What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-10-28 compared with 2022-07-28 · 182 added, 132 removed, 611 unchanged (34% of the section changed)

2 unchanged sentences

(In millions, except share data)

September 30,

Current assets:

29 unchanged sentences

392,805,244 and

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

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

December 31, 2021

10 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of revenue

6 unchanged sentences

Net income (loss) before income taxes

Provision (benefit) for income taxes

Provision for income taxes

Net income (loss)

5 unchanged sentences

See notes to unaudited consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

(In millions)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

1 unchanged sentence

Changes in derivative financial instruments, net of tax

Comprehensive income (loss)

Changes in defined benefit plans, net of tax

Comprehensive loss

Comprehensive income attributable to noncontrolling interest

Comprehensive income (loss) attributable to Company

Comprehensive loss attributable to Company

See notes to unaudited consolidated financial statements.

1 unchanged sentence

(In millions)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

Net income (loss)

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

Adjustments to reconcile net income (loss) to net cash provided by (used in)

operating activities:

Depreciation and amortization

3 unchanged sentences

Equity (income) loss in unconsolidated affiliates

Stock-based compensation

Impairment and loss on assets held for sale

Change in operating assets and liabilities, net of acquisitions:

42 unchanged sentences

Balance at June 30, 2022

Other comprehensive loss, net

Cash dividends, $ 0.05 per common share

Stock-based compensation

Balance at September 30, 2022

Comprehensive

15 unchanged sentences

Balance at June 30, 2021

Net income (loss)

Other comprehensive loss

Stock-based compensation

Balance at September 30, 2021

See notes to unaudited consolidated financial statements.

7 unchanged sentences

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

The results of operations for the three and nine months ended September 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.

4 unchanged sentences

Inventories consist of (in millions):

September 30,

Raw materials and supplies

4 unchanged sentences

Accrued liabilities consist of (in millions):

September 30,

Taxes (non-income)

7 unchanged sentences

income (loss)

Balance at June 30, 2022

Balance at September 30, 2022

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

Three Months Ended June 30,

Three Months Ended September 30,

Cost of revenue

Six Months Ended June 30,

Selling, general, and administrative

Nine Months Ended September 30,

Cost of revenue

Selling, general, and administrative

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 ($ 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.

1) changes in fair value of open derivatives of ($ 19 ) million and ($ 34 ) million during the three and nine months ended September 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 ($ 6 ) million during the three months ended September 30, 2022 , and zero during the nine months ended September 30, 2022.

The Company offered a new benefit plan to employees during the third quarter of 2022, resulting in the recognition of prior service cost in accumulated other comprehensive loss during the three and nine months ended September 30, 2022.

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Wellbore Technologies

12 unchanged sentences

Intrasegment transactions are eliminated within each segment.

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.

Impairment and Other Items

Beginning February 2022, as a result of armed conflict in Ukraine, governments in the European Union, the United States, the United Kingdom, Switzerland, and other countries have enacted sanctions against Russia and Russian interests.

Among other things, these sanctions include controls on the export, re-export, and in-country transfer in Russia of certain goods, supplies, and technologies, including some that we use in our business in Russia.

They also impose restrictions on doing business with specially designated nationals, including certain state-owned Russian customers, certain financial institutions and certain individuals and restrict or prohibit new investments and business activities in Russia.

As previously disclosed, in response to these sanctions, the Company ceased new investments and curtailed our activities in Russia.

Further, during the third quarter of 2022, the Company sold its business in Belarus and committed to a plan to sell its businesses in Russia.

The sale is subject to government approval under Russian law.

As a result of these actions, we recorded $ 76 million and $ 125 million in impairment and other charges for the three and nine months ended September 30, 2022, respectively, of which $ 51 million relates to accumulated foreign currency translation adjustment losses for Russia and Belarus.

The impairment and other charges are reported in “Cost of revenue”

($ 25 million and $ 74 million for the three and nine months ended September 30, 2022, respectively) and “Selling, general and administrative”

($ 51 million for both the three and nine months ended September 30, 2022) in our Consolidated Statements of Income (Loss).

Charges were $ 31 million and $ 61 million for the three and nine months ended September 30, 2022, respectively, for Wellbore Technologies, $ 22 million and $ 39 million, respectively, for Completion & Production Solutions, and $ 23 million and $ 25 million, respectively, for Rig Technologies.

