What changed in this filing

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Item 1. Financial Statements

2022-07-28 compared with 2022-04-29 · 170 added, 140 removed, 573 unchanged (35% of the section changed)

33 unchanged sentences

392,801,775 and

392,673,077 shares issued and outstanding at March 31, 2022 and

392,673,077 shares issued and outstanding at June 30, 2022 and

December 31, 2021

10 unchanged sentences

Three Months Ended

Six Months Ended

Cost of revenue

Selling, general and administrative

Operating loss

Operating profit (loss)

Interest and financial costs

2 unchanged sentences

Other income (expense), net

Loss before income taxes

Net income (loss) before income taxes

Provision (benefit) for income taxes

Net income (loss)

Net income attributable to noncontrolling interests

Net loss attributable to Company

Net loss attributable to Company per share:

Net income (loss) attributable to Company

Net income (loss) attributable to Company per share:

Cash dividends per share

4 unchanged sentences

Three Months Ended

Six Months Ended

Net income (loss)

Currency translation adjustments

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(In millions)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

1 unchanged sentence

Deferred income taxes

Loss on extinguishment of debt

Equity (income) loss in unconsolidated affiliates

7 unchanged sentences

Other assets/liabilities, net

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

3 unchanged sentences

Borrowings against lines of credit and other debt

Payments against lines of credit and other debt

Cash dividends paid

17 unchanged sentences

Balance at December 31, 2021

Net income (loss)

Other comprehensive income, net

3 unchanged sentences

Balance at March 31, 2022

Other comprehensive loss, net

Cash dividends, $ 0.05 per common share

Stock-based compensation

Balance at June 30, 2022

Comprehensive

4 unchanged sentences

Balance at December 31, 2020

Net income (loss)

Other comprehensive loss, net

3 unchanged sentences

Balance at March 31, 2021

Net income (loss)

Other comprehensive income, net

Stock-based compensation

Common stock issued

Balance at June 30, 2021

See notes to unaudited consolidated financial statements.

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In our opinion, the consolidated financial statements include all adjustments, which are of a normal recurring nature unless otherwise disclosed, necessary for a fair presentation of the results for the interim periods.

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with GAAP in the United States requires management to make estimates and assumptions that affect reported and contingent amounts of assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period.

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Fair value of derivatives

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows (in millions):

Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) are as follows (in millions):

Balance at December 31, 2021

3 unchanged sentences

income (loss)

Balance at March 31, 2022

Balance at June 30, 2022

The components of amounts reclassified from accumulated other comprehensive income (loss) are as follows (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Cost of revenue

Six Months Ended June 30,

Cost of revenue

The Company’s reporting currency is the U.S.

4 unchanged sentences

The movement in other comprehensive income (loss) from period to period will be the combination of:

1) changes in fair value of open derivatives of ($ 2 ) million during the three months ended March 31, 2022;

and, 2) the outflow of other comprehensive income (loss) related to cumulative changes in the fair value of derivatives that have settled in the current period of ($ 6 ) million during the three months ended March 31, 2022.

1) changes in fair value of open derivatives of ($ 13 ) million and ($ 15 ) million during the three and six months ended June 30, 2022;

and, 2) the outflow of other comprehensive income (loss) related to cumulative changes in the fair value of derivatives that have settled in the current period were zero during the three months ended June 30, 2022, and $ 6 million during the six months ended June 30, 2022.

Financial results by operating segment are as follows (in millions):

Three Months Ended

Six Months Ended

Wellbore Technologies

12 unchanged sentences

Intrasegment transactions are eliminated within each segment.

First quarter 2022 operating profit includes pre-tax charges for severance, facility closures, and other items of ($ 45 ) million.

Other items in the first quarter of 2022 included impairment and other charges associated with the Company's operations in Russia, Belarus, and Ukraine of approximately $ 41 million recorded within cost of revenue.

First quarter 2021 operating profit includes pre-tax charges for severance, facility closures and other items of ($ 9 ) million.

Cost of revenue and operating profit for the three months ended June 30, 2022 includes pre-tax charges for other items (impairment, restructure, severance, facility closure costs, and inventory charges) of $ 14 million, net of related credits of $ 16 million.

Cost of revenue and operating profit for the six months ended June 30, 2022 includes pre-tax charges for other items of $ 59 million, net of related credits of $ 17 million.

Other items associated with the Company's operations in Russia, Belarus, and Ukraine of approximately $ 8 million and $ 49 million were recorded within cost of revenue for the three and six months ended June 30, 2022, respectively.

Cost of revenue and operating profit for the three months ending June 30, 2021, includes other items of $ 20 million, net of related credits of $ 9 million.

Cost of revenue and operating loss for the six months ending June 30, 2021, includes pre-tax charges for other items of $ 24 million, net of related credits of $ 12 million.

Disaggregation of Revenue

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and Canada (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

North America

International

Six Months Ended June 30,

North America

International

Performance Obligations

Net revenue recognized from performance obligations satisfied in previous periods was $ 6 million for the three months ended March 31, 2022 primarily due to change orders.

Remaining performance obligations represents the transaction price of firm orders for all revenue streams for which work has not been performed on contracts with original expected duration of one year or more.

Net revenue recognized from performance obligations satisfied in previous periods was $ 3 million for the three months ended June 30, 2022 primarily due to change orders.

Remaining performance obligations represent the transaction price of firm orders for all revenue streams for which work has not been performed on contracts with original expected duration of one year or more.

