On March 17, 2026, the Company extended the maturity date of the revolving credit facility by one additional year to September 12, 2030. The revolving credit facility has a borrowing capacity of $1.5 billion through September 12, 2030. The Company has the right to increase the aggregate commitments under this agreement to an aggregate amount of up to $2.5 billion upon the consent of only those lenders holding any such increase. Interest under the multicurrency facility is based upon Secured Overnight Financing Rate (SOFR), Euro Interbank Offered Rate (EURIBOR), Sterling Overnight Index Average (SONIA), Canadian Overnight Repo Rate Average (CORRA), or Norwegian Interbank Offered Rate (NIBOR), plus 1.25% subject to a ratings-based grid or the U.S. prime rate. The credit facility contains a financial covenant establishing a maximum debt-to-capitalization ratio of 60%. As of March 31, 2026, the Company was in compliance with a debt-to-capitalization ratio of 24.0% and had no outstanding borrowings or letters of credits issued under the facility, resulting in $1.5 billion of available funds.
A consolidated joint venture of the Company borrowed $120 million against a $150 million bank line of credit, payable by June 2032, for the construction of a facility in Saudi Arabia. Interest under the bank line of credit is based upon SOFR plus 1.40%. The bank line of credit contains a financial covenant regarding maximum debt-to-equity ratio of 75%. As of March 31, 2026, the joint venture was in compliance and will not have future borrowings on the line of credit. As of March 31, 2026, the Company had $84 million in borrowings related to this line of credit. The carrying value of debt under the Company’s consolidated joint venture approximates fair value because the interest rates are variable and reflective of current market rates. The Company has $11 million in payments related to this line of credit due in the next twelve months. The Company can repay the entire outstanding facility balance without penalty at its sole discretion.
Other debt at March 31, 2026 included $42 million of amounts owed to current and former minority interest partners of NOV consolidated joint ventures, of which $16 million is due in the next twelve months.
The Company had $1,040 million of outstanding letters of credit at March 31, 2026, primarily in Norway and the United States, that are under various bilateral letter of credit facilities. Letters of credit are issued as bid bonds, advanced payment bonds and performance bonds.
At March 31, 2026 and December 31, 2025, the fair value of the Company’s unsecured Senior Notes approximated $1,349 million and $1,353 million, respectively. The fair value of the Company’s debt is estimated using Level 2 inputs in the GAAP fair value hierarchy and is based on quoted prices for those of similar instruments. At March 31, 2026 and December 31, 2025, the carrying value of the Company’s unsecured Senior Notes approximated $1,589 million at both reporting dates.
9. Income Taxes
The effective tax rate was 42.9% and 38.8% for the three months ended March 31, 2026, and 2025, respectively, as compared to the U.S. statutory tax rate of 21% for both periods. The effective tax rate for the three months ended March 31, 2026 was negatively impacted by a mix of earnings in higher tax rate jurisdictions and a shortfall related to previously recognized stock compensation deductibility. The effective tax rate for the three months ended March 31, 2025 was negatively impacted by a mix of earnings in higher tax rate jurisdictions, unfavorable adjustments related to changes in certain foreign currency exchange rates, a shortfall related to previously recognized stock compensation deductibility, and adjustments to the carrying value of deferred tax assets, partially offset by a benefit from withholding tax refunds received.
10. Stock-Based Compensation
The Company’s stock-based compensation plan, known as the NOV Inc. Long-Term Incentive Plan (the “NOV Plan”), was approved by shareholders on May 11, 2018 and amended and restated on May 24, 2022 and May 20, 2025. The NOV Plan provides for the granting of stock options, restricted stock, restricted stock units, performance awards, phantom shares, stock appreciation rights, stock payments and substitute awards. The number of shares authorized under the NOV Plan is 70.9 million. At March 31, 2026, approximately 13 million shares remained available for future grants under the NOV Plan. The Company also has outstanding awards under its former stock-based compensation plan known as the National Oilwell Varco, Inc. Long-Term Incentive Plan (the “Former Plan”); however, the Company is no longer granting new awards under the Former Plan.
On February 18, 2026, under the NOV Plan, the Company granted 2,165,773 restricted stock units (“RSUs”) with a fair value of $19.99 per share, and performance share awards (“PSAs”) to senior management employees with potential payouts varying from zero to 1,522,052 shares in the aggregate.
The restricted stock units vest in three equal annual installments commencing on the first anniversary of the grant date. The 2026 PSAs can be earned based on performance against two established goals over a three-year period: TSR (total shareholder return) goal and ROCE (“Return on Capital Employed”, a return on capital metric) goal. TSR performance is determined by comparing the Company’s TSR with the TSR of the members of the Philadelphia Stock Exchange’s Oil Services Sector Index (OSX) for the three-year performance period. The TSR portion of the performance share awards is subject to a vesting cap equal to 100% of Target Level if the Company’s absolute TSR is negative, regardless of relative TSR results. Conversely, if the Company’s absolute TSR is greater than 15% annualized over the three-year performance period, the payout amount shall not be less than 50% of Target Level, regardless of relative TSR results. The ROCE goal is based on the Company’s ROCE using the Company’s consolidated financial results from January 1, 2028 until December 31, 2028. ROCE shall be an amount equal to the Company’s (a) adjusted operating profit for the performance period, multiplied by (b) (1 - an assumed tax rate of 23%) divided by (c) the average of the Company’s total capital employed as of beginning of the performance period and the end of the performance period, with “total capital employed” equal to the Company’s (i) total stockholders’ equity plus (ii) long-term debt (including the current portion) less (iii) cash and cash equivalents.
Total expense for all stock-based compensation arrangements was $26 million for the three months ended March 31, 2026, which included a non-recurring charge of $12 million, and $16 million for the three months ended March 31, 2025.
The total income tax expense recognized in the Consolidated Statements of Income for stock-based compensation arrangements for the three months ended March 31, 2026, and 2025 was zero and $9 million, respectively.
