National Oilwell Varco has reported that for its second quarter ended June 30, 2009 it earned net income of $220 million, or $0.53 per fully diluted share, on revenues of $3,010 million.
The results include a $147 million pre-tax charge ($0.23 per share after tax) related to impairment of an intangible asset, $56 million of pre-tax charges ($0.09 per share after tax) related to transaction and voluntary retirement costs, and $21 million ($0.05 per share after tax) related to additional tax charges on revaluation gains in Norway. Net income for the period excluding these charges was $376 million, or $0.90 per fully diluted share, compared to first quarter ended March 31, 2009 net income of $470 million, or $1.13 per fully diluted share. Earnings per share, excluding these charges, decreased 13 percent compared to the second quarter of 2008, when the Company earned $421 million or $1.04 per fully diluted share.
Operating profit for the quarter, excluding the $203 million of impairment, transaction and voluntary retirement costs, was $589 million or 19.6 percent of sales. In addition to reported results, the Company is also providing supplemental results, which include the combined financial results for the Company and Grant Prideco as if the April 21, 2008 acquisition occurred at the beginning of 2008. Revenues decreased 14 percent from the first quarter of 2009, and decreased 13 percent from the second quarter of 2008, on this adjusted combined basis.
Operating profit flow-through, or the change in operating profit divided by the change in revenue, was down 28 percent from the first quarter to the second quarter of 2009, and was down 44 percent from the second quarter of 2008 to the second quarter of 2009, on an adjusted combined basis.
During the second quarter the Company added $616 million of orders to its capital equipment backlog, including a major drillship package order, and removed $108 million of discontinued orders on cancelled projects. Backlog for capital equipment orders for the Company's Rig Technology segment was $8.7 billion at June 30, 2009 compared to $9.6 billion at March 31, 2009.
Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, "Our strong book of business and solid balance sheet positions us well to navigate the current challenging marketplace, which witnessed further steep rig count declines and fierce pricing pressure during the second quarter, particularly in North America. We are using this time to streamline our business and invest for future growth, while continuing to execute on our customer's requirements. We finished the first half of the year with $2.3 billion in cash holdings, despite making four acquisitions during the quarter for approximately $400 million in cash. Cash flow remains a strength for our Company. While the timing of a recovery remains uncertain, we plan to emerge stronger, faster, and more efficient when significant drilling activity inevitably resumes."
Second quarter revenues for the Rig Technology segment were $1,917 million, a decrease of 13 percent from the first quarter of 2009 and flat from the second quarter of 2008. Operating profit for this segment was $536 million, or 28.0 percent of sales, a record high margin for the segment. Operating profit flow-through from the first quarter of 2009 to the second quarter of 2009 was down 25 percent. Revenue out of backlog for the segment decreased 15 percent sequentially and rose 7 percent year-over-year, to $1,434 million for the second quarter of 2009. Non-backlog revenue, predominantly spare parts, repair, and services sales, declined 5 percent from the first quarter to the second quarter.
Petroleum Services & Supplies
Revenues for the second quarter of 2009 for the Petroleum Services & Supplies segment were $913 million, down 10 percent compared to first quarter 2009 results and down 27 percent from the second quarter of 2008, on an adjusted combined basis for the Grant Prideco merger. Softer results reflect second quarter 2009 worldwide rig count declines of 25 percent from the first quarter, and 36 percent declines from the second quarter of 2008, with the largest declines coming in North America. Operating profit was $96 million, or 10.5 percent of revenue, a decrease of 41 percent from the first quarter of 2009. Operating profit flow-through was down 67 percent sequentially and down 60 percent from the prior year, on an adjusted combined basis for the merger, due in part to sharply lower prices in many products and services.
The Distribution Services segment generated second quarter revenues of $305 million, which were down 25 percent from the first quarter of 2009 and represented a 28 percent decrease from the second quarter of 2008. Second quarter operating profit was $10 million or 3.3 percent of sales. Operating profit flow-through from the second quarter of 2008 to the second quarter of 2009 was down 13 percent. Operating profit flow-through was down 15 percent from the first quarter of 2009 to the second quarter of 2009.
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