As of September 30, 2022, all our Russian assets and liabilities were classified as held for sale and reported in “Prepaid and Other Current Assets”

and “Accrued Liabilities”, respectively, in our Consolidated Balance Sheet.

We expect to complete the sale of our Russian entities within the next 12 months, subject to regulatory approval.

Total other items included in operating profit for the three months ended September 30, 2022, were $ 63 million (pre-tax costs of $ 76 million for the impairment and other charges discussed above partially offset by credits of ($ 13 ) million related to gains on sales of previously reserved inventory).

Total other items included in operating profit for the nine months ended September 30, 2022, was $ 122 million (pre-tax charges of $ 125 million for the impairment and other charges discussed above, $ 23 million of severance, facility closure costs and restructure, partially offset by credits of ($ 26 ) million related to gains on sales of previously reserved inventory).

Cost of revenue and operating loss for the three months ending September 30, 2021, includes other items of $ 24 million ($ 24 million of restructure, severance and facility closure costs and an $ 8 million post-warranty product modification, partially offset by credits of $ 8 million related to gains on sales of previously reserved inventory and gains on the sales of fixed assets).

Cost of revenue and operating loss for the nine months ending September 30, 2021, includes pre-tax charges for other items of $ 48 million ($ 67 million of restructure,

severance and facility closure costs and an $ 8 million post-warranty product modification, partially offset by credits of $ 27 million related to gains on sales of previously reserved inventory and gains on the sale of fixed assets).

Disaggregation of Revenue

2 unchanged sentences

and Canada (in millions):

Three Months Ended June 30,

Three Months Ended September 30,

North America

International

Six Months Ended June 30,

Nine Months Ended September 30,

North America

1 unchanged sentence

Performance Obligations

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.

Net revenue recognized from performance obligations satisfied in previous periods was $ 6 million for the three months ended September 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 June 30, 2022 , the aggregate amount of the transaction price allocated to remaining performance obligations was $ 4,247 million.

As of September 30, 2022 , the aggregate amount of the transaction price allocated to remaining performance obligations was $ 4,151 million.

The Company expects to recognize approximately $ 372 million in revenue for the remaining performance obligations in 2022 and $ 3,779 million in 2023 and thereafter.

6 unchanged sentences

Currency translation adjustments and other

Balance at June 30, 2022

Balance at September 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 June 30, 2022, the allowance for credit losses totaled $ 93 million.

As of September 30, 2022, the allowance for credit losses totaled $ 70 million.

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

6 unchanged sentences

Components of leases are as follows (in millions):

September 30,

Current portion of lease liabilities:

September 30,

Long-term portion of lease liabilities:

Debt consists of (in millions):

September 30,

$ 1.1 billion in Senior Notes, interest at 3.95 % payable

8 unchanged sentences

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

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.

As of September 30, 2022 , the Company was in compliance with a debt-to-capitalization ratio of 28.5 % 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.

1 unchanged sentence

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

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

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

As of September 30, 2022 , the Company has a carrying value of $ 115 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.

1 unchanged sentence

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

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.

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

The Company had $ 485 million of outstanding letters of credit at September 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 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.

At September 30, 2022 and December 31, 2021, the fair value of the Company’s unsecured Senior Notes approximated $ 1,158 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 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.

At September 30, 2022 and December 31, 2021, the carrying value of the Company’s unsecured Senior Notes approximated $ 1,585 million and $ 1,584 million, respectively.

The effective tax rate for the three and nine months ended September 30, 2022 was 45.3 % and 42.3 %, respectively, compared to ( 8.3 %) and ( 0.5 %) 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 impacts related to changes in certain exchange rates, 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 adjustments related to changes in certain exchange rates, utilization of previously unrealized losses, and tax credits.

Stock-Based Compensation

4 unchanged sentences

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.

At September 30, 2022, approximately 17.2 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 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.

Total expense for all stock-based compensation arrangements was $ 17 million and $ 50 million for the three and nine months ended September 30, 2022 , respectively and $ 19 million and $ 59 million for the three and nine months ended September 30, 2021, respectively.

Derivative Financial Instruments

1 unchanged sentence

The Company also executes forward currency contracts to manage the foreign currency exchange rate risk on recognized nonfunctional currency monetary accounts (non-designated hedge).

