Oil-field equipment supplier National Oilwell Varco (NOV -1.62%) continues to battle challenging conditions in the oil market. While that put some pressure on its fourth-quarter financial results, the company posted decent numbers overall, which is evident especially after digging deeper into the report.

Drilling down into National Oilwell Varco's fourth-quarter results


Q4 2019

Q4 2018

Q3 2019


$2.281 billion

$2.398 billion

$2.126 billion

Net income (loss)

($385 million)

$12 million

($244 million)

Earnings per share (loss)




Data source: National Oilwell Varco. 

At first glance, National Oilwell Varco reported mixed Q4 results. While its revenue rose 7% compared with the third quarter, it declined 5% year over year. Meanwhile, the company posted a much wider net loss versus both periods.

But upon closer inspection, the numbers look a lot better. That's because its net loss was entirely the result of recording $537 million of noncash, pre-tax restructuring and impairment charges stemming from the slowdown in U.S. onshore drilling activities. That masked the fact that the company's underlying profitability as measured by adjusted EBITDA was $288 million, an increase of $26 million sequentially and $9 million year over year.

A major driver of that improvement was the company's completion and production systems segment:

Chart showing National Oilwell Varco's revenue by segment for Q4 2018, Q4 2019, and Q3 2019

Data source: National Oilwell Varco. Chart by author.

Revenue in that business group rose 10% versus the third quarter (which was the third consecutive period of double-digit sequential growth) and 1% year over year. The improvement was a result of growing demand in offshore and international markets, which more than offset rapidly declining demand for completion equipment in the U.S. onshore market.

The uptick in sales helped fuel a 17% sequential increase in this segment's adjusted EBITDA, though earnings fell 14% year over year. Another positive was that National Oilwell Varco booked $502 million of new orders, which was slightly higher than the $499 million of orders it shipped out of the backlog during the period, implying that revenue should continue rising.

The rig technologies segment posted a mixed quarter. While revenue rose 17% sequentially, it fell 6% year over year. Driving the uptick in sales from the third quarter was an increase in land rig deliveries and improved progress on offshore equipment projects. Adjusted EBITDA, meanwhile, rose 7% sequentially and 10% year over year. However, the company only booked $211 million of new orders during the quarter, which was well below the $360 million of orders shipped out of its backlog and could weigh on revenue growth in the future.

The wellbore technologies segment, meanwhile, posted weaker revenue both sequentially (down 4%) and year over year (down 14%). Driving the decline were lower drilling activity levels in North America, which more than offset the improving conditions in offshore and international markets. Adjusted EBITDA in the segment did improve 8% from the third quarter, though it fell 8% versus last year's Q4.

An offshore drilling rig at sunset.

Image source: Getty Images.

What National Oilwell Varco's management had to say

CEO Clay Williams commented on the company's results in the earnings press release: "The fourth quarter saw continued improvements in international and offshore markets, partially offset by another sequential decline in spending by our customers in North America. While this mix shift affects each of our segments differently, all three of our operating segments were able to deliver sequential improvements in adjusted EBITDA."

One of the drivers of the earnings improvements was the company's success in pushing down costs last year. As a result, National Oilwell Varco was able to "significantly improve cash flow and strengthen our balance sheet, despite the financial charges that were necessary through the year," according to Williams. It ended the year with $1.17 billion in cash against $1.99 billion in total debt. That cash-rich balance sheet gives the company the financial flexibility to navigate through the choppy oil market.

Tough but manageable

National Oilwell Varco continues to battle challenging industry headwinds. The company is doing a solid job overall, as its revenue and underlying earnings improved during the fourth quarter, thanks in part to cost-cutting and its ability to quickly capture offshore and international opportunities as they arose. The energy company's ability to adapt, when combined with its strong balance sheet, gives it an edge over the competition in the ever-changing oil market.