The recovery in the oil market is starting to take root, which was evident in National Oilwell Varco's (NYSE:NOV) second-quarter results. The oil-field equipment company's revenue soared on improving demand, which finally enabled it to turn a profit. Those results should continue improving from here, since the recovery is still in the early innings.

Drilling down into the results

National Oilwell Varco's revenue surged 20% versus the year-ago quarter to $2.11 billion, which was also up 17% from the first quarter. On top of that, the company reported $24 million, or $0.06 per share, of net income, which reversed a steady string of losses.

All three of the company's operating segments posted strong results in the quarter:

A chart shows National Oilwell Varco's segment revenue in the second quarters of 2018 and 2017, as well as the first quarter of 2018.

Data source: National Oilwell Varco. Chart by author.

The rig technologies segment shined brightest as revenue surged 35% sequentially and 19% year over year, which was well ahead of its guidance, driven by better progress on the construction of new offshore drilling rigs, the delivery of two land rigs, and improving aftermarket sales. The company also booked $2.03 billion of new orders during the quarter, including $1.8 billion associated with a recently signed joint venture with Saudi Aramco, pushing the backlog up to $3.51 billion.

Revenue from the wellbore technologies segment also increased sharply in the quarter, up 12% sequentially and 29% year over year, driven by the ongoing recovery of drilling activities in the U.S. and a seasonal rebound in the Eastern Hemisphere. Meanwhile, sales from the completion and production solutions segment rose 10% from last quarter and 13% versus the year-ago period, thanks to an improving market for capital equipment in North America and increased demand for pressure pumping equipment and composite pipe. National Oilwell Varco booked $398 million in new orders during the period, ending with a backlog of $995 million.

An oil drilling rig at sunset

Image source: Getty Images.

What management had to say

"Our team executed well and delivered double-digit sequential sales growth across all three of our business segments during the second quarter," stated CEO Clay Williams. He also pointed out that "we achieved several notable milestones during the quarter, including securing the largest land rig order ever placed, which was associated with the creation of our previously announced drilling equipment joint venture with Saudi Aramco." National Oilwell Varco will own 70% of that JV, which will see Saudi Aramco buy 50 onshore drilling rigs over a 10-year period, with the first one scheduled for delivery by 2021.

William also noted that there is "growing confidence in the sustainability of the ongoing recovery" which "is resulting in strong North American activity coupled with improving activity and revenue growth in most international markets." He further stated that: "... demand is accelerating for the technologies and products we've developed through the downturn that drive better safety and efficiency for our customers around the world. NOV is well-positioned to capitalize on an expanding global recovery."

Just the beginning

National Oilwell Varco's second-quarter results were its best in quite some time. However, they appear to be just the start of a meaningful rebound in revenue and profitability driven by the ongoing recovery of the oil market. The company's stock -- which is already one of the best-performing energy stocks of 2018 -- could have much more upside ahead.