What changed in this filing

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Item 1. Financial Statements

2023-04-27 compared with 2022-10-28 · 188 added, 248 removed, 545 unchanged (44% of the section changed)

2 unchanged sentences

(In millions, except share data)

September 30,

Current assets:

19 unchanged sentences

Total current liabilities

Lease liabilities

Long-term debt

Lease liabilities

Deferred income taxes

6 unchanged sentences

393,727,525 and

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

392,832,752 shares issued and outstanding at March 31, 2023 and

December 31, 2022

10 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Cost of revenue

3 unchanged sentences

Interest income

Equity income (loss) in unconsolidated affiliates

Other income (expense), net

Equity income in unconsolidated affiliates

Other expense, net

Net income (loss) before income taxes

1 unchanged sentence

Net income (loss)

Net income attributable to noncontrolling interests

Net income (loss) attributable to noncontrolling interests

Net income (loss) attributable to Company

6 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Net income (loss)

2 unchanged sentences

Changes in defined benefit plans, net of tax

Comprehensive loss

Comprehensive income attributable to noncontrolling interest

Comprehensive loss attributable to Company

Comprehensive income (loss)

Comprehensive income (loss) attributable to noncontrolling interest

Comprehensive income (loss) loss attributable to Company

See notes to unaudited consolidated financial statements.

1 unchanged sentence

(In millions)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Net income (loss)

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

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

operating activities:

2 unchanged sentences

Deferred income taxes

Loss on extinguishment of debt

Equity (income) loss in unconsolidated affiliates

Stock-based compensation

Impairment and loss on assets held for sale

Equity income in unconsolidated affiliates

Change in operating assets and liabilities, net of acquisitions:

6 unchanged sentences

Other assets/liabilities, net

Net cash provided by (used in) operating activities

Net cash 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

6 unchanged sentences

Supplemental disclosures of cash flow information:

Cash payments (refunds) during the period for:

Cash payments during the period for:

See notes to unaudited consolidated financial statements.

2 unchanged sentences

(In millions)

Shares Issued

Comprehensive

7 unchanged sentences

Cash dividends, $ 0.05 per common share

Transactions with non-controlling interests

Stock-based compensation

Common stock issued

Withholding taxes

Balance at March 31, 2023

Other comprehensive loss, net

Cash dividends, $ 0.05 per common share

Stock-based compensation

Balance at June 30, 2022

Other comprehensive loss, net

Cash dividends, $ 0.05 per common share

Stock-based compensation

Balance at September 30, 2022

Shares Issued

Comprehensive

6 unchanged sentences

Other comprehensive loss, net

Cash dividends, $ 0.05 per common share

Stock-based compensation

Common stock issued

Withholding taxes

Balance at March 31, 2022

Net income (loss)

Other comprehensive income, net

Stock-based compensation

Common stock issued

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 nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year.

The results of operations for the three months ended March 31, 2023 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)

6 unchanged sentences

Amounts reclassified from accumulated other comprehensive

income (loss)

Balance at September 30, 2022

Balance at March 31, 2023

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

Three Months Ended September 30,

Cost of revenue

Selling, general, and administrative

Nine Months Ended September 30,

Three Months Ended March 31,

Cost of revenue

Other expense

Selling, general and administrative

5 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 ($ 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.

1) changes in fair value of open derivatives of $( 12 ) million during the three months ended March 31, 2023 ;

and, 2) the outflow of other comprehensive loss related to cumulative changes in the fair value of derivatives that have settled in the current period were $ 2 million during the three months ended March 31, 2023 .

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

Three Months Ended

Nine Months Ended

September 30,

Wellbore Technologies

19 unchanged sentences

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”

As a result of these actions, we recorded $ 41 million in impairment and other charges within costs of revenue in the first quarter of 2022.

As of March 31, 2023, 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).

Total other items included in operating profit for the three months ended March 31, 2023, were a pre-tax credit of $ 4 million primarily related to gains on sales of previously reserved inventory.

Total other items included in operating profit for the three months ended March 31, 2022, were 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 discussed above.

Disaggregation of Revenue

2 unchanged sentences

and Canada (in millions):

Three Months Ended September 30,

North America

International

Nine Months Ended September 30,

Three Months Ended March 31,

North America

1 unchanged sentence

Performance Obligations

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.

