Varco's About to Display More Verve

In an earnings season during which all companies' results have not been rosy, it'll likely be a pleasure for investors to greet the release of oil-field services powerhouse National Oilwell Varco (NYSE: NOV  ) on Thursday.

For the quarter, the company is expected to report earnings of $1.51 per share, up nearly 20% from the $1.26 for the same quarter a year ago. Revenues could rise by as much as 43% to more than $5.35 billion, as the company's top line moves toward a full-year figure that's expected to approach $20 billion.

The top of the heap
For the sake of perspective, softness in the U.S. market has held back third-quarter results of such typically stellar oil-field services performers as Halliburton (NYSE: HAL  ) and Baker Hughes (NYSE: BHI  ) . As such, assuming it meets or exceeds expectations, National Oilwell Varco will join the industry's big enchilada, Schlumberger (NYSE: SLB  ) , in handily topping its year-ago results.

It's likely that Varco will continue to benefit from what I'll term a "worldwide deepwater creep." As the company's CFO Clay Williams told analysts and investors during his company's second-quarter conference call, Brazil has a number of planned -- but as yet not awarded -- drilling equipment packages in the offing. Beyond that, as he noted, construction of floaters in Asia is being considered as a means of filling a gap prior to the delivery of units being built in Brazil.

Further, both East and West Africa are the sites of expanding deepwater activity. And, as you likely realize, the Gulf of Mexico continues to regain the spunk that it lost with the April 2010 Macondo well disaster. Southeast Asia also continues to emerge, and the North Sea -- which for a time had become moribund -- is also the locus of increasing activity. As I see it, this combination of active venues should benefit National Oilwell Varco for years to come.

Growing by leaps and bounds
I'll also be awaiting management's comments, especially on the company's call, regarding both the delta for Varco's backlog and the perspective on both acquisitions and organic growth. At the conclusion of the June quarter, the company's backlog had expanded by an astounding 46%. That increase was made even more impressive by the fact that 86% of the orders were directed toward offshore venues, while fully 92% were bound for international horizons.

From an acquisition perspective, during the quarter, Varco, through a subsidiary, completed the previously announced acquisition of CE Franklin. The acquired company is a distributor of such oil-field equipment as drill pipe, valves, flanges, production equipment, and tubular goods in the sedimentary basin of Western Canada.

In August, National Oilwell Varco announced that it would pay approximately $2.5 billion to acquire Houston-based Robbins & Myers (NYSE: RBN  ) . The combination, which is under regulatory review, would add Robbins & Myers' capabilities as a supplier of engineered application-critical equipment and systems in 15 countries to Varco's repertoire.

Foolish conclusions
National Oilwell Varco's operations continue to sit in the sweet spot of the world's continually more technologically challenging quest for oil and gas, especially in the offshore. Indeed, it's telling to note that, of the 30 analysts who currently follow the company, all but two rate it at least a "buy." At the same time, it's noteworthy that of energy seer T. Boone Pickens' top half-dozen energy picks, Varco is the sole member of the services contingent.

So there you have it. A solid, well-positioned company that appears to be on the verge of ginning out strong quarterly results yet again. If you're at all into energy investments -- and all Fools should be -- please be certain that Varco enjoys a position on your version of My Watchlist.

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David Lee Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Halliburton Company. Motley Fool newsletter services recommend Halliburton Company and National Oilwell Varco. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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