NOV 10-Q
NOV Inc. (NOV)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of April 14, 2023 the registrant had
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NOV INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
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March 31, |
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December 31, |
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2023 |
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2022 |
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ASSETS |
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(Unaudited) |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables, net |
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Inventories, net |
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Contract assets |
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Prepaid and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Lease right-of-use assets, operating |
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Lease right-of-use assets, financing |
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Goodwill |
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Intangibles, net |
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Investment in unconsolidated affiliates |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Contract liabilities |
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Current portion of lease liabilities |
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Current portion of long-term debt |
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Accrued income taxes |
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Total current liabilities |
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Long-term debt |
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Lease liabilities |
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Deferred income taxes |
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Other liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Common stock - par value $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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( |
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Retained deficit |
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( |
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( |
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Total Company stockholders' equity |
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Noncontrolling interests |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See notes to unaudited consolidated financial statements.
2
NOV INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)
(In millions, except per share data)
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Revenue |
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$ |
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$ |
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Cost of revenue |
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Gross profit |
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Selling, general and administrative |
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Operating profit (loss) |
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( |
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Interest and financial costs |
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( |
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( |
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Interest income |
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Equity income in unconsolidated affiliates |
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Other expense, net |
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( |
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( |
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Net income (loss) before income taxes |
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( |
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Provision for income taxes |
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Net income (loss) |
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( |
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Net income (loss) attributable to noncontrolling interests |
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( |
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Net income (loss) attributable to Company |
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$ |
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$ |
( |
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Net income (loss) attributable to Company per share: |
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Basic |
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$ |
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$ |
( |
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Diluted |
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$ |
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$ |
( |
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Cash dividends per share |
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$ |
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$ |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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See notes to unaudited consolidated financial statements.
3
NOV INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
(In millions)
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Net income (loss) |
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$ |
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$ |
( |
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Currency translation adjustments |
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Changes in derivative financial instruments, net of tax |
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( |
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( |
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Changes in defined benefit plans, net of tax |
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— |
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Comprehensive income (loss) |
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( |
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Comprehensive income (loss) attributable to noncontrolling interest |
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( |
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Comprehensive income (loss) loss attributable to Company |
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$ |
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$ |
( |
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See notes to unaudited consolidated financial statements.
4
NOV INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In millions)
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net income (loss) |
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$ |
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$ |
( |
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Adjustments to reconcile net income (loss) to net cash used in |
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Depreciation and amortization |
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Provision for inventory losses |
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Deferred income taxes |
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( |
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( |
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Equity income in unconsolidated affiliates |
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( |
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( |
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Other, net |
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Change in operating assets and liabilities, net of acquisitions: |
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Receivables |
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( |
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( |
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Inventories |
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( |
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( |
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Contract assets |
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Prepaid and other current assets |
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( |
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Accounts payable |
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Accrued liabilities |
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( |
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Contract liabilities |
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( |
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Income taxes payable |
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( |
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Other assets/liabilities, net |
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Net cash used in operating activities |
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$ |
( |
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$ |
( |
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Cash flows from investing activities: |
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Purchases of property, plant and equipment |
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( |
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( |
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Other |
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( |
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Net cash used in investing activities |
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$ |
( |
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$ |
( |
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Cash flows from financing activities: |
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Borrowings against lines of credit and other debt |
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Cash dividends paid |
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( |
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( |
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Financing leases |
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( |
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( |
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Other |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Effect of exchange rates on cash |
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— |
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Decrease in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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Supplemental disclosures of cash flow information: |
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Cash payments during the period for: |
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Interest |
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$ |
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$ |
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Income taxes |
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$ |
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$ |
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See notes to unaudited consolidated financial statements.
5
NOV INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In millions)
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Shares Issued |
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Common |
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Additional |
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Accumulated |
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Retained |
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Total |
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Noncontrolling |
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Total |
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Balance at December 31, 2022 |
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( |
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( |
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$ |
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Net income (loss) |
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— |
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— |
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— |
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— |
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( |
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Other comprehensive income, net |
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— |
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— |
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— |
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— |
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— |
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Cash dividends, $ |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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— |
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( |
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Transactions with non-controlling interests |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Common stock issued |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Withholding taxes |
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( |
) |
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— |
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( |
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— |
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— |
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( |
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— |
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( |
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Other |
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— |
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— |
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— |
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— |
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— |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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$ |
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Shares Issued |
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Common |
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Additional |
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Accumulated |
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Retained |
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Total |
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Noncontrolling |
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Total |
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Balance at December 31, 2021 |
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( |
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( |
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$ |
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Net income (loss) |
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— |
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— |
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— |
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— |
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( |
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( |
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( |
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Other comprehensive loss, net |
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— |
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— |
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— |
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— |
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— |
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Cash dividends, $ |
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— |
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— |
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— |
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— |
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( |
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( |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Withholding taxes |
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— |
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— |
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( |
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— |
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— |
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( |
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— |
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( |
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Other |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
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$ |
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See notes to unaudited consolidated financial statements.
6
NOV INC.
Notes to Consolidated Financial Statements (Unaudited)
The accompanying unaudited consolidated financial statements of NOV Inc. (“NOV” or the “Company”) present information in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial information and the instructions to Form 10-Q and applicable rules of Regulation S-X. They do not include all information or footnotes required by GAAP in the United States for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements included in the Company’s 2022 Annual Report on Form 10-K. Certain reclassifications have been made to prior period financial information in order to conform with current period presentation.
In our opinion, the consolidated financial statements include all adjustments, which are of a normal recurring nature unless otherwise disclosed, necessary for a fair presentation of the results for the interim periods. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year.
The preparation of financial statements in conformity with GAAP in the United States requires management to make estimates and assumptions that affect reported and contingent amounts of assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The fair values of cash and cash equivalents, receivables and payables were approximately the same as their presented carrying values because of the short maturities of these instruments. The fair value of long-term debt is provided in Note 9, and the fair values of derivative financial instruments are provided in Note 12.