We do not disclose the remaining performance obligations of royalty contracts, service contracts for which there is a right to invoice, and short-term contracts that are expected to have a duration of one year or less.

As of March 31, 2022 , the aggregate amount of the transaction price allocated to remaining performance obligations was $ 4,193 million.

As of June 30, 2022 , the aggregate amount of the transaction price allocated to remaining performance obligations was $ 4,247 million.

The Company expects to recognize approximately $ 678 million in revenue for the remaining performance obligations in 2022 and $ 3,569 million in 2023 and thereafter.

6 unchanged sentences

Currency translation adjustments and other

Balance at March 31, 2022

Balance at June 30, 2022

Allowance for Credit Losses

1 unchanged sentence

The Company’s customer base, mostly in the oil and gas industry, have generally similar collectability risk characteristics, although larger and state-owned customers may have lower risk than smaller independent customers.

As of March 31, 2022, the allowance for credit losses totaled $ 98 million.

As of June 30, 2022, the allowance for credit losses totaled $ 93 million.

The Company leases certain facilities and equipment to support its operations around the world.

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The credit facility contains a financial covenant regarding maximum debt-to-capitalization ratio of 60 %.

As of March 31, 2022, the Company was in compliance with a debt-to-capitalization ratio of 28.1 % and had no outstanding letters of credit issued under the facility, resulting in $ 2.0 billion of available funds.

Additionally, the Company’s joint venture has a $ 150 million bank line of credit for the construction of a facility in Saudi Arabia.

As of June 30, 2022, the Company was in compliance with a debt-to-capitalization ratio of 28.3 % and had no outstanding borrowings or letters of credit issued under the facility, resulting in $ 2.0 billion of available funds.

Additionally, the consolidated joint venture of the Company has a $ 150 million bank line of credit for the construction of a facility in Saudi Arabia.

Interest under the bank line of credit is based upon LIBOR plus 1.40 %.

The bank line of credit contains a financial covenant regarding maximum debt-to-equity ratio of 75 %.

As of March 31, 2022, the Company was in compliance.

As of June 30, 2022, the joint venture was in compliance.

The line of credit repayment schedule begins in December 2022 with final payment no later than June 2032 .

As of March 31, 2022, the Company had $ 103 million in borrowings related to this line of credit.

The first payment in December 2022 will be approximately $ 5 million.

As of June 30, 2022, the Company has a carrying value of $ 111 million in borrowings related to this line of credit.

The carrying value of debt under the Company’s consolidated joint venture approximates fair value because the interest rates are variable and reflective of current market rates.

The Company has $ 10 million in payments related to this line of credit due in the next twelve months.

The Company can repay the entire outstanding facility balance without penalty at its sole discretion.

Other debt at March 31, 2022 included $ 27 million of funding provided by minority interest partners of NOV consolidated joint ventures.

The Company had $ 437 million of outstanding letters of credit at March 31, 2022, primarily in the U.S.

Other debt at June 30, 2022 included $ 29 million of funding provided by minority interest partners of NOV consolidated joint ventures.

The Company had $ 502 million of outstanding letters of credit at June 30, 2022, primarily in the U.S.

and Norway, that are under various bilateral letter of credit facilities.

Letters of credit are issued as bid bonds, advanced payment bonds and performance bonds.

At March 31, 2022 and December 31, 2021, the fair value of the Company’s unsecured Senior Notes approximated $ 1,466 million and $ 1,610 million, respectively.

At June 30, 2022 and December 31, 2021, the fair value of the Company’s unsecured Senior Notes approximated $ 1,262 million and $ 1,610 million, respectively.

The fair value of the Company’s debt is estimated using Level 2 inputs in the fair value hierarchy and is based on quoted prices for those of similar instruments.

At March 31, 2022 and December 31, 2021, the carrying value of the Company’s unsecured Senior Notes approximated $ 1,584 million.

The effective tax rate for the three months ended March 31, 2022 and 2021 was ( 39.3 )% and 5.0 %, respectively.

At both June 30, 2022 and December 31, 2021, the carrying value of the Company’s unsecured Senior Notes approximated $ 1,584 million.

The effective tax rate for the three and six months ended June 30, 2022 was ( 2.9 )% and 36.4 %, respectively, compared to ( 9.5 )% and 2.8 % for the same periods in 2021.

The Company has established valuation allowances on deferred tax assets for losses and tax credits generated in 2022 and 2021.

The effective tax rate for 2022 was negatively impacted by current year losses in certain jurisdictions with no tax benefit, partially offset by favorable adjustments related to utilization of previously unrealized losses and tax credits.

The effective tax rate for 2022 was negatively impacted by current year losses in certain jurisdictions with no tax benefit, partially offset by favorable impacts related to changes in certain exchange rates, utilization of previously unrealized losses, and tax credits.

Stock-Based Compensation

The Company’s stock-based compensation plan, known as the National Oilwell Varco, Inc.

2018 Long-Term Incentive Plan (the “2018 Plan”), was approved by shareholders on May 11, 2018 and amended and restated on May 20, 2020.

The 2018 Plan provides for the granting of stock options, restricted stock, restricted stock units, performance awards, phantom shares, stock appreciation rights, stock payments and substitute awards.

The number of shares authorized under the 2018 Plan is 42.7 million.

The 2018 Plan is also subject to a fungible ratio concept, such that the issuance of stock options and stock appreciation rights reduces the number of available shares under the 2018 Plan on a 1-for-1 basis, and the issuance of other awards reduces the number of available shares under the 2018 Plan on a 2.5-for-1 basis.

