The fourth quarter was another rough one for the oil industry after the price of crude slumped more than 20%. That put even more pressure on the industry to reduce costs, likely leading them to further delay equipment purchases. It's an environment that's expected to put additional pressure on National Oilwell Varco's (NOV -0.83%) financial results, which investors will be able to review before the market opens on Wednesday.

A quick review
Last quarter National Oilwell Varco reported revenue of $3.3 billion, which was 15% lower than the second quarter and 41% lower year over year. Meanwhile, earnings slumped to $155 million, or $0.41 per share, which was well below the $289 million, or $0.74 per share it earned in the second quarter. However, a big portion of that was due to $112 million in one-time charges, which if adjusted pushed earnings up to $232 million, or $0.61 per share. That said, overall the company faced weakness across all four of its business segments:

 RevenueOperating Profit

Q3 2015

Q2 2015

Q3 2015

Q2 2015

Rig systems

$1.5 billion

$1.9 billion

$275 million

$395 million

Rig aftermarket

$570 million

$657 million

$146 million

$145 million

Wellbore technologies

$834 million

$956 million

$22 million

$47 million

Completion & production systems

$798 million

$873 million

$63 million

$81 million

Data source: National Oilwell Varco.

The rig systems segment in particular was weak, not only because revenue has fallen sharply, but so has its backlog. In fact, last quarter the company pulled $1.3 billion in revenue from the backlog, but only had new orders for $367 million, suggesting a continuation of the revenue slide in future quarters.

Expect more of the same
Given that oil prices weakened during the quarter, investors can expect that this will push National Oilwell Varco's revenue and earnings lower than last quarter. That's something that CEO Clay Williams warned last quarter when he said that "the sharp decline in oil prices and activity since late last year has affected each of our segments, and will drive activity lower in the fourth quarter." That being said, the severity of the impact on earnings really boils down to how well the company managed its own costs during the quarter.

Last quarter, for example, National Oilwell Varco controlled its costs exceptionally well with sales, general, and administrative expenses falling 15% quarter over quarter and matching the decline in revenue. That said, year-over-year revenue was down 41% while SG&A costs were only 34% below the year-ago quarter, suggesting that it could have more opportunities to reduce costs. The company needs to capture these cost reductions in order to help soften the impact of the expected decline in sales.

One area to watch
While the downturn is putting a lot of pressure on National Oilwell Varco's business, it's also opening up opportunities because of the deeper impact the operating environment is having on smaller rivals. It's an opportunity the company hopes to take advantage of, with Williams pointing out last quarter that the company believes that its "strong financial resources will enable National Oilwell Varco to invest in the extraordinary opportunities that will arise from this downturn," particularly with respect to M&A opportunities.

That being said, the M&A market has been much quieter than expected, with the only notable deal in the equipment space being Schlumberger's (SLB 0.44%) $14.8 billion acquisition of Cameron (CAM.DL). However, Schlumberger did note on its most recent conference call that it sees significant M&A opportunities on the horizon and has "really stepped up our efforts in screening and evaluating these opportunities." What investors will want to keep any eye on is if National Oilwell Varco, likewise, is seeing a rise in M&A opportunities, especially considering its history of being a very active acquirer.

Investor takeaway
Given the decline in the price of oil, and the backlog of National Oilwell Varco's key Rig System's segment, the fourth quarter will likely show another decline in revenue and earnings. That said, the hope is that the company will once again deliver strong cost reductions to keep the earnings slide to a minimum. In addition to that, the other thing investors will want to be on the lookout for is what the company sees ahead for M&A, because making and integrating acquisitions is really its strong suit.