Net revenue recognized from performance obligations satisfied in previous periods was $ 13 million for the three months ended March 31, 2023 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 September 30, 2022 , the aggregate amount of the transaction price allocated to remaining performance obligations was $ 4,151 million.

As of March 31, 2023 , the aggregate amount of the transaction price allocated to remaining performance obligations was $ 4,224 million.

The Company expects to recognize approximately $ 1,083 million in revenue for the remaining performance obligations in 2023 and $ 3,141 million in 2024 and thereafter.

6 unchanged sentences

Currency translation adjustments and other

Balance at September 30, 2022

Balance at March 31, 2023

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

As of March 31, 2023, the allowance for credit losses totaled $ 71 million.

Balance at December 31, 2022

Provision for expected credit losses

Recoveries collected

Balance at March 31, 2023

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

6 unchanged sentences

The Company has the right to increase the commitments under this agreement to an aggregate amount of up to $ 3.0 billion upon the consent of only those lenders holding any such increase.

Interest under the multicurrency facility is based upon LIBOR, NIBOR or CDOR plus 1.25 % subject to a ratings-based grid or the U.S.

Interest under the multicurrency facility is based upon Secured Overnight Financing Rate (SOFR), NIBOR or CDOR plus 1.25 % subject to a ratings-based grid or the U.S.

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

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.

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

As of March 31, 2023 , the Company was in compliance with a debt-to-capitalization ratio of 27.0 % and had no outstanding borrowings or letters of credit issued under the facility, resulting in $ 2.0 billion of available funds.

Additionally, a consolidated joint venture of the Company borrowed $ 120 million against 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 SOFR plus 1.40 %.

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

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 September 30, 2022 , the Company has a carrying value of $ 115 million in borrowings related to this line of credit.

As of March 31, 2023 , the joint venture was in compliance.

The facility construction was completed in the fourth quarter of 2022, and the joint venture will not have future borrowings on the line of credit.

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

As of March 31, 2023, the Company has a carrying value of $ 114 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 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.

Other debt at March 31, 2023 included $ 32 million of funding provided by minority interest partners of NOV consolidated joint ventures, of which $ 3 million is due in the next twelve months.

The Company had $ 464 million of outstanding letters of credit at March 31, 2023, 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 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.

At March 31, 2023 and December 31, 2022, the fair value of the Company’s unsecured Senior Notes approximated $ 1,272 million and $ 1,215 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 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 adjustments related to changes in certain exchange rates, utilization of previously unrealized losses, and tax credits.

At March 31, 2023 and December 31, 2022, the carrying value of the Company’s unsecured Senior Notes approximated $ 1,585 million.

The effective tax rate for the three months ended March 31, 2023 was 13.8 %, compared to ( 39.3 )% for the same period in 2022.

The effective tax rate for 2023 was positively impacted by the utilization of previously unrealized loss carryforwards and tax credits as well as favorable adjustments related to changes in certain exchange rates, partially offset by current year losses in certain jurisdictions with no tax benefit.

Stock-Based Compensation

3 unchanged sentences

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 September 30, 2022, approximately 17.2 million shares remained available for future grants under the NOV Plan.

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 March 31, 2023 , approximately 12.8 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.

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.

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 nine months ended September 30, 2022 and 2021 .

On February 23, 2023, under the NOV Plan, the Company granted 1,014,002 stock options with a fair value of $ 9.75 per option and an exercise price of $ 21.76 per share;

2,228,226 restricted stock units with a fair value of $ 21.76 per share;

and performance share awards (PSAs) to senior management employees with potential payouts varying from zero to 960,478 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 2023 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 $ 15 million and $ 16 million for the three months ended March 31, 2023 and 2022, 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 months ended March 31, 2023 and 2022 .

Derivative Financial Instruments

4 unchanged sentences

Currency Denomination

September 30,

Foreign Currency

3 unchanged sentences

South African Rand

Canadian Dollar

Singapore Dollar

British Pound Sterling

Russian Ruble

Canadian Dollar

Cash Flow Hedging Strategy

To protect against the volatility of forecasted foreign currency cash flows resulting from forecasted revenues and expenses, the Company instituted a cash flow hedging program.

For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is recorded in accumulated other comprehensive income (loss) and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings (e.g., in “revenues”

line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings (e.g., in “revenues”

when the hedged transactions are cash flows associated with forecasted revenues).