The fair value of these derivative financial instruments are determined using level 2 inputs (inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability) in the fair value hierarchy as the fair value is based on publicly available foreign exchange and interest rates at each financial reporting date.

The fair values of these derivative financial instruments are determined using level 2 inputs (inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability) in the fair value hierarchy as the fair value is based on publicly available foreign exchange and interest rates at each financial reporting date.

Forward currency contracts consist of (in millions):

Currency Denomination

September 30,

Foreign Currency

1 unchanged sentence

Norwegian Krone

Brazilian Real

South African Rand

12 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 ($ 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 amount of gain (loss) recognized in other income (expense), net was ($ 8 ) million and ($ 22 ) million for the three and nine months ended September 30, 2022 , respectively, and ($ 5 ) million and ($ 10 ) million for the three and nine months ended September 30, 2021, respectively.

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

2 unchanged sentences

Balance Sheet

September 30,

Balance Sheet

September 30,

Derivatives designated as hedging instruments

4 unchanged sentences

Accrued liabilities

Foreign exchange contracts

Other liabilities

Total derivatives designated as hedging instruments

under ASC Topic 815

Derivatives not designated as hedging instruments

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income (loss) attributable to Company

7 unchanged sentences

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 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.

Net income (loss) attributable to the Company allocated to these participating securities was immaterial for each of the three and nine months ended September 30, 2022 and 2021 , respectively.

The Company had stock options outstanding that were anti-dilutive totaling 22 million and 20 million shares for the three and nine months ended September 30, 2022 , respectively, compared to 23 million and 21 million shares for the three and nine months ended September 30, 2021 , respectively.

Cash Dividends

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.

Cash dividends were $ 20 million and $ 59 million for the three and nine months ended September 30, 2022 compared to no dividends paid for both the three and nine months ended September 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.

3 unchanged sentences

In the United States these governmental authorities include:

Department of Labor, the Occupational Safety and Health Administration, the Environmental Protection Agency, the Bureau of Land Management, the Department of Treasury, Office of Foreign Asset Controls, state and international environmental agencies and many others.

We are unaware of any material liabilities in connection with our compliance with such laws.

1 unchanged sentence

The Company is involved in various claims, regulatory agency audits and pending or threatened legal actions involving a variety of matters.

The Company maintains insurance that covers many of the claims arising from risks associated with the business activities of the Company, including claims for premises liability, product liability and other such claims.

The Company carries substantial insurance to cover such risks above a self-insured retention.

1 unchanged sentence

The Company is also a party to claims, threatened and actual litigation, private arbitration, internal investigations of potential regulatory and compliance matters which arise both from legacy businesses that the Company has acquired over many years and from the Company’s current ordinary day-to-day business activities.

These regulatory matters and disputes involve private parties and/or government authorities, which assert claims against the Company for a broad spectrum of potential claims including:

employment law claims, collective actions or class action claims under employment laws, intellectual property claims (such as alleged patent infringement, and/or misappropriation of trade secrets by the company), premises liability claims, environmental claims, product liability claims, warranty claims, personal injury claims arising from exposure to or use of allegedly defective products, alleged regulatory violations, alleged violations of anti-corruption and anti-bribery laws and other commercial and/or regulatory claims seeking recovery for alleged actual or exemplary damages or fines and penalties.

Such claims involve various theories of liability which include:

negligence, strict liability, product liability, and other theories of liability.

These regulatory matters and disputes involve private parties and/or government authorities, which assert claims against the Company for a broad spectrum of potential claims, including employment law claims, collective actions or class action claims under employment laws, intellectual property claims (such as alleged patent infringement, and/or misappropriation of trade secrets by the company), premises liability claims, environmental claims, product liability claims, warranty claims, personal injury claims arising from exposure to or use of allegedly defective products, alleged regulatory violations, alleged violations of anti-corruption and anti-bribery laws and other commercial and/or regulatory claims seeking recovery for alleged actual or exemplary damages or fines and penalties.

Such claims involve various theories of liability which include negligence, strict liability, product liability, and other theories of liability.

For some of these contingent claims, the Company’s insurance coverage is inapplicable or an exclusion to coverage may apply.

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 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.

As of September 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.

2 unchanged sentences

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.

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.

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

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

8 unchanged sentences

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

From time to time, we are engaged in disputes concerning protection of the Company’s trade secrets and confidential information, patents, and other intellectual property rights.

