National Oilwell Varco Announces Q2 Earnings
National Oilwell Varco, Inc. on Thursday reported that it earned net income of $147.9 million, or $0.84 per fully diluted share for its second quarter ended June 30, 2006, an increase of 23 percent compared to first quarter ended March 31, 2006 net income of $120.3 million, or $0.68 per fully diluted share. Earnings per share increased 140 percent compared to the second quarter of 2005, when the Company earned $61.2 million or $0.35 per fully diluted share. The second quarter of 2005 was the first full quarter following the merger between National-Oilwell, Inc. and Varco International, Inc.
Revenues for the second quarter of 2006 were $1,657.4 million, an increase of 10 percent from the first quarter of 2006 and an increase of 36 percent from the second quarter of 2005. Operating profit for the quarter was $246.6 million, which includes $8.3 million in stock-based compensation expense. Operating profit flow-through, or the increase in operating profit divided by the increase in revenue, was 29 percent from the first quarter of 2006 to the second quarter of 2006, and was 31 percent from the second quarter of 2005 to the second quarter of 2006, excluding Varco merger integration and stock-based compensation from prior periods. The Company discontinued recording integration charges during the second quarter of 2006.
Backlog for capital equipment orders for the Company's Rig Technology segment at June 30, 2006 rose 30 percent over the prior quarter to $4.1 billion, compared to $3.2 billion at March 31, 2006. New capital equipment orders during the second quarter of $1.5 billion increased 14 percent as compared to the first quarter, as the Company won several major offshore projects.
Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, "We are extremely pleased with the very positive results we achieved during this quarter. Strong demand for our oilfield products and services together with efficient execution of our business are driving solid operating margins and growth through each of our business segments. As a sign of our continuing commitment to provide our customers with the best technology, during the second quarter we launched our new Rapid Rig(TM), an efficient "singles" land rig delivering high speed, safety and performance in a compact drilling package.
Our record backlog for drilling equipment is providing unprecedented visibility, and leads us to believe that our Company will continue to build off of the strong results we have achieved so far this year. I'm extremely proud of the job our employees have done throughout all of our businesses to meet the needs of our customers."
Second-quarter revenues for the Rig Technology segment were $845.8 million, an increase of 18 percent over the first quarter of 2006 and an increase of 47 percent from the second quarter of 2005. Operating profit for this segment was $136.1 million or 16.1 percent of sales in the second quarter. Operating profit flow-through from the first quarter of 2006 to the second quarter of 2006 was 27 percent, excluding integration charges from the prior period. Revenue out of backlog for the segment was $527 million, an increase of 25 percent over the first quarter.
Petroleum Services & Supplies
Revenues for the second quarter of 2006 for the Petroleum Services & Supplies segment were $589.9 million, up 9 percent compared to first quarter results and up 31 percent from the second quarter of 2005. Operating profit was $129.7 million or 22.0 percent of revenue in the second quarter of 2006. Operating profit flow-through from the first quarter of 2006 to the second quarter of 2006 was 23 percent. Strong sequential revenue growth in fiberglass pipe sales, Mission Mono products, pipe inspection, solids control and instrumentation services across the U.S. and overseas markets overcame seasonal declines in Canada.
The Distribution Services segment generated second quarter revenues of $319.1 million, a decline of 2 percent or $7.4 million from the first quarter of 2006 and an increase of 24 percent from the second quarter of 2005. Second quarter operating profit was $20.8 million or 6.5 percent of sales, a near record level for the group. Sequentially stronger sales in the United States and international markets were offset by $16.0 million in seasonal revenue declines in Canada due to breakup.
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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