Inventories consist of (in millions):
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March 31, |
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December 31, |
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2023 |
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2022 |
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Raw materials and supplies |
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$ |
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$ |
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Work in process |
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Finished goods and purchased products |
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Less: Inventory reserve |
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( |
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( |
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Total |
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$ |
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$ |
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Accrued liabilities consist of (in millions):
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March 31, |
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December 31, |
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2023 |
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2022 |
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Compensation |
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$ |
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$ |
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Vendor costs |
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Taxes (non-income) |
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Warranties |
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Insurance |
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Interest |
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Fair value of derivatives |
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Commissions |
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Other |
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Total |
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$ |
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$ |
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7
The components of accumulated other comprehensive income (loss) are as follows (in millions):
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Derivative |
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Employee |
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Currency |
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Financial |
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Benefit |
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Translation |
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Instruments, |
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Plans, |
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Adjustments |
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Net of Tax |
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Net of Tax |
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Total |
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Balance at December 31, 2022 |
|
$ |
( |
) |
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$ |
( |
) |
|
$ |
( |
) |
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$ |
( |
) |
Accumulated other comprehensive income (loss) before |
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( |
) |
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Amounts reclassified from accumulated other comprehensive |
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Balance at March 31, 2023 |
|
$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
The components of amounts reclassified from accumulated other comprehensive income (loss) are as follows (in millions):
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Three Months Ended March 31, |
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2023 |
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2022 |
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Derivative |
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Currency |
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Employee |
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|
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Derivative |
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|
Employee |
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|
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|
|||||||
|
|
Financial |
|
|
Translation |
|
|
Benefit |
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Financial |
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Benefit |
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|||||||
|
|
Instruments |
|
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Adjustments |
|
|
Plans |
|
|
Total |
|
|
Instruments |
|
|
Plans |
|
|
Total |
|
|||||||
Revenue |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
||
Cost of revenue |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
||
Other expense |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Selling, general and administrative |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Tax effect |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
||||
The Company’s reporting currency is the U.S. dollar. A majority of the Company’s international entities in which there is a substantial investment have the local currency as their functional currency. As a result, currency translation adjustments resulting from the process of translating the entities’ financial statements into the reporting currency are reported in other comprehensive income (loss).
The effect of changes in the fair values of derivatives designated as cash flow hedges are accumulated in other comprehensive income (loss), net of tax, until the underlying transactions are realized. The movement in other comprehensive income (loss) from period to period will be the combination of: 1) changes in fair value of open derivatives of $(
Financial results by operating segment are as follows (in millions):
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Revenue: |
|
|
|
|
|
|
||
Wellbore Technologies |
|
$ |
|
|
$ |
|
||
Completion & Production Solutions |
|
|
|
|
|
|
||
Rig Technologies |
|
|
|
|
|
|
||
Eliminations |
|
|
( |
) |
|
|
( |
) |
Total revenue |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Operating profit (loss): |
|
|
|
|
|
|
||
Wellbore Technologies |
|
$ |
|
|
$ |
|
||
Completion & Production Solutions |
|
|
|
|
|
( |
) |
|
Rig Technologies |
|
|
|
|
|
|
||
Eliminations and corporate costs |
|
|
( |
) |
|
|
( |
) |
Total operating profit (loss) |
|
$ |
|
|
$ |
( |
) |
|
8
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
Beginning February 2022, as a result of armed conflict in Ukraine, governments in the European Union, the United States, the United Kingdom, Switzerland, and other countries have enacted sanctions against Russia and Russian interests. Among other things, these sanctions include controls on the export, re-export, and in-country transfer in Russia of certain goods, supplies, and technologies, including some that we use in our business in Russia. They also impose restrictions on doing business with specially designated nationals, including certain state-owned Russian customers, certain financial institutions and certain individuals and restrict or prohibit new investments and business activities in Russia. As previously disclosed, in response to these sanctions, the Company ceased new investments and curtailed our activities in Russia. Further, during the third quarter of 2022, the Company sold its business in Belarus and committed to a plan to sell its businesses in Russia. The sale is subject to government approval under Russian law.
As a result of these actions, we recorded $
Total other items included in operating profit for the three months ended March 31, 2023, were a pre-tax credit of $
Disaggregation of Revenue
The following table disaggregates the Company’s revenue by major geographic and market segment destination. In the table, North America includes the U.S. and Canada (in millions):
|
|
Three Months Ended March 31, |
|
|||||||||||||||||||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
||||||||||||||||||||||||||||||||||
|
|
|
|
|
Completion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completion |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Wellbore |
|
|
& Production |
|
|
Rig |
|
|
|
|
|
|
|
|
Wellbore |
|
|
& Production |
|
|
Rig |
|
|
|
|
|
|
|
||||||||||
|
|
Technologies |
|
|
Solutions |
|
|
Technologies |
|
|
Elims. |
|
|
Total |
|
|
Technologies |
|
|
Solutions |
|
|
Technologies |
|
|
Elims. |
|
|
Total |
|
||||||||||
North America |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
International |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||||
Eliminations |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
||||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Land |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||||||
Offshore |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||||
Eliminations |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
||||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||||
Performance Obligations
Net revenue recognized from performance obligations satisfied in previous periods was $
Remaining performance obligations represent the transaction price of firm orders for all revenue streams for which work has not been performed on contracts with original expected duration of one year or more. We do not disclose the remaining performance obligations of royalty contracts, service contracts for which there is a right to invoice, and short-term contracts that are expected to have a duration of one year or less. As of March 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $
9
Contract Assets and Liabilities
Contract assets include unbilled amounts when revenue recognized exceeds the amount billed to the customer under contracts where revenue is recognized over time. Contract liabilities consist of customer billings in excess of revenue recognized under over-time contracts, customer advance payments and deferred revenue.
The changes in the carrying amount of contract assets and contract liabilities are as follows (in millions):
|
|
Contract |
|
|
Contract |
|
||
Balance at December 31, 2022 |
|
$ |
|
|
$ |
|
||
Provision |
|
|
— |
|
|
|
— |
|
Billings |
|
|
( |
) |
|
|
|
|
Revenue recognized |
|
|
|
|
|
( |
) |
|
Currency translation adjustments and other |
|
|
|
|
|
|
||
Balance at March 31, 2023 |
|
$ |
|
|
$ |
|
||
Allowance for Credit Losses
The Company estimates its allowance for credit losses using information about past events, current conditions and risk characteristics of each customer, and reasonable and supportable forecasts relevant to assessing risk associated with the collectability of receivables and contract assets. The Company’s customer base, mostly in the oil and gas industry, have generally similar collectability risk characteristics, although larger and state-owned customers may have lower risk than smaller independent customers.
Balance at December 31, 2022 |
|
$ |
|
|
Provision for expected credit losses |
|
|
|
|
Recoveries collected |
|
|
( |
) |
Other |
|
|
( |
) |
Balance at March 31, 2023 |
|
$ |
|
The Company leases certain facilities and equipment to support its operations around the world. These leases generally require the Company to pay maintenance, insurance, taxes and other operating costs in addition to rent. Renewal options are common in longer term leases; however, it is rare that the Company initially intends that a lease option will be exercised due to the cyclical nature of the Company’s business. Residual value guarantees are not typically part of the Company’s leases. Occasionally, the Company sub-leases excess facility space, generally at terms similar to the source lease. The Company reviews agreements at inception to determine if they include a lease and, when they do, uses its incremental borrowing rate to determine the present value of the future lease payments as most do not include implicit interest rates.
