Another quarter, another billion-dollar bump in the backlog. Welcome to the world of National Oilwell Varco (NYSE:NOV) -- oilfield equipment supplier and servicer extraordinaire.
If you're familiar with this company and its ultra-informative conference calls, I'm sure you're curious about management's outlook, so I'll keep my results review brief. Orders hit a record $2.4 billion, including six deepwater packages. In terms of big-ticket orders, this is about on pace with what we saw last quarter. Operating profit, after adjusting for the large Grant Prideco acquisition, was up about 28% compared to last year. All in all, it was another stellar quarter.
As we've seen on the E&P side with companies like Newfield Exploration (NYSE:NFX) and Chesapeake Energy (NYSE:CHK), NOV directed a considerable amount of conference call time to the potential effects of today's financial dislocations. Given the firm's own balance sheet strength, NOV focused more on addressing investor and analyst concerns about the firm's customers.
Several points were reassuring:
- NOV's top five shipyard customers -- the folks who put the big rigs together -- had well over $6 billion in net cash between them as of their most recent financial statements.
- Large entities, from Petrobras (NYSE:PBR) to export-import banks, appear prepared to step in to plug financing gaps in their home countries.
- The company's contracts "do not allow for cancellation for lack of financing."
- Payments are structured in a manner that NOV's cash collection is well ahead of its investment outlays. This positive spread is currently in the neighborhood of $3 billion.
A different angle to the whole downturn issue is the consolidation role that NOV will play. This is only natural for a company that's been closing in on the 200 acquisition mark over the past dozen years. Given the depressed share price of -- well, just about every publicly traded company -- NOV has to be pretty excited here. Not that they need my help, but I'll just throw out FMC Technologies (NYSE:FTI) and NATCO Group (NYSE:NTG) as two interesting ideas.
