With operations in over 1160 locations worldwide, National Oilwell Varco (NYSE:NOV) is a leading provider of equipment and services to the oil and gas industry through its three segments; Rig Technology, Petroleum Services & Supplies, and Distribution & Transmission. CEO Merrill "Pete" Miller has held a number of senior executive positions with NOV, beginning in 1996. Miller also serves on the boards of Chesapeake Energy Corporation (NYSE:CHK), Offshore Energy Center, Petroleum Equipment Suppliers Association, and Spindletop International.
Miller considers new prospects for oil development around the world, and explains some of the differences between the land and offshore drilling markets. With clients worldwide, and in both sectors, National Oilwell Varco's products and services are always in demand somewhere. The full version of the interview can be found here.
A full transcript follows the video.
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Taylor Muckerman: When you look at offshore market, you think about the Golden Triangle of West Africa, the Gulf of Mexico and Brazil, but what else in the international market, when you think of offshore drilling, really brings a smile to your face?
Pete Miller: I think right now you're starting to see some things in the North Sea again. You're starting to see a pickup, especially off of Norway. I think Statoil (NYSE:EQNR) is doing more and more things. I truly believe the Arctic -- whether or not we do anything in Alaska, it's problematical -- but they're certainly going to do things in Russia, in different areas, and in Norway and places like that.
I think the South China Sea is another area that's really starting to show very good. Then you talk about West Africa, but one of the more exciting places is East Africa. When you look at what's happening there, and then coming off the west coast of India, essentially what you're seeing is there's all kinds of offshore basins that are pretty exciting today.
Muckerman: Do you think this is just a combination of onshore drying up, or do you think it's just the fact that technology is improving and they're really realizing that the vast reserves are located offshore right now?
Miller: Well, first off, land isn't drying up. But when you're talking about shales, which is essentially what's going on in most land drilling today, those are rapidly declining wells, and that's kind of being on a treadmill and you have to keep going.
But offshore, you're looking for the big elephant. You're looking for the Big Kahuna that you can hit out there and really get production without a 70-80% decline curve the way you get on land. Both of them are really doing well today, but I think on the offshore business it's just looking for that big field.
Muckerman: You mentioned both of them are doing really well today. In the North American market, you kind of had a bifurcation in the last few years, where right after Macondo offshore kind of settled down in the Gulf of Mexico a little bit until we could get our footing, while the land production really sped up.
But now you see North American land taking a step back as far as natural gas production, while offshore and the Gulf is booming. How do you think you can operate and balance that, once both of them start to pick up at the same time?
Miller: That's a problem I love to have. Those are the kind; we'll figure it out.
Actually, what you're seeing in the land market today is the number of wells being drilled hasn't reduced. Actually, as an industry, we're starting to look at -- rather than a rig count -- we're looking at well count.
You look at what's being done on pads, and they've really become very, very efficient. Then you've seen the shift from natural gas to oil. Well, depending on what this winter's like, I think you're liable next year to see a little bit of a shift back toward natural gas.
I think that's going to occur. Then with the expansion that you're seeing in the Gulf of Mexico ... but this industry is very good at being able to expand and contract. Unfortunately, we've got a lot of experience at doing it. It's a cyclical industry, whether you like it or not, and we can handle those kind of issues.
Muckerman: Being involved in rigs all around the world certainly helps hedge any downturns in specific geographic areas.
Miller: Absolutely. That's been our strategy all along, Taylor. We want to make sure that, as you take a look at the companies that we put together, you've got early , mid-, and late-cycle companies so someplace along that way, one of those parts of the cycle ought to be hitting, and it helps to mitigate the problems that occur in other parts of it.
Now, when we have all parts of the cycle hitting at the same time, that's nice to have.