In my coverage universe, National Oilwell Varco (NYSE:NOV) is something like a pole star. The firm's position as the dominant rig manufacturer, cranking out stellar results quarter after quarter, simply doesn't change.
Of course, the specific numbers are relatively mercurial. At this time last year, NOV was reporting 44% top-line growth and a $7.2 billion backlog. This time around, revenue grew 21%, if you tack a full quarter's worth of Grant Prideco numbers onto each period. That acquisition was only completed part of the way into the quarter, and this adjusted basis is probably the best way to present things. On this combined basis, overall operating profit margins strengthened, while operating profit itself strengthened 30% before merger costs.
As for backlog, which rose to $10.8 billion, what can I say? A few things, actually.
For one, the deepwater trend remains intact. NOV booked seven floating rig orders in the quarter, each of which can add between $150 million and $290 million to the backlog, depending on the vessel type and configuration.
In case you were wondering why I'm talking about backlog like it's a good thing, consider the scale of these orders. Deepwater rigs don't get built in a matter of months. As noted in my recent look at drilling dynamo Noble (NYSE:NE), a floater ordered today wouldn't be delivered until 2012. Backlog thus keeps building as orders come in faster than rigs go out. That provides a mountain of revenue visibility going forward.
In addition to those deepwater kits, land drilling rigs are poised to increasingly pump up NOV's backlog, thanks in part to the robust economics and unique equipment demands of shale plays. Echoing what we've heard from enticing EnCana (NYSE:ECA), NOV argues that a natural gas pullback is not going to ding shale drilling in a drastic way. A lot of the fleet needs retooling in order to help Chesapeake Energy (NYSE:CHK) to milk the Marcellus, and Apache (NYSE:APA) to maraud the Muskwa shale. NOV is thus setting up shop and licking its chops.
In addition to domestic land rig demand, there are also international markets to consider. Russia, for one, is looking lucrative, with between 200 and 250 rigs expected over the next five years. Overall, the stars continue to appear aligned for this rig builder.
National Oilwell Varco is beloved in Fooldom, and carries a five-star ranking in Motley Fool CAPS. Share your two cents on the equipment ace's prospects right here.
Related Foolishness:
- NOV's land drilling enthusiasm emerged last quarter.
- Here's a more thorough breakdown of the business.
- This driller agrees that shale is anything but frail.
