National Oilwell Varco Sees 4Q06 Earnings Double
National Oilwell Varco, Inc. (NYSE:NOV) reported that for its fourth quarter ended December 31, 2006 it earned net income of $239.2 million, or $1.35 per fully diluted share, compared to third quarter ended September 30, 2006 net income of $176.6 million, or $1.00 per fully diluted share. Earnings per share more than doubled from the fourth quarter of 2005, when the Company earned $101.6 million or $0.58 per fully diluted share.
Revenues reported for the full year 2006 were $7,025.8 million, up 42 percent from 2005 revenues of $4,952.4 (which includes results from Varco International, Inc. prior to the Company's merger with Varco on March 11, 2005). Net income was $684.0 million, or $3.87 per fully diluted share. 2006 operating profit was $1,111.1 million, up 133 percent from 2005, and up 99 percent from 2005 operating profit, as adjusted to include full year Varco results for 2005.
Revenues for the fourth quarter increased 17 percent sequentially to $2,078.7 million, and operating profit was $381.2 million, an increase of 34 percent over the third quarter.
Backlog for capital equipment orders for the Company's Rig Technology segment at December 31, 2006 increased to $6.0 billion, compared to $5.4 billion at September 30, 2006, with new orders during the quarter of $1.4 billion. The Company's backlog for capital equipment continued to increase as a result of the strong demand for its drilling equipment products, and its new orders included $133 million in backlog added through an acquisition during the quarter.
Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, "Our Company enjoyed a very successful 2006. Each of our three segments reported higher year-over-year sales and profits for the year, and we enter 2007 with a very healthy backlog of equipment and technology to deliver to our customers.
I am very proud of all the contributions made by our employees in helping us deliver on time quality equipment and services. We remain optimistic about market conditions and our opportunities for this year. We expect 2007 to be another successful year for our Company as we continue to help our customers retool the world's rig fleet after years of underinvestment, and bring better, faster, safer and more environmentally sound technologies to the energy industry."
Fourth quarter revenues for the Rig Technology segment increased by 28 percent over the third quarter to $1,136.5 million. Operating profit for this segment was $227.3 million, or 20.0 percent of sales, an increase of $70.1 million from the third quarter. Operating profit flow-through, or incremental operating profit divided by incremental revenue, from the third quarter of 2006 to the fourth quarter of 2006 was 28 percent. Revenue out of backlog for the segment was $775 million, an increase of 31 percent over the third quarter, due primarily to higher shipments of drilling equipment.
Petroleum Services & Supplies
Revenues for the fourth quarter of 2006 for the Petroleum Services & Supplies segment were $670.0 million, up 7 percent sequentially compared to third quarter results. Operating profit was $166.0 million, or 24.8 percent of revenue, representing an increase of $23.6 million from the third quarter. Operating profit flow-through from the third quarter of 2006 to the fourth quarter of 2006 was 51 percent. This segment benefited from generally higher demand for the goods and services it provides, primarily outside of North America, and improved pricing in many areas.
Fourth quarter revenues for the Distribution Services segment were $370.5 million, up 5 percent from the third quarter. Fourth quarter operating profit was $29.0 million or 7.8 percent of sales. Operating profit flow-through was 21 percent from the third quarter of 2006 to the fourth quarter of 2006. This segment benefited from stronger sales in the United States and international markets.
The Company has scheduled a conference call for February 6, 2007, at 10:00 a.m. Central Time to discuss fourth quarter and 2006 results. The call will be broadcast through the Investor Relations link on National Oilwell Varco's web site at www.nov.com, and a replay will be available on the site for thirty days following the conference. Participants may also join the conference call by dialing 303-262-2193 prior to the scheduled start time.
National Oilwell Varco is a worldwide leader in the design, manufacture and sale of equipment and components used in oil and gas drilling and production operations, the provision of oilfield services, and supply chain integration services to the upstream oil and gas industry.
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