Components of leases are as follows (in millions):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Current portion of lease liabilities: |
|
|
|
|
|
|
||
Operating |
|
$ |
|
|
$ |
|
||
Financing |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Long-term portion of lease liabilities: |
|
|
|
|
|
|
||
Operating |
|
$ |
|
|
$ |
|
||
Financing |
|
|
|
|
$ |
|
||
Total |
|
$ |
|
|
$ |
|
||
10
Debt consists of (in millions):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
$ |
|
$ |
|
|
$ |
|
||
$ |
|
|
|
|
|
|
||
Other debt |
|
|
|
|
|
|
||
Total Debt |
|
|
|
|
|
|
||
Less current portion |
|
|
|
|
|
|
||
Long-term debt |
|
$ |
|
|
$ |
|
||
The Company has a revolving credit facility with a borrowing capacity of $
Additionally, a consolidated joint venture of the Company borrowed $
The Company had $
At March 31, 2023 and December 31, 2022, the fair value of the Company’s unsecured Senior Notes approximated $
The effective tax rate for the three months ended March 31, 2023 was
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. 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
11
such that the issuance of stock options and stock appreciation rights reduces the number of available shares under the NOV Plan on a 1-for-1 basis, and the issuance of other awards reduces the number of available shares under the NOV Plan on a 1.5-for-1 basis. At March 31, 2023, approximately
On February 23, 2023, under the NOV Plan, the Company granted
Total expense for all stock-based compensation arrangements was $
There was
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):
|
|
Currency Denomination |
|
|||||||
|
|
March 31, |
|
|
December 31, |
|
||||
Foreign Currency |
|
2023 |
|
|
2022 |
|
||||
South Korean Won |
|
KRW |
|
|
|
KRW |
|
|
||
Norwegian Krone |
|
NOK |
|
|
|
NOK |
|
|
||
U.S. Dollar |
|
USD |
|
|
|
USD |
|
|
||
Japanese Yen |
|
JPY |
|
|
|
JPY |
|
|
||
Brazilian Real |
|
BRL |
|
|
|
BRL |
|
|
||
Euro |
|
EUR |
|
|
|
EUR |
|
|
||
South African Rand |
|
ZAR |
|
|
|
ZAR |
|
|
||
Singapore Dollar |
|
SGD |
|
|
|
SGD |
|
|
||
British Pound Sterling |
|
GBP |
|
|
|
GBP |
|
|
||
Danish Krone |
|
DKK |
|
|
|
DKK |
|
|
||
Canadian Dollar |
|
CAD |
|
|
|
CAD |
|
|
||
Mexican Peso |
|
MXN |
|
— |
|
|
MXN |
|
|
|
Cash Flow Hedging Strategy
To protect against the volatility of forecasted foreign currency cash flows resulting from forecasted revenues and expenses, the Company instituted 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 income (loss) and reclassified into earnings in the same
12
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 $
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 (loss) recognized in other income (expense), net was $(
The Company has the following fair values of its derivative instruments and their balance sheet classifications (in millions):
|
|
Asset Derivatives |
|
|
Liability Derivatives |
|
||||||||||||||
|
|
|
|
Fair Value |
|
|
|
|
Fair Value |
|
||||||||||
|
|
Balance Sheet |
|
March 31, |
|
|
December 31, |
|
|
Balance Sheet |
|
March 31, |
|
|
December 31, |
|
||||
|
|
Location |
|
2023 |
|
|
2022 |
|
|
Location |
|
2023 |
|
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign exchange contracts |
|
Prepaid and other |
|
$ |
|
|
$ |
|
|
Accrued liabilities |
|
$ |
|
|
$ |
|
||||
Foreign exchange contracts |
|
Other Assets |
|
|
— |
|
|
|
— |
|
|
Other liabilities |
|
|
|
|
|
|
||
Total derivatives designated as hedging instruments |
|
|
|
$ |
|
|
$ |
|
|
|
|
$ |
|
|
$ |
|
||||
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign exchange contracts |
|
Prepaid and other |
|
$ |
|
|
$ |
|
|
Accrued liabilities |
|
$ |
|
|
$ |
|
||||
Total derivatives |
|
|
|
$ |
|
|
$ |
|
|
|
|
$ |
|
|
$ |
|
||||
The following table sets forth the computation of weighted average basic and diluted shares outstanding (in millions, except per share data):
|
Three Months Ended |
|
|||||
|
March 31, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Numerator: |
|
|
|
|
|
||
Net income (loss) attributable to Company |
$ |
|
|
$ |
( |
) |
|
Denominator: |
|
|
|
|
|
||
Basic—weighted average common shares outstanding |
|
|
|
|
|
||
Dilutive effect of employee stock options and other |
|
|
|
|
|
||
Diluted outstanding shares |
|
|
|
|
|
||
|
|
|
|
|
|
||
Net income (loss) attributable to Company per share: |
|
|
|
|
|
||
Basic |
$ |
|
|
$ |
( |
) |
|
Diluted |
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Cash dividends per share |
$ |
|
|
$ |
|
||
13
Companies with unvested participating securities are required to utilize a two-class method for the computation of net income attributable to Company per share. The two-class method requires a portion of net income attributable to Company to be allocated to participating securities, which are unvested awards of share-based payments with non-forfeitable rights to receive dividends or dividend equivalents if declared. Net income (loss) attributable to the Company allocated to these participating securities was immaterial for each of the three months ended March 31, 2023 and 2022, respectively.
The Company had stock options outstanding that were anti-dilutive totaling
Cash dividends were $
Our business is governed by laws and regulations, including those directed to the oilfield service industry, promulgated by U.S. federal and state governments and regulatory agencies, as well as international governmental authorities in the many countries in which we conduct business. In the United States these governmental authorities include: the U.S. Department of Labor, the Occupational Safety and Health Administration, the Environmental Protection Agency, the Bureau of Land Management, the Department of Treasury, Office of Foreign Asset Controls, state environmental agencies and many others. We are unaware of any material liabilities in connection with our compliance with such laws. New laws, investigations, regulations and enforcement policies may result in additional, presently unquantifiable, or unknown, costs or liabilities.
From time to time, the Company is involved in various claims, regulatory agency audits, investigations and legal actions involving a variety of matters. The Company maintains insurance that covers claims such as third-party personal injuries or property damage arising from risks associated with the business activities of the Company, such as premises liability, product liability, personal injury, marine risk, property damage, and other such insurable losses. The Company carries substantial insurance to cover insurable risks above a self-insured retention. The Company believes, and the Company’s experience has been, that such insurance has been sufficient to cover any such material risks.