From time to time, we are engaged i n disputes concerning protection of the Company’s trade secrets and confidential information, patents, and other intellectual property rights.

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.

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.

The Company is currently pursuing, and intends to pursue future claims involving revenue recognized for technology related to drill bits.

The amount of the Company's claims for outstanding receivables exceed $ 25 million dollars, and are likely to increase over time until we achieve resolution of such claims.

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.

Further, in some instances, direct or indirect consumers 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.

In such circumstances, such investigations may adversely impact the ability of consumers of our products, entities providing financial support to such consumers or entities in the supply chain to timely perform their business plans or to timely perform under agreements with us.

8 unchanged sentences

The Company may face increased tariffs and trade costs, loss of revenue, loss of customers, increased costs, the need for renegotiation of agreements, and other business disruptions.

In addition, trade regulations, export controls, and other laws may adversely impact our ability to do business in certain countries, e.g.:

Iran, Syria, Russia, China and Venezuela.

In addition, trade regulations, export controls, and other laws adversely impact our ability to do business in certain countries, e.g., Iran, Syria, Russia, China and Venezuela.

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.

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

During the third quarter of 2022, we sold our business in Belarus committed to a plan to sell our business in Russia.

The sale is subject to government approval under Russian law.

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 $ 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.

We also may incur severance costs as a result of conditions in Russia if we are unable to obtain government approval.

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

1 unchanged sentence

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.

The Company continues to see operational delays due to supply chain disruption and closure or limitations imposed on our facilities and work force from “shelter in place”

regulation in different jurisdictions around the world.

We also face sometimes conflicting regulatory and legal prescriptions concerning vaccine mandates and prohibitions of vaccine mandates.

The Company continues to see operational delays due to supply chain disruption and closure or limitations imposed on our facilities and work force regulations.

We also face sometimes conflicting regulatory and legal regulations, for example, vaccine mandates and prohibitions of vaccine mandates.

We may face loss of workers, labor shortages, litigation, fines and/or other adverse consequences resulting from vaccine mandates and enforcement of other COVID-19 regulations.

80 unchanged sentences

In our annual report on Form 10-K for the year ended December 31, 2021, we identified our most critical accounting policies.

In preparing the financial statements, we make assumptions, estimates and judgements that affect the amounts reported.

We periodically evaluate our estimates and judgements that are most critical in nature which are related to revenue recognition under long-term construction contracts;

In preparing the financial statements, we make assumptions, estimates and judgments that affect the amounts reported.

We periodically evaluate our estimates and judgments that are most critical in nature which are related to revenue recognition under long-term construction contracts;

inventory reserves;

1 unchanged sentence

Our estimates are based on historical experience and on our future expectations that we believe are reasonable.

The combination of these factors forms the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources.

The combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results are likely to differ from our current estimates and those differences may be material.

EXECUTIVE SUMMARY

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.

For the third quarter ended September 30, 2022, the Company generated revenues of $1.89 billion, an increase of 9 percent compared to the second quarter of 2022 and an increase of 41 percent compared to the third quarter of 2021.

Net income for the third quarter of 2022 was $32 million, or 1.7% percent of sales, which included $63 million in Other Items (pre-tax costs of $76 million for Russia Impairment and other charges offset by credits of ($13) million for inventory).

See Footnote 6 Impairment and Other Items for additional information.

Adjusted EBITDA (operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets and, when applicable, Other Items) increased sequentially to $195 million, or 10.3% percent of sales.

1 unchanged sentence

Wellbore Technologies

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.

Wellbore Technologies generated revenues of $741 million in the third quarter of 2022, an increase of 11 percent from the second quarter of 2022 and an increase of 46 percent from the third quarter of 2021.

Operating profit was $74 million, or 10.0 percent of sales, and included $31 million of Other Items.

Adjusted EBITDA increased $23 million sequentially and $68 million from the prior year to $145 million, or 19.6 percent of sales.

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.

Accelerating growth in international markets along with continued improvements in demand from North America led to the seventh straight quarter of improved results for the segment.

Completion & Production Solutions

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.

Completion & Production Solutions generated revenues of $681 million in the third quarter of 2022, an increase of 7 percent from the second quarter of 2022 and an increase of 42 percent from the third quarter of 2021.