11. Derivative Financial Instruments
The Company uses forward currency contracts to manage the foreign currency exchange rate risk on forecasted revenues and expenses denominated in currencies other than the functional currency of the operating unit (cash flow hedge). The Company also executes forward currency contracts to manage the foreign currency exchange rate risk on recognized nonfunctional currency monetary accounts (non-designated hedge).
The fair values of these derivative financial instruments are determined using Level 2 inputs (inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability) in the fair value hierarchy as the fair value is based on publicly available foreign exchange and interest rates at each financial reporting date.
Forward currency contracts consist of (in millions):
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|
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|
|
|
|
|
|
Currency Denomination |
Currency |
|
|
|
March 31, 2026 |
|
December 31, 2025 |
South Korean Won |
|
KRW |
|
34,967 |
|
49,790 |
Norwegian Krone |
|
NOK |
|
2,604 |
|
2,756 |
Indian Rupee |
|
INR |
|
1,417 |
|
— |
U.S. Dollar |
|
USD |
|
882 |
|
827 |
Japanese Yen |
|
JPY |
|
837 |
|
569 |
Euro |
|
EUR |
|
200 |
|
190 |
Singapore Dollar |
|
SGD |
|
15 |
|
18 |
British Pound Sterling |
|
GBP |
|
3 |
|
3 |
Cash Flow Hedging Strategy
To protect against the volatility of forecasted foreign currency cash flows resulting from forecasted revenues and expenses, the Company maintains a cash flow hedging program. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is recorded in accumulated other comprehensive loss and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings (e.g., in “revenues” when the hedged transactions are cash flows associated with forecasted revenues). The Company includes time value in hedge relationships.
The Company expects accumulated other comprehensive income of $3 million will be reclassified into earnings within the next twelve months.
Non-designated Hedging Strategy
The Company enters into forward exchange contracts to hedge certain nonfunctional currency monetary accounts. The gain or loss on the derivative instrument is recognized in earnings in other income (expense), together with the changes in the hedged nonfunctional monetary accounts.
The amount of gain recognized in other income (expense), net was zero for the three months ended March 31, 2026, and $3 million for the three months ended March 31, 2025.
15. Commitments and Contingencies
From time to time, the Company is involved in various claims, regulatory agency audits, investigations and legal actions involving a variety of matters. As of March 31, 2026, in the ordinary course of business, the Company recorded reserves in an amount believed to be sufficient, given the estimated range of potential outcomes, for contingent liabilities believed to be probable. These estimated liabilities are based on the Company’s assessment of the nature of these matters, their progress toward resolution, the advice of legal counsel and outside experts as well as management’s experience. The litigation process and the outcome of regulatory oversight is inherently uncertain, and our best judgment concerning the probable outcome of litigation or regulatory enforcement matters may prove to be incorrect. No assurance can be given as to the outcome of these matters. The total potential loss on these matters cannot be determined; however, in our opinion, any ultimate liability, to the extent not otherwise provided for, should not materially affect our financial position, cash flows or results of operations.
Developments in global trade policy, including tariffs, geopolitical tensions, sanctions, and regulatory changes, have impacted and may continue to influence our operations. In February 2026, the U.S. Supreme Court determined that certain tariffs were unlawful, effectively nullifying the legal basis for some incremental tariffs implemented since February 2025 and sending related cases back to the Court of International Trade. In response, the U.S. administration introduced new tariffs under different authorities, increasing uncertainty around the scope, duration, and potential changes to current and future tariffs, as well as the risk of retaliatory measures. We have submitted Consolidated Administration and Processing of Entries (“CAPE”) Declarations for International Emergency Economic Powers Act (“IEEPA”) duty refunds and are closely monitoring developments to better understand the government’s next steps. Our first-quarter 2026 financial results do not reflect any potential benefit from such refunds.
The Company is currently pursuing litigation against several companies involving royalties due under licenses for technology related to drill bits. This technology resulted in a portfolio of patents related to leaching technology, a revolutionary technology owned by the Company that improves the performance of drill bits and other products utilizing certain synthetic diamond parts. The Company previously sued several drill bit manufacturers for patent infringement and those lawsuits were resolved by a series of licensing agreements with various drill bit manufacturers (the “License Agreements”). To settle and end litigation or to avoid litigation, the licensees were provided access to the portfolio of leaching patents owned by the Company in exchange for a royalty payment, as defined in each License Agreement. The companies agreed to pay the royalties for the right to use the portfolio of patents, whether they used some, all or none of the specific patented claims in any particular patent. The license agreements provide that they terminate on the date of the last to expire of the patents in the licensed portfolio. Having obtained the benefit of these licenses for more than a decade, all of the drill bit manufacturer licensees unilaterally stopped making royalty payments even though all of the patents in the portfolio have not expired. These companies have asserted, among other reasons, that they are entitled to stop making these payments because they claim to not manufacture products covered by the unexpired patents. Some of these companies stopped making payments after the expiration of what are allegedly the patents in the portfolio that they elected to use. Others paid for some period of time after that date but have since stopped making payments. The Company has sued asserting that failure to pay the royalties is a breach of the License Agreements. The Company is in litigation with most of the licensees seeking a judicial determination that it is entitled to be paid royalties pursuant to the terms of the License Agreements. The licensees have responded with a number of alleged defenses and requests for declaratory judgment all focused on avoiding the payments called for under the License Agreements. The parties’ legal filings to date can be found in the following cases: Grant Prideco, Inc., et al. v. Schlumberger Technology Corp., et al., No. 4:23-cv-00730; Halliburton Energy Services, Inc. v. Grant Prideco, Inc., et al., No. 4:23-cv-01789; and Grant Prideco, Inc., et al. v. Baker Hughes Oilfield Operations Inc., et al., No. 4:25-cv-03459, all in the United States District Court for the Southern District of Texas. We have also recently initiated litigation against Taurex Drill Bits. The legal filings to date can be found in the case Grant Prideco, Inc., et al. v. Taurex Drill Bits, L.L.C., No. 25-BC11B-0065, in the Eleventh Business Court Division for Harris County, Texas. On September 29, 2025, and October 7, 2025, in the lawsuits against Halliburton, Ulterra and Varel, the district court issued rulings, the effect of which is that NOV cannot collect royalties under the License Agreements after the date each licensee stopped making royalty payments. NOV believes the court’s ruling is incorrect and is appealing the court’s decision, which can be found in the case: Halliburton Energy Services, Inc. v. Grant Prideco, Inc. et al., Nos. 26-1256, 26-1266, In the United States Court of Appeals for the Federal Circuit. The Company continues to strongly believe that the royalties for which it has sued are due and owing pursuant to the terms of the License Agreements. Of course, there is inherent risk with the related litigation and the Company makes no assurances as to the outcome of such litigation. As of March 31, 2026, royalty receivables of $137 million, net of related reserves of $78 million and the remaining timing related discount of $43 million, are included in “Other assets” on the Consolidated Balance Sheets. While we continue to believe it is probable the Company will collect all or substantially all of the consideration to which it is entitled pursuant to the terms of the licensing agreements, the Company will also continue to evaluate the collectability of the receivables in accordance with the allowance for credit losses policy described in Note 6.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
NOV is a leading independent equipment and technology provider to the global energy industry. NOV and its predecessor companies have spent over 160 years helping transform oil and gas development and improving its cost-effectiveness, efficiency, safety, and environmental impact.