At March 31, 2022, approximately 4.1 million shares remained available for future grants under the 2018 Plan.

The Company’s stock-based compensation plan, known as the NOV Inc.

Long-Term Incentive Plan (the “NOV Plan”), was approved by shareholders on May 11, 2018 and amended and restated on May 24, 2022.

The NOV Plan provides for the granting of stock options, restricted stock, restricted stock units, performance awards, phantom shares, stock appreciation rights, stock payments and substitute awards.

The number of shares authorized under the NOV Plan is 55.7 million.

The NOV Plan is also subject to a fungible ratio concept, such that the issuance of stock options and stock appreciation rights reduces the number of available shares under the NOV Plan on a 1-for-1 basis, and the issuance of other awards reduces the number of available shares under the NOV Plan on a 1.5-for-1 basis.

At June 30, 2022, approximately 17.1 million shares remained available for future grants under the NOV Plan.

The Company also has outstanding awards under its other stock-based compensation plan known as the National Oilwell Varco, Inc.

Long-Term Incentive Plan (the “Plan”), however the Company is no longer granting new awards under the Plan.

On February 15, 2022, under the 2018 Plan, the Company granted 1,492,020 stock options with a fair value of $ 6.28 per option and an exercise price of $ 16.73 per share;

2,877,894 restricted stock units with a fair value of $ 16.73 per share;

and performance share awards (PSAs) to senior management employees with potential payouts varying from zero to 1,188,884 shares.

The stock options vest over a three-year period from the grant date.

The restricted stock units vest in three equal annual installments commencing on the first anniversary of the grant date.

The 2022 PSAs can be earned based on performance against two established goals over a three-year period:

85 % with a TSR (total shareholder return) goal and 15 % with an internal NVA (“NOV Value Added”, a return on capital metric) goal.

TSR performance is determined by comparing the Company’s TSR with the TSR of the members of the Philadelphia Stock Exchange’s Oil Services Sector Index (OSX) for the three-year performance period.

The TSR portion of the performance share awards is subject to a vesting cap equal to 100% of Target Level if the Company’s absolute TSR is negative, regardless of relative TSR results.

Conversely, if the Company’s absolute TSR is greater than 15% annualized over the three-year performance period the payout amount shall not be less than 50% of Target Level, regardless of relative TSR results.

The NVA goal is based on the Company’s improvement in NVA from the beginning of the performance period until the end of the performance period.

NVA is calculated as an amount equal to the Company’s (a) gross cash earnings less (b) average gross operating assets times an amount equal to a required return on assets, with certain adjustments.

Total expense for all stock-based compensation arrangements was $ 16 million and $ 20 million for the three months ended March 31, 2022 and 2021, respectively.

There was no income tax benefit recognized in the Consolidated Statements of Income (Loss) for stock-based compensation arrangements under the 2018 Plan for both the three months ended March 31, 2022 and 2021.

On May 24, 2022 the Company granted 76,257 restricted stock awards with a fair value of $ 19.12 per share.

The awards were granted to non-employee members of the board of directors and vest on the first anniversary of the grant date.

Total expense for all stock-based compensation arrangements was $ 17 million and $ 33 million for the three and six months ended June 30, 2022 , respectively and $ 20 million and $ 40 million for the three and six months ended June 30, 2021, respectively.

There was no income tax benefit recognized in the Consolidated Statements of Income (Loss) for stock-based compensation arrangements under the NOV Plan for each of the three and six months ended June 30, 2022 and 2021.

Derivative Financial Instruments

8 unchanged sentences

South African Rand

British Pound Sterling

Canadian Dollar

Singapore Dollar

British Pound Sterling

Russian Ruble

8 unchanged sentences

The gain or loss on the derivative instrument is recognized in earnings in other income (expense), together with the changes in the hedged nonfunctional monetary accounts.

The amount of gain (loss) recognized in other income (expense), net was ($ 3 ) million and ($ 4 ) million for the three months ended March 31, 2022 and 2021, respectively.

The amount of gain (loss) recognized in other income (expense), net was ($ 11 ) million and ($ 14 ) million for the three and six months ended June 30, 2022, respectively, and ($ 1 ) million and ($ 5 ) million for the three and six months ended June 30, 2021, respectively.

The Company has the following fair values of its derivative instruments and their balance sheet classifications (in millions):

9 unchanged sentences

Accrued liabilities

Total derivatives designated as hedging instruments

under ASC Topic 815

Derivatives not designated as hedging instruments

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Accrued liabilities

Total derivatives not designated

as hedging instruments under ASC

Total derivatives

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Three Months Ended

Net loss attributable to Company

Six Months Ended

Net income (loss) attributable to Company

Basic—weighted average common shares outstanding

2 unchanged sentences

Diluted outstanding shares

Net loss attributable to Company per share:

Net income (loss) attributable to Company per share:

Cash dividends per share

1 unchanged sentence

The two-class method requires a portion of net income attributable to Company to be allocated to participating securities, which are unvested awards of share-based payments with non-forfeitable rights to receive dividends or dividend equivalents if declared.

Net loss attributable to Company allocated to these participating securities was immaterial for the three months ended March 31, 2022 and 2021 and therefore not excluded from net income attributable to Company per share calculation.

The Company had stock options outstanding that were anti-dilutive totaling 22 million and 24 million shares for each of the three months ended March 31, 2022 and 2021, respectively.

Net loss attributable to Company allocated to these participating securities was immaterial for each of the three and six months ended June 30, 2022 and 2021, respectively.

