NOV Inc. 2026 Q3 Earnings Call

Ma'am, please go ahead. Welcome everyone to NOV's third quarter 2026 earnings conference call.

With me today are Jose Bayardo, our Chairman, President, and CEO, and Rodney Reed, our Senior Vice President and CFO. Before we begin, I would like to remind you that some of today's comments are forward-looking statements within the meaning of the federal securities laws. They involve risks and uncertainty, and actual results may differ materially. No one should assume these forward-looking statements remain valid later in the quarter or later in the year. For a more detailed discussion of the major risk factors affecting our business, please refer to our latest Forms 10-K and 10-Q filed with the Securities and Exchange Commission. Our comments also include non-GAAP measures. Reconciliations to the nearest corresponding GAAP measures are in our earnings release available on our website.

On a US GAAP basis for the third quarter of 2026, NOV reported revenues of $2.23 billion and a net income of $90 million, or $0.25 per fully diluted share. Our use of the term EBITDA throughout this morning's call corresponds with the term adjusted EBITDA, as defined in our earnings release. Later in the call, we will host a question and answer session. Please limit yourself to one question and one follow-up to permit more participation. Now, let me turn the call over to Jose.

Thank you, Amy. Good morning, everyone, and thank you for joining us. NOV delivered another strong quarter. Our teams continued to execute well and build on the operational momentum we established earlier this year with improving performance across much of our portfolio. NOV generated revenue of $2.23 billion during the third quarter, an increase of 4% sequentially and 2% year-over-year. Solid incremental margins on the increase in revenue resulted in $281 million of adjusted EBITDA. Over the past several calls, we've talked about two priorities for NOV. First, improving profitability and returns by operating more efficiently, simplifying how we work, and better leveraging the capabilities and scale of the broader NOV organization. Second, positioning NOV to capitalize on attractive growth opportunities where we have durable competitive advantages and provide products and services that drive higher value for our customers. We're making meaningful progress on both fronts.

This quarter, both reporting segments delivered improved margins, reflecting better execution, continued efficiency gains, and the benefits of the actions we've been taking across the company. At the same time, the industry outlook continues to improve, especially in markets where NOV is particularly well-positioned. While years of limited investment have left relatively little excess capacity across important parts of the service and equipment supply chain. Let me start with the Middle East. As we discussed on our last call, activity in the region had settled into what appeared to be a new operating normal following the disruptions earlier in the year. While takeaway capacity and operating conditions generally improved through most of the third quarter, maritime security continued to deteriorate, creating logistical disruptions and higher costs that affected deliveries of equipment and spare parts and delayed certain tenders.

Despite these challenges, our team in the Middle East delivered sequential and year-over-year growth of over 20% during the quarter. We remain focused first and foremost on the safety of our people and on serving the needs of our customers. I want to thank our employees and our customers in the region who continue doing critical work to maintain the essential flow of energy to the world in an extraordinarily difficult environment. As tensions escalated late in the quarter, we began to see some moderation in regional activity, which we expect will continue through at least year-end. While these challenges will likely persist over the medium term, we remain focused on the importance of the region to the global energy markets over the long term.

The disruption of Middle East supply has required significant draws on global inventories, and experts suggest that replenishing those inventories while also meeting ongoing demand could take up to two years after flows out of the region normalize. Rebuilding global inventories will require increased investment, some of which is beginning to take place in other regions as countries and producers seek to strengthen energy security and diversify sources of supply. But there are limits to how far supply can diversify. The Middle East holds roughly half of the world's proven oil reserves, and as Amin Nasser recently put it, "Markets can diversify suppliers, they cannot diversify geology." That's why we continue to view the Middle East as one of the most important and attractive markets for NOV over the long term.

Maintaining and ultimately increasing production from the region will require significant investment, particularly as unconventional resources become a larger part of the production mix. Economically developing those resources requires many of the same higher specification drilling completion and production technologies that we've perfected to help enable the U.S. shale revolution. We're already seeing increased investment in these technologies as unconventional development expands across the region. A similar pattern is developing across a number of other international land markets. In Argentina, we're capitalizing on attractive growth opportunities as development of the Vaca Muerta continues to scale. Our revenue in the country has now grown double digits year over year for three consecutive quarters as operators move toward increasingly industrialized development programs.

We're seeing greater demand for higher performance motors and other drilling technologies, and we're introducing new completion and drill out solutions to help operators improve efficiency as lateral lengths and completion intensity increase. Importantly, there's still considerable opportunity for us to help operators improve costs and efficiencies with better equipment and technology. We're also benefiting from investment in the infrastructure required to support growing production. During the quarter, we secured orders for production and midstream equipment associated with natural gas infrastructure in the Vaca Muerta, illustrating the breadth of NOV's opportunity as development scales. Argentina is just one example, and we're also capitalizing on opportunities developing in other emerging international unconventional resource markets, including Algeria, Australia, Egypt, and Pakistan. Customers in these countries are increasingly incorporating the technologies we've developed and proven in more mature resource plays.

In Venezuela, we're also seeing activity and customer engagement increase, with growing inquiries across a range of NOV businesses, including production and midstream equipment, artificial lift and pumping technologies, drilling systems, and digital solutions. While still small, our revenue from Venezuela is growing at a high rate, and we see the potential for it to materially increase given the need to reinvest in the country's asset base. More broadly, as international development programs scale and become more technically demanding, they require greater technology content, creating a long runway of opportunity for NOV. North America presents a somewhat different opportunity. Activity continued to improve during the quarter, led by private operators and a normal seasonal increase in Canada. Public operators remain disciplined with capital, and at least for now, they're not making a broad push to materially increase activity. We're seeing a similar dynamic among service companies and drilling contractors.

For the most part, they remain very disciplined and want to see meaningful, sustained improvement in pricing and returns before committing significant capital to their fleets. Importantly, there is little excess high specification equipment capacity available today. As a result, we believe even a modest increase in operator activity could tighten the market fairly quickly, improving utilization, pricing, and ultimately the returns required to support broader fleet reinvestment. Today, we're seeing a few more agile private customers begin investing ahead of what they and we soon believe will be higher utilization and pricing. During the quarter, we booked the sale of two new 2,000 horsepower high spec land rigs, a major upgrade to another rig that included a DC to AC conversion, and an order for our new TDS-1400 top drive, which provides the higher torque and horsepower required to drill increasingly demanding ultra long lateral wells.

At the other end of the spectrum, major operators are helping support selective investments in leading-edge technologies that can structurally improve safety and efficiency, including robotic systems and fully electric well servicing rigs. So while capital equipment investment in North America remains constrained, the customers who are investing are generally focused on higher specification solutions that lower total well costs, improve reliability, and enhance safety. Customers' relentless focus on improving efficiency also continues to drive demand for our shorter cycle technologies, tools, and services. For example, our drill bit business delivered a record quarter with particularly strong growth in the Permian, while our downhole tools business generated record motor revenues and continued to gain traction with several differentiated drilling technologies. The performance and reliability of these products are helping us deepen penetration with customers and gain share. Digital is becoming an increasingly important part of that same efficiency equation.

During the quarter, we were awarded a contract to provide digital services across more than 30 rigs for a large U.S. operator, combining electronic drilling recorders and remote monitoring to standardize data capture, improve operational visibility, and support more consistent decision-making across the fleet. North America remains one of the most important technology markets in the world and an extraordinary proving ground for NOV as customers continue pushing the limits of lateral length, drilling speed, automation, and capital efficiency. That creates opportunities for us to provide more technology and value on each active rig, and many of the solutions proven in North America will ultimately help us drive growth in the international unconventional markets we just discussed. Finally, turning to offshore, where we continue to see some of the strongest industry momentum and some of the most attractive opportunities for NOV.