NOV’s extensive proprietary technology portfolio supports the industry’s drilling, completion, and production needs. With unmatched cross-segment capabilities, scope, and scale, NOV continues to develop and introduce technologies that further enhance the economics and efficiencies of energy production, with a focus on digital, automation, and robotics solutions.
Lower-cost, reliable sources of energy significantly contribute to raising the global standard of living by powering economic development, enabling better infrastructure and facilitating the production of goods and services that improve quality of life. Over the past few decades, the Company has pioneered and refined key technologies to improve the economic viability of frontier resources, including unconventional and deepwater oil and gas. More recently, by applying its deep expertise and technology, NOV has developed solutions to improve the economics of alternative energy sources.
NOV serves major-diversified, national, and independent service companies, contractors, and energy producers in 57 countries. NOV operates under two segments, Energy Products and Services and Energy Equipment.
Results of operations are presented in accordance with GAAP. Certain reclassifications have been made to prior period financial information in order to conform with current period presentation. The Company discloses Adjusted Operating Profit (defined as Operating Profit excluding gains and losses on sales of fixed assets, and, when applicable, pre-tax Other Items (as defined below under “Executive Summary”)) and Adjusted EBITDA (defined as Operating Profit excluding depreciation, amortization, gains and losses on sales of fixed assets, and, when applicable, pre-tax Other Items) in its periodic earnings press releases and other public disclosures to provide investors additional information about the results of ongoing operations. See “Non-GAAP Financial Measures and Reconciliations in Results of Operations” for an explanation of our use of non-GAAP financial measures and reconciliations to their corresponding measures calculated in accordance with GAAP.
Energy Products and Services
The Company’s Energy Products and Services segment primarily designs, manufactures, rents, and sells products and equipment used in drilling, intervention, completion, and production activities. Products include drill bits, downhole tools, premium drill pipe, drilling fluids, integral and weld-on connectors for conductor strings and surface casing, completion tools, and artificial lift systems. The segment also designs, manufactures, and delivers high-end composite pipe, tanks, and structures engineered to solve both corrosion and weight challenges in a wide variety of applications, including oil and gas, chemical, industrial, wastewater, fuel handling, marine and offshore, and rare earth mineral extraction.
In addition to product and equipment sales, the segment provides services, software, and digital solutions to improve drilling and completion operational performance. Services include tubular inspection and coating, solids control, waste management. Software and digital solutions offered include drilling and completion optimization and remote monitoring (via downhole and surface instrumentation), wired drill pipe services, software controls and applications, and data management and analytics services at the edge and in the cloud.
Energy Products and Services serves oil and gas companies, drilling contractors, oilfield service companies, oilfield equipment rental companies and developers of geothermal energy. Demand for the segment’s products and services primarily depends on the level of oilfield drilling activity by oil and gas companies, drilling contractors, and oilfield service companies. Demand for the segment’s composite solutions serving applications outside of oil and gas are driven by industrial activity, infrastructure spend, and population growth.
Energy Equipment
The Company’s Energy Equipment segment manufactures and supports the capital equipment and integrated systems needed for oil and gas exploration and production, both onshore and offshore, as well as for other marine-based, industrial and renewable energy markets.
The segment designs, manufactures, and integrates technologies for drilling and producing oil and gas wells. This includes equipment and technologies needed for drilling, including land rigs, offshore drilling equipment packages, drilling rig components, managed pressure drilling, and software control systems that mechanize and automate the drilling process and rig functionality; hydraulic fracture stimulation; well intervention, including coiled tubing units, coiled tubing, and wireline units and tools; cementing products; onshore production, including fluid and gas processing, flow control and pumping solutions; offshore production, including integrated production systems and subsea production technologies; and aftermarket support of these technologies, providing spare parts, service, and repair.
Energy Equipment primarily serves contract drillers, oilfield service companies, and oil and gas companies. Demand for the segment’s products primarily depends on capital spending plans by drilling contractors, service companies, and oil and gas companies, and secondarily on the overall level of oilfield drilling, completions, and workover activity which drives demand for equipment, spare parts, service, and repair for the segment’s large installed base of equipment.
