What changed in this filing

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Item 1A. Risk Factors

2024-02-14 compared with 2023-02-14 · 83 added, 96 removed, 453 unchanged (28% of the section changed)

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Drilling and workover activity can fluctuate significantly in a short period, particularly in the United States and Canada.

The willingness of oil and gas operators to make capital expenditures to explore for and produce oil and natural gas and the willingness of oilfield service companies to invest in capital equipment will continue to be influenced by numerous factors over which we have no control, including the:

current and anticipated future prices for oil and natural gas;

volatility of prices for oil and natural gas;

ability or willingness of the members of the Organization of Petroleum Exporting Countries (“OPEC”) and other countries, such as Russia, to maintain or influence price stability through voluntary production limits;

sanctions and other restrictions placed on certain oil producing countries, such as Russia, Iran, and Venezuela;

The demand and pricing for our products and services will continue to be influenced by numerous factors over which we have no control, including the:

• current and anticipated future prices for oil and natural gas and volatility in supply and demand and pricing for oil and natural gas;

• the impact on markets from the Organization of Petroleum Exporting Countries (“OPEC”) and other countries, such as Russia, based on voluntary production limits;

• interruptions in supply chains caused by war, geo-political conflict, trade sanctions or other restrictions placed on oil producing countries, such as Russia, Iran, and Venezuela or otherwise placed on trade and commerce;

• level of production by non-OPEC countries including production from U.S.

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• level of drilling activity and drilling rig dayrates;

worldwide economic activity and associated demand for oil and gas;

public health crises and other catastrophic events, such as the COVID-19 pandemic;

• catastrophic events, such as public health crises, e.g., the COVID-19 pandemic or other geopolitical events, such as war or terrorist activities,

• availability and access to potential hydrocarbon resources;

• governmental political requirements, regulation and energy policies;

fluctuations in political conditions in the United States and abroad;

• evolving environmental and climate change policies and regulations and fluctuations in political conditions in the United States and abroad which adversely impact exploration or development of oil or gas;

• currency exchange rate fluctuations and devaluations;

• development of alternate energy sources.

environmental regulations.

Expectations for future oil and gas prices cause many shifts in the strategies and expenditure levels of oil and gas companies, drilling contractors, and other service companies, particularly with respect to decisions to purchase major capital equipment of the type we manufacture.

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For example, section 232 tariffs on steel may increase our costs, reduce margins or otherwise adversely affect the Company;

export sanctions, controls or other trade restrictions, which could affect our ability to manufacture, sell, or receive payment for our equipment and/or services.

The Company’s existing contracts for rig and production equipment generally carry significant down payment and progress billing terms to facilitate the ultimate completion of these projects and the majority do not allow customers to cancel projects for convenience.

However, unfavorable market conditions or financial difficulties experienced by our customers may result in cancellation of contracts or the delay or abandonment of projects.

• trade or travel restrictions, including export sanctions, trade controls or other supply chain interruption, which could affect our ability to manufacture, sell, or receive payment for our equipment and/or services.

However, unfavorable market conditions or financial difficulties experienced by our customers have in the past and may in the future result in cancellation of contracts or the delay or abandonment of projects.

Any such developments could have a material adverse effect on our operating results and financial condition.

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Furthermore, while the Company stresses the importance of its research and development programs, the technical challenges and market uncertainties associated with the development and successful introduction of new products are such that there can be no assurance that the Company will realize future revenue from new products.

We may also have disputes with competitors concerning our technology or payment for licenses of our technology.

For example, we have on-going litigation concerning payments due under some of our technology licenses.

See Note 12 to the Consolidated Financial Statements for further discussion.

The tools, techniques, methodologies, programs and components we use to provide our services may infringe upon the intellectual property rights of others.

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• uncertain political, social and economic environments;

social unrest, acts of terrorism, war and other armed conflict;

• social unrest, acts of terrorism, war and other armed conflict, such as the conflicts in Ukraine, Israel and the broader Middle East;

• public health crises and other catastrophic events, such as the COVID-19 pandemic;

• trade and economic sanctions, export controls, and other restrictions imposed by the United States, European Union or other countries;

restrictions under the United States Foreign Corrupt Practices Act (“FCPA”) or similar legislation, as well as foreign anti-bribery and anti-corruption laws;

• restrictions under the United States Foreign Corrupt Practices Act (“FCPA”) or similar legislation, as well as foreign anti-bribery and anti-corruption laws;

• confiscatory taxation, tax duties, complex and everchanging tax regimes or other adverse tax policies;

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• Other contractual or other legal claims from our customers resulting from supply chain, transportation or other business disruption.