The Company is also a party to claims, threatened and actual litigation, arbitration, internal investigations of potential regulatory and compliance matters which arise both from legacy businesses that the Company has acquired over many years and from the Company’s current ordinary day-to-day business activities. These regulatory matters and disputes involve private parties and/or government authorities, which assert claims against the Company for a broad spectrum of potential claims including: employment law claims, collective actions or class action claims under employment laws, intellectual property claims, (such as alleged patent infringement, and/or misappropriation of trade secrets by the company), premises liability claims, environmental claims, product liability claims, warranty claims, personal injury claims arising from exposure to or use of allegedly defective products, alleged regulatory violations, alleged violations of anti-corruption and anti-bribery laws and other commercial and/or regulatory claims seeking recovery for alleged actual or exemplary damages or fines and penalties. Such claims involve various theories of liability which include: negligence, breach of contract, strict liability, product liability, and other theories of liability. For some of these contingent claims and potential liabilities, the Company’s insurance coverage may not apply, exclusions to coverage may apply or legal impediments may apply. In such instances, settlement or other resolution of such claims, individually or collectively, could have a material financial or reputational impact on the Company. As of March 31, 2023, the Company recorded reserves in an amount believed to be sufficient, given the range of potential outcomes, for contingent liabilities representing all contingencies believed to be probable. These reserves include costs currently and reasonably estimated to be incurred for reclamation of a closed barite mine and product liability claims, as well as other circumstances involving material claims.
14
The Company has assessed the potential for additional losses above the amounts accrued as well as potential losses for matters that are believed to be not probable, but are reasonably possible. The Company sets accruals in accordance with GAAP based on its best judgment about the probable results of disputed claims, regulatory enforcement actions, tax and other governmental audits, and other contingencies. The litigation process as well as 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, will not materially affect our financial position, cash flow or results of operations. 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. Because of uncertainty and risk inherent to litigation, arbitration, audits, governmental investigations, enforcement actions, and similar matters, the Company’s actual liabilities incurred may materially exceed our estimated liabilities and reserves, which could have a material financial or reputational impact on the Company. In 2022, the Company received and paid a $
In many instances, the Company’s products and services embody or incorporate trade secrets or patented inventions. From time to time, we are engaged in disputes concerning protection of the Company’s trade secrets and confidential information, patents, and other intellectual property rights. Such disputes frequently involve complex, factual, technical and/or legal issues which result in high costs to adjudicate our rights and for which it may be difficult to predict the ultimate outcome. At any given time, the Company may be a plaintiff or defendant in disputes involving disputed intellectual property rights. The Company is currently pursuing, and intends to pursue future claims involving revenue recognized for technology related to drill bits. The Company is suing for breach of certain license in agreements pursuant to which certain drill bit manufacturers have licensed the Company’s intellectual property. The amount of the Company's claims for outstanding receivables approximates $
Further, in some instances, direct or indirect consumers of our products and services or members of the supply chain for our products and services become involved in governmental investigations, internal investigations, political or other enforcement matters. In such circumstances, such investigations may adversely impact the ability of consumers of our products, entities providing financial support to such consumers or entities in the supply chain to timely perform their business plans or to timely perform under agreements with us. We may, from time to time, become involved in these investigations, at substantial cost to the Company. We also are subject to trade regulations, supply chain regulations, and other regulatory compliance in which the laws and regulations of different jurisdictions conflict or these regulations may conflict with contractual terms. In such circumstances, our compliance with U.S. laws and regulations may subject us to risk of fines, penalties, or contractual liability in other jurisdictions. Our efforts to actively manage such risks may not always be successful which could lead to negative impacts on revenue or earnings.
The Company is exposed to customs and trade regulation risk in the countries in which we do business and countries from which or to which we import or export goods. Such trade regulations can be complex and conflicting, as different countries use trade regulation to promote conflicting policy objectives. Compliance with these laws and regulations present challenges which could result in future liabilities (for example, when laws conflict between countries). The Company may face increased tariffs and trade costs, loss of revenue, loss of customers, fines, penalties, increased costs, the need for renegotiation of agreements, and other business disruptions. In addition, trade regulations, export controls, and other laws adversely impact our ability to do business in certain countries, e.g., Iran, Syria, Russia, China and Venezuela. In response to additional sanctions enacted by governments in the European Union, the United States, the United Kingdom, Switzerland, and other countries as a result of active armed conflict in Ukraine, we ceased new investments in Russia and have curtailed our activities in Russia. During the third quarter of 2022, we sold our business in Belarus and committed to a plan to sell our business in Russia. The sale is subject to various government approvals in Russia and other jurisdictions. Litigation may result from the confluence of these events in Russia and Belarus and our response to the various sanctions as we work to comply with applicable laws and regulations. We also may incur severance costs as a result of conditions in Russia if we are unable to obtain the required government approvals.
Lingering supply chain disruptions arising from the COVID-19 pandemic continue to adversely impact normal economic and manufacturing related activities. The Company’s ability to manufacture equipment and perform services could be impaired from such disruptions and the Company could be exposed to liabilities resulting from additional interruption or delay in its ability to perform due to materials shortages, inflationary pressures, and limited manpower. While the overall situation related to COVID-19 has improved, the Company continues to see operational delays resulting from the limited availability of materials and work force, the lack of predictability around vendor delivery dates and other operational disruptions. We may face loss of workers, labor shortages, litigation, fines and/or other adverse consequences resulting from other pandemic related labor impacts and COVID-19 regulations. The combined
15
impact of supply chain and labor market disruptions along with the inflationary impacts of pandemic monetary and regulatory policies could have material adverse impacts on our financial results.
Disputes may arise regarding application of force majeure contract provisions and allocation of responsibility among customers, the Company, and suppliers, resulting in material added cost and/or litigation. Our customers may attempt to cancel or delay projects, cancel contracts, or may invoke force majeure clauses. Our customers may also seek to delay or may default on their payments to us. As a result, the Company may be exposed to additional costs, liabilities and risks which could materially, adversely impact our financial performance and results. These potential operational and service delays could result in contractual or other legal claims from our customers. At this time, it is not possible to quantify all these risks, but the combination of these factors could have a material impact on our financial results.
Due to market conditions and ongoing concerns about the energy transition, demand for our products and services may decline. Legal restrictions on exploration and production may impede our customer’s ability to do business in certain jurisdictions. The political environment may adversely impact demand for hydrocarbons in different jurisdictions or globally. The demand for energy may be constrained with adverse consequences for our customers and for the company.
Recently Issued Accounting Standards
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848).” Topic 848, as amended, applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2024. During the
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
NOV Inc. (“NOV” or the “Company”) is a leading independent equipment and technology provider to the global energy industry. Originally founded in 1862, NOV and its predecessor companies have spent 161 years helping transform oil and gas field development and improving its cost-effectiveness, efficiency, safety, and environmental impact. 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, the company has helped advance the transition toward sustainable energy.
NOV’s extensive proprietary technology portfolio supports the industry’s full-field 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 automation, predictive analytics, and condition-based maintenance.