The segment also serves marine and offshore markets, where it designs and builds equipment for wind turbine installation and cable lay vessels, and offers heavy lift cranes and jacking systems; industrial markets, where the segment provides pumps and mixers for a wide breadth of industrial end markets; and other renewable energy markets, where it provides solutions that support wind power development, and carbon sequestration by applying its gas processing expertise.
Critical Accounting Policies and Estimates
In our annual report on Form 10-K for the year ended December 31, 2025, we identified our most critical accounting policies. In preparing the financial statements, we make assumptions, estimates and judgments that affect the amounts reported. We periodically evaluate our estimates and judgments that are most critical in nature which are related to revenue recognition under long-term construction contracts, impairment of goodwill and other indefinite-lived intangible assets, inventory reserves, and income taxes. Our estimates are based on historical experience and on our future expectations that we believe are reasonable. The combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results are likely to differ from our current estimates and those differences may be material.
EXECUTIVE SUMMARY
For the first quarter ended March 31, 2026, the Company generated revenues of $2.05 billion, a decrease of two percent compared to the first quarter of 2025. Net income decreased $54 million, or $0.14 per diluted share, year-over-year to $19 million. The Company recorded $37 million within pre-tax Other Items during the first quarter of 2026 primarily related to a non-recurring stock-based compensation charge, severance and facility closures, and costs associated with streamlining our business operations. Operating profit was $47 million and adjusted operating profit was $85 million, compared to operating profit of $152 million and adjusted operating profit of $163 million in the first quarter of 2025. Adjusted EBITDA decreased $75 million year-over-year to $177 million, or 8.6 percent of sales.
Segment Performance
Energy Products and Services
Energy Products and Services generated revenues of $897 million in the first quarter of 2026, a decrease of 10 percent from the first quarter of 2025. Operating profit decreased $57 million from the prior year to $26 million, or 2.9 percent of sales, and included $8 million in pre-tax Other Items. Adjusted EBITDA decreased $49 million from the prior year to $96 million, or 10.7 percent of sales. Disruptions in the Middle East and lower global drilling activity more than offset strong performance from the segment’s drill bit and digital services business.
Energy Equipment
Energy Equipment generated revenues of $1.19 billion in the first quarter of 2026, an increase of four percent when compared to the first quarter of 2025. Operating profit decreased $41 million from the prior year to $93 million, or 7.8 percent of sales, and included $9 million in pre-tax Other Items. Adjusted EBITDA decreased $34 million from the prior year to $131 million, or 11.0 percent of sales. Strong execution on the segment’s backlog more than offset lower sales of aftermarket parts and services, which were impacted by war related disruptions in the Middle East. A less favorable sales mix and higher costs from the Middle East disruptions contributed to lower profitability.
New orders booked during the quarter totaled $520 million, an increase of $83 million when compared to the $437 million of new orders booked during the first quarter of 2025. Orders shipped from backlog were $650 million, representing a book-to-bill of 80 percent and an increase of $101 million when compared to the $549 million orders shipped and an 80 percent book-to-bill during the first quarter 2025. As of March 31, 2026, backlog for capital equipment orders for Energy Equipment totaled $4.23 billion, a decrease of $184 million from the first quarter of 2025.
Oil & Gas Equipment and Services Market and Outlook
Macroeconomic and geopolitical uncertainty remains elevated due to the conflict in the Middle East. Widespread damage to energy infrastructure and the closure of the Strait of Hormuz have materially tightened oil and gas fundamentals, causing volatility in global commodity markets and renewing focus on the need for energy security. Management believes reduced production capacity resulting from years of underinvestment in the oil and gas industry along with the growing need to diversify supply sources will spur renewed investment in upstream capacity and regional infrastructure needed to support more resilient supply. In this environment, management expects increased demand for the Company’s equipment and technology.
NOV remains focused on the development and commercialization of innovative products and services that lower the marginal cost and environmental footprint of energy production. The Company also remains focused on improving operational efficiency, simplifying processes, and allocating capital to opportunities where it believes it has competitive advantages, technology differentiation, and attractive return potential. Management believes this strategy will further strengthen the Company’s competitive position across market cycles.
Operating Environment Overview
The Company’s results are dependent on, among other things, the level of worldwide oil and gas drilling, well remediation activity, the prices of crude oil and natural gas, capital spending by exploration and production companies and drilling contractors, worldwide oil and gas inventory levels and, to a lesser degree, the level of investment in wind and geothermal energy projects. Key industry indicators for the first quarter of 2026 and 2025, and the fourth quarter of 2025 include the following:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% increase (decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
1Q26 v |
|
|
1Q26 v |
|
|
|
1Q26* |
|
|
1Q25* |
|
|
4Q25* |
|
|
1Q25 |
|
|
4Q25 |
|
Active Drilling Rigs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
548 |
|
|
|
588 |
|
|
|
548 |
|
|
|
(6.8 |
)% |
|
|
— |
% |
Canada |
|
|
201 |
|
|
|
216 |
|
|
|
185 |
|
|
|
(6.9 |
)% |
|
|
8.6 |
% |
International |
|
|
1,083 |
|
|
|
1,098 |
|
|
|
1,066 |
|
|
|
(1.4 |
)% |
|
|
1.6 |
% |
Worldwide |
|
|
1,832 |
|
|
|
1,902 |
|
|
|
1,799 |
|
|
|
(3.7 |
)% |
|
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West Texas Intermediate
Crude Prices (per barrel) |
|
$ |
71.98 |
|
|
$ |
71.84 |
|
|
$ |
59.64 |
|
|
|
0.2 |
% |
|
|
20.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Prices ($/mmbtu) |
|
$ |
3.04 |
|
|
$ |
4.15 |
|
|
$ |
3.75 |
|
|
|
(26.7 |
)% |
|
|
(18.9 |
)% |
* Averages for the quarters indicated. See sources below.
The following table details the U.S., Canadian, and international rig activity and West Texas Intermediate Crude Oil prices for the past nine quarters ended March 31, 2026, on a quarterly basis.
