Oilfield services company National Oilwell Varco, Inc. (NOV) reported Monday a sharp fall in profit for the third quarter, hurt by lower revenues from Petroleum Services & Supplies and Distribution Services segments, mainly due to pricing pressure and reduced purchasing by domestic customers.
The Houston, Texas-based company's net income net income attributable to company for the third quarter fell to $385 million or $0.92 per share from $548 million or $1.31 per share last year.
The latest quarter results included transaction and restructuring charges of $17 million pre-tax, or $0.03 per share after-tax, compared to prior year's transaction and restructuring costs of $28 million pre-tax.
Excluding charges, third-quarter net income was $396 million or $0.95 per share. On average, 23 analysts polled by Thomson Reuters expected the company to report earnings of $0.79 per share. Analysts' estimates typically exclude special items.
Total revenue declined 15% to $3.09 billion from $3.61 billion in the prior year quarter, yet beat fourteen Wall Street analysts' revenue estimate of $2.90 billion.
Segment-wise, third-quarter revenues for the Rig Technology rose 4% to $2.00 billion from last year's $1.93 billion. Revenue out of backlog for the segment rose 17% year-over-year, to $1.599 billion. The company pointed out that efficiencies and favorable cost results on large rig construction projects contributed to the strong margin performance by the segment.
In the Petroleum Services & Supplies segment, revenues fell 33% to $882 million from $1.31 billion a year ago, as the segment continued to face pricing pressure and reduced purchasing by domestic customers, and slightly lower rig counts in international markets, despite modest gains in North American rig counts.
The Distribution Services segment generated revenues of $306 million in the quarter, down 39% from prior year's $498 million. The company noted that the division was benefited from sequential seasonal sales improvements in Canada, which was fully offset by lower domestic and other international sales, adversely affecting the mix.
In the quarter, total gross profit fell to $897 million, or 29.1% of total revenues, from $1.13 billion or $31.2% of total revenues last year. Operating profit declined to $601 million from $790 million a year ago. Total operating profit before intangible asset impairment and transaction and restructuring costs dropped to $618 million or 20% of revenues from $818 million or 22.7% of total revenues a year ago.
During the third quarter, the company added $333 million of orders to its capital equipment backlog, and removed $72 million of discontinued orders on canceled projects and project change orders requested by customers. As of September 30, 2009, backlog for capital equipment orders for the company's Rig Technology segment was $7.3 billion, compared to $8.7 billion as of June 30, 2009.
Commenting on the results, Pete Miller, Chairman, President and Chief Executive Officer, of National Oilwell Varco, said, "The Company achieved solid results and strong cash flow this quarter, despite the current challenging market environment, thanks to the hard work of our dedicated employees. Continued outstanding execution of equipment orders and strong financial resources position us well for this marketplace, and we are well positioned for the inevitable recovery in drilling activity. While difficult credit market conditions have led to order rates below our expectations so far this year, we continue to pursue new rig opportunities aggressively, and seek and execute strategic internal growth and acquisition opportunities."
In its preceding second quarter, National Oilwell Varco had reported a steep decline in net profit to $222 million from $425 million last year, hurt by a downspin in the oil service division. Net income attributable to company was $220 million or $0.53 per share, and adjusted net income was $376 million or $0.90 per share. Total revenue declined to $3.01 billion from $3.32 billion a year ago.
Among National Oilwell's rivals, Smith International Inc. (SII) is slated to post third-quarter earnings results on Thursday, October 29. Analysts project earnings of $0.15 per share on revenues of $1.91 billion, compared to prior year's earnings of $1.00 per share and revenues of $2.85 billion, respectively.
Swiss-based oilfield service company Weatherford International Ltd. (WFT) last Monday reported a sharp decline in profit for the third quarter, hurt by a 15% decline in revenue along with higher losses on foreign currency remeasurement and the settlement of a legal dispute. Net income attributable to Weatherford plummeted to $77.37 million or $0.11 per share from $370.6 million or $0.53 per share last year. On a non-GAAP basis, income from continuing operations were $92.66 million or $0.13 per share, compared to $384.33 million or $0.55 per share a year earlier. Net revenues declined to $2.15 billion from $2.54 billion in the prior year quarter.
For the nine months of fiscal 2009, National Oilwell Varco's net income attributable to company fell to $1.08 billion or $2.58 per share from last year's $1.37 billion or $3.48 per share. Total revenue was $9.58 billion, down from $9.62 billion a year ago.
NOV closed Monday's regular trading session at $46.89, down $1.71, on a volume of 5.8 million shares.
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