Operating profit was $21 million, or 3.1 percent of sales, and included $19 million in Other Items.

Adjusted EBITDA increased $24 million sequentially and increased $61 million from the prior year to $56 million, or 8.2 percent of sales.

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.

Continued improvements in execution and healthy demand drove improved results for the segment.

New orders booked during the quarter totaled $493 million, representing a book-to-bill of 116 percent when compared to the $425 million of orders shipped from backlog.

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.

As of September 30, 2022, backlog for capital equipment orders for Completion & Production Solutions was $1,478 million, an increase of 2 percent from the second quarter of 2022 and an increase of 34 percent from the third quarter of 2021.

Rig Technologies

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.

Rig Technologies generated revenues of $511 million in the third quarter of 2022, an increase of 11 percent from the second quarter of 2022, and an increase of 31 percent from the third quarter of 2021.

Operating profit was $22 million, or 4.3 percent of sales, and included $13 million of Other Items.

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.

Adjusted EBITDA increased $11 million sequentially and increased $27 million from the prior year to $52 million, or 10.2 percent of sales.

Accelerating revenue conversion from renewable energy projects and demand for the segment’s aftermarket parts and services drove the improvement in results.

New orders booked during the quarter totaled $119 million, representing a book-to-bill of 59 percent when compared to the $202 million of orders shipped from backlog.

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

As of September 30, 2022, backlog for capital equipment orders for Rig Technologies was $2,781 million.

Oil & Gas Equipment and Services Market and Outlook

4 unchanged sentences

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.

Throughout 2021 and the first nine 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.

4 unchanged sentences

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 second quarter of 2022 and 2021, and the first quarter of 2022 include the following:

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

Active Drilling Rigs:

8 unchanged sentences

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 June 30, 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 September 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.

5 unchanged sentences

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

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.

The worldwide quarterly average rig count increased 11 percent (from 1,644 to 1,817), and the U.S.

increased 6 percent (from 715 to 761), in the third quarter of 2022 compared to the second quarter of 2022.

The average per barrel price of West Texas Intermediate Crude Oil decreased 14 percent (from $108.72 per barrel to $93.18 per barrel) and natural gas prices increased 7 percent (from $7.44 per mmbtu to $7.96 per mmbtu) in the third quarter of 2022 compared to the second quarter of 2022.

At October 14, 2022, there were 985 rigs actively drilling in North America, which increased 3 percent from the third quarter average of 960 rigs.

The price for West Texas Intermediate Crude Oil was $85.61 per barrel at October 14, 2022, a decrease of 8 percent from the third quarter of 2022 average.

The price for natural gas was $6.45 per mmbtu at October 14, 2022, a decrease of 19 percent from the third quarter of 2022 average.

Results of Operations

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Wellbore Technologies

9 unchanged sentences

Wellbore Technologies

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.

Three and nine months ended September 30, 2022 and 2021.

Revenue from Wellbore Technologies was $741 million for the three months ended September 30, 2022, compared to $507 million for the three months ended September 30, 2021, an increase of $234 million or 46 percent.

For the nine months ended September 30, 2022, revenue from Wellbore Technologies was $2,015 million compared to $1,383 million for the nine months ending September 30, 2021, an increase of $632 million or 46 percent.

Operating profit from Wellbore Technologies was $74 million for the three months ended September 30, 2022 compared to an operating profit of $32 million for the three months ended September 30, 2021, an increase of $42 million.

For the nine months ended September 30, 2022, operating profit from Wellbore Technologies was $194 million compared to operating profit of $24 million for the nine months ending September 30, 2021, an increase of $170 million.

Completion & Production Solutions

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.

Three and nine months ended September 30, 2022 and 2021.

Revenue from Completion & Production Solutions was $681 million for the three months ended September 30, 2022, compared to $478 million for the three months ended September 30, 2021, an increase of $203 million or 42 percent.

For the nine months ended September 30, 2022, revenue from Completion & Production Solutions was $1,850 million compared to $1,414 million for the nine months ending September 30, 2021, an increase of $436 million or 31 percent.

Operating profit from Completion & Production Solutions was $21 million for the three months ended September 30, 2022 compared to an operating loss of $26 million for the three months ended September 30, 2021, an increase of $47 million.