The COVID-19 pandemic and related economic repercussions have had and are expected to continue to have a significant impact on our business.

Negative impacts arising from the COVID-19 pandemic continue to adversely affect a number of jurisdictions and disrupt pre-pandemic economic activities.

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

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 disruption due to work force and supply chain impacts and closure or limitations imposed on our facilities as well as work force regulations.

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.

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

Our customers may attempt to cancel or delay projects, cancel contracts, or may invoke force majeure clauses.

Our customers may also seek to delay or may default on their payments to us.

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 and long tail supply chain disruption could result in contractual or other legal claims from our customers or with our vendors.

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.

We sometimes provide engineered process packages and other engineered products for multi-year, fixed price contracts that may require us to assume risks associated with cost over-runs, operating cost inflation, labor availability, supplier and contractor pricing and performance, and potential claims for liquidated damages.

We sometimes provide engineered skid packages of processing equipment or complex equipment in the form of multi-year contracts, without price escalation clauses.

Some of these contracts are required by our customers, primarily national oil companies (NOCs).

Some of these contracts are required by our customers, including national oil companies (NOCs).

These projects include acting as suppliers of skid packages or engineered products, as well as installation and commissioning services and may require us to assume additional risks associated with cost over-runs from our vendors or due to material or labor cost escalation.

In addition, NOCs often operate in countries with unsettled political conditions, war, civil unrest, or other types of community issues.

In addition, NOCs often possess substantial leverage in the event of dispute or disagreement regarding performance under an agreement and they often operate in countries with unsettled political conditions, war, civil unrest, or other types of community issues.

These issues may also result in cost over-runs, delays, and project losses.

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These take many forms, including ransomware directed at us, our vendors or our customers.

For example, our operations were affected by the well-publicized shutdown of the Kronos Company’s cloud-based employee work time keeping system, to which certain of our operations subscribe for recording hours worked.

Our Human Resources and Operations management were able to quickly implement alternate procedures until the Kronos system was restored.

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The timing and magnitude of any goodwill impairment charge, which could be material, would depend on the timing and severity of the event or events triggering the charge and would require a high degree of management judgement.

If we were to determine that any of our remaining balance of goodwill or other indefinite lived intangible assets was impaired, we would record an immediate charge to earnings with a corresponding reduction in stockholders’

resulting in a possible increase in balance sheet leverage as measured by debt to total capitalization.

See additional discussion on “Goodwill and Other Indefinite –

Lived Intangible Assets”

in Critical Accounting Estimates of Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We have expanded and grown our businesses through acquisitions and continue to pursue a growth strategy but we cannot assure that attractive acquisitions will be available to us at reasonable prices or at all.

We cannot assure that we will successfully integrate the operations and assets of any acquired business with our own or that our management will be able to effectively manage any new lines of business.

See additional discussion on “Goodwill and Other Indefinite – Lived Intangible Assets” in Critical Accounting Estimates of Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We cannot assure that acquisitions will result in the financial, operational or other benefits that we anticipate and we cannot assure that we will successfully integrate the operations and assets of any acquired business with our own or that our management will be able to effectively manage any new lines of business.

Any inability on the part of management to integrate and manage acquired businesses and their assumed liabilities could adversely affect our business and financial performance.

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The Company could also become involved in investigations of consumers of our products at significant cost to the Company.

We could be adversely affected if we fail to comply with any of the numerous federal, state and local laws, regulations and policies that govern environmental protection, zoning and other matters applicable to our businesses.

Our businesses are subject to numerous federal, state and local laws, regulations and policies governing environmental protection, zoning and other matters.

We could be adversely affected if we fail to comply with any of the numerous international, federal, state and local laws, regulations and policies that govern environmental protection, zoning and other matters applicable to our businesses.

Our businesses are subject to numerous international, federal, state and local laws, regulations and policies governing environmental protection, zoning and other matters.

These laws and regulations have changed frequently in the past and it is reasonable to expect additional changes in the future.

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These liabilities could also be imposed on the basis of one or more of the following theories:

• negligence;

• strict liability;

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federal lands and offshore waters available for oil and gas exploration.

The Executive Orders halting the leasing of U.S.

federal lands were challenged in court and remain subject to litigation.

