Oilfield services company National Oilwell Varco's (NYSE: NOV) fourth-quarter earnings beat estimates again. Today, let's look at how the energy-equipment maker fares on a SWOT test, looking at strengths, weaknesses, opportunities, and threats. This test should help investors develop a more complete picture of the company.

Strengths

  • National's product lines are diverse. Its services range from rig technology to petroleum services and supplies, and distribution and transmission.
  • Demand for oilfield equipment is growing. The company has an order backlog worth $10.8 billion -- a new record. The previous best was $7.3 billion in 2008.
  • The company has strong revenue growth. On the back of the Ameron acquisition last October, year-over-year revenues for the fourth quarter rose 38% in the petroleum services and supplies segment and 32% in the distribution and transmission segment.
  • It has a healthy balance sheet, with more than $3.5 billion in cash. Since 2008, free cash flow generated has never dipped below $1 billion. Debt-to-equity stands at only 2.9%.

Weaknesses

  • Inventory levels have gone up. This might be the effect of increased dayrates (the cost of using the equipment for a day), with many of National's customers taking a hiatus from giving further orders. This could affect margins in the immediate future.

Opportunities

  • Demand for deepwater drilling is growing by the day. However, the deepwater equipment supply is tight. In the next decade, oil production from deepwater is expected to grow in the range of 5 million to 10 million barrels per day, so demand for more rigs is inevitable.
  • There's a huge opportunity for the rig technology segment, as shale drilling is emerging outside U.S. borders, led by Argentina and newer prospects such as China.
  • The company is experiencing faster turnaround times on offshore rig-building orders because of shorter construction cycles in Asian shipyards. This development should help National take in more orders in the long run.

Threats

  • Sustained low natural gas prices in North America might eventually make shale drilling too costly a proposition to continue. As a result, demand for this segment of high-tech drilling might fall in the United States.

Foolish bottom line
As of now, the pros outweigh the cons. National seems to be doing just fine. However, investors must dig deeper. To stay up to speed on the top news and analysis on National Oilwell Varco, you can start by adding the company to your watchlist.