Boston, MA 04/29/2014 (wallstreetpr) – National-Oilwell Varco, Inc. (NYSE:NOV)’s stock price fell after the announcement of its first quarter result ended march 31, 2014. The U.S. largest oilfield equipment maker was down by 6.7% to $77.88 in intraday trading since 2011, and last closed at $77.31. The sharp decline was due to lower orders forecast for offshore rig equipments.
Backlog
During the first quarter, the backlog for rig technology equipments was $16.4 billion, but, new orders during the quarter were only $2.3 billion, down by 23% compared to 1Q2013. Even, the Company expects low range of $14-$15 billion by the end 2014. So, offshore rig equipments are the primary business of NOV and lower backlog projection for FY2014 indicates that the Company shows sign for limited capacity either to deliver or a slowdown in the market for oilfield equipments.
The growing market
The energy companies are retooling their aging rigs to enhance the production that provide an opportunity for drilling equipment makers. The industry is shifting trends towards deepwater floating rig, shale technologies and retooling of deepwater and jack-up rigs. As the number for floating rig increase, oil companies will seek production that will provide investment opportunities for equipment’s manufacturers.
Scope for NOV
National-Oilwell Varco, Inc. (NYSE:NOV) expects increase in drilling activity, in the domestic market that leads to increasing demand for drilling and simulation equipments. The equipment maker expects continued growth from its investment in the developing market such as Latin America, Asia and Africa. In deepwater segment, NOV has nearly 100 new floating drilling rigs on their order books that are likely to deliver in next few years.
Solid performance
Total revenues were up by 9% YoY to $5.8 billion due to increase in revenue across all segments – Rig Technology (+14%), Petroleum Services and Supplies (+5%) and Distribution and Transmission (+4%). The growing revenue improved overall segment profits and net earnings. Adjusted EBITDA was $1.07 billion with an adjusted EPS of $1.38 in 1Q2014.
Conclusion
Despite a healthy backlog, National-Oilwell Varco, Inc. (NYSE:NOV) forecasts lower orders for the year 2014. The separation of distribution business will further strengthen its core business that helps to create future cash flow opportunities.
