Geneseo Student Managed Investment Fund
Feb-29
Company Overview
National Oilwell Varco, designs, constructs, manufactures, and
sells systems, components, and products for oil and gas drilling
and production, as well as provides oilfield services and
supplies, and supply chain integration services to the upstream
oil and gas industry worldwide.
Source: Finviz.com
Business Segments
• Rig Technology
• Offers offshore and onshore drilling components and services used in the
construction of oil and gas rigs.
• Petroleum Services & Supplies
• Markets consumables used in the extraction process of oil and gas
• Distribution & Transmission
• Provides pipe maintenance, spare parts, and repair & operating supplies.
Source: NOV 10K- FYE 2012
Business Segments
Source: NOV 10K- FYE 2012
Oil & Gas Industry
• 2004-2008
• $30 per barrel at the beginning of 2004 to more than $130 by mid 2008
• Attracted investment in oil and gas exploration and development
• Increased utilization, 70% to over 90%
• 2008
• Collapse of spot price of oil from $140 to under $50
• Diminished utilization to a meager 40%
• Perpetuated by a stalling economy, nearly halted exploration and rig construction
• 2009-present
• Recovery in oil prices, approaching $100 per barrel
• Growing Utilization rates, approaching 90%
Source: NOV Rig Census 2011
Utilization
Source: Rigzone.com
Source: NOV Rig Census 2011
Period of High Utilization
Source: NOV Rig Census 2011
Backlog – National Oilwell Varco
Source: NOV Rig Census 2011
Porters Five Forces
• Threat of New Entrants
• Minimal, only few minor niche players show any potential to compete
• Industry Rivalry
• Heavy price competition, especially in National Oilwell Varco’s PS&S segment
• Bargaining Power of Buyers
• “[National Oilwell Varco] equipment is on 90% of the world's rigs, and a rig
cannot be built in the Western world without using some components from
National Oilwell Varco.” – Stephen Ellis, Morningstar
• Bargaining Power of Suppliers
• Threat of Substitute Products or Services
• NOV’s services are easily replaced by in-house teams, especially in large
multinational customers.
Financial Overview
• National Oilwell Varco’s financial condition is strong and stable:
• Debt/Equity - .21 (after adjustment for Robbins & Myers acquisition)
• Highly capitalized despite aggressive acquisition and growth strategy
• Regularly generating over $2B USD per year
• Stable bottom line growth
Source: TD Ameritrade