Source: Rig count: Baker Hughes, Inc. (www.bakerhughes.com); West Texas Intermediate Crude Oil and Natural Gas Prices: US Department of Energy, Energy Information Administration (www.eia.doe.gov).
The worldwide quarterly average rig count increased 2 percent (from 1,799 to 1,832) in the first quarter of 2026 when compared to the fourth quarter of 2025. The average per barrel price of West Texas Intermediate Crude Oil increased 21 percent (from $59.64 per barrel to $71.98 per barrel) and natural gas prices decreased 19 percent (from $3.75 per mmbtu to $3.04 per mmbtu) in the first quarter of 2026 compared to the fourth quarter of 2025.
On April 24, 2026, there were 674 rigs actively drilling in North America, comprised of U.S. and Canada, which decreased 10 percent from the first quarter average of 749 rigs. The price for West Texas Intermediate Crude Oil was $94.40 per barrel at April 24, 2026, an increase of 31 percent from the first quarter of 2026 average. The price for natural gas was $2.52 per mmbtu at April 24, 2026, a decrease of 17 percent from the first quarter of 2026 average.
Results of Operations
Financial results by operating segment are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2026 |
|
|
2025 |
|
Revenue: |
|
|
|
|
|
|
Energy Products and Services |
|
$ |
897 |
|
|
$ |
992 |
|
Energy Equipment |
|
|
1,190 |
|
|
|
1,146 |
|
Eliminations |
|
|
(35 |
) |
|
|
(35 |
) |
Total revenue |
|
$ |
2,052 |
|
|
$ |
2,103 |
|
|
|
|
|
|
|
|
Operating profit: |
|
|
|
|
|
|
Energy Products and Services |
|
$ |
26 |
|
|
$ |
83 |
|
Energy Equipment |
|
|
93 |
|
|
|
134 |
|
Eliminations and corporate costs |
|
|
(72 |
) |
|
|
(65 |
) |
Total operating profit |
|
$ |
47 |
|
|
$ |
152 |
|
Energy Products and Services
three months ended March 31, 2026 and 2025. Revenue from Energy Products and Services was $897 million for the three months ended March 31, 2026, compared to $992 million for the three months ended March 31, 2025, a decrease of $95 million or 10 percent. Revenue was negatively impacted from the Middle East conflict, resulting in delayed deliveries of capital equipment, as well as a 7 percent reduction in North America rig count resulting in lower revenue in the region.
Operating profit from Energy Products and Services was $26 million for the three months ended March 31, 2026, compared to an operating profit of $83 million for the three months ended March 31, 2025, a decrease of $57 million. Profitability was impacted by reduced deliveries of capital equipment due to the conflict in the Middle East and decreased product sales from overall drilling levels, as well as higher tariffs and inflationary pressures for certain raw materials.
Energy Equipment
three months ended March 31, 2026 and 2025. Revenue from Energy Equipment was $1,190 million for the three months ended March 31, 2026, compared to $1,146 million for the three months ended March 31, 2025, an increase of $44 million or 4 percent. Strong execution on backlog for capital equipment more than offset a 12 percent decline in sales of aftermarket parts and services, which were negatively impacted by delivery delays resulting from logistics challenges in the Middle East.
Operating profit from Energy Equipment was $93 million for the three months ended March 31, 2026, compared to an operating profit of $134 million for the three months ended March 31, 2025, a decrease of $41 million. Profitability for the segment was impacted by a less favorable sales mix, rising freight costs, both primarily from the conflict in the Middle East.
The Energy Equipment segment monitors its capital equipment backlog to plan its business. New orders are added to backlog only when the Company receives a firm written order for major completion and production components or a contract related to a construction project. The capital equipment backlog was $4.23 billion at March 31, 2026, a decrease of $184 million from backlog of $4.41 billion at March 31, 2025. Although numerous factors can affect the timing of revenue out of backlog (including, but not limited to, customer change orders, supplier accelerations or delays, and the current uncertainty and conflict in the Middle East), the Company reasonably expects approximately 40 percent of backlog to become revenue during the rest of 2026 and the remainder thereafter. At March 31, 2026, approximately 58 percent of the capital equipment backlog was for offshore products and approximately 94 percent of the capital equipment backlog was destined for international markets.
Eliminations and corporate costs
Eliminations and corporate costs were $72 million for the three months ended March 31, 2026, compared to $65 million for the three months ended March 31, 2025.
Sales from one segment to another generally are priced at estimated equivalent commercial selling prices; however, segments originating an external sale are credited with the full profit to the Company. Eliminations include intercompany transactions conducted between the two reporting segments that are eliminated in consolidation. Intrasegment transactions are eliminated within each segment. Eliminations decreased 15 percent when compared to the first quarter of 2025 due to lower activity, while corporate costs increased 22 percent. Corporate costs included $20 million in pre-tax Other Items for the three months ended March 31, 2026, compared to $5 million for the three months ended March 31, 2025. Pre-tax Other Items in the current year primarily related to a non-recurring charge related to stock-based compensation and other restructuring costs.
Interest and financial costs and Interest income
Interest and financial costs were $22 million for each of the three months ended March 31, 2026 and 2025, remaining consistent year-over-year.
Interest income was $11 million for each of the three months ended March 31, 2026 and 2025, remaining consistent year-over-year.
Equity loss in unconsolidated affiliates
Equity loss in unconsolidated affiliates was $3 million and zero for the three months ended March 31, 2026, and 2025, respectively. Sales for our largest investment in unconsolidated affiliates declined 15 percent for the first quarter of 2026 when compared to the first quarter of 2025. The decline in sales is primarily due to pricing pressures for oil country tubular goods which led to lower profitability year-over-year.
Other income (expense), net
Other income (expense), net was $2 million for the three months ended March 31, 2026, compared to $(20) million for three months ended March 31, 2025. The change in expense was primarily due to larger foreign currency fluctuations in the prior year, particularly with the devaluation of the U.S. Dollar.
