As the North American onshore continues to cool down, oilfield technology specialist National Oilwell Varco Inc. (NOV) is making adjustments, concentrating efforts to offshore and international drilling markets, where new orders grew during the third quarter.

The Houston-based operator in its third quarter results reported that North American onshore customers are limiting spending, mirroring reports by other major oilfield services operators.

To adjust, CEO Clay Williams pointed to “accelerating cost reductions, a favorable revenue shift toward higher-margin offshore and aftermarket businesses, and positive project close-out variances.”

NOV also posted its strongest cash flow in more than three years, “as our concerted efforts to more efficiently manage working capital are making an impact,” he said.

“The U.S. land rig count is now down more than 20% from its recent high in late 2018. And while this will eventually result in decelerating U.S. production growth, it's currently pressuring our domestic customer base and consequently our short-cycle U.S. business lines.”

On the other hand, said Williams, international and offshore activity is growing at a modest pace, with international oil companies and national oil companies using the “prolonged downcycle to pull cost out of their planned projects,” with final investment decision approvals for projects increasing.

NOV, said the CEO, has the “necessary durability to navigate the extreme volatility experienced in oil and gas,” and it’s important to make the “investment case for NOV at a time when oil and gas is deeply out of favor…”

In the final three months of 2019, NOV expects to see “continued capital restraint” across the North American exploration and production complex, combined with the holiday season, which should result in further declines in U.S. activity.

The Completion and Production Solutions (CPS) segment recorded its second straight quarter of double-digit revenue growth on sales of fiberglass pipe, processing equipment and subsea flexible pipe to international and offshore drilling markets. Revenue climbed 10% sequentially and was down only 1% year/year.

CPS booked $535 million of new orders during 3Q2019, representing a book-to-bill of 124% when compared to the $431 million of orders shipped from backlog. At the end of September, backlog for capital equipment orders was $1.3 billion, implying that revenue should continue to increase.

Weakness in the U.S. onshore weighed on the Rig Technologies segment, with revenue of $649 million, up 2% year/year but down 3% sequentially. Increased contributions from the aftermarket business came on gains in offshore drilling, offset by a decline in capital equipment sales in the North American land market.

New orders booked in Rig Technologies totaled $221 million in 3Q2019, representing a book-to-bill of 90% when compared to the $246 million of orders shipped from backlog. The backlog for capital equipment orders at the end of September was $3.14 billion.

Wellbore Technology sales totaled $793 in the quarter, down 6% from 3Q2018 and off 7% sequentially on “contracting North American market, coupled with reduced drillpipe deliveries.”

NOV also highlighted some technology achievements during 3Q2019. Among other things, it deployed VectorZIEL rotary steerable systems tools into Latin America for the first time with a job in Mexico.

NOV’s SelectShift downhole adjustable motor also helped an operator improve drilling times and reduce bit repair costs in West Texas. The operator used the motor in a “challenging intermediate section with rough zones of abrasive formations from 6,000-9,000 feet, where bits were previously damaged beyond repair almost half the time.”

Net losses in 3Q2019 totaled $249 million (minus 64 cents/share), versus year-ago losses of $5.38 billion (minus $14.11). One-time impairments in 3Q2019 totaled $314 million primarily from inventory reserves/severance costs.

Revenue was slightly down year/year at $2.13 billion from $2.15 billion, and it was flat sequentially.