The Company had stock options outstanding that were anti-dilutive totaling 20 million and 21 million shares for the three and six months ended June 30, 2022, respectively, compared to 23 million and 21 million shares for the three and six months ended June 30, 2021, respectively.

Cash Dividends

Cash dividends were $ 20 million and $ 0 for the three months ended March 31, 2022 and March 31, 2021, respectively.

Cash dividends were $ 19 million and $ 39 million for the three and six months ended June 30, 2022 compared to no dividends paid for both the three and six months ended June 30, 2021.

The declaration and payment of future dividends is at the discretion of the Company’s Board of Directors and will be dependent upon the Company’s results of operations, financial condition, capital requirements and other factors deemed relevant by the Company’s Board of Directors.

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In such instances, settlement or other resolution of such claims, individually or collectively, could have a material financial or reputational impact on the Company.

As of March 31, 2022, the Company recorded reserves in an amount believed to be sufficient, given the range of potential outcomes, for contingent liabilities representing all contingencies believed to be probable.

As of June 30, 2022, the Company recorded reserves in an amount believed to be sufficient, given the range of potential outcomes, for contingent liabilities representing all contingencies believed to be probable.

These reserves include all costs expected for reclamation of a closed barite mine and product liability claims, as well as other circumstances involving material claims.

Risks and Uncertainties

The Company has assessed the potential for additional losses above the amounts accrued as well as potential losses for matters that are not probable but are reasonably possible.

The litigation process as well as the outcome of regulatory oversight is inherently uncertain, and our best judgement concerning the probable outcome of litigation or regulatory enforcement matters may prove to be incorrect in some instances.

The Company has assessed the potential for additional losses above the amounts accrued as well as potential losses for matters that are believed to be not probable, but are reasonably possible.

The Company sets accruals in accordance with GAAP based on its best judgment about the probable results of disputed claims, regulatory enforcement actions, tax and other governmental audits, and other contingencies.

No assurance can be given as to the outcome of these matters.

The total potential loss on these matters cannot be determined;

1 unchanged sentence

These estimated liabilities are based on the Company’s assessment of the nature of these matters, their progress toward resolution, the advice of legal counsel and outside experts as well as management’s experience.

Because of uncertainty and risk inherent to litigation and arbitration, actual liabilities incurred may exceed our estimated liabilities and reserves, which could have a material financial or reputational impact on the Company.

Because of uncertainty and risk inherent to litigation, arbitration, audits, governmental investigations and enforcement actions, the Company’s actual liabilities incurred may exceed our estimated liabilities and reserves, which could have a material financial or reputational impact on the Company.

Recently, the Company received and paid a $ 51 million transfer pricing tax assessment in Denmark.

The Company and its advisors believe the assessment is without merit.

The Company is presently appealing and believes it will be reimbursed following a successful appeals process.

The payment has been recorded as a long term receivable.

In many instances, the Company’s products and services embody or incorporate trade secrets or patented inventions.

1 unchanged sentence

Such disputes frequently involve complex, factual, technical and/or legal issues which result in high costs to adjudicate our rights and for which it may be difficult to predict the ultimate outcome.

Because of the importance of the Company’s intellectual property to the Company’s performance, an adverse result in such disputes could result in the loss of revenue from royalties or a decline in sales of products protected by patents, which could materially and adversely impact our financial performance.

At any given time, the Company may be a plaintiff or defendant in disputes involving disputed intellectual property rights.

The Company is currently pursuing claims involving technology related to drill bits.

Because of the importance of the Company’s intellectual property to the Company’s performance, an adverse result in such disputes could result in a material loss of revenue from royalties or a decline in sales of products protected by patents, which could materially and adversely impact our financial performance.

Further, in some instances, direct or indirect consumers of our products and services, entities providing financing for purchases of our products and services or members of the supply chain for our products and services become involved in governmental investigations, internal investigations, political or other enforcement matters.

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In response to additional sanctions enacted by governments in the European Union, the United States, the United Kingdom, Switzerland, and other countries as a result of active armed conflict in Ukraine, we ceased new investments in Russia and have curtailed our activities in Russia.

We are actively examining our alternatives, including the potential to further curtail our activities, sell some or all of our businesses, or wind down our remaining operations in Russia and Belarus.

We are actively examining our alternatives, including the potential to further curtail our activities, sell some or all of our businesses, or wind down our remaining operations in Russia.

We have sold our business in Belarus subsequent to June 30, 2022.

Litigation may result from the confluence of these events in Russia and Belarus and our response to the various sanctions as we work to comply with applicable laws and regulations.

We also may incur severance costs as a result of conditions in Russia and Belarus.

As a consequence of the conflict in Ukraine and related sanctions on activities related to Russia and Belarus, we recorded impairment and other charges of $ 41 million for the quarter ending March 31, 2022.

The Company has approximately $ 30 million in remaining assets and $ 67 million in currency translation losses related to Russia and Belarus recorded in accumulated other comprehensive loss as of March 31, 2022.

As a consequence of the conflict in Ukraine and related sanctions on activities related to Russia and Belarus, we recorded impairment and other charges of $ 8 million and $ 49 million for the three and six months ended June 30, 2022.

The Company has approximately $ 10 million in remaining assets and $ 74 million in currency translation losses related to Russia and Belarus recorded in accumulated other comprehensive loss as of June 30, 2022.

The currency translation losses related to Belarus of approximately $ 20 million will be taken to results of operations in the third quarter 2022 upon recording the sale of the business.