As a result of the review of leasing and permitting practices, the U.S.

Department of the Interior has recommended increasing the royalty rate payable to the U.S.

government by operators, as well as bonding requirements and emissions requirements for operators.

Some form of these recommendations may become applicable to operations on U.S.

federal leases, which could have a negative effect on exploration and production of oil and natural gas given the increased costs associated with any such changes.

In February 2021, the United States formally re-joined the Paris Agreement.

The Paris Agreement requires countries to review and

“represent a progression”

in their intended nationally determined contributions, which set greenhouse gases emission reduction goals, every five years.

The Paris Agreement requires countries to review and “represent a progression” in their intended nationally determined contributions, which set greenhouse gases emission reduction goals, every five years.

Though we are closely following developments in this area and changes in the regulatory landscape in the United States and other jurisdictions, we cannot predict with precision or quantify how or when those challenges may ultimately impact our business.

Laws and regulations in some jurisdictions, for example in the EU Corporate Sustainability Reporting Directive ("CSRD") and the California Climate Corporate Data Accountability Act and Climate-Related Financial Risk Act, impose obligations in future years to report GHG emissions.

Calculation of some GHG emissions can involve uncertainty and lack precision because of the absence of reliable inputs or methods to perform such calculations.

Accordingly, the EU CSRD and California regulations and other similar regulations give rise to litigation risk concerning the required disclosures.

Because our business depends on the level of activity in the oil and natural gas industry, existing or future laws, regulations, treaties, or international agreements related to greenhouse gases and climate change, including incentives to conserve energy or use alternative energy sources, may reduce demand for oil and natural gas and could have a negative impact on our business.

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In addition, our ability to work in certain jurisdictions is sometimes subject to our ability to successfully negotiate and agree upon acceptable joint venture agreements.

The failure to reach acceptable agreements could adversely impact the Company’s operations in certain countries.

Additionally, we may share control of joint ventures with unaffiliated third parties.

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The payment has been recorded as a long-term receivable.

The Company is assessing various provisions contained in the Inflation Reduction Act of 2022 (the “IRA”) including increased production and manufacturing credits as well as the new Corporate Alternative Minimum Tax.

The Company does not anticipate that these provisions will materially impact its results from operations or its effective tax rate.

Additionally, the IRS is examining the Company’s tax returns for 2017 and 2018 and has proposed an adjustment to certain restructuring steps which occurred in 2017.

The Company and its advisors believe these restructuring steps were properly completed in accordance with U.S.

tax laws and regulations and has appealed the proposed adjustment.

However, if the Company is unsuccessful in the appeals process, the IRS proposed adjustment would be substantially offset by the utilization of foreign tax credit carryforwards which subsequently expired unused or are fully reserved by a valuation allowance and $48 million additional income tax expense would be owed.

The Company is monitoring developments related to the OECD’s Global Anti-Base Erosion Model Rules (“Pillar Two”), which will become effective during 2024 in numerous jurisdictions.

The Company does not anticipate the provisions of Pillar Two will have a material impact on the Company’s effective tax rate in the future.

Our operations outside the United States require us to comply with both United States and international regulations violations of which could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition.

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This in turn can restrict, limit or prevent our conduct of business in certain jurisdictions.

For our operations outside the United States, we are required to comply with United States laws and other international regulations.

For our operations outside the United States, we are required to comply with applicable United States laws and other applicable international regulations.

Because we have legal entities, facilities and citizens from many jurisdictions, our operations and people may be subject to laws and regulations issued by different sovereigns.

Sometimes these laws conflict and impose inconsistent obligations on citizens from the different jurisdictions in which we operate giving rise to complicated compliance issues.

In 2014, the United States, the European Union and other governmental bodies imposed sectoral sanctions directed at Russia’s oil and gas industry.

Among other things, these sanctions restricted the provision of certain United States and European Union goods, services, and technology in support of exploration or production for deep water, Arctic offshore, or shale projects that have the potential to produce oil in Russia.

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In 2017 and 2018, the U.S.

Government imposed additional sanctions against Russia, Russia’s oil and gas industry, and certain Russian companies.

In February of 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 additional sanctions against Russia and Russian interests.

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The situation is complicated by actual and potential governmental and legal actions taken by the Russian Federation in response to the sanctions, which could expose our employees to adverse legal consequences in Russia, including potential criminal penalties.

Other sanctions have been enacted related to Belarus and Belarussian interests.

