National Oilwell Varco 1Q16 Earnings Call Notes

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Clay C. Williams – Chairman, President & Chief Executive Officer

The internet of things is coming to the oilfield

“We believe that condition-based remote monitoring of oilfield equipment and predictive data analytics will grow in importance in the next upturn as the industry increasingly employs more sophisticated equipment in more demanding environments. The Internet of Things is coming to the oilfield and NOV will continue to lead the way, and will benefit from the largest installed base of drilling equipment and drilling control systems in the world. Hydraulic fracture simulation is another enabling technology with proven value to the industry.”

Some customers are beginning to think about a potential upturn

“While we are not planning for a recovery in 2016, we are encouraged by reports from some customers that they are beginning to think about a potential upturn in the second half of the year as oil production has finally begun to rollover and demand continues to march upward.”

Business is now down to a subsistence level

“What I would tell you is, although orders are very, very slow now, business is obviously down to sort of subsistence levels, looking out in coming quarters we expect to see a resumption of land rig projects. We have a number of conversations underway around the globe. We expect to see drilling contractors continuing to upgrade their equipment and make their rigs more competitive in a market that’s a little tougher on them.”

M&A has become more of a buyers market

We do think it’s steadily become more of a buyer’s market, frankly, through the past year and half, and so we’re trying to be very selective, very disciplined in our application of capital, and so we’re looking at opportunities but nothing to report yet.”

We have plenty of capacity but you’ll need to see prices rise and stay there for customers to increase activity

“we have an abundance of capacity, so as soon as a purchase order comes in, I think we can respond pretty quickly. From a macro perspective though, I do think commodity prices have to go up and they have to stay there a while before you really see activity and purchasing follow that as customers repair balance sheets and basically get comfortable that commodity prices are going to stay high for a while and so kind of the activity recovery will lag the commodity price recovery, I believe. But when the activity recovery comes though, we are very encouraged and anxious to move forward with a lot of the new ideas that we outlined in the call.”