The continued impact of existing sanctions or imposition of increasingly severe sanctions and the potentially broader impact of the conflict between Russia and Ukraine could result in additional impairments, write downs or charges which could have a material adverse effect on our business.

Uncertainty arising from the COVID-19 pandemic continues to adversely impact many jurisdictions and disrupt normal economic activities.

For example, recent lockdowns in China have disrupted supply chains for the Company’s products.

For example, lockdowns in China have disrupted supply chains for the Company’s vendors and products.

The Company’s ability to manufacture equipment and perform services could also be impaired and the Company could be exposed to liabilities resulting from additional interruption or delay in its ability to perform due to limited manpower, travel restrictions, difficulty obtaining visas, adverse health consequences to employees, supply chain disruption, inflationary pressures, and materials shortages.

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well construction, including premium connections and liner hangers;

onshore production, including composite pipe, surface transfer and progressive cavity pumps, and artificial lift systems;

onshore production, including composite pipe, tanks, and structures, surface transfer and progressive cavity pumps, and artificial lift systems;

and, offshore production, including floating production systems and subsea production technologies.

The segment also manufactures industrial pumps and mixers.

Completion & Production Solutions supports service companies and oil and gas companies.

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EXECUTIVE SUMMARY

For the first quarter ended March 31, 2022 the Company generated revenues of $1.55 billion, an increase of 2 percent compared to the fourth quarter of 2021 and an increase of 24 percent compared to the first quarter of 2021.

Net loss for the first quarter of 2022 was $50 million, or 3.2 percent of sales, which included $45 million in Other Items.

For the second quarter ended June 30, 2022, the Company generated revenues of $1.73 billion, an increase of 12 percent compared to the first quarter of 2022 and an increase of 22 percent compared to the second quarter of 2021.

Net income for the second quarter of 2022 was $69 million, or 4.0 percent of sales, which included $14 million in Other Items.

Adjusted EBITDA (operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets and, when applicable, Other Items) increased sequentially to $150 million, or 8.7 percent of sales.

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Wellbore Technologies

Wellbore Technologies generated revenues of $608 million in the first quarter of 2022, an increase of 6 percent from the fourth quarter of 2021 and an increase of 47 percent from the first quarter of 2021.

Wellbore Technologies generated revenues of $666 million in the second quarter of 2022, an increase of 10 percent from the first quarter of 2022 and an increase of 44 percent from the second quarter of 2021.

Operating profit was $81 million, or 12.2 percent of sales, and included $7 million of Other Items.

Adjusted EBITDA increased $21 million sequentially and $59 million from the prior year to $122 million, or 18.3 percent of sales.

Growing global drilling activity, a better sales mix, and improved pricing, partially offset by ongoing supply chain related challenges, drove the improvement in results.

Improved results were driven by continued growth in the Western Hemisphere and the Middle East, market share gains, higher prices, and improved management of ongoing supply chain disruptions.

Completion & Production Solutions

Completion & Production Solutions generated revenues of $530 million in the first quarter of 2022, a decrease of 3 percent from the fourth quarter of 2021 and an increase of 21 percent from the first quarter of 2021.

Operating loss was $22 million, or 4.2 percent of sales, and included $16 million in Other Items.

Completion & Production Solutions generated revenues of $639 million in the second quarter of 2022, an increase of 21 percent from the first quarter of 2022 and an increase of 29 percent from the second quarter of 2021.

Operating profit was $20 million, or 3.1 percent of sales, and included $1 million in Other Items.

Adjusted EBITDA increased $22 million sequentially and increased $28 million from the prior year to $32 million, or 5.0 percent of sales.

Despite the improvement in Adjusted EBITDA margins, the segment remains challenged by continuing supply chain issues and operational disruptions in shipyards.

Growing demand for oil and gas equipment and improving execution against ongoing supply chain challenges and operational disruptions in shipyards drove improved results for the segment.

New orders booked during the quarter totaled $530 million, representing a book-to-bill of 132 percent when compared to the $401 million of orders shipped from backlog.

As of March 31, 2022, backlog for capital equipment orders for Completion & Production Solutions was $1,364 million, an increase of 6% from the fourth quarter of 2021 and an increase of 68 percent from the first quarter of 2021.

As of June 30, 2022, backlog for capital equipment orders for Completion & Production Solutions was $1,442 million, an increase of 6 percent from the first quarter of 2022 and an increase of 44 percent from the second quarter of 2021.

Rig Technologies

Rig Technologies generated revenues of $441 million in the first quarter of 2022, an increase of 2 percent from both the fourth quarter of 2021 and the first quarter of 2021.

Rig Technologies generated revenues of $462 million in the second quarter of 2022, an increase of 5 percent from the first quarter of 2022, and a decrease of 5 percent from the second quarter of 2021.

Operating profit was $31 million, or 6.7 percent of sales, and included $(8) million of Other Items.

Adjusted EBITDA increased $15 million sequentially and $23 million from the prior year to $36 million, or 8.2 percent of sales.

A more favorable sales mix, cost savings initiatives, and improved pricing drove the improvement in profitability.

Adjusted EBITDA increased $5 million sequentially and decreased $34 million from the prior year to $41 million, or 8.9 percent of sales.

Growing demand for the segment’s aftermarket products and services as a result of increased global drilling activity levels, and the rising number of offshore wind power installation vessel projects drove the sequential improvement in results.

New orders booked during the quarter totaled $140 million, representing a book-to-bill of 80 percent when compared to the $174 million of orders shipped from backlog.

The segment also recorded a positive $80 million adjustment to backlog, primarily related to contractual inflationary price index adjustments.