Provision for income taxes
The effective tax rate was 42.9% and 38.8% for the three months ended March 31, 2026, and 2025, respectively, as compared to the U.S. statutory tax rate of 21% for both periods. The effective tax rate for the three months ended March 31, 2026 was negatively impacted by a mix of earnings in higher tax rate jurisdictions and a shortfall related to previously recognized stock compensation deductibility. The effective tax rate for the three months ended March 31, 2025 was negatively impacted by a mix of earnings in higher tax rate jurisdictions, unfavorable adjustments related to changes in certain foreign currency exchange rates, a shortfall related to previously recognized stock compensation deductibility, and adjustments to the carrying value of deferred tax assets, partially offset by a benefit from withholding tax refunds received.
Non-GAAP Financial Measures and Reconciliations
This Form 10-Q contains certain non-GAAP financial measures that management believes are useful tools for internal use and the investment community in evaluating NOV’s overall financial performance. These non-GAAP financial measures are broadly used to value and compare companies in the oilfield services and equipment industry. Not all companies define these measures in the same way. In addition, these non-GAAP financial measures are not a substitute for financial measures prepared in accordance with GAAP and should therefore be considered only as supplemental to such GAAP financial measures.
The Company defines Adjusted Operating Profit as Operating Profit excluding gains and losses on sales of fixed assets, and, when applicable, pre-tax Other Items. The Company defines Adjusted EBITDA as Operating Profit excluding depreciation, amortization, gains and losses on sales of fixed assets, and, when applicable, pre-tax Other Items. Adjusted Operating Profit % is a ratio showing Adjusted Operating Profit as a percentage of sales and Adjusted EBITDA % is a ratio showing Adjusted EBITDA as a percentage of sales. Management believes this is important information to provide because it is used by management to evaluate the Company’s operational performance and trends between periods and manage the business. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company’s results of ongoing operations. Adjusted Operating Profit, Adjusted Operating Profit %, Adjusted EBITDA, and Adjusted EBITDA % are not intended to replace GAAP financial measures, such as Net Income and Operating Profit %.
The following tables set forth the reconciliation of Adjusted EBITDA to its most comparable GAAP financial measure (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2026 |
|
|
2025 |
|
|
2025 |
|
Operating profit: |
|
|
|
|
|
|
|
|
|
Energy Products and Services |
|
$ |
26 |
|
|
$ |
83 |
|
|
$ |
73 |
|
Energy Equipment |
|
|
93 |
|
|
|
134 |
|
|
|
107 |
|
Eliminations and corporate costs |
|
|
(72 |
) |
|
|
(65 |
) |
|
|
(88 |
) |
Total operating profit |
|
$ |
47 |
|
|
$ |
152 |
|
|
$ |
92 |
|
|
|
|
|
|
|
|
|
|
|
Operating profit %: |
|
|
|
|
|
|
|
|
|
Energy Products and Services |
|
|
2.9 |
% |
|
|
8.4 |
% |
|
|
7.4 |
% |
Energy Equipment |
|
|
7.8 |
% |
|
|
11.7 |
% |
|
|
8.0 |
% |
Eliminations and corporate costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total operating profit % |
|
|
2.3 |
% |
|
|
7.2 |
% |
|
|
4.0 |
% |
|
|
|
|
|
|
|
|
|
|
Pre-tax Other Items, net: |
|
|
|
|
|
|
|
|
|
Energy Products and Services |
|
$ |
8 |
|
|
$ |
5 |
|
|
$ |
7 |
|
Energy Equipment |
|
|
9 |
|
|
|
3 |
|
|
|
46 |
|
Corporate |
|
|
20 |
|
|
|
5 |
|
|
|
33 |
|
Total pre-tax Other Items |
|
$ |
37 |
|
|
$ |
13 |
|
|
$ |
86 |
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on sales of fixed assets: |
|
|
|
|
|
|
|
|
|
Energy Products and Services |
|
$ |
1 |
|
|
$ |
(2 |
) |
|
$ |
1 |
|
Energy Equipment |
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
Corporate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total (gain) loss on sales of fixed assets |
|
$ |
1 |
|
|
$ |
(2 |
) |
|
$ |
(1 |
) |
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit: |
|
|
|
|
|
|
|
|
|
Energy Products and Services |
|
$ |
35 |
|
|
$ |
86 |
|
|
$ |
81 |
|
Energy Equipment |
|
|
102 |
|
|
|
137 |
|
|
|
151 |
|
Eliminations and corporate costs |
|
|
(52 |
) |
|
|
(60 |
) |
|
|
(55 |
) |
Adjusted operating profit |
|
$ |
85 |
|
|
$ |
163 |
|
|
$ |
177 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation & amortization: |
|
|
|
|
|
|
|
|
|
Energy Products and Services |
|
$ |
61 |
|
|
$ |
59 |
|
|
$ |
59 |
|
Energy Equipment |
|
|
29 |
|
|
|
28 |
|
|
|
29 |
|
Corporate |
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
Total depreciation & amortization |
|
$ |
92 |
|
|
$ |
89 |
|
|
$ |
90 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
Energy Products and Services |
|
$ |
96 |
|
|
$ |
145 |
|
|
$ |
140 |
|
Energy Equipment |
|
|
131 |
|
|
|
165 |
|
|
|
180 |
|
Eliminations and corporate costs |
|
|
(50 |
) |
|
|
(58 |
) |
|
|
(53 |
) |
Total Adjusted EBITDA |
|
$ |
177 |
|
|
$ |
252 |
|
|
$ |
267 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA %: |
|
|
|
|
|
|
|
|
|
Energy Products and Services |
|
|
10.7 |
% |
|
|
14.6 |
% |
|
|
14.2 |
% |
Energy Equipment |
|
|
11.0 |
% |
|
|
14.4 |
% |
|
|
13.5 |
% |
Eliminations and corporate costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total Adjusted EBITDA % |
|
|
8.6 |
% |
|
|
12.0 |
% |
|
|
11.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2026 |
|
|
2025 |
|
|
2025 |
|
Reconciliation of Adjusted operating profit and Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