For the nine months ended September 30, 2022, operating profit from Completion & Production Solutions was $19 million compared to operating loss of $49 million for the nine months ending September 30, 2021, an increase of $68 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 $1,442 million at June 30, 2022, an increase of $439 million from backlog of $1,003 million at June 30, 2021.

The capital equipment backlog was $1,478 million at September 30, 2022, an increase of $371 million from backlog of $1,107 million at September 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 28 percent of backlog to become revenue during the rest of 2022 and the remainder thereafter.

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.

At September 30, 2022, approximately 54 percent of the capital equipment backlog was for offshore products and approximately 66 percent of the capital equipment backlog was destined for international markets.

Rig Technologies

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.

Three and nine months ended September 30, 2022 and 2021 .

Revenue from Rig Technologies was $511 million for the three months ended September 30, 2022, compared to $390 million for the three months ended September 30, 2021, an increase of $121 million or 31 percent.

For the nine months ended September 30, 2022, revenue from Rig Technologies was $1,414 million compared to $1,308 million for the nine months ending September 30, 2021, an increase of $106 million or 8 percent.

Operating profit from Rig Technologies was $22 million for the three months ended September 30, 2022 compared to $1 million for the three months ended September 30, 2021, an increase of $21 million.

For the nine months ended September 30, 2022, operating profit from Rig Technologies was $64 million compared to $42 million for the nine months ending September 30, 2021, an increase of $22 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 $2,839 million at June 30, 2022, an increase of $184 million from backlog of $2,655 million at June 30, 2021.

The capital equipment backlog was $2,781 million at September 30, 2022, a decrease of $3 million from backlog of $2,784 million at September 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 9 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.

At September 30, 2022, approximately 26 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 $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.

Eliminations and corporate costs were $62 million and $175 million for the three and nine months ended September 30, 2022, compared to $50 million and $136 million for the three and nine months ended September 30, 2021.

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

3 unchanged sentences

Other income (expense), net

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.

Other income (expense), net was $10 million and $8 million for the three and nine months ended September 30, 2022, compared to income of $1 million and expense of $25 million for the three and nine months ended September 30, 2021, respectively.

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

Provision for income taxes

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 effective tax rate for the three and nine months ended September 30, 2022 was 45.3% and 42.3%, respectively, compared to (8.3%) and (0.5%) 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

9 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating profit (loss):

39 unchanged sentences

Liquidity and Capital Resources

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

At September 30, 2022, the Company had cash and cash equivalents of $998 million and total debt of $1,730 million.

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

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.

As of September 30, 2022, approximately $758 million of the $998 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.

5 unchanged sentences

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

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.

As of September 30, 2022, the Company was in compliance with a debt-to-capitalization ratio of 28.5% 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.

1 unchanged sentence

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

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.

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

As of September 30, 2022, the Company had $115 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.

The Company’s outstanding debt at September 30, 2022 consisted primarily of $1,090 million in 3.95% Senior Notes, $495 million in 3.60% Senior Notes, and other debt of $145 million.

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

Long-term lease liabilities totaled $546 million at September 30, 2022.

The Company had $485 million of outstanding letters of credit at September 30, 2022, primarily in the U.S.

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

1 unchanged sentence

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

Nine Months Ended

September 30,

Net cash provided by (used in) operating activities

1 unchanged sentence

Net cash used in financing activities

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

Significant uses of cash during the first nine months of 2022

Cash flows used in operating activities were $333 million, primarily driven by changes in the primary components of our working capital (receivables, inventories and accounts payable).

1 unchanged sentence

We paid $59 million in dividends to shareholders.

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.

The effect of the change in exchange rates on cash flows was a decrease of $15 million and $5 million for the first nine 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.

24 unchanged sentences

You should also consider carefully the statements under “Risk Factors,”

as disclosed in our Annual Report on Form 10-K for the year-end December 31, 2021, as updated in Part II, Item 1A of this Quarterly Report on Form 10-Q, which addresses additional factors that could cause our actual results to differ from those set forth in the forward-looking statements, and additional disclosures we make in our press releases and Forms 10-Q, and 8-K.

as disclosed in our Annual Report on Form 10-K for the year-end December 31, 2021, as updated in Part II, Item 1A of our Quarterly Reports on Form 10-Q, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements, and additional disclosures we make in our press releases and Forms 10-Q, and 8-K.

We also suggest that you listen to our quarterly earnings release conference calls with financial analysts.

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