Good News in Oil Field Services Continues (NOV, HAL, WFT, SLB)

National Oilwell Varco Inc. (NYSE:NOV) reported a solid beat of analysts’ estimates for the fourth quarter. After last week’s surprising earnings from Halliburton Co. (NYSE:HAL) and Weatherford International Limited (NYSE:WFT), National Oil Well Varco’s results were not entirely unexpected.

EPS, excluding transaction costs of $20.1 million related to thepurchase of Grant Prideco, reached $1.44, beating expectations of$1.33. Fourth quarter revenue for the oilfield services provider was up 5% sequentially at $3.81 billion,beating estimates of $3.76 billion.

For the full year, revenue and EPS were a bit softer. National reported2008 revenue of $13.43 billion, slightly higher than expectations of$13.36 billion. Full-year EPS came was $4.90 on netprofit of $1.95 billion, against expectations of $4.98. National notedthat pro forma results including Grant Prideco for the full year wouldhave yielded $14.04 billion in revenue and $3.14 billion in net profit.

The company noted that it’s backlog of capital equipment orders goinginto 2009 was $11.1 billion, down from $11.8 billion in backlog at theend of the third quarter.

Following the lead of Halliburton, Weatherford, and Schlumberger Ltd.(NYSE:SLB), National did not issue guidance for 2009, except to saythat "oil and gas industry’s challenge to replace depleting reserveswill require upgrading the world’s rig fleet, and we look forward tocontinuing to help our customers retool their rigs after years ofunderinvestment." That’s a fine sentiment, but industry investment hasclimbed for the past few years, and is now falling again. Didn’t anyoneat National notice that? Even its own backlog is off by $700 millionfrom last quarter.

National’s shares are up more than 4.5% in pre-open trading, but arestill only about even with the 50-day moving average of $25.46, andwell below the 200-day moving average of $41.90…. and the highs above $90.00 last year seem like ancient history.

Paul Ausick
February 4, 2009