4 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 ($ 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 amount of gain (loss) recognized in other income (expense), net was $( 5 ) million for the three months ended March 31, 2023 , and $( 3 ) million for the three months ended March 31, 2022, 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

18 unchanged sentences

Three 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 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.

Net income (loss) attributable to the Company allocated to these participating securities was immaterial for each of the three months ended March 31, 2023 and 2022 , respectively.

The Company had stock options outstanding that were anti-dilutive totaling 16 million and 22 million shares for the three months ended March 31, 2023 and 2022 , respectively.

Cash Dividends

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 .

Cash dividends were $ 20 million for both the three months ended March 31, 2023 and March 31, 2022 .

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.

5 unchanged sentences

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

New laws, regulations and enforcement policies may result in additional, presently unquantifiable, or unknown, costs or liabilities.

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, personal injury and other such claims.

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

The Company believes, and the Company’s experience has been, that such insurance has been enough to cover any such material risks.

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.

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

New laws, investigations, regulations and enforcement policies may result in additional, presently unquantifiable, or unknown, costs or liabilities.

From time to time, the Company is involved in various claims, regulatory agency audits, investigations and legal actions involving a variety of matters.

The Company maintains insurance that covers claims such as third-party personal injuries or property damage arising from risks associated with the business activities of the Company, such as premises liability, product liability, personal injury, marine risk, property damage, and other such insurable losses.

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

The Company believes, and the Company’s experience has been, that such insurance has been sufficient to cover any such material risks.

The Company is also a party to claims, threatened and actual litigation, 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, breach of contract, strict liability, product liability, and other theories of liability.

For some of these contingent claims and potential liabilities, the Company’s insurance coverage may not apply, exclusions to coverage may apply or legal impediments 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 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.

Risks and Uncertainties

As of March 31, 2023, 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 costs currently and reasonably estimated to be incurred for reclamation of a closed barite mine and product liability claims, as well as other circumstances involving material claims.

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.

5 unchanged sentences

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, 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.

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

In 2022, 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.

6 unchanged sentences

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.

The Company is suing for breach of certain license in agreements pursuant to which certain drill bit manufacturers have licensed the Company’s intellectual property.

The amount of the Company's claims for outstanding receivables approximates $ 40 million dollars, and is 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.

9 unchanged sentences

Compliance with these laws and regulations present challenges which could result in future liabilities (for example, when laws conflict between countries).

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.

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

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.

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.

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

The sale is subject to various government approvals in Russia and other jurisdictions.

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 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.

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.

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.

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

Lingering supply chain disruptions arising from the COVID-19 pandemic continue to adversely impact normal economic and manufacturing related activities.

The Company’s ability to manufacture equipment and perform services could be impaired from such disruptions and the Company could be exposed to liabilities resulting from additional interruption or delay in its ability to perform due to materials shortages, inflationary pressures, and limited manpower.

While the overall situation related to COVID-19 has improved, the Company continues to see operational delays resulting from the limited availability of materials and work force, the lack of predictability around vendor delivery dates and other operational disruptions.

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

impact of supply chain and labor market disruptions along with the inflationary impacts of pandemic monetary and regulatory policies could have material adverse impacts on our financial results.

Disputes may arise regarding application of force majeure contract provisions and allocation of responsibility among customers, the Company, and suppliers, resulting in material added cost and/or litigation.

2 unchanged sentences

As a result, the Company may be exposed to additional costs, liabilities and risks which could materially, adversely impact our financial performance and results.

These potential operational and service delays resulting from the COVID-19 pandemic could result in contractual or other legal claims from our customers.

These potential operational and service delays could result in contractual or other legal claims from our customers.

At this time, it is not possible to quantify all these risks, but the combination of these factors could have a material impact on our financial results.

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Legal restrictions on exploration and production may impede our customer’s ability to do business in certain jurisdictions.

The political environment may adversely impact demand for hydrocarbons in different jurisdictions or worldwide.

The political environment may adversely impact demand for hydrocarbons in different jurisdictions or globally.

The demand for energy may be constrained with adverse consequences for our customers and for the company.

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Recently Issued Accounting Standards

In March 2020, the FASB issued ASU 2021-01 and 2020-04, “Reference Rate Reform (Topic 848).”

This ASU applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

Management is currently assessing the impact of adopting ASU 2020-04 on the company’s financial position, results of operations and cash flows.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848).”

Topic 848, as amended, applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2024.

During the first quarter of 2023 , the Company adopted the optional relief guidance provided under Topic 848 after modifying certain debt and derivative instruments to update the reference rate from LIBOR to SOFR.

