Citing impacts from low oil prices in late 2018, National Oilwell Varco Inc. (NOV), one of the largest oilfield services operators in the U.S. onshore, said it expects 1Q2019 revenues to come in lower than expected.
Management for Houston-based NOV announced Friday that 1Q2019 revenues are expected to total $1.94 billion, below prior targets.
“The severity of the decline in demand for oilfield equipment resulting from the sharp fall in oil prices during late 2018, further compounded by capital austerity that has taken hold in upstream oil and gas markets, was greater than we expected,” CEO Clay Williams said.
“Market weakness was particularly acute among our oilfield service company customers, resulting in a disproportionate impact to our Completion & Production Solutions segment; however, all three operating segments will report results below prior expectations.”
After falling sharply last year, dropping into the mid to low $40s in December, West Texas Intermediate crude oil futures have since rebounded. The May contract was trading above $64/bbl Friday.
The steady improvement in crude prices in 2019 is “slowly inspiring greater confidence among our North American customers, while international and offshore markets continue to exhibit steady signs of improvement,” Williams said. “These dynamics translated into order intake that accelerated through the quarter and resulted in a sequential increase in bookings.
“Notwithstanding our expectations for market conditions and our financial results to improve as we progress through 2019, the outlook remains opaque. Therefore, we will be undertaking new initiatives throughout 2019 to align our cost structure with the current market environment.”
Despite the recent rebound in oil prices, there could be cause for concern for bulls, according to analysts.
During a recent presentation in New York, Drillinginfo’s Bernadette Johnson, vice president in charge of market intelligence, warned that crude oil prices may have climbed “too high too soon.”
“Just last quarter, we were more oversupplied in 4Q2018 than we were when prices collapsed back in 2014,” with an overhang of 2.2 million b/d, Johnson said. “I don’t think that’s widely recognized by the market.”
Cuts by OPEC, aka the Organization of the Petroleum Exporting Countries, could be contributing to a “kind of artificial” balance, with Drillinginfo’s estimates of spare capacity implying additional slack in the global market, according to Johnson.
NOV plans to release its complete 1Q2019 results later this month. Management has scheduled an earnings conference call April 26.