NOV serves major-diversified, national, and independent service companies, contractors, and energy producers in 62 countries, operating under three segments: Wellbore Technologies, Completion & Production Solutions, and Rig Technologies.
Unless indicated otherwise, results of operations are presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Certain reclassifications have been made to prior period financial information in order to conform with current period presentation. The Company discloses Adjusted EBITDA (defined as operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets and, when applicable, 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.
Wellbore Technologies
The Company’s Wellbore Technologies segment designs, manufactures, rents, and sells a variety of equipment and technologies used to perform drilling operations, and offers services that optimize their performance, including: solids control and waste management equipment and services, drilling fluids, premium drillpipe, wired pipe, drilling optimization services, tubular inspection and coating services, instrumentation, downhole tools, and drill bits.
Wellbore Technologies focuses on oil and gas companies and supports drilling contractors, oilfield service companies, and oilfield equipment rental companies. Demand for the segment’s products and services depends on the level of oilfield drilling activity by oil and gas companies, drilling contractors, and oilfield service companies.
Completion & Production Solutions
The Company’s Completion & Production Solutions segment integrates technologies for well completions and oil and gas production.
The segment designs, manufactures, and integrates technologies for well completions, oil and gas production, and industrial markets. This includes equipment and technologies needed for hydraulic fracture stimulation, including pressure pumping trucks, blenders, sanders, hydration units, injection units, flowline, and manifolds; well intervention, including coiled tubing units, coiled tubing, and wireline units and tools; cementing products for pumping, mixing, transport, and storage; onshore production, including fluid processing, composite pipe, surface transfer and progressive cavity pumps, and artificial lift systems; and offshore production, including integrated production systems and subsea production technologies.
Completion & Production Solutions supports service companies and oil and gas companies. Demand for the segment’s products depends on the level of oilfield completions and workover activity by oilfield service companies and drilling contractors, and capital spending plans by oil and gas companies and oilfield service companies.
The segment also designs and manufactures equipment for industrial markets. This includes specialized, technology-driven progressive cavity pumps and mixers for a wide breadth of industrial end markets with high failure costs, premium pole products to support connectivity, lighting, and power for municipal and residential applications including 5G, smart-city infrastructure, roads and highways, and energy-grid modernization. Demand for these products is driven by general industrial activity and infrastructure spend.
Rig Technologies
The Company’s Rig Technologies segment manufactures and supports the capital equipment and integrated systems needed to drill oil and gas wells on land and offshore as well as other marine-based markets, including offshore wind vessels. The segment designs, manufactures and sells land rigs, offshore drilling equipment packages, including installation and commissioning services, and drilling rig components that mechanize and automate the drilling process and rig functionality. Equipment and technologies the segment provides to customers include: substructures, derricks, and masts; cranes; jacking systems; pipe lifting, racking, rotating, and assembly systems;
17
fluid transfer technologies, such as mud pumps; pressure control equipment, including blowout preventers; power transmission systems, including drives and generators; rig instrumentation and control systems; mooring, anchor, and deck handling machinery; major equipment components for offshore wind construction vessels; and pipelay and construction systems. The segment also provides spare parts, repair, and rentals as well as comprehensive remote equipment monitoring, technical support, field service, and customer training through an extensive network of aftermarket service and repair facilities strategically located in major areas of drilling operations around the world.
Rig Technologies supports land and offshore drillers. Demand for the segment’s products depends on drilling contractors’ and oil and gas companies’ capital spending plans, specifically capital expenditures on rig construction and refurbishment; and secondarily on the overall level of oilfield drilling activity, which drives demand for spare parts, service, and repair for the segment’s large installed base of equipment. The segment also designs and builds equipment for wind turbine installation companies, where demand is dependent on global investment into offshore wind energy developments.
Critical Accounting Policies and Estimates
In our annual report on Form 10-K for the year ended December 31, 2022, 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; inventory reserves; impairment of goodwill 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, 2023, the Company generated revenues of $1.96 billion, a decrease of 5 percent compared to the fourth quarter of 2022 and an increase of 27 percent compared to the first quarter of 2022. Net income for the first quarter of 2023 was $126 million, or 6.4 percent of sales, which included $4 million of credits in Other Items. Adjusted EBITDA (operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets and, when applicable, Other Items) decreased sequentially to $195 million, or 9.9 percent of sales.
Segment Performance
Wellbore Technologies
Wellbore Technologies generated revenues of $745 million in the first quarter of 2023, a decrease of 2 percent from the fourth quarter of 2022 and an increase of 23 percent from the first quarter of 2022. Operating profit was $96 million, or 12.9 percent of sales. Adjusted EBITDA decreased $13 million sequentially and increased $32 million from the prior year to $133 million, or 17.9 percent of sales. Results were negatively impacted during the quarter by continued supply chain challenges that disrupted the Segment’s drill pipe operations.
Completion & Production Solutions
Completion & Production Solutions generated revenues of $718 million in the first quarter of 2023, a decrease of 3 percent from the fourth quarter of 2022 and an increase of 35 percent from the first quarter of 2022. Operating profit was $44 million, or 6.1 percent of sales, and included a credit of $1 million in Other Items. Adjusted EBITDA decreased $12 million sequentially and increased $44 million from the prior year to $54 million, or 7.5 percent of sales. Results reflect typical seasonal declines in certain product lines and markets, partially offset by an improving rate of execution on projects, which contributed to a 37% increase in revenue out of backlog compared to the first quarter of 2022.
New orders booked during the quarter totaled $407 million, representing a book-to-bill of 96 percent when compared to the $422 million of orders shipped from backlog. As of March 31, 2023, backlog for capital equipment orders for Completion & Production Solutions was $1,601 million, a decrease of $1 million from the fourth quarter of 2022 and an increase of $237 million from the first quarter of 2022.
Rig Technologies
Rig Technologies generated revenues of $550 million in the first quarter of 2023, a decrease of 11 percent from the fourth quarter of 2022, and an increase of 25 percent from the first quarter of 2022. Operating profit was $53 million, or 9.6 percent of sales, and included a credit of $3 million of Other Items. Adjusted EBITDA decreased $19 million sequentially and increased $33 million from the prior year to $69 million, or 12.5 percent of sales. Steadily improving demand for drilling equipment and aftermarket parts and services only partially offset the effect of strong capital equipment shipments in the fourth quarter that did not repeat and seasonal declines in the Segment’s aftermarket operations.
18
New orders booked during the quarter totaled $251 million, representing a book-to-bill of 140 percent when compared to the $179 million of orders shipped from backlog. As of March 31, 2023, backlog for capital equipment orders for Rig Technologies was $2,876 million, an increase of $83 million from the fourth quarter of 2022 and a decrease of $17 million from the first quarter of 2022.