GAAP net income (loss) attributable to Company |
|
$ |
19 |
|
|
$ |
73 |
|
|
$ |
(78 |
) |
Noncontrolling interests |
|
|
1 |
|
|
|
1 |
|
|
|
(3 |
) |
Provision for income taxes |
|
|
15 |
|
|
|
47 |
|
|
|
147 |
|
Interest and financial costs |
|
|
22 |
|
|
|
22 |
|
|
|
22 |
|
Interest income |
|
|
(11 |
) |
|
|
(11 |
) |
|
|
(19 |
) |
Equity loss in unconsolidated affiliates |
|
|
3 |
|
|
|
— |
|
|
|
6 |
|
Other (income) expense, net |
|
|
(2 |
) |
|
|
20 |
|
|
|
17 |
|
(Gain) loss on sales of fixed assets |
|
|
1 |
|
|
|
(2 |
) |
|
|
(1 |
) |
Pre-tax Other Items, net |
|
|
37 |
|
|
|
13 |
|
|
|
86 |
|
Adjusted operating profit |
|
|
85 |
|
|
|
163 |
|
|
|
177 |
|
Depreciation and amortization |
|
|
92 |
|
|
|
89 |
|
|
|
90 |
|
Total Adjusted EBITDA |
|
$ |
177 |
|
|
$ |
252 |
|
|
$ |
267 |
|
Liquidity and Capital Resources
Overview
At March 31, 2026, the Company had cash and cash equivalents of $1,342 million and total debt of $1,715 million. At December 31, 2025, cash and cash equivalents were $1,552 million and total debt was $1,718 million. As of March 31, 2026, approximately $839 million of the $1,342 million of cash and cash equivalents was held by our foreign subsidiaries and the earnings associated with this cash could be subject to foreign withholding taxes and incremental U.S. taxation if transferred among countries or repatriated to the U.S. If opportunities to invest in the U.S. are greater than available cash balances that are not subject to income tax, rather than repatriating cash, the Company may choose to borrow against its revolving credit facility.
On March 17, 2026, the Company extended the maturity date of the revolving credit facility by one additional year to September 12, 2030. The revolving credit facility has a borrowing capacity of $1.5 billion through September 12, 2030. The Company has the right to increase the aggregate commitments under this agreement to an aggregate amount of up to $2.5 billion upon the consent of only those lenders holding any such increase. Interest under the multicurrency facility is based upon Secured Overnight Financing Rate (SOFR), Euro Interbank Offered Rate (EURIBOR), Sterling Overnight Index Average (SONIA), Canadian Overnight Repo Rate Average (CORRA), or Norwegian Interbank Offered Rate (NIBOR), plus 1.25% subject to a ratings-based grid or the U.S. prime rate. The credit facility contains a financial covenant establishing a maximum debt-to-capitalization ratio of 60%. As of March 31, 2026, the Company was in compliance with a debt-to-capitalization ratio of 24.0% and had no borrowings or letters of credits issued under the facility, resulting in $1.5 billion of available funds.
A consolidated joint venture of the Company borrowed $120 million against a $150 million bank line of credit, payable by June 2032, for the construction of a facility in Saudi Arabia. Interest under the bank line of credit is based upon SOFR plus 1.40%. The bank line of credit contains a financial covenant regarding maximum debt-to-equity ratio of 75%. As of March 31, 2026, the joint venture was in compliance and will not have future borrowings on the line of credit. As of March 31, 2026, the Company had $84 million in borrowings related to this line of credit. The Company has $11 million in payments related to this line of credit due in the next twelve months. The Company can repay the entire outstanding facility balance without penalty at its sole discretion.
Other debt at March 31, 2026 included $42 million of amounts owed to current and former minority interest partners of NOV consolidated joint ventures, of which $16 million is due in the next twelve months.
The Company’s outstanding debt at March 31, 2026 also consisted of $1,092 million in 3.95% Senior Notes, maturing on December 1, 2042, and $497 million in 3.60% Senior Notes, maturing on December 1, 2029. The Company was in compliance with all covenants at March 31, 2026. Long-term lease liabilities totaled $524 million at March 31, 2026.
The Company had $1,040 million of outstanding letters of credit at March 31, 2026, primarily in Norway and the United States, that are under various bilateral letter of credit facilities. Letters of credit are issued as bid bonds, advanced payment bonds and performance bonds.
The following table summarizes our net cash provided by (used in) continuing operating activities, continuing investing activities and continuing financing activities for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2026 |
|
|
2025 |
|
Net cash provided by (used in) operating activities |
|
$ |
(26 |
) |
|
$ |
135 |
|
Net cash used in investing activities |
|
|
(64 |
) |
|
|
(81 |
) |
Net cash used in financing activities |
|
|
(115 |
) |
|
|
(135 |
) |
Significant uses of cash during the first three months of 2026
•Cash flows used in operating activities were $26 million, primarily driven by changes in the primary components of our working capital (receivables, inventories, accounts payable, and accrued liabilities).
•Capital expenditures were $65 million.
•Dividend payments to our shareholders were $33 million.
•Share repurchases were $67 million.
Other
The effect of the change in exchange rates on cash flows was a decrease of $5 million for the first three months of 2026, and an increase of $8 million for the first three months of 2025.
We believe that cash on hand, cash generated from operations and amounts available under our credit facilities and from other sources of debt will be sufficient to fund operations, lease payments, working capital needs, capital expenditure requirements, dividends and financing obligations.
