Distribution NOW (DNOW) Q2 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Distribution NOW (DNOW) Robert Workman said their international oil equipment business remains challenged

“Internationally, scheduled project shipments in the UK, Holland, Iraq, Kazakhstan, and turnarounds for Chevron in China likely won’t be sufficient to offset continued declines with the offshore drilling fleet globally, a strengthening dollar, and potential fallout from volatility surrounding Brexit, the Middle East, and South America. So while we’re experiencing a few green shoots, we are still in a languishing market, and we’ll continue our efforts of right-sizing our business to match this environment, while ensuring we take advantage of opportunities as they arise.”

Distribution NOW (DNOW) Robert Workman channeled his inner Wayne Gretzky

“In closing, let me mention a quote from Wayne Gretzky that has been used often over the years: “Skate to where the puck is going to be, not where it has been.” So while we are managing our business to the current realities and are proud of the gains our employees have made, we are also preparing for the future and where we see DNOW in 10 years. The market will turn around at some point and we’ll be ready to take advantage of it when it does.”

Concerned about customer’s ability to pay

“We continue to be challenged by bankruptcies in our energy space, with more than 80 oil and gas related bankruptcies since early 2015.”

Not interested in doing international M&A transactions at the moment because they want to see how the energy landscape evolves and where the price of oil goes in the short-term

“We have a still robust pipeline of opportunities, some similar in size to the largest one we’ve done so far like MacLean and Power Service, but we are a lot more cautious right now simply because we want to see how these different challenges internationally play out. I’d hate to put our toe in the water and make an assumption and end up not being accurate and then we end up having issues with an acquisition. So we’re continuing the relationships, we’re continuing the evaluations, the communications, but kind of in a pause a little bit to see how these different international challenges turn out.”