NOV Inc. 2021 Q3 Form 10-Q Summary
Business context and reporting period
NOV is a global equipment and technology provider to the energy industry, operating through Wellbore Technologies, Completion & Production Solutions, and Rig Technologies. This unaudited filing covers the quarter and nine months ended September 30, 2021; amounts are in U.S. dollars unless noted.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $1.341 billion | $1.384 billion | $4.007 billion | $4.763 billion |
| Gross profit / margin | $185 million / 13.8% | $139 million / 10.0% | $572 million / 14.3% | $500 million / 10.5% |
| Operating loss | $43 million | $74 million | $119 million | $2.124 billion |
| Net loss attributable to NOV | $69 million; $0.18/share | $55 million; $0.14/share | $210 million; $0.54/share | $2.195 billion; $5.72/share |
| Adjusted EBITDA, non-GAAP | $56 million; 4.2% of revenue | $71 million | $160 million | $333 million |
- Q3 revenue fell 3% year over year and 5% sequentially. Gross margin improved year over year, while adjusted EBITDA declined sequentially from $104 million in Q2 2021.
- Q3 segment revenue and operating results: Wellbore Technologies $507 million and $32 million profit; Completion & Production Solutions $478 million and $26 million loss; Rig Technologies $390 million and $1 million profit.
- Cash from operating activities was $255 million for the first nine months, versus $740 million in 2020. Investing used $102 million, including $137 million of capital expenditures; financing used $172 million. Cash declined $24 million to $1.668 billion.
- At September 30, cash was $1.668 billion, total debt $1.704 billion, and lease liabilities $695 million. Cash less reported debt was approximately $36 million net debt, excluding leases. Total current assets were $4.939 billion and current liabilities $1.853 billion.
- Long-term debt fell from $1.834 billion at year-end 2020. NOV repaid $182 million of 2.60% notes in April, incurring a $7.1 million extinguishment loss; the earliest remaining bond maturity is 2029.
Material changes versus prior comparable periods
- Year-to-date operating loss improved substantially from 2020, chiefly because the prior year included $1.378 billion of goodwill and indefinite-lived intangible impairment, $513 million of long-lived asset impairment, and a $250 million equity loss in affiliates. These items did not recur at comparable levels.
- Q3 Wellbore revenue increased 40% year over year, supported by higher drilling activity, market-share gains, and pricing. Completion & Production revenue declined 20%, and Rig Technologies revenue declined 13%.
- Q3 Completion & Production and Rig Technologies orders exceeded shipments: book-to-bill was 144% and 190%, respectively. September 30 capital-equipment backlog was $1.11 billion and $2.78 billion, respectively.
- Year-to-date revenue decreased 16%. Wellbore revenue declined 8%, Completion & Production 25%, and Rig Technologies 12% versus 2020.
- No cash dividends were paid in the first nine months of 2021, compared with $19 million in the same 2020 period.
Outlook, commentary, risks and unusual items
- Management described global drilling activity as improving and expressed optimism that stronger market fundamentals and company actions would support growth and profitability. The filing gives no quantified company revenue or earnings guidance.
- Management cited ongoing COVID-19 disruption, supply-chain constraints, inflation, materials shortages, labor and facility limitations, and possible customer delays, cancellations, payment defaults, or force-majeure disputes. NOV said these risks could materially affect results and were not fully quantifiable.
- Energy-transition concerns, restrictions on exploration and production, oil and gas prices, customer capital spending, geopolitical conditions, and trade or export controls may affect demand and costs. NOV reported work in areas including offshore wind, geothermal, biogas, rare-earth extraction, and carbon sequestration.
- Q3 included $24 million of segment-level net pretax “Other Items,” primarily restructuring, severance, facility-closure and product-modification costs, net of credits. Management also identified $12 million of charges from COVID-related operational disruption on a Southeast Asian shipyard project. The filing does not clearly reconcile the relationship between these disclosures.
- NOV held $867 million of cash at foreign subsidiaries, which could incur taxes if transferred or repatriated. It reported $2.0 billion available under its revolving facility, compliance with its 60% debt-to-capitalization covenant (ratio 27.7%), and $441 million of letters of credit under separate bilateral facilities.
- Contingencies include litigation, regulatory matters, product and environmental claims, intellectual-property disputes, and trade-compliance risks. The company said reserves cover contingencies considered probable and that unprovided ultimate liabilities were not expected to materially affect results, but actual costs could exceed estimates and some claims may be uninsured.
Important facts for investors to verify
- Reconcile the reported $12 million COVID-related project charges with the $24 million of Q3 “Other Items,” and assess the extent to which such costs may recur.
- Track whether order intake and reported backlog convert to revenue on the expected schedule; backlog recognition is subject to customer and supplier delays.
- Monitor operating cash generation, working-capital movements, and the decline in year-to-date cash flow versus 2020.
- Review debt, lease obligations, foreign-held cash, credit-facility availability, and the timing and terms of future financing needs.
- Assess continuing supply-chain, COVID-19, inflation, energy-market, litigation, and regulatory exposures, including potential effects not quantifiable in this filing.