Other sanctions have been enacted related to Belarus and Belarusian interests.

In response to these sanctions, 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 and 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 entered into an agreement 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.

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 $127 million for the year ended December 31, 2022.

As a consequence of the conflict in Ukraine and related sanctions on activities related to Russia and Belarus, we recorded impairment and other charges of $4.2 million and $126.8 million for the years ended December 31, 2023 and 2022, respectively.

In addition to customs laws, trade regulations and sanctions, our operations in countries outside the United States are subject to anti-corruption laws.

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Company management;

“A Dictionary for the Petroleum Industry,”

The University of Texas at Austin, 2001.)

“A Dictionary for the Petroleum Industry,” The University of Texas at Austin, 2001.)

American Petroleum Institute

The open space around pipe in a wellbore through which fluids may pass.

Automatic Roughneck

A large, self-contained pipe-handling machine used by drilling crew members to make up and break out tubulars.

The device combines a spinning wrench, torque wrench, and backup wrenches.

The cutting or boring element used in drilling oil and gas wells.

The bit consists of a cutting element and a circulating element.

The cutting element is steel teeth, tungsten carbide buttons, industrial diamonds, or polycrystalline diamonds (“PDCs”).

These teeth, buttons, or diamonds penetrate and gouge or scrape the formation to remove it.

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Series of valves installed at the wellhead while drilling to prevent the escape of pressurized fluids.

Borehole Enlargement (“BHE”)

The process of opening up or enlarging the internal diameter of the wellbore.

This is typically done with under-reamers, reamers, or hole openers.

Bottomhole Assembly (“BHA”)

The lower portion of the drillstring including (if used):

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Levelized Cost of Energy

(“LCOE”)

A measure of the average net present cost of electricity generation for a generating plant over its lifetime.

The LCOE is calculated as the ratio between all the discounted costs over the lifetime on an electricity generating plant divided by a discounted sum of the actual energy

amounts delivered.

The LCOE is calculated as the ratio between all the discounted costs over the lifetime on an electricity generating plant divided by a discounted sum of the actual energy amounts delivered.

LCOE is used to compare different methods of electricity generation on a consistent basis.

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it turns the kelly bushing, which permits vertical movement of the kelly while the stem is turning.

Wedge-shaped pieces of metal with serrated inserts (dies) or other gripping elements, such as serrated buttons, that suspend the drill pipe or drill collars in the master bushing of the rotary table when it is necessary to disconnect the drill stem from the kelly or from the top-drive unit’s drive shaft.

Rotary slips fit around the drill pipe and wedge against the master bushing to support the pipe.

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Power slips are pneumatically or hydraulically actuated devices that allow the crew to dispense with the manual handling of slips when making a connection.

See “Cuttings”

Spinning wrench

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On a rig, the usual stand is about 90 feet (about 27 meters) long (three lengths of drill pipe screwed together), or a treble.

Steerable Technologies

Tools that allow for steering the BHA towards a target while rotating from surface.

The entire length of casing, tubing, sucker rods, or drill pipe run into a hole.

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Even though the rotary table assembly is not used to rotate the drill stem and bit, the top-drive system retains it to provide a place to set the slips to suspend the drill stem when drilling stops.

Torque wrench

Spinning wrench with a gauge for measuring the amount of torque being applied to the connection.

Mechanical device that allows a floating vessel to rotate around stationary flowlines, umbilicals, and other associated risers.

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UNRESOLVE D STAFF COMMENTS

CYBERSECURITY

As part of the Company’s enterprise risk management, we maintain a cyber risk program with established policies and procedures to detect, prevent, mitigate, and remediate cybersecurity incidents and related risks.

The program is led by our Chief Information Security Officer ("CISO"), who has 30 years of experience in information security and is a Certified Information Systems Security Professional.

Our CISO reports directly to our Chief Information Officer of Corporate IT, who has over 25 years of experience in all areas of information technology.

Our cybersecurity team is comprised of experienced, educated, and certified professionals with decades of experience in cybersecurity leadership roles.

Our cyber risk management program is based on recognized industry practices and standards in cybersecurity and information technology.

These standards include the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework (“CSF”) and the International Organization for Standardization (“ISO”) 27001.

Security controls are managed using an information security management system (“ISMS”), providing a systematic approach consisting of people, processes, and technology.

NOV's ISMS aims to minimize risk and ensure business continuity by proactively limiting the impact of security incidents.