The adoption of this optional relief did no t have a material impact on the consolidated financial statements.

The Company is currently assessing the impact of other optional elections allowed under Topic 848 and their impact on the company’s financial position, results of operations and cash flows.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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More recently, by applying its deep expertise and technology, the company has helped advance the transition toward sustainable energy.

While oil and gas will remain critical to many parts of the global economy, the transition to clean, carbon-neutral energy sources represents an enormous economic opportunity for organizations that can improve the economic competitiveness of renewable energy.

NOV’s extensive proprietary technology portfolio supports the industry’s full-field drilling, completion, and production needs.

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The Company’s Wellbore Technologies segment designs, manufactures, rents, and sells a variety of equipment and technologies used to perform drilling operations, and offers services that optimize their performance, including:

solids control and waste management equipment and services;

portable power generation;

managed-pressure drilling;

drilling optimization and automation services;

tubular inspection, repair and coating services;

instrumentation;

measuring and monitoring;

downhole and fishing tools;

steerable technologies;

and drill bits.

solids control and waste management equipment and services, drilling fluids, premium drillpipe, wired pipe, drilling optimization services, tubular inspection and coating services, instrumentation, downhole tools, and drill bits.

Wellbore Technologies focuses on oil and gas companies and supports drilling contractors, oilfield service companies, and oilfield equipment rental companies.

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The Company’s Completion & Production Solutions segment integrates technologies for well completions and oil and gas production.

The segment designs, manufactures, and services equipment and technologies needed for hydraulic fracture stimulation, including downhole multistage fracturing tools, pressure pumping trucks, blenders, sanders, hydration units, injection units, flowline, and manifolds;

The segment designs, manufactures, and integrates technologies for well completions, oil and gas production, and industrial markets.

This includes equipment and technologies needed for hydraulic fracture stimulation, including pressure pumping trucks, blenders, sanders, hydration units, injection units, flowline, and manifolds;

well intervention, including coiled tubing units, coiled tubing, and wireline units and tools;

well construction, including premium connections and liner hangers;

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.

cementing products for pumping, mixing, transport, and storage;

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

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

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

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pressure control equipment, including blowout preventers;

power transmission systems,

including drives and generators;

power transmission systems, including drives and generators;

rig instrumentation and control systems;

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EXECUTIVE SUMMARY

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.

For the first quarter ended March 31, 2023, the Company generated revenues of $1.96 billion, a decrease of 5 percent compared to the fourth quarter of 2022 and an increase of 27 percent compared to the first quarter of 2022.

Net income for the first quarter of 2023 was $126 million, or 6.4 percent of sales, which included $4 million of credits in Other Items.

Adjusted EBITDA (operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets and, when applicable, Other Items) decreased sequentially to $195 million, or 9.9 percent of sales.

Segment Performance

Wellbore Technologies

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.

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.

Wellbore Technologies generated revenues of $745 million in the first quarter of 2023, a decrease of 2 percent from the fourth quarter of 2022 and an increase of 23 percent from the first quarter of 2022.

Operating profit was $96 million, or 12.9 percent of sales.

Adjusted EBITDA decreased $13 million sequentially and increased $32 million from the prior year to $133 million, or 17.9 percent of sales.

Results were negatively impacted during the quarter by continued supply chain challenges that disrupted the Segment’s drill pipe operations.

Completion & Production Solutions

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.

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

Completion & Production Solutions generated revenues of $718 million in the first quarter of 2023, a decrease of 3 percent from the fourth quarter of 2022 and an increase of 35 percent from the first quarter of 2022.

Operating profit was $44 million, or 6.1 percent of sales, and included a credit of $1 million in Other Items.

Adjusted EBITDA decreased $12 million sequentially and increased $44 million from the prior year to $54 million, or 7.5 percent of sales.

Results reflect typical seasonal declines in certain product lines and markets, partially offset by an improving rate of execution on projects, which contributed to a 37% increase in revenue out of backlog compared to the first quarter of 2022.

New orders booked during the quarter totaled $407 million, representing a book-to-bill of 96 percent when compared to the $422 million of orders shipped from backlog.

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.

As of March 31, 2023, backlog for capital equipment orders for Completion & Production Solutions was $1,601 million, a decrease of $1 million from the fourth quarter of 2022 and an increase of $237 million from the first quarter of 2022.

