National Oilwell Varco 1Q17 Earnings Call Notes

Clay C. Williams – National Oilwell Varco, Inc.

Customers are putting rigs back to work at an astonishing rate

“depleting production through the other 80-plus-million barrels a day of supply and another year of growing demand, the industry’s 159th, will inevitably lead to tightening. In the meantime, our North American customers are demonstrating that their economics work even at current oil prices in many North American basins by putting rigs back to work at an astonishing rate.”

Seeing scarcity return to sectors of the oilfield

“After a couple of very, very rough years, we’re seeing scarcity return to certain sectors of the oilfield, sectors where NOV plays an important supply role. Strategically, we have positioned NOV within the sectors we see as most likely to face scarcity as the upcycle emerges, including horizontal drilling that is growing rapidly in unconventional basins today.”

New rig building is still a ways out

“Yeah. On the land rig newbuild outlook, we are continuing to pursue those tenders in the Middle East. And there’s been I think some – there’s been a lot of public discussion about those. And just so you’re aware, lots of the NOCs in the Gulf States and in The Kingdom are discussing putting more land rigs to work. It’ll be a combination of existing rigs and newbuilds. And those various tenders are moving at different rates, but it’s a meaningful number of rigs.

And then in the quarter, we did see demand blossoming in a couple of other regions. In our conversations with North American drilling contractors, I do think new rig building is still a ways out. But the good news for all of them and us is that dayrates are continuing to march up and we’re currently selling into that trend in terms of upgrading the torque and pressure capabilities of rigs. So adding a third mud pump, adding a fourth genset, adding hightop torque drives, top drives to those rigs.

But I think once dayrates get up into the mid-$20,000 range a day, I think that’s really where you see meaningful demand for new rigs across the North American market. And as Jose just said just a moment ago, past cycles are a guide. They all seem to phone us at once seeking to put those rigs to work”