National Oilwell Varco Announces Fourth Quarter and 2005 Earnings
National Oilwell Varco, Inc. (NYSE: NOV) reported that for its fourth quarter ended December 31, 2005 it earned net income of $101.6 million, or $0.58 per fully diluted share, compared to third quarter ended September 30, 2005 net income of $88.5 million, or $0.50 per fully diluted share.
The results include $13.5 million of pre-tax charges ($0.05 per share after tax) related to its merger with Varco International, Inc., including integration costs and stock-based compensation charges. Excluding integration and stock-based compensation charges, earnings were $0.63 per fully diluted share.
Revenues reported for the full year 2005 were $4,644.5 million, and net income was $286.9 million, or $1.81 per fully diluted share. Including results for Varco prior to the March 11, 2005 merger, 2005 revenues were $4,952.4 million, up 27 percent from 2004 revenues of $3,886.2 million. Pro forma 2005 operating profit was $557.8 million, up 50 percent from pro forma 2004 operating profit, including full year Varco results and excluding integration and stock-based compensation charges in both periods.
Revenues for the fourth quarter increased 11 percent sequentially to $1,377.4 million, and operating profit excluding the $13.5 million integration and stock-based compensation charges was $177.3 million, an increase of 16 percent over the third quarter.
Backlog for capital equipment orders for the Company's Rig Technology segment at December 31, 2005 increased to $2.3 billion, compared to $1.75 billion at September 30, 2005, with new orders during the quarter of $901.3 million. The Company's backlog for capital equipment continues to increase as a result of the strong demand for its drilling equipment products.
Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, "Our Company enjoyed an outstanding 2005. The integration of National Oilwell and Varco has proceeded very smoothly, and as one team we've achieved great success in securing orders and delivering new equipment. Each of our three segments reported higher year-over-year sales and profits for both the quarter and the year. With the very high levels of oilfield activity and brisk demand for products and services we are witnessing now, I expect 2006 will be another great year for our Company."
The Rig Technology segment includes most of the capital equipment manufactured and sold by the Company including drilling rigs, jackup packages, coiled tubing units, cranes, mooring systems, wireline units, nitrogen injection units and workover rigs. Fourth quarter revenues for this segment increased by 12.5 percent over the third quarter to $644.4 million. Higher shipments of drilling equipment to support rising levels of investments in new drilling rigs and well remediation equipment drove most of the increase. Operating profit for this segment excluding integration and stock-based compensation charges was $80.5 million, or 12.5 percent of sales, an increase of $10.1 million from the third quarter. Margins in the fourth quarter were adversely affected by lower than expected profitability on a crane order, and by higher inventory and accounts receivable reserves.
Petroleum Services & Supplies
The Petroleum Services & Supplies segment consists of those businesses within the Company providing critical services and consumables to the oil and gas industry and includes pump and liner expendable supplies; pipeline and tubular inspection and coating; fiberglass and coiled tubing pipe sales; solids control and rig instrumentation; and downhole tools rentals and sales. Revenues of $513.2 million were up 8.7 percent sequentially compared to third quarter results, and operating profit was $101.4 million or 19.8 percent of revenue during the fourth quarter. This segment benefited from higher demand for the goods and services it provides, and improved pricing in most areas.
The Distribution Services segment provides maintenance, repair and
operating supplies to drilling and production operations around the
world, employing advanced information technologies to provide complete
procurement, inventory management and logistics services to our
customers. Fourth quarter revenues of $308.2 million were up 13.1
percent from the third quarter. Fourth quarter operating profit was
$14.9 million or 4.8 percent of sales.
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