Rig Technologies

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 $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.

Rig Technologies generated revenues of $550 million in the first quarter of 2023, a decrease of 11 percent from the fourth quarter of 2022, and an increase of 25 percent from the first quarter of 2022.

Operating profit was $53 million, or 9.6 percent of sales, and included a credit of $3 million of Other Items.

Adjusted EBITDA decreased $19 million sequentially and increased $33 million from the prior year to $69 million, or 12.5 percent of sales.

Steadily improving demand for drilling equipment and aftermarket parts and services only partially offset the effect of strong capital equipment shipments in the fourth quarter that did not repeat and seasonal declines in the Segment’s aftermarket operations.

New orders booked during the quarter totaled $251 million, representing a book-to-bill of 140 percent when compared to the $179 million of orders shipped from backlog.

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

As of March 31, 2023, backlog for capital equipment orders for Rig Technologies was $2,876 million, an increase of $83 million from the fourth quarter of 2022 and a decrease of $17 million from the first quarter of 2022.

Oil & Gas Equipment and Services Market and Outlook

During 2020, the COVID-19 outbreak rapidly spread across the world, driving sharp demand destruction for crude oil as countries took measures that curtailed economic activity to slow the spread of the outbreak.

Companies across the industry responded with severe capital spending budget cuts, curtailed production, cost reductions, personnel layoffs, facility closures and bankruptcy filings.

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

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 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.

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.

Despite the recent volatility in commodity prices, management believes the industry is in the early stages of an extended recovery that began in 2021 with the gradual reopening of global economies following the COVID-19 pandemic.

Improving economic activity, driven by pent-up consumer and industrial demand combined with government economic stimulus drove higher consumption of commodities, pulled significant volumes of oil and gas out of global inventories, and exposed diminished productive capacity resulting from years of underinvestment in the oil and gas industry.

Tightening of government fiscal policies, concerns regarding a global recession, ongoing global supply chain disruptions, and rising inflationary costs may drive volatility and could pressure commodity prices near-term;

however, management believes diminished global oil and gas production capacity, along with rising energy security risks will 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 oil and gas operations, and technologies to accelerate the energy transition that are responsive to the longer-term needs of NOV’s customers.

We believe this strategy will further advance the Company’s competitive position in all market conditions.

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

Key industry indicators for the first quarter of 2023 and 2022, and the fourth 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 September 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 March 31, 2023, 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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The worldwide quarterly average rig count increased 1 percent (from 1,872 to 1,899), 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.

decreased 2 percent (from 775 to 761), in the first quarter of 2023 compared to the fourth quarter of 2022.

The average per barrel price of West Texas Intermediate Crude Oil decreased 8 percent (from $82.79 per barrel to $76.08 per barrel) and natural gas prices decreased 52 percent (from $5.51 per mmbtu to $2.65 per mmbtu) in the first quarter of 2023 compared to the fourth quarter of 2022.

At April 14, 2023, there were 859 rigs actively drilling in North America, which decreased 13 percent from the first quarter average of 984 rigs.

The price for West Texas Intermediate Crude Oil was $82.52 per barrel at April 14, 2023, an increase of 8 percent from the first quarter of 2023 average.

The price for natural gas was $2.11 per mmbtu at April 14, 2023, a decrease of 20 percent from the first quarter of 2023 average.

Results of Operations

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Three Months Ended

Nine Months Ended

September 30,

Wellbore Technologies

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Wellbore Technologies

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.

Three months ended March 31, 2023 and 2022.

Revenue from Wellbore Technologies was $745 million for the three months ended March 31, 2023, compared to $608 million for the three months ended March 31, 2022, an increase of $137 million or 23 percent.

Operating profit from Wellbore Technologies was $96 million for the three months ended March 31, 2023 compared to an operating profit of $39 million for the three months ended March 31, 2022, an increase of $57 million.

Completion & Production Solutions

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.

Three months ended March 31, 2023 and 2022.

Revenue from Completion & Production Solutions was $718 million for the three months ended March 31, 2023, compared to $530 million for the three months ended March 31, 2022, an increase of $188 million or 35 percent.

Operating profit from Completion & Production Solutions was $44 million for the three months ended March 31, 2023 compared to an operating loss of $22 million for the three months ended March 31, 2022, an increase of $66 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 $1,478 million at September 30, 2022, an increase of $371 million from backlog of $1,107 million at September 30, 2021.