As of March 31, 2022, backlog for capital equipment orders for Rig Technologies was $2,893 million.

As of June 30, 2022, backlog for capital equipment orders for Rig Technologies was $2,839 million.

Oil & Gas Equipment and Services Market and Outlook

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Towards the end of 2020 and into 2021, commodity prices stabilized and began to recover resulting in improving industry activity levels in North America.

Throughout 2021, greater availability of COVID-19 vaccines resulted in the gradual reopening of certain economies around the world.

Pent-up consumer and industrial demand combined with government economic stimulus programs are serving to amplify the global recovery, improve economic activity, and drive higher demand for oil and gas, which management believes is setting the stage for a global recovery in drilling activity.

During 2021, oil and gas drilling activity levels increased in every major region of the world, reflecting this growing demand.

Despite ongoing disruptions from raw material shortages, COVID-19 lockdowns, inflationary forces, and other supply chain disruptions, management is optimistic that improving market fundamentals and the actions NOV has taken to position its business for the future will drive growth and improve profitability for the Company.

During 2021, greater availability of COVID-19 vaccines resulted in the gradual reopening of economies around the world.

Pent-up consumer and industrial demand combined with government economic stimulus programs amplified the global recovery, improving economic activity, and driving higher demand for oil and gas.

Throughout 2021 and the first six months of 2022, oil and gas drilling activity levels increased in every major region of the world, reflecting this growing demand.

Despite tightening government fiscal policies, concerns regarding a global recession, ongoing global supply chain disruptions and rising inflationary costs, management believes the industry is in the early stages of an extended recovery.

Diminished global oil and gas inventories and productive capacity resulting from underinvestment in the industry over the last seven years, along with rising energy security risks, and higher commodity prices should continue to spur increased oilfield activity and demand for the Company’s equipment and technology.

NOV remains committed to improving organizational efficiencies while focusing on the development and commercialization of innovative products and services, including technologies to reduce environmental impact of petroleum operations, and technologies to accelerate the energy transition that are responsive to the longer-term needs of NOV’s customers.

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The Company’s results are dependent on, among other things, the level of worldwide oil and gas drilling, well remediation activity, the prices of crude oil and natural gas, capital spending by other oilfield service companies and drilling contractors, and worldwide oil and gas inventory levels.

Key industry indicators for the first quarter of 2022 and 2021, and the fourth quarter of 2021 include the following:

Key industry indicators for the second quarter of 2022 and 2021, and the first quarter of 2022 include the following:

Active Drilling Rigs:

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Management expects to see continued growth in these areas as low carbon power becomes a larger portion of the global energy supply.

The following table details the U.S., Canadian, and international rig activity and West Texas Intermediate Crude Oil prices for the past nine quarters ended March 31, 2022, on a quarterly basis:

The following table details the U.S., Canadian, and international rig activity and West Texas Intermediate Crude Oil prices for the past nine quarters ended June 30, 2022, on a quarterly basis:

Industry Trends Rig Counts and Oil Prices Total Number of Rigs 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 $140.00 $120.00 $100.00 $80.00 $60.00 $40.00 $20.00 $ West Texas Int.

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Department of Energy, Energy Information Administration (www.eia.doe.gov).

The worldwide quarterly average rig count increased 8 percent (from 1,538 to 1,654), and the U.S.

increased 13 percent (from 559 to 633), in the first quarter of 2022 compared to the fourth quarter of 2021.

The average per barrel price of West Texas Intermediate Crude Oil increased 22 percent (from $77.45 per barrel to $94.54 per barrel) and natural gas prices decreased 3 percent (from $4.74 per mmbtu to $4.62 per mmbtu) in the first quarter of 2022 compared to the fourth quarter of 2021.

At April 14, 2022, there were 796 rigs actively drilling in North America, which decreased 4 percent from the first quarter average of 831 rigs.

The price for West Texas Intermediate Crude Oil was $106.95 per barrel at April 14, 2022, an increase of 13 percent from the first quarter of 2022 average.

The price for natural gas was $7.30 per mmbtu at April 14, 2022, an increase of 58 percent from the first quarter of 2022 average.

The worldwide quarterly average rig count decreased 1 percent (from 1,654 to 1,644), and the U.S.

increased 13 percent (from 633 to 715), in the second quarter of 2022 compared to the first quarter of 2022.

The average per barrel price of West Texas Intermediate Crude Oil increased 15 percent (from $94.54 per barrel to $108.72 per barrel) and natural gas prices increased 61 percent (from $4.62 per mmbtu to $7.44 per mmbtu) in the second quarter of 2022 compared to the first quarter of 2022.

At July 15, 2022, there were 947 rigs actively drilling in North America, which increased 14 percent from the second quarter average of 829 rigs.

The price for West Texas Intermediate Crude Oil was $97.59 per barrel at July 15, 2022, a decrease of 10 percent from the second quarter of 2022 average.

The price for natural gas was $6.93 per mmbtu at July 15, 2022, a decrease of 7 percent from the second quarter of 2022 average.

Results of Operations

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Three Months Ended

Six Months Ended

Wellbore Technologies

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Wellbore Technologies

Three months ended March 31, 2022 and 2021.

Revenue from Wellbore Technologies was $608 million for the three months ended March 31, 2022, compared to $413 million for the three months ended March 31, 2021, an increase of $195 million or 47 percent.

Operating profit from Wellbore Technologies was $39 million for the three months ended March 31, 2022 compared to an operating loss of $14 million for the three months ended March 31, 2021, an increase of $53 million.

