National Oilwell 2Q Profit Up 26% On Broad Revenue Gains

07/26/2012| 07:55am US/Eastern

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   By Nathalie Tadena 
 

National Oilwell Varco Inc.'s (>> National-Oilwell Varco, Inc.) second-quarter earnings rose 26% as the oilfield-services equipment manufacturer posted better-than-expected revenue, with gains across its segments.

The company's earnings have strengthened over the past year as oil-and-gas producers boost their capital expenditures, often spending heavily on complex equipment that can extract harder-to-reach reserves through unconventional means like hydraulic fracturing and horizontal drilling.

"All three segments posted higher sequential and year-over-year revenues and operating profit, and we are pleased at the high level of demand we continue to see for new drilling equipment," said Chairman and Chief Executive Pete Miller.

Producers are now poised to move much of their spending in North America to areas that yield more oil and natural-gas liquids instead of cheap natural gas--a shift that could generate yet more demand for National Oilwell's products.

The company has grown to be become the sector's dominant equipment maker through mergers. In May, the company agreed to acquire CE Franklin Ltd. (CFT.T), which provides products and services to the energy industry, for about C$231 million. It also recently completed its acquisition of Schlumberger Ltd.'s (>> Schlumberger Limited.) Wilson business, which distributes pipe, valves and other products to the oil patch, in a deal that vastly expands National Oilwell's footprint.

National Oilwell reported a profit of $605 million., or $1.42 a share, up from $481 million, or $1.13 a share, a year earlier. Excluding transaction charges, adjusted per-share earnings rose to $1.46 from $1.14. Revenue increased 35% to $4.73 billion.

Analysts polled by Thomson Reuters had projected a per-share profit of $1.40 and revenue of $4.44 billion.

Gross margin narrowed to 27.9% from 30.9%.

Backlog at the company's rig-technology business reached $11.28 billion as of June 30, up 46% from a year earlier up 9% from the prior quarter. New orders in the segment, National Oilwell's largest, rose to $2.22 billion, from $1.91 billion in the prior quarter.

Revenue in the rig technology segment increased 27% from a year earlier, while the petroleum services and supplies unit saw revenue rise 31%. Sales from the distribution and transmission segment were up 84%.

Shares closed at $67.33 Wednesday and were inactive premarket. The stock has fallen 12% over the past three months.

-Write to Nathalie Tadena at nathalie.tadena@dowjones.com

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