Oil & Gas Equipment and Services Market and Outlook
Despite the recent volatility in commodity prices, management believes the industry is in the early stages of an extended recovery that began in 2021 with the gradual reopening of global economies following the COVID-19 pandemic. Improving economic activity, driven by pent-up consumer and industrial demand combined with government economic stimulus drove higher consumption of commodities, pulled significant volumes of oil and gas out of global inventories, and exposed diminished productive capacity resulting from years of underinvestment in the oil and gas industry.
Tightening of government fiscal policies, concerns regarding a global recession, ongoing global supply chain disruptions, and rising inflationary costs may drive volatility and could pressure commodity prices near-term; however, management believes diminished global oil and gas production capacity, along with rising energy security risks will continue to spur increased oilfield activity and demand for the Company’s equipment and technology.
NOV remains committed to improving organizational efficiencies while focusing on the development and commercialization of innovative products and services, including technologies to reduce environmental impact of oil and gas operations, and technologies to accelerate the energy transition that are responsive to the longer-term needs of NOV’s customers. We believe this strategy will further advance the Company’s competitive position in all market conditions.
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 other oilfield service companies and drilling contractors, and worldwide oil and gas inventory levels. Key industry indicators for the first quarter of 2023 and 2022, and the fourth quarter of 2022 include the following:
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
% |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
1Q23 |
|
|
1Q23 |
|
|||||
|
|
1Q23* |
|
|
1Q22* |
|
|
4Q22* |
|
|
1Q22 |
|
|
4Q22 |
|
|||||
Active Drilling Rigs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. |
|
|
761 |
|
|
|
633 |
|
|
|
775 |
|
|
|
20.2 |
% |
|
|
(1.8 |
)% |
Canada |
|
|
223 |
|
|
|
198 |
|
|
|
190 |
|
|
|
12.6 |
% |
|
|
17.4 |
% |
International |
|
|
915 |
|
|
|
823 |
|
|
|
907 |
|
|
|
11.2 |
% |
|
|
0.9 |
% |
Worldwide |
|
|
1,899 |
|
|
|
1,654 |
|
|
|
1,872 |
|
|
|
14.8 |
% |
|
|
1.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
West Texas Intermediate |
|
$ |
76.08 |
|
|
$ |
94.54 |
|
|
$ |
82.79 |
|
|
|
(19.5 |
)% |
|
|
(8.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Natural Gas Prices ($/mmbtu) |
|
$ |
2.65 |
|
|
$ |
4.62 |
|
|
$ |
5.51 |
|
|
|
(42.6 |
)% |
|
|
(51.9 |
)% |
* Averages for the quarters indicated. See sources below.
The Company is also becoming increasingly engaged with energy transition related opportunities and is currently involved in projects related to wind energy, geothermal power, rare earth metal extraction, biogas production, and carbon sequestration. Additionally, the Company is investing in developing technologies and solutions that will support other energy transition related industry verticals. Management expects to see continued growth in these areas as low carbon power becomes a larger portion of the global energy supply.
19
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, 2023, on a quarterly basis:
Industry Trends Rig Counts and Oil Prices Total Number of Rigs 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 $140.00 $120.00 $100.00 $80.00 $60.00 $40.00 $20.00 $ West Texas Int. (Price per Barrel) 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Total Rings 2,110 2,262 2,260 2,260 2,210 2,197 2,071 2,053 1,255 Canada 105 208 177 185 83 132 139 196 25 US 1,037 1,051 1,072 1,046 989 920 821 784 396 International 968 1,003 1,011 1,029 1,138 1,145 1,111 1,073 834 W.TX Int. ($) $68.03 $69.76 $59.08 $54.83 $59.78 $56.37 $56.92 $4
.99 $2
Source: Rig count: Baker Hughes, Inc. (www.bakerhughes.com); West Texas Intermediate Crude Oil and Natural Gas Prices: Department of Energy, Energy Information Administration (www.eia.doe.gov).
The worldwide quarterly average rig count increased 1 percent (from 1,872 to 1,899), and the U.S. decreased 2 percent (from 775 to 761), in the first quarter of 2023 compared to the fourth quarter of 2022. The average per barrel price of West Texas Intermediate Crude Oil decreased 8 percent (from $82.79 per barrel to $76.08 per barrel) and natural gas prices decreased 52 percent (from $5.51 per mmbtu to $2.65 per mmbtu) in the first quarter of 2023 compared to the fourth quarter of 2022.
At April 14, 2023, there were 859 rigs actively drilling in North America, which decreased 13 percent from the first quarter average of 984 rigs. The price for West Texas Intermediate Crude Oil was $82.52 per barrel at April 14, 2023, an increase of 8 percent from the first quarter of 2023 average. The price for natural gas was $2.11 per mmbtu at April 14, 2023, a decrease of 20 percent from the first quarter of 2023 average.
20
Results of Operations
Financial results by operating segment are as follows (in millions):
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Revenue: |
|
|
|
|
|
|
||
Wellbore Technologies |
|
$ |
745 |
|
|
$ |
608 |
|
Completion & Production Solutions |
|
|
718 |
|
|
|
530 |
|
Rig Technologies |
|
|
550 |
|
|
|
441 |
|
Eliminations |
|
|
(51 |
) |
|
|
(31 |
) |
Total revenue |
|
$ |
1,962 |
|
|
$ |
1,548 |
|
|
|
|
|
|
|
|
||
Operating profit (loss): |
|
|
|
|
|
|
||
Wellbore Technologies |
|
$ |
96 |
|
|
$ |
39 |
|
Completion & Production Solutions |
|
|
44 |
|
|
|
(22 |
) |
Rig Technologies |
|
|
53 |
|
|
|
11 |
|
Eliminations and corporate costs |
|
|
(67 |
) |
|
|
(49 |
) |
Total operating profit (loss) |
|
$ |
126 |
|
|
$ |
(21 |
) |
Wellbore Technologies
Three months ended March 31, 2023 and 2022. Revenue from Wellbore Technologies was $745 million for the three months ended March 31, 2023, compared to $608 million for the three months ended March 31, 2022, an increase of $137 million or 23 percent.
Operating profit from Wellbore Technologies was $96 million for the three months ended March 31, 2023 compared to an operating profit of $39 million for the three months ended March 31, 2022, an increase of $57 million.
Completion & Production Solutions
Three months ended March 31, 2023 and 2022. Revenue from Completion & Production Solutions was $718 million for the three months ended March 31, 2023, compared to $530 million for the three months ended March 31, 2022, an increase of $188 million or 35 percent.
Operating profit from Completion & Production Solutions was $44 million for the three months ended March 31, 2023 compared to an operating loss of $22 million for the three months ended March 31, 2022, an increase of $66 million.
The Completion & Productions Solutions 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 $1,601 million at March 31, 2023, an increase of $237 million from backlog of $1,364 million at March 31, 2022. Although numerous factors can affect the timing of revenue out of backlog (including, but not limited to, customer change orders and supplier accelerations or delays), the Company reasonably expects approximately 72 percent of backlog to become revenue during the rest of 2023 and the remainder thereafter. At March 31, 2023, approximately 56 percent of the capital equipment backlog was for offshore products and approximately 71 percent of the capital equipment backlog was destined for international markets.
Rig Technologies
Three months ended March 31, 2023 and 2022. Revenue from Rig Technologies was $550 million for the three months ended March 31, 2023, compared to $441 million for the three months ended March 31, 2022, an increase of $109 million or 25 percent.
Operating profit from Rig Technologies was $53 million for the three months ended March 31, 2023 compared to $11 million for the three months ended March 31, 2022, an increase of $42 million.
The Rig Technologies 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 drilling rig components or a signed contract related to a construction project. The capital equipment backlog was $2,876 million at March 31, 2023, a decrease of $17 million from backlog of $2,893 million at March 31, 2022. Although numerous factors can affect the timing of revenue out of backlog (including, but not limited to, customer change
21
orders and supplier accelerations or delays), the Company reasonably expects approximately 24 percent of backlog to become revenue during the rest of 2023 and the remainder thereafter. At March 31, 2023, approximately 31 percent of the capital equipment backlog was for offshore products and approximately 96 percent of the capital equipment backlog was destined for international markets.
Eliminations and corporate costs
Eliminations and corporate costs were $67 million for the three months ended March 31, 2023, compared to $49 million for the three months ended March 31, 2022. 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 three reporting segments that are eliminated in consolidation. Intrasegment transactions are eliminated within each segment.
Other expense, net
Other expense, net was $16 million for the three months ended March 31, 2023, compared to $2 million for the three months ended March 31, 2022, respectively. The change in income was primarily due to fluctuations in foreign currencies.
Provision for income taxes
The effective tax rate for the three months ended March 31, 2023 was 13.8%, compared to (39.3)% for the same period in 2022. The effective tax rate for 2023 was positively impacted by the utilization of previously unrealized loss carryforwards and tax credits as well as favorable adjustments related to changes in certain exchange rates, partially offset by current year losses in certain jurisdictions with no tax benefit.
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 EBITDA as operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets and, when applicable, Other Items. 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 EBITDA is not intended to replace GAAP financial measures, such as Net Income.
22
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, |
|
||||||
|
|
2023 |
|
|
2022 |
|
|
2022 |
|
|||
Operating profit (loss): |
|
|
|
|
|
|
|
|
|
|||
Wellbore Technologies |
|
$ |
96 |
|
|
$ |
39 |
|
|
$ |
110 |
|
Completion & Production Solutions |
|
|
44 |
|
|
|
(22 |
) |
|
|
50 |
|
Rig Technologies |
|
|
53 |
|
|
|
11 |
|
|
|
80 |
|
Eliminations and corporate costs |
|
|
(67 |
) |
|
|
(49 |
) |
|
|
(78 |
) |
Total operating profit (loss) |
|
$ |
126 |
|
|
$ |
(21 |
) |
|
$ |
162 |
|
|
|
|
|
|
|
|
|
|
|
|||
Other items, net: |
|
|
|
|
|
|
|
|
|
|||
Wellbore Technologies |
|
$ |
— |
|
|
$ |
23 |
|
|
$ |
(1 |
) |
Completion & Production Solutions |
|
|
(1 |
) |
|
|
16 |
|
|
|
— |
|
Rig Technologies |
|
|
(3 |
) |
|
|
6 |
|
|
|
(11 |
) |
Corporate |
|
|
— |
|
|
|
— |
|
|
|
4 |
|
Total other items |
|
$ |
(4 |
) |
|
$ |
45 |
|
|
$ |
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|||
(Gain)/Loss on Sales of Fixed Assets: |
|
|
|
|
|
|
|
|
|
|||
Wellbore Technologies |
|
$ |
— |
|
|
$ |
2 |
|
|
$ |
— |
|
Completion & Production Solutions |
|
|
(5 |
) |
|
|
— |
|
|
|
1 |
|
Rig Technologies |
|
|
— |
|
|
|
1 |
|
|
|
— |
|
Corporate |
|
|
1 |
|
|
|
2 |
|
|
|
— |
|
Total (gain)/loss on sales of fixed assets |
|
$ |
(4 |
) |
|
$ |
5 |
|
|
$ |
1 |
|
|
|
|
|
|
|
|
|
|
|
|||
Depreciation & amortization: |
|
|
|
|
|
|
|
|
|
|||
Wellbore Technologies |
|
$ |
37 |
|
|
$ |
37 |
|
|
$ |
37 |
|
Completion & Production Solutions |
|
|
16 |
|
|
|
16 |
|
|
|
15 |
|
Rig Technologies |
|
|
19 |
|
|
|
18 |
|
|
|
19 |
|
Corporate |
|
|
5 |
|
|
|
3 |
|
|
|
5 |
|
Total depreciation & amortization |
|
$ |
77 |
|
|
$ |
74 |
|
|
$ |
76 |
|
|
|
|
|
|
|
|
|
|
|
|||
Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|||
Wellbore Technologies |
|
$ |
133 |
|
|
$ |
101 |
|
|
$ |
146 |
|
Completion & Production Solutions |
|
|
54 |
|
|
|
10 |
|
|
|
66 |
|
Rig Technologies |
|
|
69 |
|
|
|
36 |
|
|
|
88 |
|
Eliminations and corporate costs |
|
|
(61 |
) |
|
|
(44 |
) |
|
|
(69 |
) |
Total Adjusted EBITDA |
|
$ |
195 |
|
|
$ |
103 |
|
|
$ |
231 |
|
|
|
|
|
|
|
|
|
|
|
|||
Reconciliation of Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|||
GAAP net income (loss) attributable to Company |
|
$ |
126 |
|
|
$ |
(50 |
) |
|
$ |
104 |
|
Noncontrolling interests |
|
|
(1 |
) |
|
|
1 |
|
|
|
(5 |
) |
Provision for income taxes |
|
|
20 |
|
|
|
14 |
|
|
|
42 |
|
Interest expense |
|
|
21 |
|
|
|
19 |
|
|
|
21 |
|
Interest income |
|
|
(8 |
) |
|
|
(1 |
) |
|
|
(7 |
) |
Equity income in unconsolidated affiliates |
|
|
(48 |
) |
|
|
(6 |
) |
|
|
(36 |
) |
Other expense, net |
|
|
16 |
|
|
|
2 |
|
|
|
43 |
|
(Gain)/Loss on Sales of Fixed Assets |
|
|
(4 |
) |
|
|
5 |
|
|
|
1 |
|
Depreciation and amortization |
|
|
77 |
|
|
|
74 |
|
|
|
76 |
|
Other items, net |
|
|
(4 |
) |
|
|
45 |
|
|
|
(8 |
) |
Total Adjusted EBITDA |
|
$ |
195 |
|
|
$ |
103 |
|
|
$ |
231 |
|
23
Liquidity and Capital Resources
Overview
At March 31, 2023, the Company had cash and cash equivalents of $774 million and total debt of $1,732 million. At December 31, 2022, cash and cash equivalents were $1,069 million and total debt was $1,730 million. As of March 31, 2023, approximately $611 million of the $774 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.
