In the third quarter of 2008, rig equipper National Oilwell Varco
Two years later, the streak has been broken. In its third-quarter release, National Oilwell Varco reported $1.18 billion of net order additions -- a 78% increase from the second quarter. This was enough to keep the backlog steady, at $4.9 billion.
So where are the pockets of strength today? We hit on one of them last quarter, and that's North American shale plays. National Oilwell Varco says it "dominated the landscape" during the period, but with a twist. Whereas in the early days of the shale boom there was mostly gas-directed drilling in places like the Fayetteville and the Haynesville, many operators are now scrambling to target oily plays like the Niobrara.
Whether operators are targeting oil or gas, National Oilwell Varco sells a lot of the equipment needed to drill shale wells. From top drives to automatic pipe handling systems, and from drill bits to drill pipe, the company has it covered. When international shale plays start to blossom, this company will be very well positioned to cash in on that trend.
As for the offshore business, orders for new deepwater rigs are still muted following the credit crisis, and the Macondo disaster didn't help that situation any. If there's a silver lining for National Oilwell Varco, it's that there has been a scramble by Gulf of Mexico drilling contractors to get their rigs up to new regulatory standards. Specifically, companies like Noble
National Oilwell Varco did book two Brazilian rig packages in the quarter, and expects to land more when the new, long-anticipated tender by Petrobras
Long-term macro forces continue to support a positive outlook for the king of rig outfitters. Investors can clearly see this, and I would probably wait for a more pessimistic moment to initiate a position here.
Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his Motley Fool CAPS profile or follow his articles using Twitter or RSS. The Fool owns shares of Noble. 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 Fool has a disclosure policy.