Three months and six months ended June 30, 2022 and 2021.

Revenue from Wellbore Technologies was $666 million for the three months ended June 30, 2022, compared to $463 million for the three months ended June 30, 2021, an increase of $203 million or 44 percent.

For the six months ended June 30, 2022, revenue from Wellbore Technologies was $1,274 million compared to $876 million for the six months ending June 30, 2021, an increase of $398 million or 45 percent.

Operating profit from Wellbore Technologies was $81 million for the three months ended June 30, 2022 compared to an operating profit of $6 million for the three months ended June 30, 2021, an increase of $75 million.

For the six months ended June 30, 2022, operating profit from Wellbore Technologies was $120 million compared to operating loss of $8 million for the six months ending June 30, 2021, an increase of $128 million.

Completion & Production Solutions

Three months ended March 31, 2022 and 2021.

Revenue from Completion & Production Solutions was $530 million for the three months ended March 31, 2022, compared to $439 million for the three months ended March 31, 2021, an increase of $91 million or 21 percent.

Operating loss from Completion & Production Solutions was $22 million for the three months ended March 31, 2022 compared to an operating loss of $17 million for the three months ended March 31, 2021, an increase of $5 million.

Three and six months ended June 30, 2022 and 2021.

Revenue from Completion & Production Solutions was $639 million for the three months ended June 30, 2022, compared to $497 million for the three months ended June 30, 2021, an increase of $142 million or 29 percent.

For the six months ended June 30, 2022, revenue from Completion & Production Solutions was $1,169 million compared to $936 million for the six months ending June 30, 2021, an increase of $233 million or 25 percent.

Operating profit from Completion & Production Solutions was $20 million for the three months ended June 30, 2022 compared to an operating loss of $6 million for the three months ended June 30, 2021, an increase of $26 million.

For the six months ended June 30, 2022, operating loss from Completion & Production Solutions was $2 million compared to $23 million for the six months ending June 30, 2021, a decrease of $21 million.

The Completion & Productions Solutions segment monitors its capital equipment backlog to plan its business.

New orders are added to backlog only when the Company receives a firm written order for major completion and production components or a contract related to a construction project.

The capital equipment backlog was $1,364 million at March 31, 2022, an increase of $554 million from backlog of $810 million at March 31, 2021.

The capital equipment backlog was $1,442 million at June 30, 2022, an increase of $439 million from backlog of $1,003 million at June 30, 2021.

Although numerous factors can affect the timing of revenue out of backlog (including, but not limited to, customer change orders and supplier accelerations or delays), the Company reasonably expects approximately 55 percent of backlog to become revenue during the rest of 2022 and the remainder thereafter.

At March 31, 2022, approximately 66 percent of the capital equipment backlog was for offshore products and approximately 74 percent of the capital equipment backlog was destined for international markets.

At June 30, 2022, approximately 61 percent of the capital equipment backlog was for offshore products and approximately 73 percent of the capital equipment backlog was destined for international markets.

Rig Technologies

Three months ended March 31, 2022 and 2021 .

Revenue from Rig Technologies was $441 million for the three months ended March 31, 2022, compared to $431 million for the three months ended March 31, 2021, an increase of $10 million or 2 percent.

Operating profit from Rig Technologies was $11 million for the three months ended March 31, 2022 compared to an operating loss of $8 million for the three months ended March 31, 2021, an increase of $19 million.

Three and six months ended June 30, 2022 and 2021 .

Revenue from Rig Technologies was $462 million for the three months ended June 30, 2022, compared to $487 million for the three months ended June 30, 2021, a decrease of $25 million or 5 percent.

For the six months ended June 30, 2022, revenue from Rig Technologies was $903 million compared to $918 million for the six months ending June 30, 2021, a decrease of $15 million or 2 percent.

Operating profit from Rig Technologies was $31 million for the three months ended June 30, 2022 compared to $49 million for the three months ended June 30, 2021, a decrease of $18 million.

For the six months ended June 30, 2022, operating profit from Rig Technologies was $42 million compared to $41 million for the six months ending June 30, 2021, an increase of $1 million.

The Rig Technologies segment monitors its capital equipment backlog to plan its business.

New orders are added to backlog only when the Company receives a firm written order for major drilling rig components or a signed contract related to a construction project.

The capital equipment backlog was $2,893 million at March 31, 2022, an increase of $302 million from backlog of $2,591 million at March 31, 2021.

Although numerous factors can affect the timing of revenue out of backlog (including, but not limited to, customer change

orders and supplier accelerations or delays), the Company reasonably expects approximately 21 percent of backlog to become revenue during the rest of 2022 and the remainder thereafter.

At March 31, 2022, approximately 30 percent of the capital equipment backlog was for offshore products and approximately 96 percent of the capital equipment backlog was destined for international markets.

The capital equipment backlog was $2,839 million at June 30, 2022, an increase of $184 million from backlog of $2,655 million at June 30, 2021.

Although numerous factors can affect the timing of revenue out of backlog (including, but not limited to, customer change orders and supplier accelerations or delays), the Company reasonably expects approximately 14 percent of backlog to become revenue during the rest of 2022 and the remainder thereafter.

At June 30, 2022, approximately 30 percent of the capital equipment backlog was for offshore products and approximately 96 percent of the capital equipment backlog was destined for international markets.

Eliminations and corporate costs

Eliminations and corporate costs were $49 million for the three months ended March 31, 2022, consistent with $49 million for the three months ended March 31, 2021.

