National Oilwell Varco Announces First Quarter 2007 Earnings and Backlog
National Oilwell Varco, Inc. (NYSE:NOV) reported that for its first quarter ended March 31, 2007 it earned net income of $275.9 million, or $1.55 per fully diluted share, compared to fourth quarter ended December 31, 2006 net income of $239.2 million, or $1.35 per fully diluted share. Earnings per share more than doubled from the first quarter of 2006, when the Company earned $120.3 million or $0.68 per fully diluted share.
Reported revenues for the first quarter were $2,165.7 million, an increase of 4 percent from the fourth quarter of 2006 and an increase of 43 percent from the first quarter of 2006. Operating profit for the quarter was $427.1 million or 19.7 percent of sales. Operating profit flow-through, or the increase in operating profit divided by the increase in revenue, was 53 percent from the fourth quarter of 2006 to the first quarter of 2007, and was 35 percent from the first quarter of 2006 to the first quarter of 2007.
Backlog for capital equipment orders for the Company's Rig Technology segment at March 31, 2007 increased to $6.4 billion, compared to $6.0 billion at December 31, 2006, with new orders during the quarter of $1.2 billion. The increase in the Company's backlog for capital equipment reflected the strong demand for its drilling equipment products, particularly for offshore rigs.
Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, "We are off to a great start in 2007. The demand for our oilfield products and services remained strong during the quarter, and we believe that activity will continue to grow internationally. We expect demand for our drilling equipment, particularly for international offshore projects, to remain strong into 2007. Our record backlog for drilling equipment continues to provide us with unprecedented visibility. We remain optimistic about our opportunities for this year."
Stock-based compensation expenses have been allocated to the respective business segments and unallocated expenses for all periods presented in the "Operating Profit - Supplemental Schedule (Unaudited)".
First quarter revenues for the Rig Technology segment were $1,219.8 million, an increase of 7 percent over the fourth quarter of 2006 and an increase of 71 percent from the first quarter of 2006. Operating profit for this segment, after the effect of allocating stock-based compensation expenses to the segment, was $268.8 million, or 22 percent of sales, an increase of 19 percent from the fourth quarter. Operating profit flow-through from the fourth quarter of 2006 to the first quarter of 2007 was 52 percent, and operating profit flow-through from the first quarter of 2006 to the first quarter of 2007 was 35 percent. Revenue out of backlog for the segment rose 2 percent sequentially and 88 percent year-over-year, to $790 million for the first quarter of 2007.
Petroleum Services & Supplies
Revenues for the first quarter of 2007 for the Petroleum Services & Supplies segment were $691.8 million, up 3 percent compared to fourth quarter results and up 28 percent from the first quarter of 2006. The segment benefited from strong results in both North American and international markets, and the acquisition of NQL in late 2006. Operating profit after the effect of allocating stock-based compensation expenses to the segment was $171.0 million, or 24.7 percent of revenue, an increase of 5 percent from the fourth quarter. Operating profit flow-through from the fourth quarter of 2006 to the first quarter of 2007 was 34 percent, and operating profit flow-through from the first quarter of 2006 to the first quarter of 2007 was 37 percent.
The Distribution Services segment generated first quarter revenues of $351.9 million, representing a 5 percent decrease from the fourth quarter and an 8 percent increase from the first quarter of 2006. First quarter operating profit, after the effect of allocating stock-based compensation expenses to the segment, was $24.9 million or 7.1 percent of sales, $3.5 million lower than the fourth quarter and $4.5 million higher than the first quarter of 2006.
The Company has scheduled a conference call for April 27, 2007, at 10:00 a.m. Central Time to discuss first quarter 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 303-262-2052 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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