Oil is starting to recover, but it's too little and too late for National Oilwell Varco (NYSE:NOV) to keep up its dividend.

In this segment from the Industry Focus: Energy podcast, Tyler Crowe and Taylor Muckerman go over how deep the cut goes, and why the company chose to slash its dividend now.

A full transcript follows the video.

This podcast was recorded on April 14, 2016.

Tyler Crowe: Moving on, we talked a lot about bankruptcy, and sticking with the bad news theme, let's talk about some dividend cuts.

Taylor Muckerman: Yeah, people are probably scratching their heads, "Oil prices are up, why such dour news about the energy space today?"

Crowe: Yeah. So, earlier this week, National Oilwell Varco, a company both Taylor and I are big fans of ...

Muckerman: Yeah, we've both been to HQ down there in Houston.

Crowe: Yeah, talked to the CEO of the company at various times, and I think we're both personally invested in the company, at least I am.

Muckerman: I'm not, but it's definitely a company that I follow closely.

Crowe: But, they cut their dividend by 89%, to $0.05 per quarter. One of the biggest reasons: CEO Clay Williams is basically saying, we want to treat shareholders right, but with the market acting the way it is, we had to cut it. And, something you just kind of hinted at for a quick second there is, we're starting to see oil rise again.

Muckerman: Yeah, a little bit.

Crowe: All this good news is coming out.

Muckerman: Above $40.

Crowe: Production is starting to slide, it's above $40, and everybody is optimistic again. So, in your opinion, why do you see this happening? If it's getting better, why now?

Muckerman: I guess, a dividend, we always say, is never a guarantee to be paid out. And with National Oilwell Varco, it's a company that is very heavily tied to offshore rigs. I think that's a little bit further out in terms of recovery. We're still seeing land rig declines. Until you start to see land activity pick back up, you're still a ways off from offshore activity -- not to say that this company has no exposure to onshore activity, so when that picks up, their revenue likely will as well. But, I think it's a prudent move by a company that's been around. And they do have great diversification across the sector. But offshore is still a big portion of this business, and you continue to see rigs being cold stacked, put back at the docks, or trying to be sold in auctions.

Crowe: Or even cannibalized. You've seen a lot of companies doing that, where they're just basically taking either land or offshore rigs and being like, "Well, we're not going to use this thing for a while."

Muckerman: They just break it down.

Crowe: "Let's strip it down and use it for parts."

Muckerman: So, that's my opinion -- it's going to take some offshore activity to really get this company back. I don't think it's going to take offshore activity to turn the stock around, but it's going to take offshore activity to get it back close to where it was a couple years ago.

Crowe: As much as somebody who's personally invested in it, I'm not a fan of losing the dividend.

Muckerman: Absolutely not, yeah. It's a tough pill to swallow.

Crowe: But at the same time, I do have to golf clap them a little bit for deciding to do a dividend cut while the finances for the company still look good. If you look at the company's balance sheet, it still has a ton of cash, it's still actually net cash positive in terms of the debt. Don't quote me on that, I don't have the numbers up.

Muckerman: They weren't getting a swirly from the energy market, they weren't getting bullied into it.

Crowe: Exactly. So, they're doing it as a prudent move now to be ready for when the market does turn, that they'll be well-financed and have capital ready and available to either make an acquisition or something like that, which they do very, very routinely.

Muckerman: And very well. When I talked to Pete Miller a couple years ago, he talked about, they have this huge -- I mean, whether or not it is an actual binder is up for discussion, because he didn't show us, but he was like, "We have like an encyclopedia of our acquisitions that we can turn to make sure we are following these steps that we've either discovered don't work or have seen play our well over time consistently." So, this is a company that has been very good at acquisitions, and you would love to see them with some spare cash at a pretty advantageous time.