National Oilwell Varco 2Q15 Earnings Call Notes

Most NA business units reporting stabilizing pricing

“Generally, we still see some pricing pressures in certain products, mostly in international markets, but most North American business units are reporting that pricing is stabilizing at new lower levels as the rig count flattens. Consolidated revenues for the U.S. declined 29% sequentially.”

As companies run their fleets, they will eventually have to restock

“As oilfield service companies gradually destock, they will eventually run out of opportunities to cannibalize their existing fleets and we expect orders to begin to flow again to NOV, given that oil and gas remains a highly capital intensive undertaking and that NOV is one of its largest capital manufacturers and suppliers of technology.”

Customers are doing the bare minimum to keep their fleets running

“Customers are doing the absolute bare minimum in terms of maintenance and repair, only what’s necessary to keep their fleets running. ”

Pricing and rig count appears to have stabilized

Pricing appears to have stabilized across North American markets as the rig count has more or less stabilized and has ranged from low-single digits and on up. ‘

It’s a buyers’ market, but companies don’t want to sell at the bottom

“in a cyclical downturn, and this is one of many we’ve been through, our view is that it becomes much more of a buyer’s market. The risk, I think, in transactions tends to go down a little bit, but it can be a challenging market to get deals done because most companies don’t particularly want to sell at the bottom. And so it’s a challenge making bids and the asks come together and to reach a price that all parties view as fair and move forward.”

Land rig customers are more optimistic about recovering commodity prices

“There’s a lot of conversations underway around land rigs. And I think generally, our land rig customers are much more optimistic about recovering commodity prices driving higher levels of activity.”

“Hallibaker” obviously changes the strategic picture somewhat

“It’s obviously a large merger. It spans a number of different subsectors in oilfield services. And so there’s implications for specific spaces within the industry, specific marketplaces, specific geographies. And so, we’re watching very closely how that comes together. And so, I would tell you strategically, certainly it’s shaded our thinking and what we always try to do is think out three or four moves into the chess game.

So, what are the perhaps non-obvious implications of the Halliburton-Baker merger. So, yeah, it’s – the short answer is yes, it’s certainly shaded our strategic thinking. And we’re – but they’re both customers, we wish them well and we’ll see what happens.”