The capital equipment backlog was $1,601 million at March 31, 2023, an increase of $237 million from backlog of $1,364 million at March 31, 2022.

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 72 percent of backlog to become revenue during the rest of 2023 and the remainder thereafter.

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.

At March 31, 2023, approximately 56 percent of the capital equipment backlog was for offshore products and approximately 71 percent of the capital equipment backlog was destined for international markets.

Rig Technologies

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.

Three months ended March 31, 2023 and 2022 .

Revenue from Rig Technologies was $550 million for the three months ended March 31, 2023, compared to $441 million for the three months ended March 31, 2022, an increase of $109 million or 25 percent.

Operating profit from Rig Technologies was $53 million for the three months ended March 31, 2023 compared to $11 million for the three months ended March 31, 2022, an increase of $42 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 $2,781 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 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.

The capital equipment backlog was $2,876 million at March 31, 2023, a decrease of $17 million from backlog of $2,893 million at March 31, 2022.

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 24 percent of backlog to become revenue during the rest of 2023 and the remainder thereafter.

At March 31, 2023, approximately 31 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 $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.

Eliminations and corporate costs were $67 million for the three months ended March 31, 2023, compared to $49 million for the three months ended March 31, 2022.

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

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Intrasegment transactions are eliminated within each segment.

Other income (expense), net

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.

Other expense, net

Other expense, net was $16 million for the three months ended March 31, 2023, compared to $2 million for the three months ended March 31, 2022, 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 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 the three months ended March 31, 2023 was 13.8%, compared to (39.3)% for the same period in 2022.

Non-GAAP Financial Measures and Reconciliations

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Three Months Ended

Nine Months Ended

September 30,

Operating profit (loss):

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Rig Technologies

Eliminations and corporate costs

Total (gain)/loss on sales of fixed assets

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Noncontrolling interests

Provision (benefit) for income taxes

Provision for income taxes

Interest expense

Interest income

Equity (income) loss in unconsolidated affiliate

Other (income) expense, net

Equity income in unconsolidated affiliates

Other expense, net

(Gain)/Loss on Sales of Fixed Assets

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Liquidity and Capital Resources

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

At March 31, 2023, the Company had cash and cash equivalents of $774 million and total debt of $1,732 million.

At December 31, 2022, cash and cash equivalents were $1,069 million and total debt was $1,730 million.

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.

As of March 31, 2023, approximately $611 million of the $774 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 Company has the right to increase the commitments under this agreement to an aggregate amount of up to $3.0 billion upon the consent of only those lenders holding any such increase.

Interest under the multicurrency facility is based upon LIBOR, NIBOR or CDOR plus 1.25% subject to a ratings-based grid or the U.S.

Interest under the multicurrency facility is based upon SOFR, NIBOR or CDOR plus 1.25% subject to a ratings-based grid or the U.S.

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

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.

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

As of March 31, 2023, the Company was in compliance with a debt-to-capitalization ratio of 27.0% 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 borrowed $120 million against 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 SOFR plus 1.40%.

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

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.

As of March 31, 2023, the joint venture was in compliance.

The facility construction was completed in the fourth quarter of 2022, the Company will not have future borrowings on the line of credit, with repayments beginning December 2022 and final payment no later than June 2032.

As of March 31, 2023, the Company had $114 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 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.

The Company’s outstanding debt at March 31, 2023 consisted primarily of $1,090 million in 3.95% Senior Notes, $495 million in 3.60% Senior Notes, and other debt of $147 million.

The Company was in compliance with all covenants at March 31, 2023.

Long-term lease liabilities totaled $556 million at March 31, 2023.

The Company had $464 million of outstanding letters of credit at March 31, 2023, 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 (used in) continuing operating activities, continuing investing activities and continuing financing activities for the periods presented (in millions):

Nine Months Ended

September 30,

Net cash provided by (used in) operating activities

The following table summarizes our net cash used in 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

Net cash used in investing activities

Net cash used in financing activities

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).

Significant uses of cash during the first three months of 2023

Cash flows used in operating activities were $202 million, primarily driven by changes in the primary components of our working capital (receivables, inventories, accounts payable, and accrued liabilities).

Capital expenditures were $57 million.

We paid $20 million in dividends to shareholders.

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.

The effect of the change in exchange rates on cash flows was immaterial for the first three months of 2023, and an increase of $3 million for the first three months of 2022.

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