Eliminations and corporate costs were $64 million and $113 million for the three and six months ended June 30, 2022, compared to $37 million and $86 million for the three and six months ended June 30, 2021.

Sales from one segment to another generally are priced at estimated equivalent commercial selling prices;

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Other income (expense), net

Other income (expense), net was expense of $2 million for the three months ended March 31, 2022, compared to expense of $10 million for the three months ended March 31, 2021, respectively.

Other income (expense), net was zero and ($2) million for the three and six months ended June 30, 2022, compared to expenses of $16 million and $26 million for the three and six months ended June 30, 2021, respectively.

The change in expense was primarily due to fluctuations in foreign currencies.

Provision for income taxes

The effective tax rate for the three months ended March 31, 2022 and 2021 was (39.3) and 5.0%, respectively.

The effective tax rate for the three and six months ended June 30, 2022 was (2.9)% and 36.4%, respectively, compared to (9.5)% and 2.8% for the same periods in 2021.

The Company has established valuation allowances on deferred tax assets for losses and tax credits generated in 2022 and 2021.

Non-GAAP Financial Measures and Reconciliations

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Three Months Ended

Six Months Ended

Operating profit (loss):

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Reconciliation of Adjusted EBITDA:

GAAP net loss attributable to Company

GAAP net income (loss) attributable to Company

Noncontrolling interests

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Liquidity and Capital Resources

At March 31, 2022, the Company had cash and cash equivalents of $1,406 million and total debt of $1,714 million.

At June 30, 2022, the Company had cash and cash equivalents of $1,218 million and total debt of $1,724 million.

At December 31, 2021, cash and cash equivalents were $1,591 million and total debt was $1,713 million.

As of March 31, 2022, approximately $857 million of the $1,406 million of cash and cash equivalents was held by our foreign subsidiaries and the earnings associated with this cash could be subject to foreign withholding taxes and incremental U.S.

As of June 30, 2022, approximately $783 million of the $1,218 million of cash and cash equivalents was held by our foreign subsidiaries and the earnings associated with this cash could be subject to foreign withholding taxes and incremental U.S.

taxation if transferred among countries or repatriated to the U.S.

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The credit facility contains a financial covenant regarding maximum debt-to-capitalization ratio of 60%.

As of March 31, 2022, the Company was in compliance with a debt-to-capitalization ratio of 28.1% and had no outstanding letters of credit issued under the facility, resulting in $2.0 billion of available funds.

The Company also has a $150 million bank line of credit for the construction of a facility in Saudi Arabia.

As of June 30, 2022, the Company was in compliance with a debt-to-capitalization ratio of 28.3% and had no outstanding letters of credit issued under the facility, resulting in $2.0 billion of available funds.

A consolidated joint venture of the Company also has a $150 million bank line of credit for the construction of a facility in Saudi Arabia.

Interest under the bank line of credit is based upon LIBOR plus 1.40%.

The bank line of credit contains a financial covenant regarding maximum debt-to-equity ratio of 75%.

As of March 31, 2022, the Company was in compliance.

As of March 31, 2022, the Company had $103 million in borrowings related to this line of credit.

The first payment in December 2022 will be approximately $5 million.

The Company’s outstanding debt at March 31, 2022 consisted primarily of $1,090 million in 3.95% Senior Notes, $494 million in 3.60% Senior Notes, and other debt of $130 million.

The Company was in compliance with all covenants at March 31, 2022.

Lease liabilities totaled $661 million at March 31, 2022.

The Company had $437 million of outstanding letters of credit at March 31, 2022, primarily in the U.S.

As of June 30, 2022, the joint venture was in compliance.

As of June 30, 2022, the Company had $111 million in borrowings related to this line of credit.

The Company has $10 million in payments related to this line of credit due in the next twelve months.

The Company’s outstanding debt at June 30, 2022 consisted primarily of $1,090 million in 3.95% Senior Notes, $494 million in 3.60% Senior Notes, and other debt of $140 million.

The Company was in compliance with all covenants at June 30, 2022.

Long-term lease liabilities totaled $563 million at June 30, 2022.

The Company had $502 million of outstanding letters of credit at June 30, 2022, primarily in the U.S.

and Norway, that are under various bilateral letter of credit facilities.

Letters of credit are issued as bid bonds, advanced payment bonds and performance bonds.

The following table summarizes our net cash provided by continuing operating activities, continuing investing activities and continuing financing activities for the periods presented (in millions):

Three Months Ended

Net cash used in operating activities

The following table summarizes our net cash provided by (used in) continuing operating activities, continuing investing activities and continuing financing activities for the periods presented (in millions):

Six Months Ended

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash used in financing activities

Significant sources and uses of cash during the first three months of 2022

Cash flows used in operating activities was $103 million.

This included changes in the primary components of our working capital (receivables, inventories and accounts payable).

Significant sources and uses of cash during the first six months of 2022

Cash flows used in operating activities were $227 million, primarily driven by changes in the primary components of our working capital (receivables, inventories and accounts payable).

Capital expenditures were $89 million.

We paid $39 million in dividends to shareholders.

The effect of the change in exchange rates on cash flows was an increase of $3 million and a decrease of $4 million for the first three months of 2022 and 2021, respectively.

The effect of the change in exchange rates on cash flows was a decrease of $5 million and an increase of $1 million for the first six months of 2022 and 2021, respectively.

We believe that cash on hand, cash generated from operations and amounts available under our credit facilities and from other sources of debt will be sufficient to fund operations, lease payments, working capital needs, capital expenditure requirements, dividends and financing obligations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements