National-Oilwell Varco, Inc. (NOV): The Company’s Welcomed Pause

The metric that really counts
Now, having regurgitated all of those numbers for you, I’ll venture that they’re all of far less importance — except as they imply long-term trends, which they clearly don’t yet — than the backlog for the rig technology segment. That’s the true measure of what probably lies ahead for National-Oilwell Varco, Inc. (NYSE:NOV). At the close of the quarter, the backlog stood at $12.92 billion, an 8% increase from its level at the immediately prior December quarter.

Varco President Clay Williams put some meat to the bones of the backlog trend when he said on the company’s call:

Rig technology capital equipment orders totaled $3 billion, or second-highest quarterly total ever. We received orders for 17 drilling equipment packages for jack-up rigs and eight … for floating rigs, including three for Brazil in the first quarter. We also had a significant increase in orders for FPSO [floating production, storage, and offloading] equipment. Our outlook for the second quarter remains very strong, as we expect even more FPSO orders, plus another great quarter for jack-ups.

It’s also noteworthy that, as Williams said, “we are very cautious about North America and continue to see headwinds here as pricing and volumes remain under pressure, and demand for pressure pumping and drilling equipment remains weak.” That puts him in Schlumberger Limited. (NYSE:SLB)’s camp, but in opposition to Baker Hughes Incorporated (NYSE:BHI) and Halliburton Company (NYSE:HAL), which joined together in proclaiming a brightening picture for our continent.

A Foolish takeaway
After 51 acquisitions in the past four years — including its biggest, Robbins & Myers, which closed during the quarter — National-Oilwell Varco, Inc. (NYSE:NOV) appears to be catching its breath. Beyond that, it’s noteworthy that Cameron International Corporation (NYSE:CAM), a competitor of Varco in some areas (blowout preventers, for instance) also reported results last week that came in under expectations.

In all, I remain every bit as optimistic about National-Oilwell Varco, Inc. (NYSE:NOV) as I was a week or a month or a year ago. I actually welcome the company’s pause to dust itself off.

The article National Oilwell Varco’s Welcomed Pause originally appeared on Fool.com.

Fool contributor David Smith has no position in any stocks mentioned. The Motley Fool recommends Halliburton and National Oilwell Varco and owns shares of National Oilwell Varco.

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