During the three months ended March 31, 2026, the Company repurchased approximately 3.5 million shares of common stock under its share repurchase program for an aggregate amount of $67 million. During the three months ended March 31, 2025, the Company repurchased 5.4 million shares of common stock under the program for an aggregate amount of $81 million. The Company expects to return at least 50% of Excess Free Cash Flow (defined as cash flow from operations less capital expenditures and other investments, including acquisitions and divestitures), through a combination of quarterly base dividends, opportunistic stock buybacks, and an annual supplemental dividend to true-up returns to shareholders on an annual basis.
We may pursue acquisition candidates, but the timing, size or success of any acquisition effort and the related potential capital commitments cannot be predicted. We continue to expect to fund future cash acquisitions primarily with cash flow from operations and borrowings, including the unborrowed portion of the revolving credit facility or new debt issuances, but may also issue additional equity either directly or in connection with acquisitions. There can be no assurance that additional financing for acquisitions will be available at terms acceptable to us.
Cautionary Note Regarding Forward-Looking Statements
This document contains, or has incorporated by reference, statements that are not historical facts, including estimates, projections, and statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often contain words such as “may,” “can,” “likely,” “believe,” “plan,” “predict,” “potential,” “will,” “intend,” “think,” “should,” “expect,” “anticipate,” “estimate,” “forecast,” “expectation,” “goal,” “outlook,” “projected,” “projections,” “target,” and other similar words, although some such statements are expressed differently. Other oral or written statements we release to the public may also contain forward-looking statements. Forward-looking statements involve risk and uncertainties and reflect our best judgment based on current information. You should be aware that our actual results could differ materially from results anticipated in such forward-looking statements due to a number of factors, including but not limited to changes in oil and gas prices, customer demand for our products, challenges related to NOV’s operations in the Middle East, potential catastrophic events related to our operations, protection of intellectual property rights, compliance with laws, and worldwide economic activity, including matters related to recent Russian sanctions and changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs and their related impacts on the economy. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward-looking statements. We undertake no obligation to update any such factors or forward-looking statements to reflect future events or developments. You should also consider carefully the statements under “Risk Factors,” as disclosed in our most recent Annual Report on Form 10-K, as updated in Part II, Item 1A of our most recent Quarterly Report on Form 10-Q, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our most recent Annual Report on Form 10-K, which address additional factors that could cause our actual results to differ from those set forth in such forward-looking statements, as well as additional disclosures we make in our press releases and other securities filings. We also suggest that you listen to our quarterly earnings release conference calls with financial analysts.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to changes in foreign currency exchange rates and interest rates. Additional information concerning each of these matters follows:
Foreign Currency Exchange Rates
We have extensive operations in foreign countries. The net assets and liabilities of these operations are exposed to changes in foreign currency exchange rates, although such fluctuations have a muted effect on net income since the functional currency for the majority of them is the local currency. These operations also have net assets and liabilities not denominated in the functional currency, which exposes us to changes in foreign currency exchange rates that impact income. We recorded a foreign exchange gain in our income statement of $6 million in the first three months of 2026, compared to a $17 million foreign exchange loss in the same period of the prior year. Gains and losses are primarily due to exchange rate fluctuations related to monetary asset balances denominated in currencies other than the functional currency and adjustments to our hedged positions as a result of changes in foreign currency exchange rates. Currency exchange rate fluctuations may create losses in future periods to the extent we maintain net monetary assets and liabilities not denominated in the functional currency of the NOV operation.
Some of our revenues in foreign countries are denominated in U.S. dollars, and therefore, changes in foreign currency exchange rates impact our earnings to the extent that costs associated with those U.S. dollar revenues are denominated in the local currency. Similarly, some of our revenues are denominated in foreign currencies, but have associated U.S. dollar costs, which also give rise to foreign currency exchange rate exposure. In order to mitigate that risk, we may utilize foreign currency forward contracts to better match the currency of our revenues and associated costs. We do not use foreign currency forward contracts for trading or speculative purposes.
The Company had other financial market risk sensitive instruments (cash balances, overdraft facilities, accounts receivable and accounts payable) denominated in foreign currencies with transactional exposures totaling $615 million and translation exposures totaling $421 million as of March 31, 2026. The Company estimates that a hypothetical 10% movement of all applicable foreign currency exchange rates on the transactional exposures could affect net income by $49 million and the translational exposures could affect other comprehensive income by $42 million.
The counterparties to forward contracts are major financial institutions. The credit ratings and concentration of risk of these financial institutions are monitored on a continuing basis. Because these contracts are net-settled the Company’s credit risk with the counterparties is limited to the foreign currency rate differential at the end of the contract.
Interest Rate Risk
At March 31, 2026, borrowings consisted of $1,092 million in 3.95% Senior Notes, $497 million in 3.60% Senior Notes, and other debt of $126 million. At March 31, 2026, there were no outstanding letters of credit issued under the Company’s revolving credit facility, resulting in $1.5 billion of available funds. Additionally, the Company’s joint venture has outstanding borrowings of $84 million under a $150 million bank line of credit for the construction of a facility in Saudi Arabia. Interest under the bank line of credit is based upon SOFR plus 1.40%. Occasionally a portion of borrowings under our credit facility could be denominated in multiple currencies which could expose us to market risk with exchange rate movements. These instruments carry interest at a pre-agreed upon percentage point spread from either SOFR, EURIBOR, SONIA, CORRA, or NIBOR, or at the U.S. prime rate. Under our credit facility, we may, at our option, fix the interest rate for certain borrowings based on a spread over SOFR, EURIBOR, SONIA, CORRA or NIBOR for one month to six months. Our objective is to maintain a portion of our debt in variable rate borrowings for the flexibility obtained regarding early repayment without penalties and lower overall cost as compared with fixed-rate borrowings.
Item 4. Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures and is recorded, processed, summarized and reported within the time period specified in the rules and forms of the Securities and Exchange Commission. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this report at a reasonable assurance level.
There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
