offshore, which dominated the company’s order books for the last decade, Williams stated. While international business will partly offset U.S. market growth in the fourth quarter, Williams sees future growth opportunity in demand for wired drillpipe and drillpipe enhanced with RFID chips, but that demand remains a few quarters out.
Since hitting a cyclical low at the end of May, Reuters reported Monday that the U.S. rig count has grown to 149. The fact that is has grown in 18 of the last 21 weeks confirms that a sustained upturn in drilling is occurring. Most of the extra rigs are drilling oil-rich formations instead of gas, although most wells will produce a mix of hydrocarbons.
Despite the anticipated shift towards onshore, the company continues to invest in technologies that will enhance their customers’ drilling operations. This includes the company’s end-to-end predictive solution that can anticipate operational failures in subsea blowout preventer components. Williams said that the company has achieved operational success in this area, helping customers avoid unplanned downtime. NOV currently is developing top drive and mudpump predictive models, Williams said.
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