The Company has a revolving credit facility with a borrowing capacity of $2.0 billion through October 30, 2024, and a borrowing capacity of $1.7 billion from October 31, 2024, to October 30, 2025. The Company has the right to increase the commitments under this agreement to an aggregate amount of up to $3.0 billion upon the consent of only those lenders holding any such increase. Interest under the multicurrency facility is based upon SOFR, NIBOR or CDOR plus 1.25% subject to a ratings-based grid or the U.S. prime rate. The credit facility contains a financial covenant regarding maximum debt-to-capitalization ratio of 60%. As of March 31, 2023, the Company was in compliance with a debt-to-capitalization ratio of 27.0% and had no outstanding letters of credit issued under the facility, resulting in $2.0 billion of available funds.
A consolidated joint venture of the Company borrowed $120 million against 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%. The bank line of credit contains a financial covenant regarding maximum debt-to-equity ratio of 75%. As of March 31, 2023, the joint venture was in compliance. The facility construction was completed in the fourth quarter of 2022, the Company will not have future borrowings on the line of credit, with repayments beginning December 2022 and final payment no later than June 2032. As of March 31, 2023, the Company had $114 million in borrowings related to this line of credit. The Company has $10 million in payments related to this line of credit due in the next twelve months.
The Company’s outstanding debt at March 31, 2023 consisted primarily of $1,090 million in 3.95% Senior Notes, $495 million in 3.60% Senior Notes, and other debt of $147 million. The Company was in compliance with all covenants at March 31, 2023. Long-term lease liabilities totaled $556 million at March 31, 2023.
The Company had $464 million of outstanding letters of credit at March 31, 2023, primarily in the U.S. and Norway, 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 used in continuing operating activities, continuing investing activities and continuing financing activities for the periods presented (in millions):
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net cash used in operating activities |
|
$ |
(202 |
) |
|
$ |
(103 |
) |
Net cash used in investing activities |
|
|
(52 |
) |
|
|
(49 |
) |
Net cash used in financing activities |
|
|
(41 |
) |
|
|
(36 |
) |
Significant uses of cash during the first three months of 2023
Other
The effect of the change in exchange rates on cash flows was immaterial for the first three months of 2023, and an increase of $3 million for the first three months of 2022.
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.
24
We may pursue additional 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.
New Accounting Pronouncements
See Note 16 for recently adopted and recently issued accounting standards.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. Some of the information in this document contains, or has incorporated by reference, forward-looking statements. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements typically are identified by use of terms such as “may,” “believe,” “plan,” “will,” “expect,” “anticipate,” “estimate,” “should,” “forecast,” and similar words, although some forward-looking statements are expressed differently. We may also provide oral or written forward-looking information in other materials we release to the public. Forward-looking information involves risk and uncertainties and reflects our best judgment based on current information. You should be aware that our actual results could differ materially from results anticipated in the 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 and worldwide economic activity, including matters related to recent Russian sanctions. 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 Annual Report on Form 10-K for the year-end December 31, 2022, as updated in Part II, Item 1A of our Quarterly Reports on Form 10-Q, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements, and additional disclosures we make in our press releases and Forms 10-Q, and 8-K. We also suggest that you listen to our quarterly earnings release conference calls with financial analysts.
25
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 loss in our income statement of $9 million in the first three months of 2023, compared to a $1 million foreign exchange loss in the same period of the prior year. The 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 $370 million and translation exposures totaling $372 million as of March 31, 2023. The Company estimates that a hypothetical 10 percent movement of all applicable foreign currency exchange rates on the transactional exposures could affect net income by $29 million and the translational exposures could affect Other Comprehensive Income by $37 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, 2023, borrowings consisted of $1,090 million in 3.95% Senior Notes and $495 million in 3.60% Senior Notes. At March 31, 2023, there were no outstanding letters of credit issued under the credit facility, resulting in $2.0 billion of funds available under this credit facility. Additionally, the Company’s joint venture has 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, NIBOR or CDOR, 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, NIBOR or CDOR 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.
26
PART II - OTHER INFORMATION
Item 1A. Risk Factors
As of the date of this filing, the Company and its operations continue to be subject to the risk factors previously disclosed in Part I, Item 1A "Risk Factors" in our 2022 Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Item 2. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Period |
|
Total number |
|
|
Average |
|
|
Total number of |
|
|
Approximate dollar |
|
||||
January 1 through January 31, 2023 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
February 1 through February 28, 2023 |
|
|
792,895 |
|
|
$ |
22.10 |
|
|
|
— |
|
|
|
— |
|
March 1 through March 31, 2023 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total(1) |
|
|
792,895 |
|
|
$ |
22.10 |
|
|
|
— |
|
|
|
|
|
(1) The 792,895 shares listed as “purchased” were withheld from employee’s vesting of restricted stock grants, as required for income taxes, and retired. These shares were not part of a publicly announced program to purchase common stock.
Item 4. Mine Safety Disclosures
Information regarding mine safety and other regulatory actions at our mines is included in Exhibit 95 to this Form 10-Q.
Item 6. Exhibits
Reference is hereby made to the Exhibit Index commencing on page 28.
27
INDEX TO EXHIBITS
3.1 |
|
Sixth Amended and Restated Certificate of Incorporation of NOV Inc. (Exhibit 3.1) (1) |
|
|
|
3.2 |
|
|
|
|
|
10.1 |
|
|
|
|
|
10.2 |
|
Amendment No. 2 to 5-Year Credit Agreement, dated as of March 10, 2023 (Exhibit 10.2) (4) |
|
|
|
10.3 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1 |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (4) |
|
|
|
32.2 |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (4) |
|
|
|
95 |
|
Mine Safety Information pursuant to section 1503 of the Dodd-Frank Act. (4) |
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* Compensatory plan or arrangement for management or others.
We hereby undertake, pursuant to Regulation S-K, Item 601(b), paragraph (4) (iii), to furnish to the U.S. Securities and Exchange Commission, upon request, all constituent instruments defining the rights of holders of our long-term debt not filed herewith.
28
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: April 27, 2023 |
By: |
|
/s/ Christy H. Novak |
|
Christy H. Novak |
||
|
Vice President, Corporate Controller & Chief Accounting Officer |
||
|
(Duly Authorized Officer, Principal Accounting Officer) |
||
29