Our cybersecurity incident response plan includes an escalation process to senior management, who evaluates various factors related to the cybersecurity incident to assess the impact on the Company and any required disclosures.

If a cybersecurity incident was determined to be material by senior management, our Board of Directors would be promptly notified and the incident reported based on applicable legal requirements.

Our processes also address cybersecurity risks associated with third-party service providers, including those in our supply chain or who have access to our data or systems.

We evaluate third-party service providers from a cybersecurity risk perspective, which may include an assessment of that service provider's cybersecurity posture or a recommendation of specific mitigation controls.

We conduct continuous vulnerability assessments and continuous penetration testing.

Additionally, we undergo internal and external assessments of our processes to identify opportunities for improvement and reduce exposure to cybersecurity incidents.

The Company’s Board of Directors provides oversight of the Company’s cybersecurity program through periodic updates, typically on a quarterly basis.

Additionally, on an annual basis, cybersecurity risks are discussed as part of enterprise risk management.

We have not experienced any cybersecurity incidents that have had a material adverse effect on our business, financial condition, results of operations, or cash flows.

Although we have not experienced any cybersecurity incidents that are individually, or in aggregate, material, we have experienced cyberattacks in the past, which we believe have thus far been mitigated by preventative, detective, and responsive measures put in place by the Company.

We recognize the potential impact of cybersecurity risks on our business strategy, results of operations, and financial condition and take proactive measures to mitigate these risks.

“Risk Factors.”

The Company owned or leased approximately 548 facilities worldwide as of December 31, 2023, including the following principal manufacturing, service, distribution and administrative facilities:

3 unchanged sentences

Conroe, Texas

Manufacturing Facility of Drill Bits and

Downhole Tools, Administrative & Sales Offices

Manufacturing Facility of Drill Bits and Downhole Tools, Administrative & Sales Offices

Houston, Texas

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Veracruz, Mexico

Manufacturing Facility of Tool Joints,

Warehouse & Administrative Offices

Manufacturing Facility of Tool Joints, Warehouse & Administrative Offices

Houston, Texas

Holmes Rd Complex:

Manufacturing, Warehouse,

Coating Manufacturing Plant & Corporate Office

Manufacturing, Warehouse, Coating Manufacturing Plant & Corporate Office

Cedar Park, Texas

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Conroe, Texas

Solids Control Manufacturing Facility, Warehouse,

Administrative & Sales Offices, and Engineering Labs

Solids Control Manufacturing Facility, Warehouse, Administrative & Sales Offices, and Engineering Labs

Houston, Texas

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Manufacturing Facility of Fiber Glass Products

Kalundborg, Denmark

Flexibles Manufacturing, Warehouse, Shop & Administrative Offices

Superporto du

Superporto du Acu, Brazil

Flexibles Manufacturing, Warehouse, Shop & Administrative Offices

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Fort Worth, Texas

Coiled Tubing Manufacturing Facility,

Warehouse, Administrative & Sales Offices

Qingdau, Shandong,

Coiled Tubing Manufacturing Facility, Warehouse, Administrative & Sales Offices

Qingdau, Shandong, China

Manufacturing of fiber-reinforced tubular products

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Houston, Texas

Bammel Facility, Repairs, Service, Aftermarket Parts,

Administrative & Sales Offices

Bammel Facility, Repairs, Service, Aftermarket Parts, Administrative & Sales Offices

Houston, Texas

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Houston, Texas

West Little York Manufacturing Facility,

Repairs, Service, Administrative & Sales Offices

West Little York Manufacturing Facility, Repairs, Service, Administrative & Sales Offices

New Iberia, Louisiana

Repair, Services and Spares facility

Manufacturing, Repairs, Service, Field

Service/Training, Administrative & Sales Offices

Repair & Overhaul of Drilling Equipment,

Warehouse & Sales Office

Manufacturing, Repairs, Service, Field Service/Training, Administrative & Sales Offices

Repair & Overhaul of Drilling Equipment, Warehouse & Sales Office

Al Jubail, Saudi Arabia

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LEGAL PROCEEDINGS

See Note 12 –

Commitments and Contingencies (Part IV, Item 15 of this Form 10-K) for further discussion.

See Note 12 – Commitments and Contingencies (Part IV, Item 15 of this Form 10-K) for further discussion.

MINE SAFETY DISCLOSURES

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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-K

Item 1A. Risk Factors